OBLIGATIONS AND COTRACTS ARTICLE 1156
complaint and interposing a special defense of lack of cause of action.
G.R. No. 109125 December 2, 1994
ANG YU ASUNCION, ARTHUR GO AND KEH TIONG, petitioners,
vs.
THE HON. COURT OF APPEALS and BUEN REALTY DEVELOPMENT
CORPORATION, respondents.
Antonio M. Albano for petitioners.
Umali, Soriano & Associates for private respondent.
VITUG, J.:
Assailed, in this petition for review, is the decision of the Court of Appeals,
dated 04 December 1991, in CA-G.R. SP No. 26345 setting aside and
declaring without force and effect the orders of execution of the trial court,
dated 30 August 1991 and 27 September 1991, in Civil Case No. 87-41058.
The antecedents are recited in good detail by the appellate court thusly:
On July 29, 1987 a Second Amended Complaint for Specific
Performance was filed by Ang Yu Asuncion and Keh Tiong, et al.,
against Bobby Cu Unjieng, Rose Cu Unjieng and Jose Tan before the
Regional Trial Court, Branch 31, Manila in Civil Case No. 87-41058,
alleging, among others, that plaintiffs are tenants or lessees of
residential and commercial spaces owned by defendants described as
Nos. 630-638 Ongpin Street, Binondo, Manila; that they have
occupied said spaces since 1935 and have been religiously paying the
rental and complying with all the conditions of the lease contract; that
on several occasions before October 9, 1986, defendants informed
plaintiffs that they are offering to sell the premises and are giving them
priority to acquire the same; that during the negotiations, Bobby Cu
Unjieng offered a price of P6-million while plaintiffs made a counter
offer of P5-million; that plaintiffs thereafter asked the defendants to put
their offer in writing to which request defendants acceded; that in reply
to defendant's letter, plaintiffs wrote them on October 24, 1986 asking
that they specify the terms and conditions of the offer to sell; that when
plaintiffs did not receive any reply, they sent another letter dated
January 28, 1987 with the same request; that since defendants failed
to specify the terms and conditions of the offer to sell and because of
information received that defendants were about to sell the property,
plaintiffs were compelled to file the complaint to compel defendants to
sell the property to them.
Defendants filed their answer denying the material allegations of the
After the issues were joined, defendants filed a motion for summary
judgment which was granted by the lower court. The trial court found
that defendants' offer to sell was never accepted by the plaintiffs for
the reason that the parties did not agree upon the terms and conditions
of the proposed sale, hence, there was no contract of sale at all.
Nonetheless, the lower court ruled that should the defendants
subsequently offer their property for sale at a price of P11-million or
below, plaintiffs will have the right of first refusal. Thus the dispositive
portion of the decision states:
WHEREFORE, judgment is hereby rendered in favor of the
defendants and against the plaintiffs summarily dismissing the
complaint subject to the aforementioned condition that if the
defendants subsequently decide to offer their property for sale
for a purchase price of Eleven Million Pesos or lower, then the
plaintiffs has the option to purchase the property or of first
refusal, otherwise, defendants need not offer the property to
the plaintiffs if the purchase price is higher than Eleven Million
Pesos.
SO ORDERED.
Aggrieved by the decision, plaintiffs appealed to this Court in
CA-G.R. CV No. 21123. In a decision promulgated on September 21,
1990 (penned by Justice Segundino G. Chua and concurred in by
Justices Vicente V. Mendoza and Fernando A. Santiago), this Court
affirmed with modification the lower court's judgment, holding:
In resume, there was no meeting of the minds between the
parties concerning the sale of the property. Absent such
requirement, the claim for specific performance will not lie.
Appellants' demand for actual, moral and exemplary damages
will likewise fail as there exists no justifiable ground for its
award. Summary judgment for defendants was properly
granted. Courts may render summary judgment when there is
no genuine issue as to any material fact and the moving party
is entitled to a judgment as a matter of law (Garcia vs. Court
of Appeals, 176 SCRA 815). All requisites obtaining, the
decision of the court a quo is legally justifiable.
WHEREFORE, finding the appeal unmeritorious, the
judgment appealed from is hereby AFFIRMED, but subject to
 the following modification: The court a quo in the aforestated
decision gave the plaintiffs-appellants the right of first refusal
only if the property is sold for a purchase price of Eleven
Million pesos or lower; however, considering the mercurial
and uncertain forces in our market economy today. We find
no reason not to grant the same right of first refusal to herein
appellants in the event that the subject property is sold for a
price in excess of Eleven Million pesos. No pronouncement
as to costs.
SO ORDERED.
The decision of this Court was brought to the Supreme Court by
petition for review on certiorari. The Supreme Court denied the appeal
on May 6, 1991 "for insufficiency in form and substances" (Annex H,
Petition).
On November 15, 1990, while CA-G.R. CV No. 21123 was pending
consideration by this Court, the Cu Unjieng spouses executed a Deed
of Sale (Annex D, Petition) transferring the property in question to
herein petitioner Buen Realty and Development Corporation, subject
to the following terms and conditions:
1. That for and in consideration of the sum of FIFTEEN
MILLION PESOS (P15,000,000.00), receipt of which in full is
hereby acknowledged, the VENDORS hereby sells, transfers
and conveys for and in favor of the VENDEE, his heirs,
executors, administrators or assigns, the above-described
property with all the improvements found therein including all
the rights and interest in the said property free from all liens
and encumbrances of whatever nature, except the pending
ejectment proceeding;
2. That the VENDEE shall pay the Documentary Stamp Tax,
registration fees for the transfer of title in his favor and other
expenses incidental to the sale of above-described property
including capital gains tax and accrued real estate taxes.
As a consequence of the sale, TCT No. 105254/T-881 in the name of
the Cu Unjieng spouses was cancelled and, in lieu thereof, TCT No.
195816 was issued in the name of petitioner on December 3, 1990.
On July 1, 1991, petitioner as the new owner of the subject property
wrote a letter to the lessees demanding that the latter vacate the
premises.
On July 16, 1991, the lessees wrote a reply to petitioner stating that
petitioner brought the property subject to the notice of lis
pendens regarding Civil Case No. 87-41058 annotated on TCT No.
105254/T-881 in the name of the Cu Unjiengs.
The lessees filed a Motion for Execution dated August 27, 1991 of the
Decision in Civil Case No. 87-41058 as modified by the Court of
Appeals in CA-G.R. CV No. 21123.
On August 30, 1991, respondent Judge issued an order (Annex A,
Petition) quoted as follows:
Presented before the Court is a Motion for Execution filed by
plaintiff represented by Atty. Antonio Albano. Both defendants
Bobby Cu Unjieng and Rose Cu Unjieng represented by Atty.
Vicente Sison and Atty. Anacleto Magno respectively were
duly notified in today's consideration of the motion as
evidenced by the rubber stamp and signatures upon the copy
of the Motion for Execution.
The gist of the motion is that the Decision of the Court dated
September 21, 1990 as modified by the Court of Appeals in
its decision in CA G.R. CV-21123, and elevated to the
Supreme Court upon the petition for review and that the same
was denied by the highest tribunal in its resolution dated May
6, 1991 in G.R. No.
L-97276, had now become final and executory. As a
consequence, there was an Entry of Judgment by the
Supreme Court as of June 6, 1991, stating that the aforesaid
modified decision had already become final and executory.
It is the observation of the Court that this property in dispute
was the subject of theNotice of Lis Pendens and that the
modified decision of this Court promulgated by the Court of
Appeals which had become final to the effect that should the
defendants decide to offer the property for sale for a price of
P11 Million or lower, and considering the mercurial and
uncertain forces in our market economy today, the same right
of first refusal to herein plaintiffs/appellants in the event that
the subject property is sold for a price in excess of Eleven
Million pesos or more.
WHEREFORE, defendants are hereby ordered to execute the
necessary Deed of Sale of the property in litigation in favor of
plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the
 consideration of P15 Million pesos in recognition of plaintiffs'
right of first refusal and that a new Transfer Certificate of Title
be issued in favor of the buyer.
All previous transactions involving the same property
notwithstanding the issuance of another title to Buen Realty
Corporation, is hereby set aside as having been executed in
bad faith.
SO ORDERED.
On September 22, 1991 respondent Judge issued another order, the
dispositive portion of which reads:
WHEREFORE, let there be Writ of Execution issue in the
above-entitled case directing the Deputy Sheriff Ramon
Enriquez of this Court to implement said Writ of Execution
ordering the defendants among others to comply with the
aforesaid Order of this Court within a period of one (1) week
from receipt of this Order and for defendants to execute the
necessary Deed of Sale of the property in litigation in favor of
the plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for
the consideration of P15,000,000.00 and ordering the
Register of Deeds of the City of Manila, to cancel and set
aside the title already issued in favor of Buen Realty
Corporation which was previously executed between the latter
and defendants and to register the new title in favor of the
aforesaid plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur
Go.
SO ORDERED.
On the same day, September 27, 1991 the corresponding writ of
execution (Annex C, Petition) was issued. 1
On 04 December 1991, the appellate court, on appeal to it by private
respondent, set aside and declared without force and effect the above
questioned orders of the court a quo.
In this petition for review on certiorari, petitioners contend that Buen Realty
can be held bound by the writ of execution by virtue of the notice of lis pendens,
carried over on TCT No. 195816 issued in the name of Buen Realty, at the
time of the latter's purchase of the property on 15 November 1991 from the Cu
Unjiengs.
We affirm the decision of the appellate court.
A not too recent development in real estate transactions is the adoption of such
arrangements as the right of first refusal, a purchase option and a contract to
sell. For ready reference, we might point out some fundamental precepts that
may find some relevance to this discussion.
An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil
Code). The obligation is constituted upon the concurrence of the essential
elements thereof, viz: (a) The vinculum juris or juridical tie which is the efficient
cause established by the various sources of obligations (law, contracts, quasi-
contracts, delicts and quasi-delicts); (b) the object which is the prestation or
conduct; required to be observed (to give, to do or not to do); and (c)
the subject-persons who, viewed from the demandability of the obligation, are
the active (obligee) and the passive (obligor) subjects.
Among the sources of an obligation is a contract (Art. 1157, Civil Code), which
is a meeting of minds between two persons whereby one binds himself, with
respect to the other, to give something or to render some service (Art. 1305,
Civil Code). A contract undergoes various stages that include its negotiation
or preparation, its perfection and, finally, its consummation. Negotiation covers
the period from the time the prospective contracting parties indicate interest in
the contract to the time the contract is concluded (perfected). The perfection of
the contract takes place upon the concurrence of the essential elements
thereof. A contract which is consensual as to perfection is so established upon
a mere meeting of minds, i.e., the concurrence of offer and acceptance, on the
object and on the cause thereof. A contract which requires, in addition to the
above, the delivery of the object of the agreement, as in a pledge
or commodatum, is commonly referred to as a real contract. In
a solemn contract, compliance with certain formalities prescribed by law, such
as in a donation of real property, is essential in order to make the act valid, the
prescribed form being thereby an essential element thereof. The stage
ofconsummation begins when the parties perform their respective
undertakings under the contract culminating in the extinguishment thereof.
Until the contract is perfected, it cannot, as an independent source of
obligation, serve as a binding juridical relation. In sales, particularly, to which
the topic for discussion about the case at bench belongs, the contract is
perfected when a person, called the seller, obligates himself, for a price
certain, to deliver and to transfer ownership of a thing or right to another, called
the buyer, over which the latter agrees. Article 1458 of the Civil Code provides:
Art. 1458. By the contract of sale one of the contracting parties
obligates himself to transfer the ownership of and to deliver a
 determinate thing, and the other to pay therefor a price certain in
money or its equivalent.
A contract of sale may be absolute or conditional.
When the sale is not absolute but conditional, such as in a "Contract to Sell"
where invariably the ownership of the thing sold is retained until the fulfillment
of a positive suspensive condition (normally, the full payment of the purchase
price), the breach of the condition will prevent the obligation to convey title
from acquiring an obligatory force. 2 In Dignos vs. Court of Appeals (158 SCRA
375), we have said that, although denominated a "Deed of Conditional Sale,"
a sale is still absolute where the contract is devoid of any proviso that title is
reserved or the right to unilaterally rescind is stipulated, e.g., until or unless
the price is paid. Ownership will then be transferred to the buyer upon actual
or constructive delivery (e.g., by the execution of a public document) of the
property sold. Where the condition is imposed upon the perfection of the
contract itself, the failure of the condition would prevent such perfection. 3 If the
condition is imposed on the obligation of a party which is not fulfilled, the other
party may either waive the condition or refuse to proceed with the sale (Art.
1545, Civil Code). 4
An unconditional mutual promise to buy and sell, as long as the object is made
determinate and the price is fixed, can be obligatory on the parties, and
compliance therewith may accordingly be exacted. 5
An accepted unilateral promise which specifies the thing to be sold and the
price to be paid, when coupled with a valuable consideration
distinct and separate from the price, is what may properly be termed a
perfected contract of option. This contract is legally binding, and in sales, it
conforms with the second paragraph of Article 1479 of the Civil Code, viz:
Art. 1479. . . .
An accepted unilateral promise to buy or to sell a determinate thing for
a price certain is binding upon the promissor if the promise is
supported by a consideration distinct from the price. (1451a) 6
Observe, however, that the option is not the contract of sale itself. 7 The
optionee has the right, but not the obligation, to buy. Once the option is
exercised timely, i.e., the offer is accepted before a breach of the option, a
bilateral promise to sell and to buy ensues and both parties are then
reciprocally bound to comply with their respective undertakings. 8
Let us elucidate a little. A negotiation is formally initiated by an offer. An
imperfect promise (policitacion) is merely an offer. Public advertisements or
solicitations and the like are ordinarily construed as mere invitations to make
offers or only as proposals. These relations, until a contract is perfected, are
not considered binding commitments. Thus, at any time prior to the perfection
of the contract, either negotiating party may stop the negotiation. The offer, at
this stage, may be withdrawn; the withdrawal is effective immediately after its
manifestation, such as by its mailing and not necessarily when the offeree
learns of the withdrawal (Laudico vs. Arias, 43 Phil. 270). Where a period is
given to the offeree within which to accept the offer, the following rules
generally govern:
(1) If the period is not itself founded upon or supported by a consideration, the
offeror is still free and has the right to withdraw the offer before its acceptance,
or, if an acceptance has been made, before the offeror's coming to know of
such fact, by communicating that withdrawal to the offeree (see Art. 1324, Civil
Code; see also Atkins, Kroll & Co. vs. Cua, 102 Phil. 948, holding that this rule
is applicable to a unilateral promise to sell under Art. 1479, modifying the
previous decision in South Western Sugar vs. Atlantic Gulf, 97 Phil. 249; see
also Art. 1319, Civil Code; Rural Bank of Paraaque, Inc., vs. Remolado, 135
SCRA 409; Sanchez vs. Rigos, 45 SCRA 368). The right to withdraw, however,
must not be exercised whimsically or arbitrarily; otherwise, it could give rise to
a damage claim under Article 19 of the Civil Code which ordains that "every
person must, in the exercise of his rights and in the performance of his duties,
act with justice, give everyone his due, and observe honesty and good faith."
(2) If the period has a separate consideration, a contract of "option" is
deemed perfected, and it would be a breach of that contract to withdraw the
offer during the agreed period. The option, however, is an independent
contract by itself, and it is to be distinguished from the projected main
agreement (subject matter of the option) which is obviously yet to be
concluded. If, in fact, the optioner-offeror withdraws the offer before its
acceptance(exercise of the option) by the optionee-offeree, the latter may not
sue for specific performance on the proposed contract ("object" of the option)
since it has failed to reach its own stage of perfection. The optioner-offeror,
however, renders himself liable for damages for breach of the option. In these
cases, care should be taken of the real nature of the consideration given, for
if, in fact, it has been intended to be part of the consideration for the main
contract with a right of withdrawal on the part of the optionee, the main contract
could be deemed perfected; a similar instance would be an "earnest money"
in a contract of sale that can evidence its perfection (Art. 1482, Civil Code).
In the law on sales, the so-called "right of first refusal" is an innovative juridical
relation. Needless to point out, it cannot be deemed a perfected contract of
sale under Article 1458 of the Civil Code. Neither can the right of first refusal,
understood in its normal concept, per se be brought within the purview of an
option under the second paragraph of Article 1479, aforequoted, or possibly of
an offer under Article 1319 9 of the same Code. An option or an offer would
require, among other things, 10 a clear certainty on both the object and the
cause or consideration of the envisioned contract. In a right of first refusal,
while the object might be made determinate, the exercise of the right, however,
would be dependent not only on the grantor's eventual intention to enter into
a binding juridical relation with another but also on terms, including the price,
that obviously are yet to be later firmed up. Prior thereto, it can at best be so
described as merely belonging to a class of preparatory juridical relations
governed not by contracts (since the essential elements to establish
the vinculum juris would still be indefinite and inconclusive) but by, among
other laws of general application, the pertinent scattered provisions of the Civil
Code on human conduct.
Even on the premise that such right of first refusal has been decreed under a
final judgment, like here, its breach cannot justify correspondingly an issuance
of a writ of execution under a judgment that merely recognizes its existence,
nor would it sanction an action for specific performance without thereby
negating the indispensable element of consensuality in the perfection of
contracts. 11 It is not to say, however, that the right of first refusal would be
inconsequential for, such as already intimated above, an unjustified disregard
thereof, given, for instance, the circumstances expressed in Article 19 12 of the
Civil Code, can warrant a recovery for damages.
The final judgment in Civil Case No. 87-41058, it must be stressed, has merely
accorded a "right of first refusal" in favor of petitioners. The consequence of
such a declaration entails no more than what has heretofore been said. In fine,
if, as it is here so conveyed to us, petitioners are aggrieved by the failure of
private respondents to honor the right of first refusal, the remedy is not a writ
of execution on the judgment, since there is none to execute, but an action for
damages in a proper forum for the purpose.
Furthermore, whether private respondent Buen Realty Development
Corporation, the alleged purchaser of the property, has acted in good faith or
bad faith and whether or not it should, in any case, be considered bound to
respect the registration of the lis pendens in Civil Case No. 87-41058 are
matters that must be independently addressed in appropriate proceedings.
Buen Realty, not having been impleaded in Civil Case No. 87-41058, cannot
be held subject to the writ of execution issued by respondent Judge, let alone
ousted from the ownership and possession of the property, without first being
duly afforded its day in court.
We are also unable to agree with petitioners that the Court of Appeals has
erred in holding that the writ of execution varies the terms of the judgment in
Civil Case No. 87-41058, later affirmed in CA-G.R. CV-21123. The Court of
Appeals, in this regard, has observed:
Finally, the questioned writ of execution is in variance with the decision
of the trial court as modified by this Court. As already stated, there
was nothing in said decision 13 that decreed the execution of a deed
of sale between the Cu Unjiengs and respondent lessees, or the fixing
of the price of the sale, or the cancellation of title in the name of
petitioner (Limpin vs. IAC, 147 SCRA 516; Pamantasan ng Lungsod
ng Maynila vs. IAC, 143 SCRA 311; De Guzman vs. CA, 137 SCRA
730; Pastor vs. CA, 122 SCRA 885).
It is likewise quite obvious to us that the decision in Civil Case No. 87-
41058 could not have decreed at the time the execution of any deed
of sale between the Cu Unjiengs and petitioners.
WHEREFORE, we UPHOLD the Court of Appeals in ultimately setting
aside the questioned Orders, dated 30 August 1991 and 27
September 1991, of the court a quo. Costs against petitioners.
SO ORDERED.
Narvasa, C.J., Padilla, Bidin, Regalado, Davide, Jr., Romero,
Bellosillo, Melo, Quiason, Puno and Mendoza, JJ., concur.
Kapunan, J., took no part.
Feliciano, J., is on leave.
G.R. No. L-12611 August 7, 1918
FELIPE AGONCILLO, and his wife, MARCELA MARIO, plaintiff-
appellees,
vs.
CRISANTO JAVIER, administrator of the estate of the late Anastasio
Alano. FLORENCIO ALANO and JOSE ALANO, defendants-appellants.
Basilio Aromin for appellants.
Felipe Agoncillo for appellees.
FISHER, J.:
On the twenty-seventh day of February, 1904, Anastasio Alano, Jose Alano,
and Florencio Alano executed in favor of the plaintiff, Da. Marcela Mario, a
document of the following tenor:
We, the undersigned, Jose Alano and Florencio Alano (on our own
behalf), and Anastasio Alano (on behalf of his children Leonila,
 Anastasio and Leocadio), the former and the latter testamentary heirs
of the Rev. Anastasio C. Cruz, deceased, hereby solemnly promise
under oath:
1. We will pay to Da. Marcela Mario within one year from this date
together with interest thereon at the rate of 12 per cent per annum, the
sum of P2,730.50, Philippine currency, this being the present amount
of indebtedness incurred in favor of that lady on the 20th of April 1897,
by our testator, the Rev. Anastasio C. Cruz;
2. To secure the payment of this debt we mortgage to the said Da.
Marcela Mario the house and lot bequeathed to us by the deceased,
situated in this town, on calle Evangelista, formerly Asturias, recorded
in the register of deeds on the twenty-second of April, 1895, under
number 730;
3. In case of insolvency on our part, we cede by virtue of these
presents the said house and lot to Da. Marcela Mario, transferring to
her all our rights to the ownership and possession of the lot; and if the
said property upon appraisal at the time of the maturity of this
obligation should not be of sufficient value to cover the total amount of
this indebtedness, I, Anastasio Alano, also mortgage to the said lady
my four parcels of land situated in the barrio of San Isidro, to secure
the balance, if any; the title deeds of said property, as well as the title
deeds of the said house and lot are this day delivered to Sr. Vicente
Ilustre, general attorney-in-fact of Da. Marcela Mario.
In witness whereof we have signed these presents in Batangas, this
twenty-seventh day of February, 1904.
(Sgd.) JOSE ALANO.
(Sgd.) ANASTASIO ALANO.
(Sgd.) FLORENCIO ALANO.
No part of the interest or of the principal due upon this undertaking has been
paid, except the sum of P200 paid in the year 1908 by the late Anastasio
Alano.
In 1912, Anastasio Alano died intestate. At the instance of one of his creditors,
proceedings upon the administration of his estate were had in the Court of First
Instance of Batangas. By order dated August 8, 1914, the court appointed an
administrator and a committee to hear claims. Notices were published, as
required, in a newspaper of general circulation, to inform the creditors of the
time and place at which they might appear to present their claims against the
estate of the deceased (Exhibit No. 1). The time designated in the notice for
the presentation of claims expired on March 24, 1915. It appears that no claims
whatever were presented to the committee, and it having been shown to the
court, by the statement of the administrator, that the claim of the creditor at
whose instance the administration proceeding was commenced, had been
settled by the heirs, the administrator was discharged and the proceeding
terminated by order dated November 8, 1915.
On April 27, 1916, at the instance of the plaintiff, Da. Marcela Mario, and
upon the statement, made on her behalf, that she was a creditor of the
deceased and that her claim was secured by mortgage upon real estate
belonging to the said deceased, the court reopened the intestate proceeding,
and appointed one Javier to be administrator of the estate. No request was
made for a renewal of the commission of the committee on claims. The
appellants Jose and Florencio Alano objected to the appointment of Javier, but
their objection was overruled by the court.
On March 17, 1916, the plaintiffs filed the complaint in this action against
Javier, as administrator of the estate of Anastasio Alano and against Florencio
Alano and Jose Alano personally. The action is based upon the execution of
the document of February 27, 1904, above set forth, which is transcribed
literally in the complaint. It is averred that defendants have paid no part of the
indebtedness therein acknowledged, with the exception of the P200 paid on
account in 1908. It is further averred that on April 22, 1910, the debtors
promised in writing that they would pay the debt in 1911, but that they had
failed to do so. The prayer of the complaint is that, unless defendants pay the
debt for the recovery of which the action was brought, they be required to
convey to plaintiffs the house and lot described in paragraph two of the said
document; that this property be appraised; and that if its value is found to be
less than the amount of the debt, with the accrued interest at the stipulated
rate, judgment be rendered in favor of the plaintiffs for the balance. No relief is
requested with respect to the undertaking of Anastasio Alano expressed in the
third paragraph of the document in suit, as guarantor for the payment of the
difference, if any, between the value of the said house and lot and the total
amount of the indebtedness.
The defendants answered denying generally the facts alleged in the complaint,
and setting up, as special defenses that (1) any cause of action which plaintiff
might have had against the estate of Anastasio Alano has been barred by
failure of the plaintiff to present her claim to the committee on claims for
allowance; (2) that the document upon which plaintiff relies does not constitute
a valid mortgage; and (3) that as to all of the defendants, the action is barred
by the general statute of limitations.
The findings of the trial court upon the evidence were substantially as follows:
1. That the document set forth in paragraph two of plaintiffs' complaint was
executed by the deceased, Anastasio Alano, and by the defendants Javier and
Jose Alano, as alleged;
2. That one year after the execution of the document, plaintiffs made a demand
upon Anastasio Alano, deceased, and the other two defendants herein, to
comply with the terms of the agreement by the execution of the conveyance of
the house and lot, but that they requested an extension of time for the payment
of the debt, which was granted them;
3. That on March 27, 1908, the defendants paid P200 on account of the debt.
Upon these findings the court below gave judgment for plaintiffs, and from that
judgment the defendants have appealed to his court upon the law and the
facts.
The question raised by the appellants require us to analyze the document upon
which this action is based, and to determine its legal effect. Appellants contend
that the contract evidenced by that instrument is merely a loan coupled with
an ineffectual attempt to create a mortgage to effect the payment of debt. The
court below regarded it as a conveyance of the house and lot described in the
contract, which took effect upon the failure of the debtors to pay the debt.
The principal undertaking evidenced by the document is, obviously, the
payment of money. The attempt to create a mortgage upon the house and lot
described in the second clause of the contract is, of course, invalid, as it is
admitted that the so-called mortgage was never recorded. Equally
inefficacious, and for the same reasons, is the purported mortgage by
Anastasio Alano of his land in the barrio of San Isidro described in the third
paragraph of the document. (Compaia General de Tabacos vs. Jeanjaquet,
12 Phil. Rep., 195.)
The agreement to convey the house and lot at an appraised valuation in the
event of failure to pay the debt in money a t its maturity is, however, in our
opinion, perfectly valid. It is simply an undertaking that if the debt is not paid in
money, it will be paid in another way. As we read the contract, the agreement
is not open to the objection that the stipulation is a pacto comisorio. It is not an
attempt to permit the creditor to declare a forfeiture of the security upon the
failure of the debtor to pay the debt at maturity. It is simply provided that if the
debt is not paid in money it shall be paid in another specific was by the transfer
of property at a valuation. Of course, such an agreement, unrecorded, creates
no right in rem; but as between the parties it is perfectly valid, and specific
performance of its terms may be enforced, unless prevented by the creation
of superior rights in favor of third persons.
The contract now under consideration is not susceptible of the interpretation
that the title to the house and lot in question was to be transferred to the
creditor ipso facto upon the mere failure of the debtors to pay the debt at its
maturity. The obligations assumed by the debtors were alternative, and they
had the right to elect which they would perform (Civil Code, art. 1132). The
conduct of the parties (Civil Code, art. 1782) shows that it was not their
understanding that the right to discharge the obligation by the payment of
money was lost to the debtors by their failure to pay the debt at its maturity.
The plaintiff accepted a partial payment from Anastasio Alano in 1908, several
years after the debt matured. The prayer of the complaint is that the
defendants be required to execute a conveyance of the house and lot, after its
appraisal, "unless the defendants pay the plaintiff the debt which is the subject
of this action."
It is quite clear, therefore, that under the terms of the contract, as we read it,
and as the parties themselves have interpreted it, the liability of the defendants
as to the conveyance of the house and lot is subsidiary and conditional, being
dependent upon their failure to pay the debt in money. It must follow, therefore,
that if the action to recover the debt has prescribed, the action to compel a
conveyance of the house and lot is likewise barred, as the agreement to make
such conveyance was not an independent principal undertaking, but merely a
subsidiary alternative pact relating to the method by which the debt might be
paid.
The undertaking to pay the debt, acknowledged by the contract in suit, is
indisputably conjoint (mancomunada). The concurrence of two or more
debtors does not in itself create a solidary liability. Obligations in solido arise
only when it is expressly stipulated that they shall have this character (Civil
Code, art. 1137). That being so, the debt must be regarded as divided into as
many equal parts as there are debtors, each part constituting a debt distinct
from the others. (Civil Code, art. 1138.) The result of this principle is that the
extinction of the debt of one of the various debtors does not necessarily affect
the debts of the others.
It is contended on behalf of the administrator of the estate of Anastasio Alano
that the failure of the plaintiff to present her claim for allowance to the
committee on claims is a bar to her action so far as this defendant is
concerned. We are of the opinion that this objection is well-taken. Section 695
of the Code of Civil Procedure expressly requires that a claim of this kind be
presented for allowance to the committee, and declares that the failure to do
so operates to extinguish the claim. The operation of this statute and the
absolute nature of the bar which it interposes against the subsequent assertion
of claims not presented in accordance with its requirements have frequently
been considered by this court, and the doctrines announced need not be here
repeated. (Estate of De Dios, 24 Phil. Rep., 573; Santos vs. Manarang, 27
Phil. Rep., 209). While it is true that under certain circumstances and within
the statutory limits (sec. 690 of the Code of Civil Procedure) the probate court
may renew the commission of the committee on claims, and permit the
presentation of belated demands, in no case may a claim proper to be allowed
by the committee, such as is the one now under consideration, be enforced by
an original action against the executor or administrator of the state. Our opinion
is, therefore, that the objection to the action interposed on behalf of the
administrator of the estate of Anastasio Alano was well-taken and that the
court erred in rejecting it.
This conclusion makes it unnecessary to consider the effect of the payment
made by Anastasio Alano in 1908 as regards the interruption of the period of
prescription with respect to him. In this connection, however, we feel
constrained to remark that a careful reading of the document makes it
extremely doubtful whether Anastasio Alano was ever personally bound by its
terms. It will be noted that he purports to have signed it only as the
representative of his children, Leonina, Anastasio, and Leocadio, who are not
parties to this suit.
With respect to the defendants Florencio and Jose Alano, their original liability
admits of no dispute and the only question open for consideration is that
presented by their plea of prescription. The debt matured February 27, 1905,
and as the complaint was not filed within ten years from that date (Code of
Civil Procedure, sec. 43), it is obvious that the plea of prescription is well-taken,
unless the running of the statute was interrupted.
While it appears that some verbal and written demands for payment were
made upon these defendants, it has been recently decided, upon mature
consideration, that an extrajudicial demand is not sufficient, under the law as
it now stands, to stop the running of the statute. (Pelaez vs. Abreu, 26 Phil.
Rep., 415). There must be either (1) a partial payment, (2) a written
acknowledgment or (3) a written promise to pay the debt. It is not contended
that there has been any written acknowledgment or promise on the part of the
defendants Jose and Florencio Alano, or either of them plaintiff relies solely
upon the payment made in 1908 by Anastasio Alano. But there is not the
slightest foundation in the evidence for the belief that the payment made by
Anastasio was for the benefit of Jose or Florencio or that it was authorized by
either of them. Bearing in mind the express declaration of article 1138 of the
Civil Code that joint (mancomunada) obligations are, as regard each of the
debtors, to be reputed as separate debts with respect to each of the debtors,
it follows of necessity that a payment or acknowledgment by one of such joint
debtors will not stop the running of the period of prescription as to the others.
That such is the law may be demonstrated by ample authority.
In his commentaries on article 1138 and 1139 of the Civil Code, Manresa says
that one of the effects of the rule established by the code that the debt is to be
regarded as "divided into as many parts . . . as there are debtors" is that "the
interruption of prescription by the claim of a creditor addressed to a single
debtor or by an acknowledgment made by one of the debtors in favor of one
or more of the creditors is not to be understood as prejudicial to or in favor of
the other debtors or creditors." (Manresa, Commentaries on the Civil Code,
vol. 8, p. 182.)
The same doctrine is recognized in the Italian Civil Law, as stated by Giorgi in
his work on Obligations as follows:
The obligation appears to be one, when as a matter of fact it is an
aggregate of as many separate and independent obligations as there
are creditors and debtors. Each creditor cannot demand more than his
part; each debtor cannot be required to pay more than his share.
Prescription, novation, merger, and any other cause of modification or
extinction does not extinguish or modify the obligation except with
respect to the creditor or debtor affected, without extending its
operation to any other part of the debt or of the credit. The obligation
is, in a word, pro rata, or in partes viriles. (Giorgi on Obligations, vol.
1, p. 83, Spanish translation.)
The same view is taken by the French law writers. In the article on obligations
in Dalloz' Encyclopedia (Jurisprudence Generale) vol. 33, p. 297, the author
says:
The conjoint (pro rata) obligation is divided by operation of law among
the non-solidary co-debtors. It is as though there were many debts as
there are persons bound. Hence it follows that if one of the debtors is
insolvent the loss falls upon the creditor and not upon the other
debtors, and that if prescription is interrupted with respect to one of
the debtors, it is not interrupted with respect to the others.
In the State of Louisiana, whose Civil Code, like ours, is largely taken from the
Code of Napoleon, the Supreme Court has established the same doctrine on
the subject of the interruption of prescription.
In the case of Buard vs. Lemee, Syndic (12 Robinson's Reports, 243), the
Supreme Court of Louisiana said:
It results . . . that when the acknowledgment of a debt is made by a
joint debtor, such acknowledgment does not interrupt the prescription
with regard to the others. Each is bound for his virile share of the debt;
and, therefore, each is at liberty to act for himself, and the effect of his
 acts cannot be extended to the benefit or prejudice of his co-debtors;
so true is this that the law has never intended that a suit brought
against one of the several debtors should interrupt prescription with
regard to all, unless they be debtors in solido.
This doctrine was recognized and applied by the Supreme Court of Louisiana
in the subsequent cases of Succession of Cornelius Voorhies (21 La. Ann.,
659) and Smith vs. Coon (22 La. Ann., 445).
There is no presumption that one conjoint ( pro-rata) debtor is authorized to
perform any act having the effect of stopping the running of the statute of
limitations as to the others. When the act relied upon is performed by some
person other than the debtor, the burden rests upon the plaintiff to show that it
was expressly authorized. (17 R.C.L., 911 and the cases there cited.) In this
case there is no such evidence. The statement in the letter of Da. Maria
Lontok, to whom the P200 payment was made, is that it was a payment made
on account of "the debt of Anastasio Alano." (Plaintiffs' Exhibit D.) Da. Maria
Lontok in her testimony does not attempt to say that the payment was made
for the account of any one but Anastasio Alano, from whom she received it.
The statement that Florencio Alano was with Anastasio at the time is not in
itself sufficient to constitute proof that the payment was made for his benefit.
(Lichauco vs. Limjuco and Gonzalo, 19 Phil. Rep., 12.)
Plaintiff argues that the undertaking to convey the house and lot constitutes an
indivisible obligation, and that even where the promise is not in solidum, the
concurrence of two or more debtors in an obligation whose performance is
indivisible creates such a relation between them that the interruption of
prescription as to one of necessity interrupts it as to all. The distinction is one
which is well-established, although the authorities cited do not fully support
plaintiffs' contentions, but in this particular case the question is academic, for
the undertaking is in the alternative to pay a sum of money an essentially
divisible obligation or to convey the house. As the alternative indivisible
obligation is imposed only in the event that the debtors fail to pay the money,
it is subject to a suspensive condition, and the prescription of the obligation
whose non-performance constitutes the condition effectively prevents the
condition from taking place.
We are, therefore, constrained to hold with defendants and to reverse the
decision of the lower court. We do this most regretfully, as the evidence in this
case shows that plaintiff has been extremely lenient with defendants and has
refrained from pressing her claim against them when it fell due, and for a long
period of years thereafter, purely out of consideration for them. The defense
of prescription interposed, particularly as regards Jose and Florencio Alano, is
an indefensible from the standpoint of fair dealing and honesty as it is
unassailable from the standpoint of legal technicality. However, the law, as we
see it, is clear and it is our duty to enforce it.
The judgment of the lower court is reversed and the action is dismissed as to
all the defendants. No costs will be allowed. So ordered.
Torres, Johnson, Street and Avancea, JJ., concur.
Malcolm, J., dissents.
RESOLUTION
September 20, 1918.
FISHER, J.:
Plaintiff seeks a consideration of the decision of this court rendered herein.
With respect to plaintiff's contention concerning the action against the estate
of Anastasio Alano, we have nothing to add to what was said in the former
decision. As regards the defendants, Florencio Alano and Jose Alano, the
principal argument advanced by plaintiff is that those defendants, as
testamentary heirs of the late Anastasio C. Cruz, are liable, in solidum, for the
debt in suit, which is evidenced by the document signed by these defendants
on February 27, 1904, set forth at length in our decision. Plaintiff argues that
he obligation being solidary, by reason of its hereditary origin (Fabievs. Yulo,
24 Phil. Rep., 240) the running of the statute of limitations was interrupted with
respect to all the debtors, by the payment of P200 made by the late Anastasio
Alano in 1908. The whole argument rests upon article 1084 of the Civil Code
and the statement contained in the document of February 27, 1904, that the
Alano brothers are the "testamentary heirs" of the original debtor, and the
assumption that the latter died, and that his inheritance was accepted, before
the present Code of Civil Procedure was enacted. There is nothing in the
record to indicate, even remotely, when the Reverend Cruz died. If he died
after the new Code took effect, the acceptance of his inheritance did not
impose upon his testamentary heirs any personal obligation to respond to the
payment of the debts of the deceased. (Pavia vs. De la Rosa, 8 Phil. Rep.,
70.) There having been neither allegation nor proof with respect to the date of
the death of the original debtor, we cannot presume, to the prejudice of the
defendants, that he died and that his succession was opened under the old
regime.
But even had it been proved that the late Reverend Cruz died before Act No.
190 took effect, and that the debt, by reason of its hereditary origin, imposed
upon the five Alano brothers the solidary obligation of paying it, as the
evidence does not show that the payment made by Anastasio Alano in 1908
was authorized by any one of the solidary debtors, it cannot have the effect of
interrupting the prescription. It must be kept in mind that Anastasio Alano was
in no sense a solidary debtor of the plaintiff, either with respect to the origin of
the obligation or by his participation in the execution of the document by which
the indebtedness was acknowledged. it is unquestionable that payment made
by any one of the several solidary debtors interrupts the running of the statute
of limitations with respect to the others, and that a third person may make a
payment without the knowledge and even against the will of the debtor, but
payments so made by a stranger to the debt do not interrupt the operation of
the statute of limitations.
The general rule is that an acknowledgment or new promise to pay
must, in order to take a case out of the statute, be made by the person
to be charged or by some person legally authorized by him so to act.
(17 Ruling Case Law, p. 911.)
In the case of a part payment by a stranger, or by a person not
authorized to represent the debtor, it is obvious that there is no ground
for assuming any admission of an existing liability on his part or for
inferring a new promise by him to pay the balance of the debt. (17
Ruling Case Law, p. 935.)
Furthermore, it is to be observed that in accordance with the express terms of
article 50 of the Code of Civil Procedure, payment in order to have the effect
of interrupting the running of the statute, must be made by the person to be
charged.
Independently of these considerations, it is obvious that this action was not
brought as though based upon an obligation which had accrued under the
provisions of the Civil Code, formerly in force, relating to the acceptance of an
estate without benefit of inventory. The action has been brought solely and
exclusively for the enforcement of the obligation created by the execution of
the document of credit of 1904. This is the reason, no doubt, why plaintiff made
no effort to prove the date of the death of Reverend Cruz; whether his heirs
accepted the inheritance with or without the benefit of inventory; if they were
all adults at the time of the death of the testator; whether they inherited in equal
parts or in some proportion. It is natural that she should have made no effort
to produce evidence upon these points, as there is nothing in the allegations
of the complaint to support its admission. If the defendants had replied
admitting the facts alleged, it is evident that it would have been necessary to
decide the case in accordance with the law in force in 1904, considering the
execution of the document in question as the act from which the obligation in
suit originated, although it appears from the document that
the consideration for its execution was the debt of a third person.
When the plaintiff deliberately adopts a certain theory with respect to the basis
of his right of action, and the case is tried and decided in the court below and
in this court upon that theory, plaintiff will not be permitted to change the theory
of his action upon a motion for rehearing. (Molina vs. Somes, 24 Phil. Rep.,
49.) To do so would be to deprive the defendant of an opportunity to defend.
The defendant naturally produces evidence relating to the evidence offered on
behalf of plaintiff. If the issue of the liability of Florencio and Jose Alano upon
the theory now advanced by plaintiff had been presented in the court below, it
is possible that these defendants might have been able to prove that their
testator died after the enactment of the new code or, if he died before, that
they were minors at that time; that the inheritance was accepted by their
guardian without the intervention of the family council (Civil Code, art. 992), or
that it was expressly accepted with benefit of inventory, and that the value of
the property inherited is less than the amount of the debt (Civil Code, art.
1023), or that the effect of the execution of the document of 1904 was a
novation of the obligation by which the latter was converted into a simple joint
indebtedness. The defendants Florencio and Jose Alano having had no
opportunity to invoke any of these defenses, which might have been available
to them, it would be unjust to give judgment against them upon the theory of
their obligation now invoked by plaintiff. The motion for a rehearing is denied.
Torres, Johnson, Street, and Avancea, JJ., concur.
Malcolm, J., dissents.
GR No. L-47362 December 19, 1940
JOHN F. Villarroel relapsing-appellant,
vs.
BERNARDINO ESTRADA, turned-appealed.
D. Felipe Agoncillo on behalf of relapsing-appelante.
D. Oben on behalf of Crispin turned-appealed.
Avancea, Pres. :
The May 9, 1912, Alejandro F. Callao, mother of defendant John F. Villarroel,
obtained from spouses Mariano Estrada and Severina a loan of P1,000
payable after seven years (Exhibito A). Alejandra died, leaving as sole heir to
the defendant. Spouses Mariano Estrada and Severina died too, leaving as
sole heir to the complainant Bernardino Estrada. On August 9, 1930, the
defendant signed a document (Exhibito B) by which the applicant must declare
in the amount of P1,000, with an interest of 12 percent per year. This action
concerns the recovery of this amount.
The Court of First Instance of Laguna, which was filed this action, condemn
the defendant to pay the claimed amount of P1,000 its legal interests of 12
percent a year since August 9, 1930 until full I pay. He appealed the sentence.
It will be noted that the parties in the present case are, respectively, the only
heirs of the original creditor and debtor. This action is brought under the
obligation that the defendant as the only son of the original debtor contracted
for the plaintiff, sole heir of primitive loa creditors. It is recognized that the
amount of P1,000 to this obligation is the same debt contracted from the
mother of the defendant to the plaintiff parents. lawphil.net

Although the action to recover the original debt has already prescribed when
the lawsuit was filed in this case, the question that arises in this appeal is
primarily whether, notwithstanding such prescription, is brought from the
action. However, this action is not based on the original obligation contracted
by the mother of the defendant, who has already prescribed, but which
contracted the defendant the August 9, 1930 (Exhibito B) to assume the
fulfillment of that obligation, as prescribed. As the defendant the only herdero
of primitive debtor, with the right to succeed her in his inheritance, that debt
brought by her mother legally, but lost their effectiveness by prescription, it is
now, however, for a moral obligation, which is consideration sufficient to create
and make effective and enforceable his obligation voluntarily the August 9,
1930 in Exhibito B.

The rule that a new promise to pay a debt prrescrita must be made by the
same person obligated or other legally authorized by it, is not applicable to the
present case that compliance with the obligation of the obligated orignalmente
is not required, but of that because I wanted to give voluntarily assume this
obligation.

The original ruling, with costs to the appellant confirmed. So it is ordered.

Imperial, Diaz, Laurel, and Horrilleno, JJ., Concur.