Академический Документы
Профессиональный Документы
Культура Документы
Areola v CA
FACTS:
Ruling
Under Art. 1191 (2), the injured party is given a choice between
fulfillment or rescission of obligation in case one of the obligors
fails to comply with what is incumbent upon him. Said article
entitles injured party to payment of damages whether he demands
fulfillment or rescission. Untenable then is PR's argument, namely
reinstatement being equivalent to fulfillment of its obligation,
divests petitioner's rightful claim over damages
P should be awarded with damages- nominal damages since no
substantial injury or actual damages have been shown.
Facts only
FACTS: Santos Areola, a lawyer from Dagupan City, availed of a
Personal Accident InsurancePolicy from Prudential, but seven
months after the issuance of the policy, On June 29,
1985,Prudential unilaterally cancelled the policy because company
records revealed that Areolafailed to pay his premiums.A few days
later, however, Prudential found out that Areola actually paid the
premiums andthat the branch manager, Teofilo Malapit, failed to
remit them. Thus, Prudential offered toreinstate the policy and
even proposed to extend its lifetime to December 17, 1985.Areola
filed a suit for breach of contract and damages against Prudential.
(Some details about the policy)
Obtained from Baguio branch of Prudential, for one year (Nov
1984-Nov 1985), premium of1470 but total monthly was 1609.5
(doc stamp 110.25, 2% premium tax of 29.4). The policystates that
the Statement of Account is not a receipt and an official receipt will
be given afterpayment but if payment is done through a
representative, payor will be given a provisionalreceipt. Areola was
given provisional receipt but Malapit just failed to remit and
thereforeAreola received no official receipt. Areola sent demand
letters for immediate reinstatement,bank apologized but did not
immediately reinstate, so he filed the case. The insurance
agentwas Carlito Ang.
Ong v CA
Facts
Petitioner Jaime Ong and Respondent spouses Robles an
Agreement of Purchase and Sale (Nota Bene: Contract to Sell)
with regards two parcels of land with a rice mill and piggery
situated at Quezon for P2M. As part of the terms and conditions,
petitioner shall advance downpayment of 300K, shall pay the loan
of the spouses of the bank, and will pay the balance of the
purchase price quarterly.
Petitioner was able to pay the downpayment and subsequently
occupied the property. However, he gave the spouses postdated
checks which were dishonored due to insufficient funds. To make it
worse, he was not able to fully pay the loan of the spouses in the
bank.
The bank threatened to foreclose the mortgage, so what the
spouses did was to sell three of the transformers of the rice mill in
order to satisfy the loan obligation.
Respondents now want to rescind the contract on account of Ongs
non-fulfillment of obligation and seek to recover the property with
damages.
RTC upheld the rescission and ordered mutual restitution as well as
awarded exemplary damages. The CA deleted the award of
exemplary damages.
Issue:
1. WON the respondent spouses may rescind the contract? YES,
but rescind through 1191 and not 1381.
Held:
Issues
1. W/N erroneous cancellation of insurance policy entitle petitionerinsured to payment of damages?
b. Logs cut were rotten; thus, they were unable to sell them.
3. In the event that the payments called for are not sufficient to
liquidate the foregoing indebtedness, the balance outstanding
after the said payments have been applied shall be paid by the
debtor in full no later than June 30, 1965.
5. In the event that the debtor fails to comply with any of its
promises, the Debtor agrees without reservation that Creditor shall
have the right to consider the Logging Agreement rescinded,
without the necessity of any judicial suit ALUMCO continued its
logging operations, but again incurred an unpaid account. On July
19,1965, UP informed ALUMCO that it had, as of that date,
considered rescinded and of no further legal effect the logging
agreement, and that UP had already taken steps to have another
concessionaire take over the logging operation. ALUMCO filed a
petition to enjoin UP from conducting the bidding. The lower court
ruled in favor of ALUMCO, hence, this appeal.
ISSUE:
Can petitioner UP treat its contract with ALUMCO rescinded, and
may disregard the same before any judicial pronouncement to that
effect?
RULING:
Yes. In the first place, UP and ALUMCO had expressly stipulated
that upon default by the debtor, UP has the right and the power to
consider the Logging Agreement of December 2, 1960 as
rescinded without the necessity of any judicial suit. As to such
special stipulation and in connection with Article 1191 of the Civil
Code, the Supreme Court, stated in Froilan vs. Pan Oriental
Shipping Co:
There is nothing in the law that prohibits the parties from entering
into agreement that violation of the terms of the contract would
cause cancellation thereof, even without court intervention. In
Boysaw v Interphil
Angeles v Calasanz
FACTS
Calasanz (D) demanded payment of past due accounts, but did not
receive any. Eventually, Calansanz (D) canceled the said contract
because Angeles (P) failed to pay the subsequent payments.
Angeles (P) asked for reconsideration, but was denied.
two days, the plaintiffs responded and advised the vendor that he
is willing to pay provided that Mr. Raymundo: (1) delivers actual
possession of the property to them not later than January 15, 1987
for their occupancy (2) causes the release of title and mortgage
from the BPI and make the title available and free from any liens
and encumbrances (3) executes an absolute deed of sale in their
favor free from any liens and encumbrances not later than Jan. 21,
1987.
Upon the appeal of the private respondent to the CA, the court
upheld the earlier decision of the RTC regarding the validity of the
rescission made by private respondents.
ISSUE: Whether the rescission of contract made by the private
respondent is valid.
HELD: There is a breach of contract because the petitioners did not
merely stopped paying the mortgage obligations but they also
failed to pay the balance purchase price. Their conditional offer to
Mr. Raymundo cannot take the place of actual payment as would
discharge the obligation of the buyer under contract of sale.
Mr. Raymundos source of right to rescind the contract is Art. 1191
of the Civil Code predicated on a breach of faith by the other party
who violates the reciprocity between them. Moreover, the new
obligations as preconditions to the performance of the petitioners
own obligation were repudiation of an existing obligation, which
was legally due and demandable under the contract of sale.
The breach committed by the petitioners was the non-performance
of a reciprocal obligation. The mutual restitution is required to
bring back the parties to their original situation prior to the
inception of the contract. The initial payment and the mortgage
payments advanced by petitioners should be returned by private
respondents, lest the latter unjustly enriched at the expense of the
other. Rescission creates the obligation to return the obligation of
contract. To rescind, is to declare a contract void at its inception
and to put an end to it as though it never was.
The decision of the CA is affirmed with modification that private
respondents are ordered to return to petitioners, the amount they
have received in advanced payment.
Padilla v Paredes
FACTS: On October 20, 1988, Albert R. Padilla and Floresco and
Adelina Paredes entered into a contract to sell a parcel of land in
San Juan, La Union. At that time, the land was untitled although
private respondents were paying taxes thereon. Under the
contract, petitioner undertook to secure title to the property in
private respondents names. Of the P312,840.00 purchase price,
petitioner was to pay a down payment of P50,000.00 upon signing
of the contract, and the balance was to be paid within ten days
from the issuance of a court order directing issuance of a decree of
registration for the property.
On December 27, 1989, the court ordered the issuance of a decree
of land registration for the subject property. The property was
titled in the name of private respondent Adelina Paredes. Private
respondents then demanded payment of the balance of the
purchase price.
Petitioner then made several payments to private respondents,
some even before the court issued an order for the issuance of a
decree of registration and they also offered to pay the land
through a check. Still, petitioner failed to pay the full purchase
price even after the expiration of the period set. In a letter dated
February 14, 1990, private respondents, through counsel,
demanded payment of the remaining balance, with interest and
attorneys fees, within five days from receipt of the letter.
Otherwise, private respondents stated they would consider the
contract rescinded.
On February 28, 1990, petitioner made a payment of P100,000.00
to private respondents, still insufficient to cover the full purchase
price. Shortly thereafter, in a letter dated April 17, 1990 private
Vda de Umali v CA
Tan then filed a case for recovery of sum of money with damages,
ISSUE: WON THERE WAS SUBSTANTIAL BREACH BY THE SPOUSES,
MERITING RESCISSION OF THE CONTRACT?
HELD: NO. 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 is clear from a reading of the Civil
Code provisions. However, it is equally settled that, in the absence
of a stipulation to the contrary, this power must be invoked
judicially; it cannot be exercised solely on a party's own judgment
that the other has committed a breach of the obligation. Where
there is nothing in the contract empowering the petitioner to
rescind it without resort to the courts, the petitioner's action in
unilaterally terminating the contract in this case is unjustified.
Petitioner, in rescinding the sale, claims that a substantial breach
of the obligation has been committed by the private respondents.
Nevertheless, the alleged breach of the obligation by the private
respondents, which consists in a mere delay for a few days in
clearing the title to the property, cannot be considered substantial
enough to warrant rescission of the contract.
A thorough review of the records clearly indicates that private
respondents had substantially complied with their undertaking of
clearing the title to the property. It is a settled principle of law that
rescission will not be permitted for a slight or casual breach of the
contract but only for such breaches as are so substantial and
fundamental as to defeat the object of the parties in making the
agreement. A court, in determining whether rescission is
warranted, must exercise its discretion judiciously considering that
the question of whether a breach of a contract is substantial
depends upon the attendant circumstances.
In this case, it is true that as of the date set for the execution of
the final deed of sale, the mortgage lien in favor of DBP annotated
in the title has not yet been cancelled as it took DBP some time in
processing the papers relative thereto. However, just a few days
after, the cancellation of the DBP mortgage was entered by the
Register of Deeds and duly noted on the title. Time not being of
the essence in the agreement, a slight delay on the part of the
private respondents in the performance of their obligation, is not
sufficient ground for the resolution of the agreement, more so
when the delay was not totally attributable to them.
Inasmuch as the private respondents are ready, willing and able to
comply with their obligation to deliver title to the property subject
of the sale and had already demanded that petitioner pay the full
amount of the purchase price, the petitioner must be considered
as having incurred in delay. This conclusion is warranted by the
clear provision of Article 1169 of the Civil Code.
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. It is basic that the
breach of a contract gives the aggrieved party under the law and
even under general principles of fairness, the right to rescind the
contract or to ask for specific performance. Petitioner having failed
to comply with her obligation of paying the balance of the
purchase price despite demands by private respondents, private
respondents were clearly entitled to their counterclaim for specific
performance, as correctly adjudged by the respondent court.
One final point, the decision of the respondent Court of Appeals
ordered execution by private respondents of the absolute deed of
sale conveying the subject property to petitioner and payment by
petitioner of the balance of the purchase price immediately upon
finality of such judgment. However, under the third paragraph of
Article 1191 of the Civil Code, the Court is given a discretionary
power to allow a period within which a person in default may be
permitted to perform his obligation. Considering the huge amount
of money involved in this sale, the Court, in the exercise of its
as lessee, in the same firm. Upon hearing the cause the trial court
absolved the defendants from the complaint and the plaintiffs
appealed.
No transcript of the oral testimony appears in the record, with the
result that our view of the case will be limited to the questions of
law arising upon the facts found by the trial court, in connection
with the letter (Exhibit K) referred to in the opinion.
It appears that by contract dated September 1, 1920, the plaintiffs,
as owners of a parcel of land on Gagalangin Street, Tondo District,
Manila, let the same, with the improvements thereon, to the firm
of Jacinto, Palma y Hermanos, S. C., for the term of fifteen years at
a monthly rental of P400 payable in advance during the first ten
days of each month. Among the provisions contained in this
contract we note clause 9, which is to the effect that the terms and
conditions of the contract shall be obligatory upon and redound to
the benefit of the persons composing the lessee firm, their heirs
executors, administrators, successors and assigns, as well as the
successors and assigns of the lessors. The lessee entered upon the
possession of the leased premises upon the date above stated;
and the payment of the agreed rental was continued until
November and December of the year 1923, for which months the
rent fell into arrears.
Meanwhile several successive reorganizations of the lessee firm
had been effected as follows: The first lessee, Jacinto, Palma y
Hermanos, S. C., was succeeded by the firm of P. & F. Jacinto, and
the latter in turn by the firm of Palma Brothers & Co., Ltd., to be
itself again succeeded by Palma & Co,. a corporation. The plaintiffs
were informed of these changes in the personality of the lessee
and, as the trial court found, acquiesced therein.
In view of the default in the payment of the monthly rental for the
months of November and December, 1923, Mr. Gregorio Araneta,
as attorney for Manuel Rios, addressed a letter, on December 27,
1923, to Rafael Palma, as partner in the original firm and its former
manager. In the course of this letter the writer asked Mr. Palma, in
case the lessee could not continue to pay the rent, to return the
property at once to Rios, "without prejudice to ulterior
responsibility for damages for breach of contract." The writer
added that Rios desired prompt action in the matter and that he
must have possession of the property on or before the 29th of the
month, otherwise he would be compelled to begin a detainer suit.
In response to this demand the occupant, Palma Bros. & Co., Ltd.,
or Palma & Co., or whoever had actual possession, vacated the
premises on December 29, giving notification to the plaintiff
Manuel Rios, who at once assumed possession. We gather from the
record that the rent for November and December, 1923, has
subsequently been paid; but the premises appear to have been
entirely vacant during the months of January and February, 1924,
and for this period no compensation has been paid to the plaintiffs
by any one. Beginning with March, 1924, the property was let by
the plaintiffs for a term of three years, renewable for another
three, to the firm of Walter A. Smith Co., Inc., upon the best terms
then procurable in the market, which was at a monthly rental of
P250.
In this court the plaintiffs, as appellants, have assigned error
among other things, to the failure of the trial court to give
judgment for the sum of P800, the stipulated rent for January and
February, 1924, and for the further sum of P22,500, being the
difference between the amount which the lessee had agreed to
pay during the twelve years that the lease was to run from the
time when the plaintiffs resumed possession and the amount
which, during the same period, the plaintiffs would obtain from the
new-lessee, or others, at the rate of P150 a month.
The firm of Jacinto, Palma y Hermanos, S. C., allowed a default
judgment to be entered in this case for its failure to answer, but
the individual defendants interposed an answer relying upon two
special defenses which will be examined in turn. It is first claimed
that the original lessee and the partners in that concern were
discharged by a novation of the original contract whereby the
lessee was changed and new debtor substituted for the original
debtor. We are of the opinion that there is no merit in this defense
and that the facts found by the trial court are not sufficient in law
to show a discharge of the parties liable upon the original lease.
What appears to have occurred, and what the court found, was
that the plaintiff Rios said that it was all right when told of the
successive changes in the personality of the lessee, and he seems
to have been content to receive the monthly rent from anybody
Mariano Rivera then went to his lawyer bringing with him the
signed documents. He also brought Fidela and her son Oscar, so
that the latter two may sign the mortgage and the Kasunduan
there. Although Fidela intended to sign only the Kasunduan and
the REM, she inadvertently affixed her signature on all 3
documents. Mariano then gave Fidela the amount for the 1st
installment. Later, he also gave Fidela a check for the 2nd
installment. Mariano also gave Oscar several amounts upon the
latters demand for the payment of the balance despite his lack of
authority to receive payments under the Kasunduan.
Fidela entrusted the owners copy of TCT to Mariano to guarantee
compliance with the Kasunduan.
When Mariano unreasonably refused to return the TCT,
respondents caused the annotation on TCT of an Affidavit of Loss
of the owners duplicate copy of the title. However, Mariano then
registered the Deed of Absolute Sale and got a new TCT.
Respondents then filed a complaint asking that the Kasunduan be
rescinded for failure of the Riveras to comply with its conditions,
with damages. They also sought the annulment of the Deed of
Absolute Sale on the ground of fraud. Respondents claimed that
Fidela never intended to enter into a deed of sale at the time of its
execution and that she signed the said deed on the mistaken belief
that she was merely signing copies of the Kasunduan.
ISSUE: WON the Deed of Absolute Sale is valid and binding?
HELD: NO. The deed is void in its entirety.
Rescission of reciprocal obligations under Article 1191 of the New
Civil Code should be distinguished from rescission of contracts
under Article 1383 of the same Code. Both presuppose contracts
validly entered into as well as subsisting, and both require mutual
restitution when proper, nevertheless they are not entirely
identical.
While Article 1191 uses the term rescission, the original term used
in Article 1124 of the old Civil Code, from which Article 1191 was
based, was resolution. Resolution is a principal action that is based
on breach of a party, while rescission under Article 1383 is a
subsidiary action limited to cases of rescission for lesion under
Article 1381 of the New Civil Code.
Obviously, the Kasunduan does not fall under any of those
situations mentioned in Article 1381. Consequently, Article 1383 is
inapplicable. Hence, we rule in favor of the respondents.
May the contract entered into between the parties, however, be
rescinded based on Article 1191? A careful reading of the
Kasunduan reveals that it is in the nature of a contract to sell, as
distinguished from a contract of sale. In a contract of sale, the title
to the property passes to the vendee upon the delivery of the
thing sold; while in a contract to sell, ownership is, by agreement,
reserved in the vendor and is not to pass to the vendee until full
payment of the purchase price. In a contract to sell, the payment
of the purchase price is a positive suspensive condition, the failure
of which is not a breach, casual or serious, but a situation that
prevents the obligation of the vendor to convey title from acquiring
an obligatory force.
Respondents in this case bound themselves to deliver a deed of
absolute sale and clean title covering Lot No. 1083-C after
petitioners have made the second installment. This promise to sell
was subject to the fulfillment of the suspensive condition that
petitioners pay P750,000 on August 31, 1987, and deposit a
postdated check for the third installment of P1M. Petitioners,
however, failed to complete payment of the second installment.
The non-fulfillment of the condition rendered the contract to sell
ineffective and without force and effect. It must be stressed that
the breach contemplated in Article 1191 of the New Civil Code is
the obligors failure to comply with an obligation already extant,
not a failure of a condition to render binding that obligation. Failure
to pay, in this instance, is not even a breach but an event that
Almira v CA
FACTS:
Petitioners are the wife and the children of the late Julio Garcia
whoinherited from his mother, Ma. Alibudbud, a portion of a
90,655 square meterproperty denominated as lot 1642 of the Sta.
Rosa Estate in Brgy. Caingin Sta.Rosa Laguna. The lot was coowned and registered in the names of threepersons with the
following shares: Vicente de Guzman (1/2), Enrique Hemedes(1/4)
and Francisco Alibudbud, the father of Ma. Alibudbud (1/4).
Although therewad no separate title in the name of Julio Garcia,
there were tax declaration inhis name to the intent of his
grandfathers share covering the area of 21460square meter.On
July 5, 1984, petitioner as heirs of Julio Garcia, and
respondentFederico Brines entered a Kasunduan ng Pagbibilihan
(Kasunduan for Brevity)over the 21460 square meter portion for
the sum of P150.000.00. Respondentpaid P65, 000.00 upon
execution of the contract while the balance of P85,000.00 was
made payable within six (6) months from the date of the
executionof the instrument. The time of the execution of the
kasunduan, petitionersallegedly informed respondent that TCT No.
RT-1076 was in the possession of their cousin, Conchila Alibudbud,
who having bought Vicente de Guzmans shares, owned the
bigger portion of lot 1642. This standing
notwithstanding,respondent willingly entered into the Kasunduan
provided that the full paymentof the purchase price will be made
upon delivery to him of the title.Respondent took possession of the
property subject of the Kasunduan andmade various payments to
petitioiners amountiong to P58500.00. However uponfailure of
petitionere to deliver to him a separate title to the property in
thename of Julio Garcia he refused to make further payments,
prompting petitionerto file a civil action before the RTC for a
rescission of the Kasunduan, return byrespondent to petitioner of
the possession of the subject parcel of land, andpayment by
respondent of damages in favour of petitioners.
ISSUE
Whether or not the petitioner may rescind the Kasunduan pursuant
toArticle 1191 of the Civil Code for the failure of respondent to give
full payment of the balance of the purchase price.
RULING:
NO, the right of the parties are governed by the terms ands the
nature of the contract they entered. Hence, although the nature of
the Kasunduan wasnever places in dispute by both parties, it is
necessary to ascertain whether theKasunduan is a contract to sell
or a contract of Sale. Although both parties haveconsistency
referred to the Kasunduan as a contract to Sell, a careful reading
of the provision of the Kasunduan reveals that it is a contract of
Sale. A deed of sale is absolute in nature in the absence of an any
stipulation reserving title tothe vendor until full payment of the
purchase price. The delivery of a separationtitle in the name of
Julio Garcia was a condition imposed on respondentsobligation to
pay the balance of the purchase price. It was not a
conditionimposed in the perfection of the contract of Sale. The
rescission will not prosper since the power to rescind is only given
tothe injured party. The injured party is the party who has faithfully
fulfilled hisobligation. In the case at bar, the petitioners were not
ready, willing and able tocomply with their obligation to deliver a
separate title in the name of Julio Garciato respondent therefore,
thy are not in a position to ask for rescission. Failure tocomply with
a condition imposed on the performance of an obligation gives
theother party the option either to refuse to proceed with the sale
or to waive thecondition under Art 1545 of the civil code. Hence it
is the respondent who has the option.
Central Bank v CA
Facts:
April 28, 1965 - Island Savings Bank (ISB) approved the loan
application for P80,000 of Sulpicio Tolentino, who, as a security for
the loan, also executed a real estate mortgage over his 100-ha
land. The approved loan application called for P80,000 loan,
repayable in semi-annual installments for a period of 3 years, with
12% interest.
May 22, 1965 a mere P17,000 partial release of the loan was
made by ISB, and Tolentino and his wife Edita signed a promissory
note for P17,000 at 12% annual interest, payable within 3 years
from the date of execution of the contract at semi-annual
installments of P3,459.
An advance interest for the P80,000 loan covering a 6-mo period
amounting to P4,800was deducted from the partial release of
P17,000, but this was refunded to Tolentino on July 23, 1965, after
being informed by ISB that there was no fund yet available for the
release of the P63,000 balance.
Aug. 13, 1965 the Monetary Board of the Central Bank issued
Resolution No. 1049, which prohibited ISB from making new loans
and investments, after finding that it was suffering liquidity
problems.
June 14, 1968 the Monetary Board issued Resolution No. 967,
which prohibited ISB from doing business in the Philippines, after
finding that it failed to put up the required capital to restore its
solvency.
Aug. 1, 1968 ISB, in view of non-payment of the P17,000 covered
by the promissory note, filed an application for the extra-judicial
foreclosure of the real estate mortgage covering the 100-ha land;
and the sheriff scheduled auction.
Tolentino filed a petition with the CFI for injunction, specific
performance or rescission and damages with preliminary
injunction, alleging that since ISB failed to deliver the P63,000
remaining balance of the loan, he is entitled to specific
performance by ordering ISB to deliver it with interest of 12% per
annum from April 28, 1965, and if said balance cannot be
delivered, to rescind the real estate mortgage.
CFI issued a TRO enjoining ISB from continuing with the foreclosure
of the mortgage, however, after finding Tolentinos petition
unmeritorious, ordered the latter to pay ISB P17,000 plus legal
interest and legal charges and lifting the TRO so the sheriff may
proceed with the foreclosure.
CA, on appeal by Tolentino, modified CFIs decision by affirming
dismissal of Tolentinos petition for specific performance, but ruled
that ISB can neither foreclose the mortgage nor collect the
P17,000 loan.
SC: The parties, in the P80,000 loan agreement, undertook
reciprocal obligations, wherein the obligation/promise of each
party is the consideration for that of the other; and when one party
has performed or is ready and willing to perform his part of the
contract, the other party who has not performed or is not ready
and willing to perform incurs in delay (Art. 1169, CC).
When Tolentino executed a real estate mortgage, he signified his
willingness to pay the P80,000 loan, and from such date, the
obligation of ISB to furnish the loan accrued. Thus, ISBs delay
started on April 28, 1965 and lasted 3 years or when Resolution
No. 967 was issued prohibiting ISB from doing further business,
which made it legally impossible from ISB to furnish the P63,000 of
the loan.
Resolution No. 1049 cannot interrupt the default of ISB in
complying with its obligation to release the P63,000 balance
because it merely prohibited ISB from making new loans and
investments, not from releasing the balance of loan agreements
previously contracted.
The fact that Tolentino demanded and accepted the refund of the
pre-deducted interest cannot be taken as a waiver of his right to
collect the P63,000 balance. The act of ISB in asking for the
advance interest was improper considering that only P17,000 out
of the P80,000 loan was released.
Issues/Held/Ratio
1)
WON the action of Tolenitno for specific performance can
prosper. NO.
Since ISB was in default under the agreement, Tolentino may
choose between specific performance or rescission, but since ISB
is now prohibited from doing further business, the only remedy left
is Rescission only for the P63,000 balance of the loan.
2)
WON Tolentino is liable to pay the P17,000 debt covered
by the promissory note. YES.
The bank was deemed to have complied with its reciprocal
obligation to furnish a P17,000 loan. The promissory note gave rise
to Tolentinos reciprocal obligation to pay such loan when it falls
due and his failure to pay the overdue amortizations under the
promissory note made him a party in default, hence not entitled to
rescission (Art. 1191, CC). ISB has the right to rescind the
promissory note, being the aggrieved party.
Since both parties were in default in the performance of their
reciprocal obligations, both are liable for damages. In case both
parties have committed a breach of their reciprocal obligations,
the liability of the first infractor shall be equirably tempered by the
courts (Art. 1192, CC). The liability of ISB for damages in not
furnishing the entire loan is offset by the liability of Tolentino for
damages (penalties and surcharges) for not paying his overdue
P17,000 debt. Since Tolentino derived some benefit for his use of
the P17,000, he should account for the interest thereon (interest
was not included in the offsetting).
3)
WON Tolentinos real estate mortgage can be foreclosed
to satisfy the P17,000 if his liability to pay therefor subsists. NO.
The fact that when Tolentino executed his real estate mortgage, no
consideration was then in existence, as there was no debt yet
because ISB had not made any release on the loan, does not make
the real estate mortgage void for lack of consideration.
It is not necessary that any consideration should pass at the time
of the execution of the contract of real mortgage. When the
consideration is subsequent to the mortgage, the latter can take
effect only when the debt secured by it is created as a binding
contract to pay. And when there is partial failure of consideration,
the mortgage becomes unenforceable to the extent of such failure.
Where the indebtedness actually owing to the holder of the
mortgage is less than the sum named in the mortgage, the
mortgage cannot be enforced for more than the actual sum due.
Since ISB failed to furnish the P63,000 balance, the real estate
mortgage of Tolentino became unenforceable to such extent.
P63,000 is 78.75% of P80,000, hence the mortgage covering 100
ha is unenforceable to the extent of 78.75 ha. The mortgage
covering the remainder of 21.25 ha subsists as a security for the
P17,000 debt.
Judgment:
1)
Tolentino is ordered to pay ISB P17,000 plus P41, 210
(12% interest per annum)
2)
In case Tolentino fails to pay, his real estate mortgage
covering 21.25 ha shall be foreclosed to satisfy his total
indebtedness
3)
The real estate mortgage covering 78.75 ha is
unenforceable and ordered released in favor of Tolentino
Palma Gil v CA
Facts:
Held:
1.The Kasulatan was clearly a Contract of Sale. A deed of sale is
considered absolute in nature when there is neither a stipulation in
the deed that title to the property sold is reserved to the seller
until the full payment of the price; nor a stipulation giving the
vendor the right to unilaterally resolve the contract the moment
the buyer fails to pay within a fixed period.
2. In a contract of sale, the remedy of an unpaid seller is either
specific performance or rescission. Under Article 1191 of the Civil
Code, the right to rescind an obligation is predicated on the
violation of the reciprocity between parties, brought about by a
breach of faith by one of them. Rescission, however, is allowed
only where the breach is substantial and fundamental to the
fulfillment of the obligation.
In the present case, the failure of respondents to pay the balance
of the purchase price within ten years from the execution of the
Deed did not amount to a substantial breach. In the Kasulatan, it
was stipulated that payment could be made even after ten years
from the execution of the Contract, provided the vendee paid 12
percent interest. The stipulations of the contract constitute the law
between the parties; thus, courts have no alternative but to
enforce them as agreed upon and written.
Petitioner never made any demand for the balance of the purchase
price. Petitioner even refused the payment tendered by
respondents during her husbands funeral, thus showing that she
was not exactly blameless for the lapse of the ten-year period. Had
she accepted the tender, payment would have been made well
within the agreed period.
3. The Kasulatan does not allow the it to be converted to a
potestative obligation. First, nowhere is it stated in the Deed that
payment of the purchase price is dependent upon whether
respondents want to pay it or not. Second, the fact that they
already made partial payment thereof only shows that the parties
intended to be bound by the Kasulatan.
Cordero v FS Management
FACTS: Belen Cordero, in her own behalf and as attorney-in-fact of
her co-petitioners, entered into a contract to sell with respondent
F.S. Management and Development Corporation (FSMDC) over five
(5) parcels of land located in Batangas. Pursuant to the terms and
conditions of the contract, FSMDC paid earnest money. No further
payments were made thereafter. Cordero sent FSMDC a demand
letter, revoking the contract to sell and treating the payments
already made as payment for damages suffered. FSMDC likewise
demanded the payment for actual damages suffered due to loss of
income.
Cordero thereafter filed before the Regional Trial Court of
Paraaque a complaint for rescission of contract with damages
alleging FSMDC failed to comply with its obligations under the
contract to sell; and that consequently entitled to rescind the
contract to sell as well as demand the payment of damages.
FSMDC, on the other hand, alleged that Cordero has no cause of
action considering that they were the first to violate the contract
to sell. It was Cordero who prevented FSMDC from complying with
its obligation to pay in full by refusing to execute the final contract
of sale unless additional payment of legal interest is made.
Moreover, Corderos refusal to execute the final contract of sale
was due to the willingness of another buyer to pay a higher price.
The RTC issued its decision, finding in favor of Cordero et al. and
ordered FSMDC to pay damages and attorneys fees. The Court of
Appeals affirmed the decision of the lower court and denied their
motion for reconsideration.
ISSUE: Whether or not contract to sell may be subject to rescission
under Article 1191 of the Civil Code
HELD: Under a contract to sell, the seller retains title to the thing
to be sold until the purchaser fully pays the agreed purchase price.
The full payment is a positive suspensive condition, the nonfulfillment of which is not a breach of contract but merely an event
that prevents the seller from conveying title to the purchaser. The
FACTS:
The Plaza, through its president, Jose C. Reyes, entered into a
contract with Rhogen Builders, represented by Ramon C. Gaite, for
the construction of a restaurant building in Greenbelt, Makati for
the price of PhP7,600,00.00. To secure Rhogen's compliance with
its obligation, Gaite and FGU Insurance corporation executed a
surety bond in favor of the Plaza.
Subsequently, Gaite was ordered by Engineer Gonzales to stop
construction due to violations of the National Building Code. This
was referred to the Plaza's Project Manager, Tayzon.
Later, the permit for the construction of the restaurant was
revoked for non-compliance with the National Building Code.
Gaiterequested that they fix the problem with cooperation from
the Plaza but the Reyes, on behalf of the Plaza, said that it was not
their responsibility to help Rhogen after its failure to comply with
the construction requirements. Because Reyes would neither
cooperate with Rhogen to fix the problem nor compensate Rhogen
for the percentage of work done, Gaite informed the Plaza that he
would be terminating their contract based on the Contractor's
Right to Stop Work or Terminate Contracts as provided for in their
agreement.
Later, the Plaza filed a case against Gaite and FGU for breach of
contract, sum of money and damages and also a separate case for
nullification of the project development contract. The RTC ruled in
favor of the Plaza saying that instead of rectifying the
violations,Rhogen continued with the construction work thereby
causing more damage. The trial court pointed out that Rhogen is
not only expected to be aware of standard requirements and
pertinent regulations on construction work, but also expressly
bound itself under the General Construction Contract to comply
with all the laws, city and municipal ordinances and all
government regulations.Having failed to complete the project
within the stipulated period and comply with its obligations,
Rhogen was thus declared guilty of breaching the Construction
Contract and is liable for damages under Articles 1170 and 1167 of
the Civil Code.
The CA affirmed the RTC decision saying that the Plaza cannot now
be demanded to comply with its obligation under the contract
since Rhogen has already failed to comply with its own contractual
obligation. Thus, The Plaza had every reason not to pay the
progress billing as a result of Rhogens inability to perform its
obligations under the contract. Further, the stoppage and
revocation orders were issued on account of Rhogens own
violations involving the construction as found by the local building
official. Clearly,Rhogen cannot blame The Plaza for its own failure
to comply with its contractual obligations. The CA stressed that
Rhogen obliged itself to comply with "all the laws, city and
municipal ordinances and all government regulations insofar as
they are binding upon or affect the parties to the contract, the
work or those engaged thereon.
ISSUE: Whether the CA erred in not holding that there were valid
and legal grounds for Rhogen to terminate the contract pursuant
to Article 1191 of the Civil Code and its agreement with the Plaza.
HELD: The petition is unmeritorious.
CIVIL LAW - Contracts; reciprocal obligations
Reciprocal obligations are those which arise from the same cause,
and in which each party is a debtor and a creditor of the other,
such that the obligation of one is dependent upon the obligation of
the other. They are to be performed simultaneously such that the
performance of one is conditioned upon the simultaneous
fulfillment of the other. Respondent The Plaza predicated its action
on Article 1191 of the Civil Code, which provides for the remedy of
"rescission" or more properly resolution, a principal action based
on breach of faith by the other party who violates the reciprocity
between them. The breach contemplated in the provision is the
obligors failure to comply with an existing obligation. Thus, the
power to rescind is given only to the injured party. The injured
party is the party who has faithfully fulfilled his obligation or is
ready and willing to perform his obligation.
The construction contract between Rhogen and The Plaza provides
for reciprocal obligations whereby the latters obligation to pay the
contract price or progress billing is conditioned on the formers
performance of its undertaking to complete the works within the
stipulated period and in accordance with approved plans and other
specifications by the owner. Pursuant to its contractual obligation,
The Plaza furnished materials and paid the agreed down payment.
It also exercised the option of furnishing and delivering
construction materials at the jobsite pursuant to Article III of the
Construction Contract. However, just two months after
commencement of the project, construction works were ordered
stopped by the local building official and the building permit
subsequently revoked on account of several violations of the
National Building Code and other regulations of the municipal
authorities.
Since Rhogen had already breached its contractual obligation by
not complying with the National Building Code, it had no right to
terminate the contract based on the Plaza's refusal to compensate
it for the percentage of work done.
Petition is DENIED.
Reyes v Tuparan
Mila A. Reyes (petitioner) filed a complaint for Rescission of
Contract with Damages against Victoria T. Tuparan (respondent)
before the RTC.In her Complaint, petitioner alleged, among others,
that she was the registered owner of a 1,274 square meter
residential and commercial lot located in Karuhatan, Valenzuela
City, and covered by TCT No. V-4130.
Petitioner mortgaged the subject real properties to the Farmers
Savings Bank and Loan Bank, Inc. (FSL Bank) to secure a loan.
Petitioner then decided to sell her real properties so she could
liquidate her bank loan and finance her businesses. As a gesture of
friendship, respondent verbally offered to conditionally buy
petitioner's real properties.
The parties and FSL Bank executed the corresponding Deed of
Conditional Sale of Real Properties with Assumption of Mortgage.
Due to their close personal friendship and business relationship,
both parties chose not to reduce into writing the other terms of
their agreement mentioned in paragraph 11 of the complaint.
Respondent, however, defaulted in the payment of her obligations
on their due dates. Instead of paying the amounts due in lump
sum on their respective maturity dates, respondent paid petitioner
in small amounts from time to time.
Respondent countered, among others, that the tripartite
agreement erroneously designated by the petitioner as a Deed of
Conditional Sale of Real Property with Assumption of Mortgage was
actually a pure and absolute contract of sale with a term period. It
could not be considered a conditional sale because the acquisition
of contractual rights and the performance of the obligation therein
did not depend upon a future and uncertain event.
Respondent further averred that she successfully rescued the
properties from a definite foreclosure by paying the assumed
mortgage plus interest and other finance charges.
The RTC handed down its decision finding that respondent failed to
pay in full the total purchase price of the subject real properties. It
stated that the checks and receipts presented by respondent refer
to her payments of the mortgage obligation with FSL Bank. The
RTC also considered the Deed of Conditional Sale of Real Property
with Assumption of Mortgage executed by and among the two
parties and FSL Bank a contract to sell, and not a contract of sale.
The CA rendered its decision affirming with modification the RTC
Decision.The CA agreed with the RTC that the contract entered into
by the parties is a contract to sell but ruled that the remedy of
rescission could not apply because the respondent's failure to pay
the petitioner the balance of the purchase was not a breach of
contract, but merely an event that prevented the seller (petitioner)
from conveying title to the purchaser (respondent).
ISSUE: Whether the agreement is a contract to sell and not a
contract of sale.
HELD: YES.
CIVIL LAW: Contract to sell versus contract of sale
The Court agrees with the ruling of the courts below that the
subject Deed of Conditional Sale with Assumption of Mortgage
entered into by and among the two parties and FSL Bank on
November 26, 1990 is a contract to sell and not a contract of sale.
The title and ownership of the subject properties remains with the
petitioner until the respondent fully pays the balance of the
purchase price and the assumed mortgage obligation. Thereafter,
FSL Bank shall then issue the corresponding deed of cancellation
This petition did not present any justification for us to deviate from
the rulings of the HLURB, the Office of the President and the Court
of Appeals.
its control and thus, should not be held liable to refund the
payments they had received.
HELD:
In this light, it cannot be denied that only GPI benefited from the
contract, having received full payment of the contract price plus
interests as early as January 17, 2000, while Sps. Fajardo remained
prejudiced by the persisting non-delivery of the subject lot despite
full payment. As a necessary consequence, considering the
propriety of the rescission as earlier discussed, Sps. Fajardo must
be able to recover the price of the property pegged at its
prevailing market value.
Reyes v Rossi
Facts:
Petitioner Reyes and Advanced Foundation, represented by
respondent Ettore Rossi, executed a deed of conditional sale
involving the purchase by Reyes of equipment consisting of a
Dredging Pump. The parties agreed therein that Reyes would pay
the sum of P3,000,000.00 as down payment, and the balance of
P7,000,000.00 through four post-dated checks. Reyes complied,
but he requested the restructuring of his obligation under the deed
of conditional sale by replacing the four post-dated checks with
nine post-dated checks that would include interest accruing on the
unpaid portion of the obligation.
Reyes issued and delivered the following nine postdated checks
drawn against the United Coconut Planters Bank. Rossi deposited
three of the post-dated checks but two of the checks were denied
payment ostensibly upon Reyes instructions to stop their
payment, while the third was dishonored for insufficiency of funds.
Rossi likewise deposited two more checks but the checks were
returned with the notation Account Closed stamped on them. He
did not anymore deposit the three remaining checks on the
assumption that they would be similarly dishonored.
Reyes commenced an action for rescission of contract and
damages and sought judgment declaring the deed of conditional
sale "rescinded and of no further force and effect," and ordering
Advanced Foundation to return the down payment with legal
interest and to pay to him attorneys fees, and various kinds and
amounts of damages.
Rossi charged Reyes with five counts of estafa and five counts of
violation of Batas Pambansa Blg. 22 for the dishonor of the checks.
Reyes submitted his counter-affidavit claiming that the checks had
not been issued for any valuable consideration; that he had
discovered from the start of using the dredging pump involved in
the conditional sale that the Caterpillar diesel engine powering the
pump had been rated at only 560 horsepower instead of the 1200
horsepower; that welding works on the pump had neatly concealed
several cracks; that he had written to Advanced Foundation
complaining about the misrepresentations on the specifications of
the pump and demanding documentary proof of Advanced
Foundations ownership of the pump; that he had caused the order
to stop the payment of three checks; that Advanced Foundation
had replied to his letter saying that the pump had been sold to him
on an as is, where is basis.
The Assistant City Prosecutor handling the preliminary
investigation recommended the dismissal of the charges of estafa
and the suspension of the proceedings relating to the violation of
Batas Pambansa Blg. 22 based on a prejudicial question which the
City Prosecutor of Makati approved.
Issues
W/N the civil action for rescission of the contract of sale raised a
prejudicial question that required the suspension of the criminal
prosecution for violation of Batas Pambansa Blg. 22.
Ruling
The petition for review is without merit.
The action for the rescission of the deed of sale on the ground that
Advanced Foundation did not comply with its obligation actually
seeks one of the alternative remedies available to a contracting
party under Article 1191 of the Civil Code, to wit:
Article 1191. The power to rescind obligations is implied in
reciprocal ones, in case one of the obligors should not comply with
what is incumbent upon him.
The injured party may choose between the fulfilment and the
rescission of the obligation, with the payment of damages in either
Issue:
W/N tender of payment has been made in this case so as to
amount to consignation?
Held: NO!
The spouses Bonrostro assert that Lourdes letter of November 24,
1993 amounts to tender of payment of the remaining balance
amounting to P630,000.00. Accordingly, thenceforth, accrual of
interest should be suspended.
Tender of payment is the manifestation by the debtor of a desire
to comply with or pay an obligation. If refused without just cause,
the tender of payment will discharge the debtor of the obligation
to pay but only after a valid consignation of the sum due shall
have been made with the proper court. Consignation is the
deposit of the [proper amount with a judicial authority] in
accordance with rules prescribed by law, after the tender of
payment has been refused or because of circumstances which
render direct payment to the creditor impossible or inadvisable.
Tender of payment, without more, produces no effect. [T]o have
the effect of payment and the consequent extinguishment of the
obligation to pay, the law requires the companion acts of tender of
payment and consignation.
As to the effect of tender of payment on interest, noted civilist
Arturo M. Tolentino explained as follows:
When a tender of payment is made in such a form that the creditor
could have immediately realized payment if he had accepted the
tender, followed by a prompt attempt of the debtor to deposit the
means of payment in court by way of consignation, the accrual of
interest on the obligation will be suspended from the date of such
tender. But when the tender of payment is not accompanied by the
means of payment, and the debtor did not take any immediate
step to make a consignation, then interest is not suspended from
the time of such tender. x x x x36 (Emphasis supplied)
Here, the subject letter merely states Lourdes willingness and
readiness to pay but it was not accompanied by payment. She
claimed that she made numerous telephone calls to Atty. Carbon
reminding the latter to collect her payment, but, neither said
lawyer nor Constancia came to collect the payment. After that,
the spouses Bonrostro took no further steps to effect payment.
They did not resort to consignation of the payment with the proper
court despite knowledge that under the contract, non-payment of
the installments on the agreed date would make them liable for
interest thereon. The spouses Bonrostro erroneously assumed that
their notice to pay would excuse them from paying interest. Their
claimed tender of payment did not produce any effect whatsoever
because it was not accompanied by actual payment or followed by
consignation. Hence, it did not suspend the running of interest.
That for and in consideration of the sum of ONE HUNDREDSIXTYFOUR THOUSAND SEVEN HUNDRED FORTY-NINE(Php164,749.00)
PESOS, Philippine currency, the VENDOR hereby agrees to SELL,
CEDE, TRANSFER and CONVEY unto the VENDEE xx x the
aforementioned properties, payable under the following terms and
conditions:
1.
The
sum
of
FORTY-ONE
THOUSAND
ONE
HUNDREDEIGHTY-SEVEN and 25/100 (Php 41,187.25)
PESOS shall be paid upon signing of this conditional deed
of sale; and
2.
The
balance
of
ONE
HUNDRED
TWENTYTHREETHOUSAND FIVE HUNDRED SIXTY-ONE and 75/100
(Php123,561.75) PESOS shall be paid within a period of
one (1) year from November 15, 1973, with interest of
12% per annum based on the balance, in the mode and
manner specified below:
a) January 4, 1974 P16,474.90 plus interest
b) On or before May 15, 1974 P53,543.43 plus
interest
c) On or before November 15, 1974 P53,543.32
plus interest
3. That the vendee shall be given a grace period of thirty
(30)days from the due date of any installment with
corresponding interest to be added, but should the
VENDEE fail to make such payment within the grace
period this contract shall be deemed rescinded and
without force and effect after notice in writing by VENDOR
to VENDEE.
4. That the VENDOR agrees to have the existing
Mortgages on the properties subject of this sale released
on or before May 20, 1974.
5. That the VENDOR agrees to have the above-described
properties freed and cleared of all lessees, tenants,
adverse occupants or squatters within 100 days from the
execution of this conditional deed of sale. In case of
failure by the VENDOR to comply with the undertaking
provided in this paragraph and the VENDEE shall find it
necessary to file a case or cases in court to eject the said
lessees, tenants, occupants and/or squatters from the
land, subject of this sale, the VENDOR agrees to answer
and pay for all the expenses incurred and to be incurred
in connection with said cases until the same are fully and
finally terminated.
was
able
to
pay
petitioner
the
amount
August
1,
2005,
the
trial
court
rendered
claim.37
It appears that after respondent filed its first Complaint for specific
performance and damages with the RTC of Antipolo City on
November 28,1994, petitioner filed an Answer and attached
thereto a copy of the written notice dated March 17, 1978 and
copies of the notarial acts of rescission dated March 15, 1978, and
that respondent received a copy of the said Answer with the
attached notices of notarial rescission. However, to reiterate, the
first Complaint was dismissed without prejudice.
Even if the defense of prescription was raised for the first time on
appeal in respondent's Supplemental Motion for Reconsideration of
the appellate court's decision, this does not militate against the
due process right of the petitioners. On appeal, there was no new
issue of fact that arose in connection with the question of
prescription, thus it cannot be said that petitioners were not given
the opportunity to present evidence in the trial court to meet a
factual issue. Equally important, petitioners had the opportunity to
oppose the defense of prescription in their Opposition to the
Supplemental Motion for Reconsideration filed in the appellate
court and in their Petition for Review in this Court. 41
In this case, petitioner raised the defense of prescription for the
first time before this Court, and respondent had the opportunity to
oppose the defense of prescription in its Comment to the petition.
Hence, the Court can resolve the issue of prescription as both
parties were afforded the opportunity to ventilate their respective
positions on the matter. The Complaint shows that the Conditional
Deeds of Sale were executed on November 29, 1973, and
payments were due on both Conditional Deeds of Sale on
November 15, 1974. Article 114442 of the Civil Code provides
that actions based upon a written contract must be brought within
ten years from the time the right of action accrues. Non-fulfillment
of the obligation to pay on the last due date, that is, on November
15, 1974, would give rise to an action by the vendor, which date of
reckoning may also apply to any action by the vendee to
determine his right under R.A. No. 6552. The vendee, respondent
herein, filed this case on March 16, 2001, which is clearly beyond
the 10-year prescriptive period; hence, the action has prescribed.
WHEREFORE, the petition is GRANTED. The Decision of the Court of
Appeals, dated December 11, 2006, in CA-G.R. CV No. 85877 and
its Resolution dated September 4, 2007 are REVERSED and SET
ASIDE. The Decision of the Regional Trial Court of Manila, Branch I,
dated August 1, 2005 in Civil Case No. 01-100411, dismissing the
case for lack of merit, is REINSTATED.
SO ORDERED.
Consolidated Industrial v Alabang Medical
FACTS:
the title remains in the vendor if the vendee does not comply
with the condition precedent of making payment at the time
specified in the contract
CONTRACT OF SALE
- the title passes to the buyer upon the delivery of the thing sold
ARTICLE 1192
MASSIVE CONSTRUCTION, INC., ENRIQUE P. SYQUIA,
RAMON P. SYQUIA, JOSE MA. MENDIETA, JAIME
SANTAMARIA, and JESUS P. SYQUIA, petitioner,
vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT and
JAIME C. UY, respondents.
Syquia Law Offices for petitioners.
R.A. V. Saguisag for private respondent.
BELLOSILLO, J.:
This is an appeal by certiorari under Rule 45, Revised Rules of
Court, from the consolidated decision of the Court of Appeals in
AC-G. R. No. 64077-CV, entitled "Massive Construction Inc. v. Jaime
C. Uy," and AC-G. R. No. 65234-CV, entitled "Jaime Uy v. Enrique P.
Syquia, et al."
In AC-G. R. NO. 64077-CV, the Court of Appeals reversed the
decision of the Court of First Instance of Manila in Civil Code No.
87006, which ordered defendant Jaime C. Uy, (UY for brevity) to
pay plaintiff (MASSIVE for brevity) a sum of money for unrealized
profits resulting from UY's violation of the Agreement dated
December 16, 1971 (AGREEMENT for brevity), attorney's fees and
costs.
In AC-G. R. No. 65234-CV, the Court of Appeals reversed the
decision of the Court of First Instance of Manila in Civil Case No.
87511, which declared the AGREEMENT as rescinded due to the
breach thereof by both UY and defendants Enrique Syquia, et al.
(stockholders of MASSIVE).
The two cases arose from a common background.
MASSIVE was engaged in the construction business in the Greater
Manila Area while UY was connected with Super Highway Lumber
and Construction Supply, Inc. (SUPER HIGHWAY for brevity), a
business run by his wife and engaged in the business of supplying
construction materials.
In the latter part of 1971, MASSIVE suffered financial reverses,
resulting in its corporate reorganization. Ramon P. Syquia, the
general manager of MASSIVE, asked his relatives to help bail out
the company from its financial difficulties. Enrique P. Syquia, Jose
Ma. Mendieta, Jaime Sta. Maria, and Jesus P. Syquia were thus
elected directors.
In the course of operation, MASSIVE became indebted to SUPER
HIGHWAY for purchase of construction materials in an amount
exceeding P100,000.00. In order to settle this obligation,
negotiations were started between the stockholders of MASSIVE on
one hand and UY on the other. After several meetings, the parties
signed on 16 December 1972 their AGREEMENT, particularly
entered into by and among JAIME C. UY as First Party, RAMON P.
SYQUIA as Second Party, and JOSE MA. MENDIETA, JAIME STA.
MARIA, ROMEO ALMARIO, JESUS P. SYQUIA and ENRIQUE P. SYQUIA
jointly as Third Party, with Jose Ma. Mendieta signing his
CONFORME in behalf of MASSIVE, the pertinent terms of which
follow:
1. That the SECOND PARTY and the THIRD PARTY
are the complete stockholders and directors of
MASSIVE CONSTRUCTION, INC., a corporation
duly organized and existing under the laws of the
Philippines.
2. That the FIRST PARTY is desirous of buying the
entire shares of stock of said corporation;
3. That the FIRST PARTY, SECOND PARTY and
THIRD PARTY have agreed that the FIRST PARTY
will purchase the entire shares of stock of the
corporation belonging to the SECOND PARTY for
P250,000.00, under the following terms and
conditions:
a) That the FIRST PARTY will pay to the SECOND
PARTY and THIRD PARTY as earnest money,
P20,000.00 upon the signing of this Agreement,
and which will constitute as down payment after
which the FIRST PARTY complies with this
Agreement, but which will be forfeited in favor of
the SECOND and THIRD PARTY in case of failure
to comply with this Agreement;
The Court of Appeals sustained the trial court in its finding that
MASSIVE was a proper party to ask for specific performance of the
contract. The appellate court noted that the contract was signed
by all the directors-stockholders of MASSIVE and even had the
conformity of said company. 14
This Court can review the findings of facts of the Court of Appeals
when the same are contrary to the findings of the trial
court 15 and to the stipulation of facts of the parties. 16
Inasmuch as the AGREEMENT imposed reciprocal obligations, the
question to resolve is who of the parties breached the contract
first. The starting point of the inquiry is the contract itself.
Under the AGREEMENT, UY, as First Party, agreed to buy all the
outstanding shares of stock of MASSIVE and the stockholders of
MASSIVE, as Second and Third Parties, agreed to sell to him the
said shares for P250,000.00, under the following terms:
1) Upon the signing of the contract, Uy, would
pay Ramon P. Syquia and the other stockholders
of Massive the sum of P20,000.00 as earnest
money;
2) Immediately upon the signing of the contract,
Uy would "make available to Massive such
materials and capital as the company may need
for its projects as determined by Ramon P.
Syquia. All the materials and capital given by Uy
would be considered an obligation of Massive;
3) On or before January 5, 1973, Uy would pay
the stockholders of Massive the sum of
P30,000.00;
4) Every 5th day of the month beginning
February 5, 1973, Uy would pay the amount of
P50,000.00 until the balance of P200,000.00 was
paid;
5) Upon the payment of the P20,000.00 to the
stockholders of Massive the latter would give him
P25,000.00 worth of shares and would elect him
a director of the company.
The party required to act first in compliance with the terms of the
contract is no other than UY.
While UY issued a postdated check for P20,000.00 on 16
December 1972 in payment of the earnest money required under
paragraph 3 (a) of the AGREEMENT, the check bounced when it
was deposited for collection. True, UY made good the check on 29
December 1971 but he had to borrow P2,000.00 out of his
payment of P20,000.00. Having failed to pay this amount by 5 July
1972 as promised, UY was sued in the City Court of Manila for its
collection. Effectively, UY was able to pay only P18,000.00 out of
the P20,000.00 he was supposed to pay as earnest money. This
aspect of the case showed the financial difficulties besetting UY
and reflecting poorly on his ability to meet his financial
commitments.
In addition to his obligation to pay the earnest money of
P20,000.00 Uy was required under paragraph 3(h) of the
AGREEMENT to make available to MASSIVE immediately upon the
signing of the contract, such "materials and capital as the
corporation may need for its projects as determined by" Ramon P.
Syquia. Uy was able to deliver to MASSIVE materials valued at only
P6,085.69 out of the P100,000.00 worth as required by the ongoing projects.
The infusion of fresh capital was the lifeblood of the projects and
the essence of his being brought in as an investor. Without his
capital contribution, the company could not possibly operate.
Lastly, UY failed to pay on or before 5 January 1972 the
P30,000.00 required under paragraph 3(b) of the AGREEMENT. UY
cannot claim that he was relieved from the payment of the
monthly installment of P50,000.00 beginning 5 January 1973.
When the parties agreed that the monthly installments should be
paid out of the receivables and collections of MASSIVE (paragraph
3[c], AGREEMENT), it was implied that there was actual cash
received or collected.
The Court of Appeals held that UY was relieved of his obligation to
pay the P30,000.00 after the stockholders of MASSIVE failed to
deliver the P20,000.00 worth of shares of stock of the company.
The thinking of the Court of Appeals was that after UY had paid the
P20,000.00 earnest money, it became the seller's turn to assign
ARTICLE 1193
ERNEST
BERG,
plaintiff-appellee,
vs.
MAGDALENA ESTATE, INC., defendant-appellant.
Claro M. Recto and Eusebio C. Encarnacion for appellant.
Alva Hill, Taada, Pelaez and Teehankee for appellee.
BAUTISTA ANGELO, J.:
This is an action for partition of the property known as Crystal
Arcade situated in the City of Manila.
The complaint avers that plaintiff and defendant are co-owners of
said property, the former being the owner of one-third interest and
the latter of the remaining two-thirds. The division is asked
because plaintiff and defendant are unable to agree upon the
management of the property and upon the partition thereof.
Defendant answered setting up a special defense and a
counterclaim. As a special defense, defendant claims that on
September 22, 1943, it sold to plaintiff one-third of the property in
litigation subject to the express condition that should either vendor
or vendee decide to sell his or its undivided share, the party selling
would grant to the other part first an irrevocable option to
purchase the same at the seller's price. It avers that on January
1946 plaintiff fixed the sum of P200,000 as the price of said share
and offered to sell it to defendant, which offer was accepted, and
for the payment of said price plaintiff gave defendant a period of
time which, including the extensions granted, would expire on May
31, 1947. Defendant claims that, in spite of the acceptance of the
offer, plaintiff refused to accept the payment of the price, and for
this refusal defendant suffered damages in the amount of
P100,000. For these reasons, defendant asks for specific
performance.
Plaintiff filed a reply setting forth therein that the transaction
referred to by the defendant in its special defense relative to the
property in litigation is not supported by any note or memorandum
subscribed by the parties, as in fact no such note or memorandum
has been made evidencing the transaction, for which reason,
plaintiff claims, this transaction falls under the statute of frauds
and cannot form the basis of the special defense invoked by the
defendant.
After trial, at which the parties presented testimonial and
documentary evidence, the lower court found for the plaintiff
holding that no agreement has been reached between the parties
relative to the purchase and sale of the property in question, and,
recognizing the right of plaintiff to demand partition under the
provisions of Rule 71 of the Rules of Court, it granted the relief
prayed for in the complaint. Hence this appeal.
The pivotal issue to be determined is whether an agreement to sell
has actually been reached between plaintiff and defendant of the
share of the former in the property in litigation for the sum of
P200,000, as claimed by defendants, or whether there have been
merely negotiations between them which never ripened into an
agreement, as claimed by plaintiff. And in the determination of this
issue, the preliminary question to be threshed out is the point
raised by plaintiff touching on the evidence submitted by
defendant in the light of the principle underlying the statute of
frauds.
It is an undisputed facts that since September 22, 1943, plaintiff
and defendant were co owners pro indiviso of the property known
as Crystal Arcade in the proportion of one-third interest belonging
to the former and two-thirds to the latter. In the deed of sale
executed by the parties on said date, they stipulated that, should
either of them decide to sell his or her share, the other party will
have an irrevocable option to purchase it at the seller's price. Then
a disagreement ensued between the parties as to what really
occurred concerning the deal.
Thus, while Berg claims that his negotiations with Hemady ended
when an offer by the latter to the former to buy his interest for the
sum of P350,000, Hemady on the other hand claims that Berg
offered to sell it to him for P200,000 subject to the condition that
the necessary permit be obtained from the United States Treasury
Department.
It should be stated that, aside from the testimony of Berg and
Hemady, no document has been presented evidencing that alleged
agreement to sell, and so when defendant made attempts to
prove, through the testimony of Hemady, that plaintiff made an
offer to sell his interest to defendant for the sum of P200,000, the
attempt met the vigorous opposition of plaintiff invoking the rule
that such agreement can only be established by a contract in
writing, or by a note or memorandum subscribed by the party
sought to be charged, as prescribed by the statute of frauds. It was
then that defendant submitted in evidence exhibits "3" and "4",
contending that these documents, read in connection with the
option to sell embodied in exhibit "1", constitute a written proof
contemplated by said statute. The crux of this case, therefore, lies
in the determination of whether said exhibits partake of the nature
of a note or memorandum within the purview of said statute as
contended by defendant.
It appears that right after the liberation of the Philippines, both
Ernest Berg and K.H. Hemady were accused of collaboration for
which reason the Treasury Department of the United States
ordered the freezing of their properties under the law known as
Trading with the Enemy Act. Under the provisions of this Act both
Berg and Hemady could not sell or dispose of their properties
without first securing the permit required by it, and so to comply
this requirement, both Berg and Hemady filed separately an
application with said Department for the purchase and sale of the
property in litigation. These applications are the ones marked as
exhibits "3" and "4". In the application exhibit "3", Ernest berg
stated that he desires a license in order to sell his interest in the
Crystal Arcade, Escolta, Manila, for P200,000 in cash to Magdalena
Estate, Inc. asking at the same time for permission to place the
amount in an account in his name or in the name of the company
he represents and to apply the same from time to time to the
payment of the obligations of Red Star Store Inc. In the application
exhibit "4", defendant in turn stated, through its president K. H.
Hemady, that it desires a license in order "to use a portion of the
P400,000 requested as a loan from the National City Bank of New
York, Manila, or from any other bank in Manila, together with funds
to be collected from old and new sales of his real estate properties,
for the purchase of the one-third (1/3) of the Crystal Arcade
property in the Escolta, Manila, belonging to Mr. Ernest Berg."
It is now defendant's position that if the option granted in exhibit
"1" (deed of sale containing the irrevocable option) is considered
in relation to Berg's application exhibit "3" and defendant's
application exhibit "4", these documents constitute a sufficient
note or memorandum of the parties' alleged contract of purchase
and sale within the purview of the statute of frauds. This claim is
disputed by Ernest Berg, appellee herein. Which of these
contentions is correct?
Before we proceed, it is important to state at this juncture some
principles governing the meaning, extent and scope of the rule
underlying the statute of frauds relative to the note or
memorandum that may serve as proof to determine the existence
of an oral contract or agreement contemplated by it, and for our
purpose, it suffices for us to quote the following authorities:
No particular form of language or instrument is necessary
to constitute a memorandum or note in writing under the
statute of frauds; any document or writing, formal or
informal, written either for the purpose of furnishing
evidence of the contract or for another purpose, which
satisfies all the requirements of the statute as to contents
and signature, as discussed respectively infra secs. 178200, and infra secs. 201-215, is a sufficient memorandum
or note. A memorandum may be written as well as with
lead pencil as with pen and ink. It may also be filled in on
a printed form (37 C.J.S., 653-654).
The note or memorandum required by the statute of fraud
need not be contained in a single document, nor, when
contained in two or more papers, need each paper to be
sufficient as to contents and signature to satisfy the
statute. Two or more writings properly connected may be
considered together, matters missing or uncertain in one
may be supplied or rendered certain by another, and their
sufficiency will depend on whether, taken together, they
meet the requirement of the statute as to contents and
the requirements of the statute as to signature, as
considered respectively infra secs. 179-200 and secs.
201-215.
Papers connected. The rule is frequently applied to two
or more, or a series of letters or telegrams, or letters and
telegrams
sufficiently
connected
to
allow
their
ARTICLE 1196
ejectment of tenants.
DECISION
PANGANIBAN, J.:
A stipulation in a lease contract stating that its five-year term
is subject to an option to renew shall be interpreted to be
reciprocal in character. Unless the language shows an intent to
allow the lessee to exercise it unilaterally, such option shall be
deemed to benefit both the lessor and the lessee who
must both consent to the extension or renewal, as well as to its
specific terms and conditions.
Statement of the Case
Before us is a Petition for Review under Rule 45 of the Rules
of Court, assailing the October 29, 1999 Decision[1] and the March
9, 2000 Resolution[2] of the Court of Appeals[3] (CA) in CA-GR SP
No. 50618. The decretal portion of the Decision reads as follows:
WHEREFORE, the petition for review is hereby DISMISSED for lack
of merit.[4]
The assailed
Reconsideration.
Resolution
denied
petitioners
Motion
for
The MTC ruled that the contract entered into by the parties may be
extended by the lessees for reasons of justice and equity, citing as
its legal bases the case of Legarda Koh v. Ongsi[a]co (36 Phil.
[185]) and Cruz v. Alberto (39 Phil. 991). It also ruled that the
corporations failure to pay the monthly rentals as they fell due was
justified by the fact that petitioner refused to honor the basis of
the rental increase as stated in their Lease Agreement.
[6] (Citations omitted)
(a) Whether or not the Contract of Lease dated August 8, 1991 had
expired; and
(b) Did defendants and/or the corporation incur rental arrearages.
2. The term of this lease is FIVE (5) YEARS from the effectivity of
said lease, and with the option to renew, specifically shall
commence from September 15, 1991 and shall expire on
September 16, 1996, and maybe adjusted depending upon the
make a new lease for the parties,[18] even on the basis of equity.
[19] Because the Lease Contract ended on September 15, 1996,
without the parties reaching any agreement for renewal,
respondents can be ejected from the premises.[20]
ARTICLE 1197
J.M.
TUASON
and
CO.,
INC., petitioner,
vs.
ESTRELLA VDA. DE LUMANLAN and the COURT OF APPEALS
(FIFTH DIVISION), respondents.
Tuason and Sison for petitioner.
Jose Chuico and Wilfredo E. Dizon for respondents.
REYES, J.B.L., Actg. C.J.:
J. M. Tuason & Co., Inc. petitioned for a review by certiorari of the
decision issued by the Court of Appeals (Fifth Division) in its case
CA-G.R. No. 27259-R, reversing the judgment rendered by the
Court of First Instance of Rizal (Civil Case No. Q-4243) that ordered
defendant (now respondent) Estrella Vda. de Lumanlan to vacate
the lot occupied by her in Sta. Mesa Heights Subdivision, barrio
Tatalon, Quezon City, and to remove therefrom the house and
other structures constructed thereon, paying P240.00 a month
until restoration of the premises to plaintiff.
The facts are stated in the decision of the Court of Appeals
(accepted by both parties) in this wise:1wph1.t
. . . That in the complaint filed in this case by plaintiff, J.
M. Tuason & Co., Inc., hereinafter called Tuason, on 30
April, 1969, the basis is that it being the registered owner
of the property known as Santa Mesa Heights Subdivision,
situated at Barrio North Tatalon, Quezon City, herein
defendant sometime in April, 1949 unlawfully entered into
possession of 800 square meters, and therein constructed
his house so that plaintiff prayed for ejectment and
damages for the occupancy; and defendant in her answer
set forthaffirmative defense that on 12 March, 1949, she
had bought the property she was occupying from one
Pedro Deudor, and that in a compromise agreement
between Pedro and Tuason on 16 March 1953, approved
by the Court of First Instance of Quezon City, she was one
of the buyers therein recognized, so that she asked that
her rights be recognized and the complaint dismissed; but
on the basis of the evidence presented by both parties in
the trial, Lower Court sustained plaintiff, holding that
Tuason being the registered owner, and the question
being purely one of possession, therefore, defendant's
said evidence was "completely immaterial". . . . (Page 2 of
Decision, Annex "A" of Petition.)
Upon the facts thus stated, the Fifth Division of the Court of
Appeals held that, pursuant to this Supreme Court's ruling
in Evangelista vs. Deudor, L-12826, September 10, 1959, the
Compromise Agreement (Exh. 2) between the petitioner Tuason &
Co. and the Deudors constituted a valid defense against the
possessory action filed by Tuason & Co.; that under paragraph 7 of
said Compromise Agreement, petitioner bound and committed
itself to sell to respondent Lumanlan the lot occupied by her at a
reasonable price; that said respondent had a right to compel
petitioner to accept payment for the lot in question; and that the
compromise agreement legalized the possession of respondent.
These pronouncements are assailed by the petitioner in this
appeal as legally incorrect and contrary to the decisions of this
Court.
The terms of the compromise agreement between the heirs of
Telesforo Deudor and J. M. Tuason & Co. have been taken
cognizance of in many decisions of this Court (Evangelista vs.
Deudor, jam. cit; Deudor vs. J. M. Tuason & Co., L-18768, May 30,
1961, and L-20105, Oct. 31, 1963; J. M. Tuason vs. Jaramillo, et al.,
L-18932-34, Sept. 30, 1963; J. M. Tuason vs. Macalindong, L-15398,
Dec. 29, 1962 and others). The Deudors had therein recognized
the registered title of Tuason & Co. over the lands claimed by
them, and received payment of certain sums of money; but as the
Deudors had, prior to the compromise, sold their possessory rights
to various persons, paragraph seventh of the compromise
agreement (case Q-135 of the court of origin) provided:
That the sales of the possessory rights claimed by the
DEUDORS, are described in the lists submitted by them to
the OWNERS which are attached hereto marked Annexes
"B" and "C" and made part hereof. Whatever amounts
may have been collected by the DEUDORS on account
thereof, shall be deducted from the total sum of
P1,201,063.00 to be paid to them. It shall be the joint and
FEDERICO
CALERO, plaintiff-appellant,
vs.
EMILIA CARRION Y SANTA MARINA, ET AL., defendantsappellees.
Ramirez and Ortigas for appellant.
Carlos, Laurea and Associates for appellees.
BARRERA, J.:
From the order of the Court of First Instance of Manila (in Civil Case
No. 31409) dismissing his complaint, on the ground of prescription,
plaintiff Federico Calero interposed this appeal directly to this
Court on questions purely of law.
On December 20, 1956, plaintiff filed with the abovementioned
court a complaint which, in part, reads:
xxx
xxx
xxx
xxx
xxx
Pacific Bank vs CA
PADILLA, J.:
The defendants appeal from a judgment of the Court of First
Instance of Pangasinan, Fourth Branch, ordering her to pay the
plaintiff the sum of P4,147.74, lawful interest thereon from 24
March 1954 when the original complaint was by the Court of
Appeals to this Court for it involves only a question of law.
As agreed upon by the parties, the facts are: On different dates
from 10 November 1952 to 30 June 1953 the appellant bought,
took delivery and received from the appellee hardware goods,
lumber and construction materials valued at the total sum of
P12,127.57 (par. 1, stipulation of facts; Exhibits A to Z; AA to OO),
and from 4 November 1952 to 10 March 1954 the appellant paid
the appellee the total sum of P6,979.83 which the latter credited
to the former's account (par. 3, stipulation of facts; Exhibits PP, PP1, QQ, QQ-1 to QQ-2). On 23 December 1954, after the original
complaint had been filed by the appellee ( 24 March 1954), the
appellant paid the appellee the sum on P1,000 which the latter
also credited to the former's account (par. 6, stipulation of facts),
thereby reducing her total indebtedness to P4, 147.74.
The appellant does not deny that she received the wares and
materials listed in the invoices (Exhibits A to Z and AA to OO), and
that she is still indebted to the appellee in the sum of P4,147.74.
At the hearing of the case on 4 June 1956, her counsel withdrew
the objection (filed earlier during the day) to the items listed in
some of the invoices (Minutes of the session of 4 June 1956).
However, she argues that as no time for payment was stipulated
or fixed and from the nature and the circumstances of the
obligation it could be inferred that a period was intended, the
Court should fix the period for payment pursuant to article 1197 of
the new Civil Code.
The parties entered into a contract of sale on credit. In the invoices
(Exhibit A to Z and AA to OO) of the wares and material sold and
delivered to the appellant, the words "credit sales" appear and it is
stated that
All civil actions on this contract shall be instituted in the
courts of the City of Dagupan and it is hereby agreed that
all may/or purchases from this Company are payable in
the said City of Dagupan. It is agreed that if this bill is not
paid within . . . days from date hereof I/we will pay
interest at the rate of 10 percentum per annum on all
overdue accounts. The buyer hereby agrees to pay and all
attorney's fees and court costs should the seller institute
legal action. Goods travel at buyer's risk. No claim of
whatsoever nature will be considered after 24 hours from
date of delivery.
COSMIC
vs.
LUMBER
COMPANY,
INC., plaintiff-appellee,
GUERRERO, J.:
This is a petition for certiorari to review the decision of the Court of
Appeals in CA-G.R. No. S.P. 06585 entitled "Rufino Q. Fernandez
vs. Hon. Ricardo M. Ilarde, et al.," promulgated on September 22,
1977.
The facts of this case are clear, undisputed and may be
summarized briefly as follows:
Private respondent's father was the original lessee of the building
and lot owned by the late Doa Concepcion Gay de Loring and the
spouses Mercedes Van Kauffman and Jaime Ibaez de Aldecoa.
This lease dates back to 1899. After his father's demise, private
respondent continued the lease. The building and lot subject of the
lease was bought by petitioner herein from the interest state
estate of the original owners for the sum of P250,000.00 on July 9,
1974. Before its purchase, private respondent was a lessee of the
said owners and was paying them a rental of P1,250.00 a month.
After the purchase, the rental corresponding to first half of the
month of July, 1974 in the sum of P625.00 was paid by private
respondent to the original owners and that of the second half in
the sum of P625.00 to the new owner, petitioner herein. In the
continuance of the lease, it was verbally agreed by and between
the petitioner and private respondent that the rental for the
succeeding months would be increased to P2,000.00 starting
August, 1974. This went on until September, 1975. About the
second week of October, 1975, private respondent was informed
by a representative of petitioner, Atty. Santiago Divinagracia, that
his contract of lease would terminate on October 31, 1975. When
private respondent refused to vacate the premises on October 31,
1975, petitioner reiterated the advice earlier made in a letter
dated November 4, 1975 formally advising him of the termination
of the lease on October 31, 1975 and giving him, the private
respondent, a final extension to occupy the premises up to the end
of November, 1975, for which reason petitioner refused to accept
further payment of rentals for December, 1975. Private respondent
in turn informed petitioner that he was depositing his rentals for
the succeeding months with the Clerk of Court.
A complaint for unlawful detainer was filed by herein petitioner
against private respondent before the City Court of Iloilo, Branch I,
which rendered a decision in favor of private respondent, the
dispositive portion of which reads:
WHEREFORE,
decision
this
court
hereby
renders
its
is
based
on
ARTICE 1198
FERNANDO
A.
GAITE, plaintiff-appellee,
vs.
ISABELO FONACIER, GEORGE KRAKOWER, LARAP MINES &
SMELTING CO., INC., SEGUNDINA VIVAS, FRNACISCO DANTE,
PACIFICO
ESCANDOR
and
FERNANDO
TY, defendantsappellants.
Alejo Mabanag for plaintiff-appellee.
Simplicio U. Tapia, Antonio Barredo and Pedro Guevarra for
defendants-appellants.
REYES, J.B.L., J.:
This appeal comes to us directly from the Court of First Instance
because the claims involved aggregate more than P200,000.00.
Defendant-appellant Isabelo Fonacier was the owner and/or holder,
either by himself or in a representative capacity, of 11 iron lode
mineral claims, known as the Dawahan Group, situated in the
municipality of Jose Panganiban, province of Camarines Norte.
By a "Deed of Assignment" dated September 29, 1952(Exhibit "3"),
Fonacier constituted and appointed plaintiff-appellee Fernando A.
Gaite as his true and lawful attorney-in-fact to enter into a contract
with any individual or juridical person for the exploration and
development of the mining claims aforementioned on a royalty
basis of not less than P0.50 per ton of ore that might be extracted
therefrom. On March 19, 1954, Gaite in turn executed a general
assignment (Record on Appeal, pp. 17-19) conveying the
development and exploitation of said mining claims into the Larap
Iron Mines, a single proprietorship owned solely by and belonging
to him, on the same royalty basis provided for in Exhibit "3".
Thereafter, Gaite embarked upon the development and
exploitation of the mining claims in question, opening and paving
roads within and outside their boundaries, making other
improvements and installing facilities therein for use in the
development of the mines, and in time extracted therefrom what
he claim and estimated to be approximately 24,000 metric tons of
iron ore.
For some reason or another, Isabelo Fonacier decided to revoke
the authority granted by him to Gaite to exploit and develop the
mining claims in question, and Gaite assented thereto subject to
certain conditions. As a result, a document entitled "Revocation of
Power of Attorney and Contract" was executed on December 8,
1954 (Exhibit "A"),wherein Gaite transferred to Fonacier, for the
consideration of P20,000.00, plus 10% of the royalties that
Fonacier would receive from the mining claims, all his rights and
interests on all the roads, improvements, and facilities in or
outside said claims, the right to use the business name "Larap Iron
Mines" and its goodwill, and all the records and documents relative
to the mines. In the same document, Gaite transferred to Fonacier
all his rights and interests over the "24,000 tons of iron ore, more
or less" that the former had already extracted from the mineral
claims, in consideration of the sum of P75,000.00, P10,000.00 of
which was paid upon the signing of the agreement, and
b. The balance of SIXTY-FIVE THOUSAND PESOS
(P65,000.00) will be paid from and out of the first letter of
credit covering the first shipment of iron ores and of the
first amount derived from the local sale of iron ore made
by the Larap Mines & Smelting Co. Inc., its assigns,
administrators, or successors in interests.
To secure the payment of the said balance of P65,000.00, Fonacier
promised to execute in favor of Gaite a surety bond, and pursuant
to the promise, Fonacier delivered to Gaite a surety bond dated
December 8, 1954 with himself (Fonacier) as principal and the
Larap Mines and Smelting Co. and its stockholders George
Krakower, Segundina Vivas, Pacifico Escandor, Francisco Dante,
(2) Whether the estimated 24,000 tons of iron ore sold by plaintiff
Gaite to defendant Fonacier were actually in existence in the
mining claims when these parties executed the "Revocation of
Power of Attorney and Contract", Exhibit "A."
On the first question, the lower court held that the obligation of
the defendants to pay plaintiff the P65,000.00 balance of the price
of the approximately 24,000 tons of iron ore was one with a term:
i.e., that it would be paid upon the sale of sufficient iron ore by
defendants, such sale to be effected within one year or before
December 8, 1955; that the giving of security was a condition
precedent to Gait's giving of credit to defendants; and that as the
latter failed to put up a good and sufficient security in lieu of the
Far Eastern Surety bond (Exhibit "B") which expired on December
8, 1955, the obligation became due and demandable under Article
1198 of the New Civil Code.
As to the second question, the lower court found that plaintiff
Gaite did have approximately 24,000 tons of iron ore at the mining
claims in question at the time of the execution of the contract
Exhibit "A."
Judgment was, accordingly, rendered in favor of plaintiff Gaite
ordering defendants to pay him, jointly and severally, P65,000.00
with interest at 6% per annum from December 9, 1955 until
payment, plus costs. From this judgment, defendants jointly
appealed to this Court.
During the pendency of this appeal, several incidental motions
were presented for resolution: a motion to declare the appellants
Larap Mines & Smelting Co., Inc. and George Krakower in
contempt, filed by appellant Fonacier, and two motions to dismiss
the appeal as having become academic and a motion for new trial
and/or to take judicial notice of certain documents, filed by
appellee Gaite. The motion for contempt is unmeritorious because
the main allegation therein that the appellants Larap Mines &
Smelting Co., Inc. and Krakower had sold the iron ore here in
question, which allegedly is "property in litigation", has not been
substantiated; and even if true, does not make these appellants
guilty of contempt, because what is under litigation in this appeal
is appellee Gaite's right to the payment of the balance of the price
of the ore, and not the iron ore itself. As for the several motions
presented by appellee Gaite, it is unnecessary to resolve these
motions in view of the results that we have reached in this case,
which we shall hereafter discuss.
The main issues presented by appellants in this appeal are:
(1) that the lower court erred in holding that the obligation of
appellant Fonacier to pay appellee Gaite the P65,000.00 (balance
of the price of the iron ore in question)is one with a period or term
and not one with a suspensive condition, and that the term expired
on December 8, 1955; and
(2) that the lower court erred in not holding that there were only
10,954.5 tons in the stockpiles of iron ore sold by appellee Gaite to
appellant Fonacier.
The first issue involves an interpretation of the following provision
in the contract Exhibit "A":
7. That Fernando Gaite or Larap Iron Mines hereby
transfers to Isabelo F. Fonacier all his rights and interests
over the 24,000 tons of iron ore, more or less, abovereferred to together with all his rights and interests to
operate the mine in consideration of the sum of SEVENTYFIVE THOUSAND PESOS (P75,000.00) which the latter
binds to pay as follows:
a. TEN THOUSAND PESOS (P10,000.00) will be paid upon
the signing of this agreement.
were viewed as non-existent or not binding until the ore was sold.
The only rational view that can be taken is that the sale of the ore
to Fonacier was a sale on credit, and not an aleatory contract
where the transferor, Gaite, would assume the risk of not being
paid at all; and that the previous sale or shipment of the ore was
not a suspensive condition for the payment of the balance of the
agreed price, but was intended merely to fix the future date of the
payment.
This issue settled, the next point of inquiry is whether appellants,
Fonacier and his sureties, still have the right to insist that Gaite
should wait for the sale or shipment of the ore before receiving
payment; or, in other words, whether or not they are entitled to
take full advantage of the period granted them for making the
payment.
We agree with the court below that the appellant have forfeited
the right court below that the appellants have forfeited the right to
compel Gaite to wait for the sale of the ore before receiving
payment of the balance of P65,000.00, because of their failure to
renew the bond of the Far Eastern Surety Company or else replace
it with an equivalent guarantee. The expiration of the bonding
company's undertaking on December 8, 1955 substantially
reduced the security of the vendor's rights as creditor for the
unpaid P65,000.00, a security that Gaite considered essential and
upon which he had insisted when he executed the deed of sale of
the ore to Fonacier (Exhibit "A"). The case squarely comes under
paragraphs 2 and 3 of Article 1198 of the Civil Code of the
Philippines:
"ART. 1198. The debtor shall lose every right to make use
of the period:
(1) . . .
(2) When he does not furnish to the creditor the
guaranties or securities which he has promised.
(3) When by his own acts he has impaired said guaranties
or securities after their establishment, and when through
fortuitous event they disappear, unless he immediately
gives new ones equally satisfactory.
Appellants' failure to renew or extend the surety company's bond
upon its expiration plainly impaired the securities given to the
creditor (appellee Gaite), unless immediately renewed or replaced.
There is no merit in appellants' argument that Gaite's acceptance
of the surety company's bond with full knowledge that on its face it
would automatically expire within one year was a waiver of its
renewal after the expiration date. No such waiver could have been
intended, for Gaite stood to lose and had nothing to gain barely;
and if there was any, it could be rationally explained only if the
appellants had agreed to sell the ore and pay Gaite before the
surety company's bond expired on December 8, 1955. But in the
latter case the defendants-appellants' obligation to pay became
absolute after one year from the transfer of the ore to Fonacier by
virtue of the deed Exhibit "A.".
All the alternatives, therefore, lead to the same result: that Gaite
acted within his rights in demanding payment and instituting this
action one year from and after the contract (Exhibit "A") was
executed, either because the appellant debtors had impaired the
securities originally given and thereby forfeited any further time
within which to pay; or because the term of payment was originally
of no more than one year, and the balance of P65,000.00 became
due and payable thereafter.
Coming now to the second issue in this appeal, which is whether
there were really 24,000 tons of iron ore in the stockpiles sold by
appellee Gaite to appellant Fonacier, and whether, if there had
been a short-delivery as claimed by appellants, they are entitled to