ARTICLE 1181 ACQUISITION/EXTINGUISHMENT OF RIGHTS

[G.R. No. 118180. September 20, 1996]

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS, Sps. NORMY D.
CARPIO and CARMEN ORQUISA; Sps. ROLANDO D. CARPIO and RAFAELA VILLANUEVA;
Sps. ELISEO D. CARPIO and ANUNCIACION del ROSARIO; LUZ C. REYES, MARIO C.
REYES, JULIET REYES-RUBIN, respondents.
DECISION
PADILLA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court which seeks to set aside
the decision[1] of the Court of Appeals (CA) dated 28 February 1994 in C.A.-G.R. CV No. 37158, as well
as the resolution dated 11 August 1994 denying petitioner's motion for reconsideration.
The facts are undisputed:
Private respondents were the original owners of a parcel of agricultural land covered by TCT No. T1432, situated in Barrio Capucao, Ozamis City, with an area of 113,695 square meters, more or less.
On 30 May 1977, private respondents mortgaged said land to petitioner. When private respondents
defaulted on their obligation, petitioner foreclosed the mortgage on the land and emerged as sole bidder
in the ensuing auction sale. Consequently, Transfer Certificate of Title No. T-10913 was eventually issued
in petitioner's name.
On 6 April 1984, petitioner and private respondents entered into a Deed of Conditional Sale wherein
petitioner agreed to reconvey the foreclosed property to private respondents.
The pertinent stipulations of the Deed provided that:
"WHEREAS, the VENDOR acquired a parcel of land in an auction sale by the City Sheriff of Ozamiz City,
pursuant to Act 3135, as amended, and subject to the redemption period pursuant to CA 141, described
as follows:
xxx

xxx

xxx

WHEREAS, the VENDEES offered to repurchase and the VENDOR agreed to sell the above-described
property, subject to the terms and stipulations as hereinafter stipulated, for the sum of SEVENTY THREE
THOUSAND SEVEN HUNDRED ONLY (P73,700.00), with a down payment of P8,900.00 and the
balance of P64,800 shall be payable in six (6) years on equal quarterly amortization plan at 18% interest
per annum. The first quarterly amortization of P4,470.36 shall be payable three months from the date of
the execution of the documents and all subsequent amortization shall be due and payable every quarter
thereafter.
xxx

xxx

xxx

That, upon completion of the payment herein stipulated and agreed, the Vendor agrees to deliver to the
Vendee/s(,) his heirs, administrators and assigns(,) a good and sufficient deed of conveyance covering

the property, subject matter of this deed of conditional sale, in accordance with the provisions of law."
(Exh. "A", p. 5, Records)[2]
On 6 April 1990, upon completing the payment of the full repurchase price, private respondents
demanded from petitioner the execution of a Deed of Conveyance in their favor.
Petitioner then informed private respondents that the prestation to execute and deliver a deed of
conveyance in their favor had become legally impossible in view of Sec. 6 of Rep. Act 6657 (the
Comprehensive Agrarian Reform Law or CARL) approved 10 June 1988, and Sec. 1 of E.O. 407 issued
10 June 1990.
Aggrieved, private respondents filed a complaint for specific performance with damages against
petitioner before the Regional Trial Court of Ozamis City, Branch XV. During the pre-trial, the trial court
narrowed down the issue to whether or not Sec. 6 of the CARL (Rep. Act 6657) had rendered legally
impossible compliance by petitioner with its obligation to execute a deed of conveyance of the subject
land in favor of private respondents. The trial court ordered both parties to file their separate
memorandum and deemed the case submitted for decision thereafter.
On 30 January 1992, the trial court rendered judgment, the dispositive part of which reads:
"WHEREFORE, judgment is rendered ordering defendant to execute and deliver unto plaintiffs a deed of
final sale of the land subject of their deed of conditional sale - Lot 5259-A, to pay plaintiffsP10,000.00 as
nominal damages, P5,000.00 as attorney's fees, P3,000.00 as litis expenses and costs."[3]
The trial court held that petitioner interpreted the fourth paragraph of Sec. 6, Rep. Act 6657 literally in
conjunction with Sec. 1 of E.O. 407.
The fourth paragraph of Sec. 6, Rep. Act 6657 states that:
"Upon the effectivity of this Act, any sale disposition, lease, management contract or transfer of
possession of private lands executed by the original landowner in violation of this act shall be null and
void; Provided, however, that those executed prior to this act shall be valid only when registered with the
Register of Deeds after the effectivity of this Act. Thereafter, all Register of Deeds shall inform the DAR
within 320 days of any transaction involving agricultural lands in excess of five hectares."
while Sec. 1 of E.O. 407 states that:
"Sec. 1. All government instrumentalities but not limited to x x x financial institutions such as the DBP x x
x shall immediately execute deeds of transfer in favor of the Republic of the Philippines as represented by
the Department of Agrarian Reform and surrender to the department all landholdings suitable for
agriculture."
The court a quo noted that Sec. 6 of Rep. Act 6657, taken in its entirety, is a provision dealing
primarily with retention limits in agricultural land allowed the landowner and his family and that the fourth
paragraph, which nullifies any sale x x x by the original landowner in violation of the Act, does not cover
the sale by petitioner (not the original land owner) to private respondents.
On the other hand, according to the trial court, E.O. 407 took effect on 10 June 1990. But private
respondents completed payment of the price for the property, object of the conditional sale, as early as 6
April 1990. Hence, with the fulfillment of the condition for the sale, the land covered thereby, was

detached from the mass of foreclosed properties held by DBP, and, therefore, fell beyond the ambit or
reach of E.O. 407.
Dissatisfied, petitioner appealed to the Court of Appeals (CA), still insisting that its obligation to
execute a Deed of Sale in favor of private respondents had become a legal impossibility and that the nonimpairment clause of the Constitution must yield to the demands of police power.
On 28 February 1994, the CA rendered judgment dismissing petitioner's appeal on the basis of the
following disquisitions:
"It is a rule that if the obligation depends upon a suspensive condition, the demandability as well as the
acquisition or effectivity of the rights arising from the obligation is suspended pending the happening or
fulfillment of the fact or event which constitutes the condition. Once the event which constitutes the
condition is fulfilled resulting in the effectivity of the obligation, its effects retroact to the moment when the
essential elements which gave birth to the obligation have taken place (8 Manresa, 5th Ed. Bk.
1, pa. 33). Applying this precept to the case, the full payment by the appellee on April 6, 1990 retroacts to
the time the contract of conditional sale was executed on April 6, 1984. From that time, all elements of
the contract of sale were present. Consequently, the contract of sale was perfected. As such, the said
sale does not come under the coverage of R.A. 6657.
It is likewise interesting to note that despite the mandate of Sec. 1, R.A. 6657, appellant continued to
accept the payments made by the appellee until it was fully paid on April 6, 1990. All that the appellant
has to do now is to execute the final deed of sale in favor of the appellee. To follow the line of argument
of the appellant would only result in an unconscionable injury to the appellee. Obligations arising from
contracts have the force of law between the contracting parties and should be complied with in good faith
(Flavio Macasaet & Associates, Inc. vs. Commission on Audit, 173 SCRA 352).
Going now to E.O. 407, We hold that the same can neither affect appellant's obligation under the deed of
conditional sale. Under the said law, appellant is required to transfer to the Republic of thePhilippines 'all
lands foreclosed' effective June 10, 1990. Under the facts obtaining, the subject property has ceased to
belong to the mass of foreclosed property falling within the reach of said law. As earlier explained, the
property has already been sold to herein appellees even before the said E.O. has been enacted. On this
same reason, We therefore need not delve on the applicability of DBP Circular No. 11." [4]
In the present petition for review on certiorari, petitioner still insists on its position that Rep. Act 6657,
E.O. 407 and DBP Circular No. 11 rendered its obligation to execute a Deed of Sale to private
respondents "a legal impossibility."[5] Petitioner also questions the award of attorney's fees, nominal
damages, and costs in favor of private respondents, as not in accord with law and the evidence. [6]
We rule in favor of private respondents.
In 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. [7]
The deed of conditional sale between petitioner and private respondents was executed on 6 April
1984. Private respondents had religiously paid the agreed installments on the property until they
completed payment on 6 April 1990. Petitioner, in fact, allowed private respondents to fulfill the condition
of effecting full payment, and invoked Section 6 of Rep. Act 6657 only after private respondents, having
fully paid the repurchase price, demanded the execution of a Deed of Sale in their favor.

It will be noted that Rep. Act 6657 was enacted on 10 June 1988. Following petitioner's argument in
this case, its prestation to execute the deed of sale was rendered legally impossible by Section 6 of said
law. In other words, the deed of conditional sale was extinguished by a supervening event, giving rise to
an impossibility of performance.
We reject petitioner's contention as we rule - as the trial court and CA have correctly ruled - that
neither Sec. 6 of Rep. Act 6657 nor Sec. 1 of E.O. 407 was intended to impair the obligation of contract
petitioner had much earlier concluded with private respondents.
More specifically, petitioner cannot invoke the last paragraph of Sec. 6 of Rep. Act 6657 to set aside
its obligations already existing prior to its enactment. In the first place, said last paragraph clearly deals
with "any sale, lease, management contract or transfer or possession of private lands executed by
the original land owner." The original owner in this case is not the petitioner but the private
respondents. Petitioner acquired the land through foreclosure proceedings but agreed thereafter to
reconvey it to private respondents, albeit conditionally.
As earlier stated, Sec. 6 of Rep. Act 6657 in its entirety deals with retention limits allowed by law to
small landowners. Since the property here involved is more or less ten (10) hectares, it is then within the
jurisdiction of the Department of Agrarian Reform (DAR) to determine whether or not the property can be
subjected to agrarian reform. But this necessitates an entirely different proceeding.
The CARL (Rep. Act 6657) was not intended to take away property without due process of law. Nor
is it intended to impair the obligation of contracts. In the same manner must E.O. 407 be regarded. It
was enacted two (2) months after private respondents had legally fulfilled the condition in the contract of
conditional sale by the payment of all installments on their due dates. These laws cannot have retroactive
effect unless there is an express provision in them to that effect. [8]
As to petitioner's contention, however, that the CA erred in affirming the trial court's decision
awarding nominal damages, and attorney's fees to private respondents, we rule in favor of petitioner.
It appears that the core issue in this case, being a pure question of law, did not reach the trial stage
as the case was submitted for decision after pre-trial.
The award of attorney's fees under Article 2208 of the Civil Code is more of an exception to the
general rule that it is not sound policy to place a penalty on the right to litigate. While judicial discretion in
the award of attorney's fees is not entirely left out, the same, as a rule, must have a factual, legal or
equitable justification. The matter cannot and should not be left to speculation and conjecture. [9]
As aptly stated in the Mirasol case:
"x x x The matter of attorney's fees cannot be touched once and only in the dispositive portion of the
decision. The text itself must expressly state the reason why attorney's fees are being awarded. The
court, after reading through the text of the appealed decision, finds the same bereft of any findings of fact
and law to justify the award of attorney's fees. The matter of such fees was touched but once and
appears only in the dispositive portion of the decision. Simply put, the text of the decision did not state
the reason why attorney's fees are being awarded, and for this reason, the Court finds it necessary to
disallow the same for being conjectural."[10]
While DBP committed egregious error in interpreting Sec. 6 of RA 6657, the same is not equivalent
to gross and evident bad faith when it refused to execute the deed of sale in favor of private respondents.

For the same reasons stated above, the award of nominal damages in the amount of P10,000.00
should also be deleted.
The amount of P3,000.00 as litigation expenses and costs against petitioner must remain.
WHEREFORE, premises considered, the petition is hereby DENIED, and the decision of the CA is
hereby AFFIRMED, for lack of any reversible error, with the MODIFICATION that attorney's fees and
nominal damages awarded to private respondents are hereby DELETED.
SO ORDERED.

G.R. No. 112127 July 17, 1995

CENTRAL PHILIPPINE UNIVERSITY, petitioner,
vs.
COURT OF APPEALS, REMEDIOS FRANCO, FRANCISCO N. LOPEZ, CECILIA P. VDA. DE LOPEZ,
REDAN LOPEZ AND REMARENE LOPEZ, respondents.

BELLOSILLO, J.:
CENTRAL PHILIPPINE UNIVERSITY filed this petition for review on certiorari of the decision of the Court
of Appeals which reversed that of the Regional Trial Court of Iloilo City directing petitioner to reconvey to
private respondents the property donated to it by their predecessor-in-interest.
Sometime in 1939, the late Don Ramon Lopez, Sr., who was then a member of the Board of Trustees of
the Central Philippine College (now Central Philippine University [CPU]), executed a deed of donation in
favor of the latter of a parcel of land identified as Lot No. 3174-B-1 of the subdivision plan Psd-1144, then
a portion of Lot No. 3174-B, for which Transfer Certificate of Title No. T-3910-A was issued in the name of
the donee CPU with the following annotations copied from the deed of donation
1. The land described shall be utilized by the CPU exclusively for the establishment and
use of a medical college with all its buildings as part of the curriculum;
2. The said college shall not sell, transfer or convey to any third party nor in any way
encumber said land;
3. The said land shall be called "RAMON LOPEZ CAMPUS", and the said college shall
be under obligation to erect a cornerstone bearing that name. Any net income from the
land or any of its parks shall be put in a fund to be known as the "RAMON LOPEZ
CAMPUS FUND" to be used for improvements of said campus and erection of a building
thereon. 1
On 31 May 1989, private respondents, who are the heirs of Don Ramon Lopez, Sr., filed an action for
annulment of donation, reconveyance and damages against CPU alleging that since 1939 up to the time
the action was filed the latter had not complied with the conditions of the donation. Private respondents

also argued that petitioner had in fact negotiated with the National Housing Authority (NHA) to exchange
the donated property with another land owned by the latter.
In its answer petitioner alleged that the right of private respondents to file the action had prescribed; that it
did not violate any of the conditions in the deed of donation because it never used the donated property
for any other purpose than that for which it was intended; and, that it did not sell, transfer or convey it to
any third party.
On 31 May 1991, the trial court held that petitioner failed to comply with the conditions of the donation and
declared it null and void. The court a quo further directed petitioner to execute a deed of the
reconveyance of the property in favor of the heirs of the donor, namely, private respondents herein.
Petitioner appealed to the Court of Appeals which on 18 June 1993 ruled that the annotations at the back
of petitioner's certificate of title were resolutory conditions breach of which should terminate the rights of
the donee thus making the donation revocable.
The appellate court also found that while the first condition mandated petitioner to utilize the donated
property for the establishment of a medical school, the donor did not fix a period within which the
condition must be fulfilled, hence, until a period was fixed for the fulfillment of the condition, petitioner
could not be considered as having failed to comply with its part of the bargain. Thus, the appellate court
rendered its decision reversing the appealed decision and remanding the case to the court of origin for
the determination of the time within which petitioner should comply with the first condition annotated in the
certificate of title.
Petitioner now alleges that the Court of Appeals erred: (a) in holding that the quoted annotations in the
certificate of title of petitioner are onerous obligations and resolutory conditions of the donation which
must be fulfilled non-compliance of which would render the donation revocable; (b) in holding that the
issue of prescription does not deserve "disquisition;" and, (c) in remanding the case to the trial court for
the fixing of the period within which petitioner would establish a medical college. 2
We find it difficult to sustain the petition. A clear perusal of the conditions set forth in the deed of donation
executed by Don Ramon Lopez, Sr., gives us no alternative but to conclude that his donation was
onerous, one executed for a valuable consideration which is considered the equivalent of the donation
itself, e.g., when a donation imposes a burden equivalent to the value of the donation. A gift of land to the
City of Manila requiring the latter to erect schools, construct a children's playground and open streets on
the land was considered an onerous donation. 3 Similarly, where Don Ramon Lopez donated the subject
parcel of land to petitioner but imposed an obligation upon the latter to establish a medical college
thereon, the donation must be for an onerous consideration.
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. 4 It is not correct to say that the schoolhouse had to be constructed before
the donation became effective, that is, before the donee could become the owner of the land, otherwise, it
would be invading the property rights of the donor. The donation had to be valid before the fulfillment of
the condition. 5 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.
The claim of petitioner that prescription bars the instant action of private respondents is unavailing.

The condition imposed by the donor, i.e., the building of a medical school upon the land donated,
depended upon the exclusive will of the donee as to when this condition shall be fulfilled. When
petitioner accepted the donation, it bound itself to comply with the condition thereof. Since the
time within which the condition should be fulfilled depended upon the exclusive will of the
petitioner, it has been held that its absolute acceptance and the acknowledgment of its obligation
provided in the deed of donation were sufficient to prevent the statute of limitations from barring
the action of private respondents upon the original contract which was the deed of donation. 6
Moreover, the time from which the cause of action accrued for the revocation of the donation and
recovery of the property donated cannot be specifically determined in the instant case. A cause of action
arises when that which should have been done is not done, or that which should not have been done is
done. 7 In cases where there is no special provision for such computation, recourse must be had to the
rule that the period must be counted from the day on which the corresponding action could have been
instituted. It is the legal possibility of bringing the action which determines the starting point for the
computation of the period. In this case, the starting point begins with the expiration of a reasonable period
and opportunity for petitioner to fulfill what has been charged upon it by the donor.
The period of time for the establishment of a medical college and the necessary buildings and
improvements on the property cannot be quantified in a specific number of years because of the presence
of several factors and circumstances involved in the erection of an educational institution, such as
government laws and regulations pertaining to education, building requirements and property restrictions
which are beyond the control of the donee.
Thus, 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. 8
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. 9 Moreover,
under Art. 1191 of the Civil Code, when one of the obligors cannot comply with what is incumbent upon
him, the obligee may seek rescission and the court shall decree the same unless there is just cause
authorizing the fixing of a period. In the absence of any just cause for the court to determine the period of
the compliance, there is no more obstacle for the court to decree the rescission claimed.
Finally, since the questioned deed of donation herein is basically a gratuitous one, doubts referring to
incidental circumstances of a gratuitous contract should be resolved in favor of the least transmission of
rights and interests.10 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.
WHEREFORE, the decision of the Regional Trial Court of Iloilo, Br. 34, of 31 May 1991 is REINSTATED
and AFFIRMED, and the decision of the Court of Appeals of 18 June 1993 is accordingly MODIFIED.

Consequently, petitioner is directed to reconvey to private respondents Lot No. 3174-B-1 of the
subdivision plan Psd-1144 covered by Transfer Certificate of Title No. T-3910-A within thirty (30) days
from the finality of this judgment.
Costs against petitioner.
SO ORDERED.

1186 CONSTRUCTIVE FULFILLMENT

G.R. No. 96053 March 3, 1993
JOSEFINA TAYAG, RICARDO GALICIA, TERESITA GALICIA, EVELYN GALICIA, JUAN GALICIA, JR.
and RODRIGO GALICIA, petitioners,
vs.
COURT OF APPEALS and ALBRIGIDO LEYVA, respondents.
Facundo T. Bautista for petitioners.
Jesus T. Garcia for private respondent.

MELO, J.:
The deed of conveyance executed on May 28, 1975 by Juan Galicia, Sr., prior to his demise in 1979, and
Celerina Labuguin, in favor of Albrigido Leyva involving the undivided one-half portion of a piece of land
situated at Poblacion, Guimba, Nueva Ecija for the sum of P50,000.00 under the following terms:
1. The sum of PESOS: THREE THOUSAND (P3,000.00) is HEREBY acknowledged to
have been paid upon the execution of this agreement;
2. The sum of PESOS: TEN THOUSAND (P10,000.00) shall be paid within ten (10) days
from and after the execution of this agreement;
3. The sum of PESOS: TEN THOUSAND (P10,000.00) represents the VENDORS'
indebtedness with the Philippine Veterans Bank which is hereby assumed by the
VENDEE; and
4. The balance of PESOS: TWENTY SEVEN THOUSAND (P27,000.00.) shall be paid
within one (1) year from and after the execution of this instrument. (p. 53, Rollo)
is the subject matter of the present litigation between the heirs of Juan Galicia, Sr. who assert breach of
the conditions as against private respondent's claim anchored on full payment and compliance with the
stipulations thereof.
The court of origin which tried the suit for specific performance filed by private respondent on account of
the herein petitioners' reluctance to abide by the covenant, ruled in favor of the vendee (p. 64, Rollo)

while respondent court practically agreed with the trial court except as to the amount to be paid to
petitioners and the refund to private respondent are concerned (p. 46, Rollo).
There is no dispute that the sum of P3,000.00 listed as first installment was received by Juan Galicia, Sr.
According to petitioners, of the P10,000.00 to be paid within ten days from execution of the instrument,
only P9,707.00 was tendered to, and received by, them on numerous occasions from May 29, 1975, up to
November 3, 1979. Concerning private respondent's assumption of the vendors' obligation to the
Philippine Veterans Bank, the vendee paid only the sum of P6,926.41 while the difference the
indebtedness came from Celerina Labuguin (p. 73, Rollo). Moreover, petitioners asserted that not a single
centavo of the P27,000.00 representing the remaining balance was paid to them. Because of the
apprehension that the heirs of Juan Galicia, Sr. are disavowing the contract inked by their predecessor,
private respondent filed the complaint for specific performance.
In addressing the issue of whether the conditions of the instrument were performed by herein private
respondent as vendee, the Honorable Godofredo Rilloraza, Presiding Judge of Branch 31 of the Regional
Trial Court, Third Judicial Region stationed at Guimba, Nueva Ecija, decided to uphold private
respondent's theory on the basis of constructive fulfillment under Article 1186 and estoppel through
acceptance of piecemeal payments in line with Article 1235 of the Civil Code.
Anent the P10,000.00 specified as second installment, the lower court counted against the vendors the
candid statement of Josefina Tayag who sat on the witness stand and made the admission that the check
issued as payment thereof was nonetheless paid on a staggered basis when the check was dishonored
(TSN, September 1, 1983, pp. 3-4; p. 3, Decision; p. 66, Rollo). Regarding the third condition, the trial
court noted that plaintiff below paid more than P6,000.00 to the Philippine Veterans Bank but Celerina
Labuguin, the sister and co-vendor of Juan Galicia, Sr. paid P3,778.77 which circumstance was construed
to be a ploy under Article 1186 of the Civil Code that "prematurely prevented plaintiff from paying the
installment fully" and "for the purpose of withdrawing the title to the lot". The acceptance by petitioners of
the various payments even beyond the periods agreed upon, was perceived by the lower court as
tantamount to faithful performance of the obligation pursuant to Article 1235 of the Civil Code.
Furthermore, the trial court noted that private respondent consigned P18,520.00, an amount sufficient to
offset the remaining balance, leaving the sum of P1,315.00 to be credited to private respondent.
On September 12, 1984, judgment was rendered:
1. Ordering the defendants heirs of Juan Galicia, to execute the Deed of Sale of their
undivided ONE HALF (1/2) portion of Lot No. 1130, Guimba Cadastre, covered by TCT
No. NT-120563, in favor of plaintiff Albrigido Leyva, with an equal frontage facing the
national road upon finality of judgment; that, in their default, the Clerk of Court II, is
hereby ordered to execute the deed of conveyance in line with the provisions of Section
10, Rule 39 of the Rules of Court;
2. Ordering the defendants, heirs of Juan Galicia, jointly and severally to pay attorney's
fees of P6,000.00 and the further sum of P3,000.00 for actual and compensatory
damages;
3. Ordering Celerina Labuguin and the other defendants herein to surrender to the Court
the owner's duplicate of TCT No. NT-120563, province of Nueva Ecija, for the use of
plaintiff in registering the portion, subject matter of the instant suit;
4. Ordering the withdrawal of the amount of P18,520.00 now consigned with the Court,
and the amount of P17,204.75 be delivered to the heirs of Juan Galicia as payment of the

balance of the sale of the lot in question, the defendants herein after deducting the
amount of attorney's fees and damages awarded to the plaintiff hereof and the delivery to
the plaintiff of the further sum of P1,315.25 excess or over payment and, defendants to
pay the cost of the suit. (p. 69, Rollo)
and following the appeal interposed with respondent court, Justice Dayrit with whom Justices Purisima
and Aldecoa, Jr. concurred, modified the fourth paragraph of the decretal portion to read:
4. Ordering the withdrawal of the amount of P18,500.00 now consigned with the Court,
and that the amount of P16,870.52 be delivered to the heirs of Juan Galicia, Sr. as
payment to the unpaid balance of the sale, including the reimbursement of the amount
paid to Philippine Veterans Bank, minus the amount of attorney's fees and damages
awarded in favor of plaintiff. The excess of P1,649.48 will be returned to plaintiff. The
costs against defendants. (p. 51, Rollo)
As to how the foregoing directive was arrived at, the appellate court declared:
With respect to the fourth condition stipulated in the contract, the period indicated therein
is deemed modified by the parties when the heirs of Juan Galicia, Sr. accepted payments
without objection up to November 3, 1979. On the basis of receipts presented by
appellee commencing from August 8, 1975 up to November 3, 1979, a total amount of
P13,908.25 has been paid, thereby leaving a balance of P13,091.75. Said unpaid
balance plus the amount reimbursable to appellant in the amount of P3,778.77 will leave
an unpaid total of P16,870.52. Since appellee consigned in court the sum of P18,500.00,
he is entitled to get the excess of P1,629.48. Thus, when the heirs of Juan Galicia, Sr.
(obligees) accepted the performance, knowing its incompleteness or irregularity and
without expressing any protest or objection, the obligation is deemed fully complied with
(Article 1235, Civil Code). (p. 50, Rollo)
Petitioners are of the impression that the decision appealed from, which agreed with the conclusions of
the trial court, is vulnerable to attack via the recourse before Us on the principal supposition that the full
consideration of the agreement to sell was not paid by private respondent and, therefore, the contract
must be rescinded.
The suggestion of petitioners that the covenant must be cancelled in the light of private respondent's socalled breach seems to overlook petitioners' demeanor who, instead of immediately filing the case
precisely to rescind the instrument because of non-compliance, allowed private respondent to effect
numerous payments posterior to the grace periods provided in the contract. This apathy of petitioners
who even permitted private respondent to take the initiative in filing the suit for specific performance
against them, is akin to waiver or abandonment of the right to rescind normally conferred by Article 1191
of the Civil Code. As aptly observed by Justice Gutierrez, Jr. inAngeles vs. Calasanz (135 SCRA 323
[1985]; 4 Paras, Civil Code of the Philippines Annotated, Twelfth Ed. [1989], p. 203:
. . . We agree with the plaintiffs-appellees that when the defendants-appellants, instead of
availing of their alleged right to rescind, have accepted and received delayed payments
of installments, though the plaintiffs-appellees have been in arrears beyond the grace
period mentioned in paragraph 6 of the contract, the defendants-appellants have waived,
and are now estopped from exercising their alleged right of rescission . . .
In Development Bank of the Philippines vs. Sarandi (5 CAR (25) 811; 817-818; cited in 4 Padilla, Civil
Code Annotated, Seventh Ed. [1987], pp. 212-213) a similar opinion was expressed to the effect that:

In a perfected contract of sale of land under an agreed schedule of payments, while the
parties may mutually oblige each other to compel the specific performance of the monthly
amortization plan, and upon failure of the buyer to make the payment, the seller has the
right to ask for a rescission of the contract under Art. 1191 of the Civil Code, this shall be
deemed waived by acceptance of posterior payments.
Both the trial and appellate courts were, therefore, correct in sustaining the claim of private respondent
anchored on estoppel or waiver by acceptance of delayed payments under Article 1235 of the Civil Code
in that:
When the obligee accepts the performance, knowing its incompleteness or irregularity,
and without expressing any protest or objection, the obligation is deemed fully complied
with.
considering that the heirs of Juan Galicia, Sr. accommodated private respondent by accepting the latter's
delayed payments not only beyond the grace periods but also during the pendency of the case for specific
performance (p. 27, Memorandum for petitioners; p. 166, Rollo). Indeed, the right to rescind is not
absolute and will not be granted where there has been substantial compliance by partial payments
(4 Caguioa, Comments and Cases on Civil Law, First Ed. [1968] p. 132). By and large, petitioners'
actuation is susceptible of but one construction that they are now estopped from reneging from their
commitment on account of acceptance of benefits arising from overdue accounts of private respondent.
Now, as to the issue of whether payments had in fact been made, there is no doubt that the second
installment was actually paid to the heirs of Juan Galicia, Sr. due to Josefina Tayag's admission in
judicio that the sum of P10,000.00 was fully liquidated. It is thus erroneous for petitioners to suppose that
"the evidence in the records do not support this conclusion" (p. 18, Memorandum for Petitioners; p.
157, Rollo). A contrario, when the court of origin, as well as the appellate court, emphasized the frank
representation along this line of Josefina Tayag before the trial court (TSN, September l, 1983, pp. 3-4; p.
5, Decision in CA-G.R. CV No. 13339, p. 50, Rollo; p. 3, Decision in Civil Case No. 681-G, p. 66, Rollo),
petitioners chose to remain completely mute even at this stage despite the opportunity accorded to them,
for clarification. Consequently, the prejudicial aftermath of Josefina Tayag's spontaneous reaction may no
longer be obliterated on the basis of estoppel (Article 1431, Civil Code;Section 4, Rule 129; Section 2(a),
Rule 131, Revised Rules on Evidence).
Insofar as the third item of the contract is concerned, it may be recalled that respondent court applied
Article 1186 of the Civil Code on constructive fulfillment which petitioners claim should not have been
appreciated because they are the obligees while the proviso in point speaks of the obligor. But, petitioners
must concede that in a reciprocal obligation like a contract of purchase, (Ang vs. Court of Appeals, 170
SCRA 286 [1989]; 4 Paras, supra, at p. 201), both parties are mutually obligors and also obligees
(4 Padilla, supra, at p. 197), and any of the contracting parties may, upon non-fulfillment by the other privy
of his part of the prestation, rescind the contract or seek fulfillment (Article 1191, Civil Code). In short, it is
puerile for petitioners to say that they are the only obligees under the contract since they are also bound
as obligors to respect the stipulation in permitting private respondent to assume the loan with the
Philippine Veterans Bank which petitioners impeded when they paid the balance of said loan. As vendors,
they are supposed to execute the final deed of sale upon full payment of the balance as determined
hereafter.
Lastly, petitioners argue that there was no valid tender of payment nor consignation of the sum of
P18,520.00 which they acknowledge to have been deposited in court on January 22, 1981 five years after
the amount of P27,000.00 had to be paid (p. 23, Memorandum for Petitioners; p. 162, Rollo). Again this
suggestion ignores the fact that consignation alone produced the effect of payment in the case at bar

because it was established below that two or more heirs of Juan Galicia, Sr. claimed the same right to
collect (Article 1256, (4), Civil Code; pp. 4-5, Decision in Civil Case No. 681-G; pp. 67-68, Rollo).
Moreover, petitioners did not bother to refute the evidence on hand that, aside from the P18,520.00 (not
P18,500.00 as computed by respondent court) which was consigned, private respondent also paid the
sum of P13,908.25 (Exhibits "F" to "CC"; p. 50, Rollo). These two figures representing private
respondent's payment of the fourth condition amount to P32,428.25, less the P3,778.77 paid by
petitioners to the bank, will lead us to the sum of P28,649.48 or a refund of P1,649.48 to private
respondent as overpayment of the P27,000.00 balance.
WHEREFORE, the petition is hereby DISMISSED and the decision appealed from is hereby AFFIRMED
with the slight modification of Paragraph 4 of the dispositive thereof which is thus amended to read:
4. ordering the withdrawal of the sum of P18,520.00 consigned with the Regional Trial
Court, and that the amount of P16,870.52 be delivered by private respondent with legal
rate of interest until fully paid to the heirs of Juan Galicia, Sr. as balance of the sale
including reimbursement of the sum paid to the Philippine Veterans Bank, minus the
attorney's fees and damages awarded in favor of private respondent. The excess of
P1,649.48 shall be returned to private respondent also with legal interest until fully paid
by petitioners. With costs against petitioners.
SO ORDERED.