G.R. No.

138814
April 16, 2009
MAKATI STOCK EXCHANGE, INC., MA. VIVIAN YUCHENGCO, ADOLFO M. DUARTE,
MYRON C. PAPA, NORBERTO C. NAZARENO, GEORGE UY-TIOCO, ANTONIO A.
LOPA, RAMON B. ARNAIZ, LUIS J.L. VIRATA, and ANTONIO GARCIA, JR. Petitioners,
vs. MIGUEL V. CAMPOS, substituted by JULIA ORTIGAS VDA. DE CAMPOS,
Respondent.
FACTS:
Respondent Miguel V. Campos instituted SEC Case No. 02-94-4678 with the Securities,
Investigation and Clearing Department (SICD) of the Securities and Exchange
Commission (SEC), a Petition against herein petitioners Makati Stock Exchange, Inc.
(MKSE) and MKSE directors. Respondent, in said Petition, sought: (1) the nullification of
the Resolution dated 3 June 1993 of the MKSE Board of Directors, which allegedly
deprived him of his right to participate equally in the allocation of Initial Public Offerings
(IPO) of corporations registered with MKSE, and (2) the delivery of the IPO shares he was
allegedly deprived of, for which he would pay IPO prices.
SICD issued an Order granting respondents prayer for the issuance of a TRO to enjoin
petitioners from implementing or enforcing the 3 June 1993 Resolution of the MKSE Board
of Directors. On 10 March 1994, SICD issued another Order granting respondents
application for a Writ of Preliminary Injunction, to continuously enjoin, during the
pendency of SEC Case No. 02-94-4678, the implementation or enforcement of the MKSE
Board Resolution in question. Petitioners assailed this SICD Order dated 10 March 1994
in a Petition for Certiorari filed with the SEC en banc, docketed as SEC-EB No. 393.
Petitioners filed a MTD respondents Petition in SEC Case No. 02-94-4678, based on the
following grounds: (1) the Petition became moot due to the cancellation of the license of
MKSE; (2) the SICD had no jurisdiction over the Petition; and (3) the Petition failed to state
a cause of action.
SICD denied petitioners MTD in an Order dated 4 May 1994. Petitioners again
challenged the 4 May 1994 Order of SICD before the SEC en banc through another
Petition for Certiorari, docketed as SEC-EB No. 403.
In SEC-EB No. 393, the SEC en banc nullified the 10 March 1994 Order of SICD in SEC
Case No. 02-94-4678 granting a Writ of Preliminary Injunction in favor of respondent. In
SEC-EB No. 403, the SEC en banc annulled the 4 May 1994 Order of SICD in SEC Case
No. 02-94-4678 denying petitioners MTD, and accordingly ordered the dismissal of
respondents Petition before the SICD.
Respondent filed a Petition for Certiorari with the CA assailing the Orders of the SEC en
banc in SEC-EB No. 393 and SEC-EB No. 403.
CA granted respondents Petition for Certiorari and declared the said orders null and void
and set aside.
ISSUE: WON respondents Petition in SEC Case No. 02-94-4678 for failure to state a
cause of action.
RULING: Petitioners want this Court to affirm the dismissal by the SEC en banc of
respondents Petition in SEC Case No. 02-94-4678 for failure to state a cause of action. On
the other hand, respondent insists on the sufficiency of his Petition and seeks the
continuation of the proceedings before the SICD.

A cause of action is the act or omission by which a party violates a right of another. A
complaint states a cause of action where it contains three essential elements of a cause
of action, namely: (1) the legal right of the plaintiff, (2) the correlative obligation of the
defendant, and (3) the act or omission of the defendant in violation of said legal right. If
these elements are absent, the complaint becomes vulnerable to dismissal on the ground
of failure to state a cause of action.
The issue of whether respondents Petition in SEC Case No. 02-94-4678 sufficiently states
a cause of action may be alternatively stated as whether, hypothetically admitting to be
true the allegations in respondents Petition in SEC Case No. 02-94-4678, the SICD may
render a valid judgment in accordance with the prayer of said Petition.
A reading of the exact text of respondents Petition in SEC Case No. 02-94-4678 is,
therefore, unavoidable. Pertinent portions of the said Petition reads:
7. In recognition of petitioners invaluable services, the general membership of
respondent corporation [MKSE] passed a resolution sometime in 1989 amending its
Articles of Incorporation, to include the following provision therein:
"ELEVENTH WHEREAS, Mr. Miguel Campos is the only surviving incorporator of the
Makati Stock Exchange, Inc. who has maintained his membership;
"WHEREAS, he has unselfishly served the Exchange in various capacities, as governor
from 1977 to the present and as President from 1972 to 1976 and again as President from
1988 to the present;
"WHEREAS, such dedicated service and leadership which has contributed to the
advancement and well being not only of the Exchange and its members but also to the
Securities industry, needs to be recognized and appreciated;
"WHEREAS, as such, the Board of Governors in its meeting held on February 09, 1989 has
correspondingly adopted a resolution recognizing his valuable service to the Exchange,
reward the same, and preserve for posterity such recognition by proposing a resolution to
the membership body which would make him as Chairman Emeritus for life and install in
the Exchange premises a commemorative bronze plaque in his honor;
"NOW, THEREFORE, for and in consideration of the above premises, the position of the
"Chairman Emeritus" to be occupied by Mr. Miguel Campos during his lifetime and
irregardless of his continued membership in the Exchange with the Privilege to attend all
membership meetings as well as the meetings of the Board of Governors of the
Exchange, is hereby created."
8. Hence, to this day, petitioner is not only an active member of the respondent
corporation, but its Chairman Emeritus as well.
9. Correspondingly, at all times material to this petition, as an active member and
Chairman Emeritus of respondent corporation, petitioner has always enjoyed the
right given to all the other members to participate equally in the Initial Public
Offerings (IPOs for brevity) of corporations.
10.IPOs are shares of corporations offered for sale to the public, prior to the listing in
the trading floor of the countrys two stock exchanges. Normally, Twenty Five
Percent (25%) of these shares are divided equally between the two stock
exchanges which in turn divide these equally among their members, who pay
therefor at the offering price.
11.However, on June 3, 1993, during a meeting of the Board of Directors of

respondent-corporation, individual respondents passed a resolution to stop giving

petitioner the IPOs he is entitled to, based on the ground that these shares were
allegedly benefiting Gerardo O. Lanuza, Jr., who these individual respondents
wanted to get even with, for having filed cases before the Securities and Exchange
(SEC) for their disqualification as member of the Board of Directors of respondent
corporation.
12.Hence, from June 3, 1993 up to the present time, petitioner has been deprived of
his right to subscribe to the IPOs of corporations listing in the stock market at their
offering prices.
13.The collective act of the individual respondents in depriving petitioner of his right
to a share in the IPOs for the aforementioned reason, is unjust, dishonest and done
in bad faith, causing petitioner substantial financial damage.
There is no question that the Petition in SEC Case No. 02-94-4678 asserts a right in favor
of respondent, particularly, respondents alleged right to subscribe to the IPOs of
corporations listed in the stock market at their offering prices; and stipulates the
correlative obligation of petitioners to respect respondents right, specifically, by
continuing to allow respondent to subscribe to the IPOs of corporations listed in the stock
market at their offering prices.
However, the terms right and obligation in respondents Petition are not magic words that
would automatically lead to the conclusion that such Petition sufficiently states a cause of
action. Right and obligation are legal terms with specific legal meaning. A right is a claim
or title to an interest in anything whatsoever that is enforceable by law. An obligation is
defined in the Civil Code as a juridical necessity to give, to do or not to do. For every right
enjoyed by any person, there is a corresponding obligation on the part of another person
to respect such right. Thus, Justice J.B.L. Reyes offers the definition given by Arias Ramos
as a more complete definition:
An obligation is a juridical relation whereby a person (called the creditor) may demand
from another (called the debtor) the observance of a determinative conduct (the giving,
doing or not doing), and in case of breach, may demand satisfaction from the assets of
the latter.
The Civil Code enumerates the sources of obligations:
Art. 1157. Obligations arise from:
(1) Law;
(2) Contracts;
(3) Quasi-contracts;
(4) Acts or omissions punished by law; and
(5) Quasi-delicts.
Therefore, an obligation imposed on a person, and the corresponding right granted to
another, must be rooted in at least one of these five sources. The mere assertion of a
right and claim of an obligation in an initiatory pleading, whether a Complaint or Petition,
without identifying the basis or source thereof, is merely a conclusion of fact and law. A
pleading should state the ultimate facts essential to the rights of action or defense
asserted, as distinguished from mere conclusions of fact or conclusions of law.
In the case at bar, although the Petition in SEC Case No. 02-94-4678 does allege
respondents right to subscribe to the IPOs of corporations listed in the stock market at
their offering prices, and petitioners obligation to continue respecting and observing
such right, the Petition utterly failed to lay down the source or basis of respondents right

and/or petitioners obligation.

Respondent merely quoted in his Petition the MKSE Board Resolution, passed sometime in
1989, granting him the position of Chairman Emeritus of MKSE for life. However, there is
nothing in the said Petition from which the Court can deduce that respondent, by virtue of
his position as Chairman Emeritus of MKSE, was granted by law, contract, or any other
legal source, the right to subscribe to the IPOs of corporations listed in the stock market
at their offering prices.
A meticulous review of the Petition reveals that the allocation of IPO shares was merely
alleged to have been done in accord with a practice normally observed by the members
of the stock exchange, to wit:
IPOs are shares of corporations offered for sale to the public, prior to their listing in the
trading floor of the countrys two stock exchanges. Normally, Twenty-Five Percent (25%)
of these shares are divided equally between the two stock exchanges which in turn divide
these equally among their members, who pay therefor at the offering price.
A practice or custom is, as a general rule, not a source of a legally demandable or
enforceable right. Indeed, in labor cases, benefits which were voluntarily given by the
employer, and which have ripened into company practice, are considered as rights that
cannot be diminished by the employer. Nevertheless, even in such cases, the source of
the employees right is not custom, but ultimately, the law, since Article 100 of the Labor
Code explicitly prohibits elimination or diminution of benefits.
There is no such law in this case that converts the practice of allocating IPO shares to
MKSE members, for subscription at their offering prices, into an enforceable or
demandable right. Thus, even if it is hypothetically admitted that normally, twenty five
percent (25%) of the IPOs are divided equally between the two stock exchanges -- which,
in turn, divide their respective allocation equally among their members, including the
Chairman Emeritus, who pay for IPO shares at the offering price -- the Court cannot grant
respondents prayer for damages which allegedly resulted from the MKSE Board
Resolution dated 3 June 1993 deviating from said practice by no longer allocating any
shares to respondent.

G.R. No. L-12219

March 15, 1918
AMADO PICART, plaintiff-appellant, vs. FRANK SMITH, JR., defendant-appellee.
FACTS: Plaintiff, Amado Picart, seeks to recover damages from the defendant, Frank
Smith, jr., allegedly caused by an automobile driven by the defendant.
The plaintiff was riding on his pony over Carlatan bridge in La Union. The defendant
approached from the opposite direction in an automobile. As the defendant neared the
bridge he saw a horseman on it and blew his horn to give warning of his approach.
The plaintiff saw the automobile coming and heard the warning signals. Instead of going
to the left lane, he pulled the pony closely up against the railing on the right side of the
bridge because he thought he did not have sufficient time to get over to the other side.
As the automobile approached, the defendant guided it toward his left, that being the
proper side of the road for the machine. In so doing the defendant assumed that the
horseman would move to the right side. The pony had not exhibited fright, and the rider
had made no sign for the automobile to stop. When the defendant was already so near,
there being then no possibility of the horse getting across to the other side, he quickly

turned his car sufficiently to the right to escape hitting the horse alongside of the railing
where it as then standing; but in so doing the automobile passed in such close proximity
to the animal that it became frightened and turned its body across the bridge with its
head toward the railing. The automobile struck the left hind leg of the animal and the
limb was broken. The horse fell and its rider was thrown off with some violence. As a
result of its injuries the horse died. The plaintiff received contusions which caused
temporary unconsciousness and required medical attention for several days.
ISSUE: WON the defendant was guilty of negligence such as gives rise to a civil
obligation to repair the damage done.
RULING: YES. As the defendant started across the bridge, he had the right to assume
that the horse and the rider would pass over to the proper side; but as he moved toward
the center of the bridge it was demonstrated to his eyes that this would not be done; and
he must in a moment have perceived that it was too late for the horse to cross with
safety in front of the moving vehicle. In the nature of things this change of situation
occurred while the automobile was yet some distance away; and from this moment it was
not longer within the power of the plaintiff to escape being run down by going to a place
of greater safety. The control of the situation had then passed entirely to the defendant;
and it was his duty either to bring his car to an immediate stop or, seeing that there were
no other persons on the bridge, to take the other side and pass sufficiently far away from
the horse to avoid the danger of collision. Instead of doing this, the defendant ran
straight on until he was almost upon the horse. He was, we think, deceived into doing this
by the fact that the horse had not yet exhibited fright. But in view of the known nature of
horses, there was an appreciable risk that, if the animal in question was unacquainted
with automobiles, he might get exited and jump under the conditions which here
confronted him. When the defendant exposed the horse and rider to this danger he was,
in our opinion, negligent in the eye of the law.
The test by which to determine the existence of negligence in a particular case may be
stated as follows: Did the defendant in doing the alleged negligent act use that person
would have used in the same situation? If not, then he is guilty of negligence. The law
here in effect adopts the standard supposed to be supplied by the imaginary conduct of
the discreet paterfamilias of the Roman law. The existence of negligence in a given case
is not determined by reference to the personal judgment of the actor in the situation
before him. The law considers what would be reckless, blameworthy, or negligent in the
man of ordinary intelligence and prudence and determines liability by that.
The question as to what would constitute the conduct of a prudent man in a given
situation must of course be always determined in the light of human experience and in
view of the facts involved in the particular case. Abstract speculations cannot here be of
much value but this much can be profitably said: Reasonable men govern their conduct
by the circumstances which are before them or known to them. They are not, and are not
supposed to be, omniscient of the future. Hence they can be expected to take care only
when there is something before them to suggest or warn of danger. Could a prudent man,
in the case under consideration, foresee harm as a result of the course actually pursued?
If so, it was the duty of the actor to take precautions to guard against that harm.
Reasonable foresight of harm, followed by ignoring of the suggestion born of this
prevision, is always necessary before negligence can be held to exist. Stated in these
terms, the proper criterion for determining the existence of negligence in a given case is
this: Conduct is said to be negligent when a prudent man in the position of the tortfeasor
would have foreseen that an effect harmful to another was sufficiently probable to
warrant his foregoing conduct or guarding against its consequences.

Applying this test to the conduct of the defendant in the present case we think that
negligence is clearly established. A prudent man, placed in the position of the defendant,
would in our opinion, have recognized that the course which he was pursuing was fraught
with risk, and would therefore have foreseen harm to the horse and the rider as
reasonable consequence of that course. Under these circumstances the law imposed on
the defendant the duty to guard against the threatened harm.
It goes without saying that the plaintiff himself was not free from fault, for he was guilty
of antecedent negligence in planting himself on the wrong side of the road. But as we
have already stated, the defendant was also negligent; and in such case the problem
always is to discover which agent is immediately and directly responsible. It will be noted
that the negligent acts of the two parties were not contemporaneous, since the
negligence of the defendant succeeded the negligence of the plaintiff by an appreciable
interval. Under these circumstances the law is that the person who has the last fair
chance to avoid the impending harm and fails to do so is chargeable with the
consequences, without reference to the prior negligence of the other party.
This Court held that while contributory negligence on the part of the person injured did
not constitute a bar to recovery, it could be received in evidence to reduce the damages
which would otherwise have been assessed wholly against the other party. In a case like
the one now before us, where the defendant was actually present and operating the
automobile which caused the damage, we do not feel constrained to attempt to weigh
the negligence of the respective parties in order to apportion the damage according to
the degree of their relative fault. It is enough to say that the negligence of the defendant
was in this case the immediate and determining cause of the accident and that the
antecedent negligence of the plaintiff was a more remote factor in the case.

G.R. No. 117009 October 11, 1995

SECURITY BANK & TRUST COMPANY and ROSITO C. MANHIT, petitioners, vs.
COURT OF APPEALS and YSMAEL C. FERRER, respondents.
FACTS: Private respondent Ysmael C. Ferrer was contracted by herein petitioners
Security Bank and Trust Company (SBTC) and Rosito C. Manhit to construct the building of
SBTC in Davao City for the price of P1,760,000.00. The contract dated 4 February 1980
provided that Ferrer would finish the construction in two hundred (200) working days.
Respondent Ferrer was able to complete the construction of the building on 15 August
1980 (within the contracted period) but he was compelled by a drastic increase in the
cost of construction materials to incur expenses of about P300,000.00 on top of the
original cost. The additional expenses were made known to petitioner SBTC as early as
March 1980. Respondent Ferrer made timely demands for payment of the increased cost.
Said demands were supported by receipts, invoices, payrolls and other documents
proving the additional expenses.
In March 1981, SBTC verified Ferrer's claims for additional cost. A recommendation was
then made to settle Ferrer's claim but only for P200,000.00. SBTC, instead of paying the
recommended additional amount, denied ever authorizing payment of any amount
beyond the original contract price. SBTC likewise denied any liability for the additional
cost based on Article IX of the building contract which states:
If at any time prior to the completion of the work to be performed hereunder, increase in

prices of construction materials and/or labor shall supervene through no fault on the part
of the contractor whatsoever or any act of the government and its instrumentalities which
directly or indirectly affects the increase of the cost of the project, OWNER shall equitably
make the appropriate adjustment on mutual agreement of both parties.
Ysmael C. Ferrer then filed a complaint for breach of contract with damages.
TC: ruled for Ferrer.
CA: affirmed the TC decision.
ISSUE: WON the absence of mutual agreement is in effect a condition dependent on
petitioner bank's sole will.
RULING: Petitioners argue that under the aforequoted Article IX of the building contract,
any increase in the price of labor and/or materials resulting in an increase in construction
cost above the stipulated contract price will not automatically make petitioners liable to
pay for such increased cost, as any payment above the stipulated contract price has been
made subject to the condition that the "appropriate adjustment" will be made "upon
mutual agreement of both parties". It is contended that since there was no mutual
agreement between the parties, petitioners' obligation to pay amounts above the original
contract price never materialized.
Article 22 of the Civil Code which embodies the maxim, Nemo ex alterius incommodo
debet lecupletari (no man ought to be made rich out of another's injury).
In the present case, petitioners' arguments to support absence of liability for the cost of
construction beyond the original contract price are not persuasive.
Under the previously quoted Article IX of the construction contract, petitioners would
make the appropriate adjustment to the contract price in case the cost of the project
increases through no fault of the contractor (private respondent). Private respondent
informed petitioners of the drastic increase in construction cost as early as March 1980.
Petitioners in turn had the increased cost evaluated and audited. When private
respondent demanded payment of P259,417.23, petitioner bank's Vice-President Rosito C.
Manhit and the bank's architectural consultant were directed by the bank to verify and
compute private respondent's claims of increased cost. A recommendation was then
made to settle private respondent's claim for P200,000.00. Despite this recommendation
and several demands from private respondent, SBTC failed to make payment. It denied
authorizing anyone to make a settlement of private respondent's claim and likewise
denied any liability, contending that the absence of a mutual agreement made private
respondent's demand premature and baseless.
Petitioners' arguments are specious.
It is not denied that private respondent incurred additional expenses in constructing
petitioner bank's building due to a drastic and unexpected increase in construction cost.
In fact, petitioner bank admitted liability for increased cost when a recommendation was
made to settle private respondent's claim for P200,000.00. Private respondent's claim for
the increased amount was adequately proven during the trial by receipts, invoices and
other supporting documents.
Under Article 1182 of the Civil Code, a conditional obligation shall be void if its fulfillment
depends upon the sole will of the debtor. In the present case, the mutual agreement, the
absence of which petitioner bank relies upon to support its non-liability for the increased

construction cost, is in effect a condition dependent on petitioner bank's sole will, since
private respondent would naturally and logically give consent to such an agreement
which would allow him recovery of the increased cost.
Further, it cannot be denied that petitioner bank derived benefits when private
respondent completed the construction even at an increased cost.
Hence, to allow petitioner bank to acquire the constructed building at a price far below its
actual construction cost would undoubtedly constitute unjust enrichment for the bank to
the prejudice of private respondent. Such unjust enrichment is not allowed by law.

G.R. No. 135528

July 14, 2004
SPOUSES ORLANDO A. RAYOS and MERCEDES T. RAYOS, petitioners, vs. THE
COURT OF APPEALS and SPOUSES ROGELIO and VENUS MIRANDA, respondents.
FACTS: Petitioner Orlando A. Rayos, a practicing lawyer, and his wife, petitioner
Mercedes T. Rayos, secured a short-term loan from the Philippine Savings Bank (PSB)
payable within a period of one (1) year in quarterly installments of P29,190.28, the first
quarterly payment to start on March 24, 1986. The loan was evidenced by a promissory
note which the petitioners executed on December 24, 1985. To secure the payment of the
loan, the petitioners-spouses executed, on the same date, a Real Estate Mortgage over
their property covered by Transfer Certificate of Title (TCT) No. 100156 located in Las
Pias.
The petitioners, as vendors, and the respondents, Spouses Miranda, as vendees,
executed a Deed of Sale with Assumption of Mortgage over the subject property for the
price of P214,000.00. However, on January 29, 1986, the petitioners-spouses, likewise,
executed a Contract to Sell the said property in favor of the respondents for P250,000.00
with the following condition:
3. That upon full payment of the consideration hereof, the SELLER shall execute a
Deed of Absolute Sale in favor of the BUYER that the payment of capital gains tax
shall be for the account of the SELLER and that documentary stamps, transfer tax,
registration expenses for the transfer of title including the notarization and
preparation of this Contract and subsequent documents if any are to be executed,
real estate taxes from January 1, 1986 and other miscellaneous expenses shall be
for the account of the BUYER; the SELLER hereby represents that all association
dues has been paid but that subsequent to the execution of this Contract the
payment of the same shall devolve upon the BUYER.
The petitioners obliged themselves to execute a deed of absolute sale over the property
in favor of the respondents upon the full payment of the purchase price thereof.
Respondent Rogelio Miranda filed an application with the PSB to secure the approval of
his assumption of the petitioners' obligation on the loan, and appended thereto a General
Information sheet. The PSB disapproved his application. Nevertheless, respondent Rogelio
Miranda paid the three quarterly installments on the petitioners' loan for which the bank
issued a receipt for the account of the petitioners.
Petitioner Rayos wrote respondent Rogelio Miranda on November 30, 1986, reminding the
latter of the last quarterly payment of his loan with the PSB. He also advised the
respondent to thereafter request the bank for the cancellation of the mortgage on his

property and to receive the owner's duplicate of his title over the same.
Petitioner Orlando Rayos then received a Letter dated November 27, 1986 from the PSB,
reminding him that his loan with the bank would mature on December 24, 1986, and that
it expected him to pay his loan on or before the said date. Fearing that the respondents
would not be able to pay the amount due, petitioner Orlando Rayos paid P27,981.41 to
the bank. The petitioner advised the PSB not to turn over to the respondents the owner's
duplicate of the title over the subject property, even if the latter paid the last quarterly
installment on the loan, as they had not assumed the payment of the same.
On December 24, 1986, respondent Rogelio Miranda arrived at the PSB to pay the last
installment on the petitioners' loan in the amount of P29,223.67. He informed the bank
that the petitioners had executed a deed of sale with assumption of mortgage in their
favor, and that he was paying the balance of the loan, conformably to said deed. On the
other hand, the bank informed the respondent that it was not bound by said deed, and
showed petitioner Orlando Rayos' Letter dated December 18, 1986. The respondent was
also informed that the petitioners had earlier paid the amount of P27,981.41 on the loan.
The bank refused respondent Rogelio Miranda's offer to pay the loan, and confirmed its
refusal in a Letter dated December 24, 1986. On even date, respondent Rogelio Miranda
wrote the PSB, tendering the amount of P29,223.67 and enclosed Interbank Check No.
01193344 payable to PSB. The PSB wrote respondent Rogelio Miranda that it was
returning his check.
Respondent Rogelio Miranda filed a complaint against the petitioners and the PSB for
damages with a prayer for a writ of preliminary attachment with the RTC of Makati. He
alleged that the petitioners and the PSB conspired to prevent him from paying the last
quarterly payment of the petitioners' loan with the bank, despite the existence of the
deed of sale with assumption of mortgage executed by him and the petitioners, and in
refusing to turn over the owner's duplicate of TCT No. 100156, thereby preventing the
transfer of the title to the property in his name.
TC granted the respondent's plea for a writ of preliminary attachment. Unaware of the
said complaint, the petitioner wrote the respondent on January 3, 1986 that as soon as
his payment to the PSB of P29,223.67 was refunded, the owner's duplicate of the title
would be released to him. On January 5, 1986, petitioner Orlando Rayos wrote respondent
Rogelio Miranda, reiterating that he would release the title in exchange for his cash
settlement of P29,421.41. The respondent failed to respond.
In the meantime, the PSB executed on January 8, 1987 a Release of Real Estate Mortgage
in favor of the petitioners, and released the owner's duplicate of title of TCT No. 100156.
On January 17, 1987, petitioner Orlando Rayos wrote respondent Rogelio Miranda,
reiterating his stance in his Letters of January 3 and 5, 1987.
In the meantime, the petitioners received the complaint in Civil Case No. 15639 and
filed their Answer with Counterclaim in which they alleged that:
14.That plaintiff has no cause of action against defendants Rayos, the latter are willing
to deliver the title sought by plaintiff under the terms set out in their letters dated
January 3, 5, 17, and 20, hereto marked as Annexes "1," "1-A," "1-B" and "1-C;"
Petitioner Orlando Rayos filed a complaint against respondent Rogelio Miranda with the
RTC of Makati for Specific Performance with Damages for the collection of the amount of
P29,223.67 which he had paid to the PSB on December 12 and 19, 1986.

The PSB and its officers filed their Answer in Civil Case No. 15639, and alleged the
following defenses, thus:
27. The application for the plaintiff to assume the mortgage loan of the defendants
Spouses Rayos was not approved, and it was NOT even recommended by the Marketing
Group of defendant PSBank for approval by its Top Management, because the credit
standing of the plaintiff was found out to be not good;
28.The acceptance of the payments made by the plaintiff for three (3) amortizations
on the loan of defendants Spouses Rayos was merely allowed upon the insistence
of the plaintiff, which payments were duly and accordingly receipted, and said
acceptance was in accordance with the terms of the Real Estate Mortgage
executed by the defendants Spouses Rayos in favor of the defendant PSBank and
is also allowed by law;
TC: orders plaintiff Rogelio Miranda to refund to spouses Orlando and Mercedes T. Rayos
the total sum of P29,069.45, Rayos paid to PS Bank as the last amortization and as
release of mortgage fee, without any interest; and upon receipt of the sum of P29,069.45
from Rogelio Miranda, Spouses Orlando and Mercedes T. Rayos shall deliver to Rogelio
Miranda Transfer Certificate of Title No. 100156 of the Registry of Deeds of Pasay City;
and, deliver to Rogelio Miranda the possession of the parcel of land described in the said
title.
CA: rendered judgment affirming with modification the decision of the RTC.
ISSUE: WON there was a breach of contract on the part of the respondents.
RULING: Contrary to the ruling of the Court of Appeals, the petitioners did not
unilaterally cancel their contract to sell with the respondents when they paid the total
amount of P29,062.80 to the PSB in December 1986. In fact, the petitioners wrote the
respondents on January 3, 5 and 17, 1987, that they were ready to execute the deed of
absolute sale and turn over the owner's duplicate of TCT No. 100156 upon the
respondents' remittance of the amount of P29,223.67. The petitioners reiterated the
same stance in their Answer with Counterclaim in Civil Case No. 15639. The petitioners
cannot, likewise, be faulted for refusing to execute a deed of absolute sale over the
property in favor of the respondents, and in refusing to turn over the owner's duplicate of
TCT No. 100156 unless the respondents refunded the said amount. The respondents were
obliged under the contract to sell to pay the said amount to the PSB as part of the
purchase price of the property. On the other hand, it cannot be argued by the petitioners
that the respondents committed a breach of their obligation when they refused to refund
the said amount.
It bears stressing that the petitioners and the respondents executed two interrelated
contracts, viz: the Deed of Sale with Assumption of Mortgage dated December 26, 1985,
and the Contract to Sell dated January 29, 1986. To determine the intention of the parties,
the two contracts must be read and interpreted together. Under the two contracts, the
petitioners bound and obliged themselves to execute a deed of absolute sale over the
property and transfer title thereon to the respondents after the payment of the full
purchase price of the property, inclusive of the quarterly installments due on the
petitioners' loan with the PSB:
3. That upon full payment of the consideration hereof, the SELLER shall execute a
Deed of Absolute Sale in favor of the BUYER that the payment of capital gains tax
shall be for the account of the SELLER and that documentary stamps, transfer tax,
registration expenses for the transfer of title including the notarization and
preparation of this Contract and subsequent documents if any are to be executed,

real estate taxes from January 1, 1986 and other miscellaneous expenses shall be
for the account of the BUYER; the SELLER hereby represents that all association
dues has been paid but that subsequent to the execution of this Contract the
payment of the same shall devolve upon the BUYER.
Construing the contracts together, it is evident that the parties executed a contract to
sell and not a contract of sale. The petitioners retained ownership without further
remedies by the respondents until the payment of the purchase price of the property in
full. Such payment is a positive suspensive condition, failure of which is not really a
breach, serious or otherwise, but an event that prevents the obligation of the petitioners
to convey title from arising, in accordance with Article 1184 of the Civil Code. In Lacanilao
v. Court of Appeals, we held that:
It is well established that where the seller promised to execute a deed of absolute sale
upon completion of payment of the purchase price by the buyer, the agreement is a
contract to sell. In contracts to sell, where ownership is retained by the seller until
payment of the price in full, such payment is a positive suspensive condition, failure of
which is not really a breach but an event that prevents the obligation of the vendor to
convey title in accordance with Article 1184 of the Civil Code.
The non-fulfillment by the respondent of his obligation to pay, which is a suspensive
condition to the obligation of the petitioners to sell and deliver the title to the property,
rendered the contract to sell ineffective and without force and effect. The parties stand as
if the conditional obligation had never existed. Article 1191 of the New Civil Code will not
apply because it presupposes an obligation already extant. There can be no rescission of
an obligation that is still non-existing, the suspensive condition not having happened.
However, the respondents may reinstate the contract to sell by paying the P29,223.67,
and the petitioners may agree thereto and accept the respondents' late payment. In this
case, the petitioners had decided before and after the respondents filed this complaint in
Civil Case No. 15639 to accept the payment of P29,223.67, to execute the deed of
absolute sale over the property and cause the transfer of the title of the subject property
to the respondents. The petitioners even filed its amended complaint in Civil Case No.
15984 for the collection of the said amount. The Court of Appeals cannot, thus, be faulted
for affirming the decision of the trial court and ordering the petitioners to convey the
property to the respondents upon the latter's payment of the amount of P29,223.67,
provided that the property has not been sold to a third-party who acted in good faith.
the petition is DENIED DUE COURSE.