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May 26, 2005G.R. No. 139523

CANNU versus GALANG

FACTS:

Respondent spouses Galang agreed to sell their house and lot subject to mortgage withthe National Home Mortgage Finance Corp (NHMFC). Petitioner Leticia Cannu agreed to buythe property for P120,000.00 and to assume the mortgage obligations with the NHMFC. A deedof sale and assumption of mortgage was executed and petitioners immediately took possessionand occupied the house & lot. Despite requests from Fernandina Galang to pay the balance or inthe alternative to vacate the property in question, petitioners refused to do so. Because theCannus, failed to fully comply with their obligations, respondent Galang, paid P233,000.00 asfull payment of her remaining mortgage loan with NHMFC. Eight (8) yrs. had already elapsed

and petitioners have not yet complied with the obligation. The Regional Trial Court ordered thedeed of sale with Assumption of Mortgage as rescinded as well as ordered mutual restitution.

ISSUE:

Whether or not the breach of obligation is substantialWhether or not rescission is subsidiary

HELD:

Breach considered being substantial. Cannu failed to comply with her obligation to paythe monthly amortizations due on the mortgage. Also, the tender made by Cannu only after thefiling of this case cannot be considered as an effective mode of payment. Resolution of a party toan obligation under Article 1191 is predicated on a breach of faith by the other party that violatesthe reciprocity between them. In the case at bar, Cannus failure to pay the remaining balances ofP45,000.00 to be substantial.

Rescission will not be permitted for a slight or casual breach of the contract. Rescissionmay be had only for such breaches that are substantial and fundamental as to defeat the object ofthe parties in making the agreement. The rescission in this case is not predicated on injury to

economic interests of the party plaintiff but on the breach of faith by the defendant, that violatesthe reciprocity between the parties. It is not a subsidiary action. The rescission in Article 1191 isa principal action retaliatory in character; it being unjust that a party be held bound to fulfill hispromises when the other violates his.


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July 13, 2011G.R. No. 185440

LALICON versus NATIONAL HOUSING AUTHORITY

FACTS:

On 1980, the National Housing Authority (NHA) executed a Deed of Sale with Mortgageover a Quezon City lot in favor of the spouses Isidro and Flaviana Alfaro. It was provided in thedeed of sale that the Alfaros could sell the land within five years from the date of its release frommortgage without NHAs prior written consent. Nine(9) years later Alfaros sold the land to theirson Victor Alfaro, who had a house built on the property and paid for the amortizations. OnMarch 21,1991, the NHA released the mortgage. After four and a half years since the mortgagedwas released Victor registered the sale of land in his favor, resulting in the cancellation of hisparents title. Afterward, Victor sold the property to Chua, one of the mortgagees, Moreover, a

year later the NHA instituted a case before the Quezon City Regional Trial Court (RTC) for theannulment of the NHAs 1980 sale of the land to their son Victor and the subsequent sale ofVictor to Chua was a violation of NHA rules and regulations.

ISSUES:

Whether or not the NHAs right to rescind has prescribed

HELD:

An action for rescission can proceed from either Article 1191 or Article 1381. It has beenheld that Article 1191 speaks of rescission in reciprocal obligations within the context of Article1124 of the Old Civil Code which uses the term "resolution." Resolution applies only toreciprocal obligations; such that a breach on the part of one party constitutes an impliedresolutely condition which entitles the other party to rescission. Resolution grants the injuredparty the option to pursue, as principal actions, either a rescission or specific performance of theobligation, with payment of damages in either case. Recession under Article 1381, on the otherhand, is subsidiary action, not based on a party's breach of obligation. The four-year prescriptiveperiod provided in Article 1389 applies to rescissions under Article 1381. Here, the NHA soughtannulment of the Alfaros' sale to Victor because they violated the five-year restriction against

such sale provided in their contract. The NHA's right of action accrued when it learned of theAlfaros' forbidden sale of the property to Victor. Since the NHA filed its action for annulmentof sale on April 10, 1998, it did so well within the 10-year prescriptive period.


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399 SCRA 207, March 14, 2003

CATHAY PACIFIC AIRWAYS VS. VAZQUEZ

FACTS:

In respondents return flight to Manila from Hongkong, they were deprived of theiroriginal seats in Business Class with their companions because of overbooking. Sincerespondents were privileged members, their seats were upgraded to First Class. Respondentsrefused but eventually persuaded to accept it. Upon return to Manila, they demanded that they beindemnified in the amount of P1million for the humiliation and embarrassment caused by itsemployees. Petitioners Country Manager failed to respond. Respondents instituted action for

damages.

ISSUES:

Whether or not the petitioners(1) breached the contract of carriage,(2) acted with fraud and(3) were liable for damages.

HELD:

(1) YES. Although respondents have the priority of upgrading their seats, such priority

may be waived, as what respondents did. It should have not been imposed on them over theirvehement objection.

(2) NO. There was no evident bad faith or fraud in upgrade of seat neither onoverbooking of flight as it is within 10% tolerance. Ms. Chiu might have failed to consider theremedy of offering the First Class seats to other passengers. But, we find no bad faith in herfailure to do so, even if that amounted to an exercise of poor judgment. Neither was the transferof the Vazquezes effected for some evil or devious purpose

(3) YES. Nominal damages (Art. 2221, NCC) were awarded in the amount of P5,000.00.


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May 8, 2009G.R. No. 174269

POLO PANTALEON versus AMERICAN EXPRESS INTERNATIONALINC.,

FACTS:

Polo Pantaleon went on a tour with his family in Europe. While they were in Amsterdam,Mrs. Pantaleon decided to purchase some diamond pieces. Mr. Pantaleon used his AMEX creditcard to pay for the said diamonds. It took AMEX a total of 78minutes to approve the purchaseand to transmit the approval to the jewelry store. The travel companions of the Pantaleonfamily got irritated because they had to cancel the city tour due to the delay in the purchase ofthe diamonds. The same thing also happened when the family was in the US.

ISSUE:

Whether or not AMEX has committed a breach of its obligation to Pantaleon, and wereliable for damages

HELD:

Yes, AMEX committed a breach of its obligation. It is the obligation of the respondent,as a debtor/obligor, to act on the purchase of the petitioner with timely dispatch. The culpablefailure of the respondent herein is not the failure to timely act on the same but the failure topromptly informed petitioner the reason for the delay, and duly advised him that resolving thesame could take some time. Yes. The reason why Pantaleon is entitled to damages is not simplybecause AMEX incurred delay, but because the delay, for which culpability lies under Article1170, led to the particular injuries under Article 2217 of the Civil Code for which moral damagesare remunerative.

GR NO. 115129

BARZAGA versus COURT OF APPEALS

FACTS:

Petitoners wife was suffering from a disease and is almost dying. The wife requestedthat upon her death, she wanted to be laid on her niche before December 25 since Christmas was


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fast approaching and she dont want to burden her family with the wake. After her death,petitioner bought materials from private respondent for the construction of the niche of his latewife. Private respondent however failed to deliver said materials on time despite repeated followup. The niche was then completed on the afternoon of the 27th day of December, and his wifewas finally laid to rest.

ISSUE:

Whether or not theres a delay in the performance of the private respondents obligation

HELD:

Yes since respondent was negligent to his obligation and incurred a delay in theperformance of his contractual obligation, petitioner is entitled to be indemnified for the damageshe suffered as a consequence of the delay or contractual breach. Non performance reciprocalobligation, as in contract of purchase and sale, petitioner had already done his part, in which he

already paid the materials needed. It was now the obligation of the respondent to deliver thegoods on time otherwise delay will attach.

GR NO. 145483

LORENZO SHIPPING CORPORATION versus BJ MARTHEL

FACTS:

Petitioner is a domestic corporatIon engaged in coast wise shipping. It used to own cargovessel M/v Badiangas Express. On the other hand, Respondent is a business entity engaged intrading marketing and selling of various industrial commodities. It is also on importer anddistributor of different brands of engines.

From 1987 onwards, respondent supplied petitioner with spare parts for the lattersmarine engine in 1989, petitioner asked respondent for quotation for various machine parts,taking action with the request, respondent furnished petitioner with formal quotation and it wasstated that delivery is within two months from receipt of the firm order.

ISSUE:

Whether or not the period of time which lapsed in the contract causing the delay indelivery of the cylinder liner is essential in the decision of the case at bar


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HELD:

The court held respondent bound to the quotation it submitted to petitioner particularlywith respect to the terms of payment and delivery of cylinder liners. It also declared thatrespondent agreed to the cancellation of the contract sale when it returned the postdated checks.

February 18, 2008G.R. No. 170479

ANDRE T. ALMOCERA versus JOHNNY ONG

FACTS:

Johnny Ong tried to acquire a townhome from the defendants. In the contract to sell,

defendants agreed to sell the said townhouse to respondent for P3.4 Million. The down paymentwas P1 Million while the balance of P2.4 Million was to be paid in full upon completion,delivery and acceptance of the townhouse. Defendants agreed to complete and convey torespondent the unit w/in 6 months from the signing thereof. Respondent was able to make downpayment of P1, 060.000.00 and that the defendants failed to complete the construction of, as wellas deliver to respondent the townhouse w/in six months from the signing of contract. Moreover,respondent was not informed the defendants at the time of the perfection of their contract that thesubject townhouse was already mortgaged to LBP, it was then foreclosed and eventually sold atpublic auction.

ISSUE:

Whether or not there is fraud on behalf of the Petitioner.

HELD:

In the light of the foregoing environmental circumstances and milieu, therefore, it appearsthat the defendants are guilty of fraud in dealing with the plaintiff. They performed voluntaryand willful acts which prevent the normal realization of the prestation, knowing the effects whichnaturally and necessarily arise from such acts. Their acts import a dishonest purpose or somemoral obliquity and conscious doing of a wrong. The said acts certainly give rise to liability fordamages. Article 1170 of the New Civil Code of the Philippinesprovides expressly that those

who in the performance of their obligations are guilty of fraud and those who in any mannercontravene the tenor thereof are liable for damages.


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October 9, 2009G.R. No. 181206

MEGAWORLD GLOBUS ASIA, INC. versus MILA S. TANSECO

FACTS:

Megaworld and respondent Tanseco entered into a Contract to Buy and Sell a 224 square-meter condominium unit at a pre-selling project. The purchase price was to be paid byinstallment provided that if the construction is completed earlier, Tanseco would pay the balancewithin seven days from receipt of a notice of turn over.Tanseco paid all installments due leavingunpaid the balance pending delivery of the unit. Megaworld, however, failed to deliver the unitwithin the stipulated period three years later, Megaworld, by notice informed Tanseco that theunit was ready for inspection preparatory to delivery. Tanseco replied that in view ofMegaworlds failure to deliver the unit on time, she was demanding the return of amount

representing the total installment payment she had made, with interest at 12% per annum.Tanseco pointed out that none of the excepted causes of delay existed. In its Answer, Megaworldattributed the delay to the 1997 Asian financial crisis which was beyond its control; and arguedthat default had not set in.

ISSUE:

Whether or not a Financial Crisis is considered to be an excuse to delay contracts

HELD:

Except in cases expressly specified by the law, or when it is otherwise declared bystipulation, or when the nature of the obligation requires the assumption of risk, no person shallbe responsible for those events which could not be foreseen, or which, though foreseen, wereinevitable. The 1997 Asian financial crisis cannot generalize to be unforeseeable and beyond thecontrol of a business corporation. A real estate enterprise engaged in the pre-selling ofcondominium units is concededly a master in projections on commodities and currencymovements, as well as business risks. The fluctuating movement of the Philippine peso in theforeign exchange market is an everyday occurrence, hence, not an instance of casofortuito. Megaworlds excuse for its delay does not thus lie.


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July 26, 2010GR No. 176858

SOLAR HARVEST INC. versus DAVAO CORRUGATED CARTONCORPORATION

FACTS:

In the 1st Quarter of 1998, Solar Harvest and Davao Corrugated entered into an unwrittenagreement. Solar Harvest placed orders for customized boxes for its business of exportingbananas at USD 1.10 each. Petitioner made a full payment of USD 40,150.00. By Jan. 3, 2001petitioner had not received any of the ordered boxes. On Feb. 19, 2001Davao Corrugated repliedthat as early as April 3, 1998, order/boxes are completed and Solar Harvest failed to pick themup from their warehouse within 30 days from completion as agreed upon. Respondent mentionedthat petitioner even placed additional order of 24,000.00 boxes, out of which, 14,000 had already

been manufactured without any advance payment from Solar Harvest. Davao Corrugated thendemanded that Solar Harvest remove boxes from their warehouse, pay balance of USD15,400.00 for the additional boxes and P132, 000 as storage fee. On August 17, 2001 Solarharvest filed complaint against Davao Corrugated for sum of money and damages claiming thatthe agreement was for the delivery of the boxes, which Davao Corrugated did not do. Due toDavao Corrugated failure to deliver, Solar Harvest had to cancel the order and demandedpayment and/or refund which Davao Corrugated refused to pay.

ISSUE:

Whether or not Davao Corrugated was responsible for breach of contract as Solar Harvest

had not yet demanded from it the delivery of the boxes?

HELD:

Respondent would not be liable for breach of contract as petitioner had not yet demandedfrom it the delivery of the boxes. Furthermore, the claim for reimbursement is actually one forrescission or resolution of contract under Article 1191 of the Civ. Code. The right to rescindcontracts arises once the party defaults in the performance of his obligation. Article 1191 shouldbe taken in conjunction with Article 1169: Those obliged to deliver or to do something in delayfrom the time the obligee judicially or extra judicially demands form them the fulfillment of theirobligation. However the demand from creditor shall not be necessary in order that delay may

exist.:1. When the obligation or the law expressly so declares, or2. When from the nature and the circumstance of the obligation it appears that the designation ofthe time when the thing is to be delivered or the service is to be rendered was a controllingmotive for the establishment of the contract.


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139 SCRA 46

CENTRAL BANK versus COURT OF APPEALS

FACTS:

Island Savings Bank (ISB) approved the loan application for P80,000 of SulpicioTolentino, who as a security for the loan, also executed a real estate mortgage over his 100-haland. The approved 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, andTolentino and his wife Edita signed a promissory note. After being informed by ISB that therewas no fund yet available for the release of the P63, 000 balance. Monetary Board of the CentralBank issued Resolution No. 1049, which prohibited ISB from making new loans andinvestments, after finding that it was suffering liquidity problems. Aug. 1, 1968ISB, in view ofnon-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.

ISSUE:

Whether or not Tolentino is liable to pay the P17,000 debt covered by the promissorynote.

HELD:

YES. The bank was deemed to have complied with its reciprocal obligation to furnish aP17,000 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 notemade him a party in default, hence not entitled to rescission (Art. 1191,CC). ISB has the right torescind the promissory note, being the aggrieved party. Since both parties were in default in theperformance of their reciprocal obligations, both are liable for damages. In case both parties havecommitted a breach of their reciprocal obligations; the liability of the first infractor shall beequitably tempered by the courts (Art. 1192, CC).

553 SCRA 741

SALUDAGA versus FAR EASTERN UNIVERSITY

FACTS:

It is the obligation of any college institution to provide a safe and secure environment forevery student. Far Eastern University failed to comply with their obligation when a student oftheirs, whose name is Joseph Saludaga was shot inside the campus by their security guard namedAlejandro Rosete. The victim petitioned a case against FEU and Edilberto C. De Jesus, president


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of FEU. The University also failed to check the qualifications of the security guards hiredthrough Galaxy, the third party which hires security guards for the university. From there, thereare also complaints for Galaxy being the first employers of Rosete. It is also said that the safetyof the university should not only be within the hands of the security guards. Damages are takenby Saludaga by surprised including physical and moral damages obtained from the said

accidental shooting by Rosete who claimed that it was an accident.

ISSUE:

Whether or not Far Eastern University failed to comply with their obligation inimplementing a safe and secure learning environment

HELD:

Article 1170 of the Civil Code provides that those who are negligent in the performance

of their obligations are liable for damages. Accordingly, for breach of contract due to negligencein providing a safe learning environment, respondent FEU is liable to petitioner for damages. Itis essential in the award of damages that the claimant must have satisfactorily proven during thetrial the existence of the factual basis of the damages and its causal connection to defendant'sacts. FEU was ordered to pay actual damage of interest per annum from the filing of thecase until the finality of decision. Moral damage, attorneys fees and litigation expense forGalaxy was and its presidents were ordered to jointly and severely pay the respondent FEUdamages equivalent to the amount awarded to Saludaga.

March 4 2008G.R No 158911

MERALCO versus RAMOY

FACTS:

On June 20, 1990 NPC wrote Meralco requesting for the "immediate disconnection ofelectric power supply to all residential and commercial establishments beneath the NPCtransmission lines along Baesa, Quezon City. Meralco decided to comply with NPC's request and

thereupon issued notices of disconnection to all establishments. Thereafter, a joint survey wasconducted and the NPC personnel pointed out the electric meters to be disconnected. In due time,the electric service connection of the plaintiffs was disconnected. Ramoy testified that he and hiswife are the registered owners of a parcel of land covered. When the Meralco employees weredisconnecting plaintiffs' power connection, Ramoy objected by informing the Meralco foremanthat his property was outside the NPC property. However, he was threatened and told not tointerfere by the armed men who accompanied the Meralco employees. After the electric power inRamoy's apartment was cut off, the plaintiffs-lessees left the premises. During the ocular


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inspection by court ordered it was found out that the residence of plaintiffs-spouses Ramoy wasindeed outside the NPC property.

ISSUE:

Whether or not MERALCO is liable for damages

HELD:Article 1170, those who in the performance of their obligations are guilty of fraud,

negligence, or delay, and those who in any manner contravene the tenor thereof, are liable fordamages.Article 1173 also provides that the fault or negligence of the obligor consists in theomission of that diligence which is required by the nature of the obligation and corresponds withthe circumstances of the persons, of the time and of the place.That, "as a public utility,MERALCO has the obligation to discharge its functions with utmost care and diligence. Being apublic utility vested with vital public interest, MERALCO is impressed with certain obligationstowards its customers and any omission on its part to perform such duties would be prejudicial to

its interest. For in the final analysis, the bottom line is that those who do not exercise suchprudence in the discharge of their duties shall be made to bear the consequences of suchoversight. This being so, MERALCO is liable for damages under Article 1170 of the Civil Code

266 SCRA 78, June 29, 2001G.R.No.125994

TANGULIG versus COURT OF APPEAL

FACTS:

Herce contracted Tanguilig to construct a windmill system for him, for consideration of60,000.00. Pursuant to the agreement Herce paid the downpayment of 30,000.00 and installmentof.15,000.00.leaving.a.15,000.00.balance.

Herce refused to pay the balance because he had already paid this amount to SPGMIwhich constructed a deep well to which the windmill system was to be connected since thedeepwell, and assuming that he owed the 15,000.00 this should be offset by the defects in thewindmill system which caused the structure to collapse after strong winds hit their place.According to Tanguilig, the 60,000.00 consideration is only for the construction of the windmill

and the construction of the deep well was not part of it. The collapse of the windmill cannot beattributed to him as well, since he delivered it in good and working condition and Herce acceptedit without protest. Herce contested that the collapse is attributable to a typhoon, a force majeurethat.relieved.him.of.liability.

The RTC ruled in favor of Tanguilig, but this decision was overturned by the Court ofAppeals which.ruled.in.favor.of.Herce.


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ISSUES:

Can the collapse of the windmill be attributed to force majeure? Thus, extinguishing theliability.of.Tanguilig?

HELD:

WHEREFORE, the appealed decision is MODIFIED. Respondent VICENTE HERCEJR. is directed to pay petitioner JACINTO M. TANGUILIG the balance of P15,000.00 withinterest at the legal rate from the date of the filing of the complaint. In return, petitioner isordered to "reconstruct subject defective windmill system, in accordance with the one-yearguaranty" and to complete the same within three (3) months from the finality of this decision.

Obligations.and.Contracts.Terms:

Fortuitous Events- Refers to an occurrence or happening which could not be foreseen,or even if foreseen, is inevitable. It is necessary that the obligor is free from negligence.Fortuitous events may be produced by two (2) general causes: (1) by Nature, such as but notlimited to, earthquakes, storms, floods, epidemics, fires, and (2) by the act of man, such as butnot limited to, armed invasion, attack by bandits, governmental prohibitions, robbery, providedthat they have the force of an imposition which the contractor or supplier could not have resisted.

144 SCRA 596, October 3, 1986G.R. No. L-47851

JUAN F. NAPKIL ANS SON versus COURT OF APPEAL

FACTS:The private respondent (Philippine Bar Association) hired the services of the petitioner

to make the plans and specifications for the construction of their office building. The buildingwas completed by the contractor but subsequently, an earthquake struck causing its partialcollapse and damage.

ISSUE:

Is the petitioner liable for damages in this case?

HELD:

Yes. The petitioner made substantial deviations from the plans and specifications andfailed to observe requisite workmanship standards in the construction of the building while theirarchitect drew plans that contain defects and other inadequacies. Both the contractor and thearchitect cannot escape liability for damages when the building collapsed due to an earthquake.


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Other buildings in the area withstood the tremor. The lower court also found that the spirals inone of the columns in the ground floor has been cut. One who creates a dangerous conditioncannot escape liability even if an act of God may have intervened as in this case. As such, theliability of the contractor (herein petitioner) and the architect for the collapse of the building issolidary.

266 SCRA 429, January 21, 1997GR 119729

ACE AGRO versus COURT OF APPEAL

FACTS:

Ace-Agro had been cleaning soft drink bottles and repairing wooden shells for Cosmoswithin its company premises in San Fernando, Pampanga. On April 25, 1990, a fire broke out inthe Cosmos plant. As a result, Ace-Agros work stopped. On May 15, 1990, Ace-Agro requestedCosmos to resume its services but they were advised that on account of the fire destroying nearlyall the bottles and shells, Cosmos was terminating their contract. Ace-Agro requested Cosmos toreconsider its decision but upon receiving no reply, they informed the employees of thetermination of their employment, which led the employees to file a complaint for illegaldismissal before the Labor Arbiter against both Ace-Agro and Cosmos. Ace-Agro sent anotherletter for reconsideration to Cosmos to which they replied that they could resume work butoutside company premises. Ace-Agro refused the offer, claiming that to work outside wouldincur additional transportation costs.

Cosmos then advised Ace-Agro that they could resume work inside the companypremises but then Ace-Agro unjustifiably refused because it wanted and extension of the contractto make up for the period of inactivity.

ISSUE:

Whether or not the period during which work has been suspended justify an extension ofthe term of the contract?

HELD:

No. The suspension of work due to fire does not merit an automatic extension. Thestipulation that in the event of a fortuitous event or force majeure the contract shall be deemedsuspended during the said period does not mean that it stops the running of the period thecontract has been agreed upon to run. The fact that the contract is subject to a resolutory period,which relieves the parties of their respective obligations, does not stop the running of the periodof their contract.


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June 15, 2005G.R. No. 154188

MONDRAGON LEISURE versus COURT OF APPEAL

FACTS:

Mondragon International Philippines, Inc., Mondragon Securities Corporation and hereinpetitioner entered into a lease agreement with the Clark Development Corporation for thedevelopment of what is now known as the Mimosa Leisure Estate.To help finance the project,petitioner, entered into an Omnibus Loan and Security Agreement with respondent banks for asyndicated term loan in the aggregate principal amount of US$20M. Under the agreement, theproceeds of the loan were to be released through advances evidenced by promissory notes to beexecuted by petitioner in favor of each lender-bank, and to be paid within a six-year period fromthe date of initial advance inclusive of a one year and two quarters grace period. Petitioner,

which had regularly paid the monthly interests due on the promissory notes until October 1998,thereafter failed to make payments. Consequently, written notices of default, acceleration ofpayment and demand letters were sent by the lenders to the petitioner. Then, respondents filed acomplaint for the foreclosure of leasehold rights against petitioner. Petitioner moved for thedismissal.of.the.complaint.but.was.denied.

ISSUE:

Whether or not respondents have a cause of action against the petitioner?

HELD:

Under the foregoing provisions of the Agreement, petitioner may be validly declared indefault for failure to pay the interest. As a consequence of default, the unpaid amount shall earndefault interest, and the respondent-banks have four alternative remedies without prejudice to theapplication of the provisions on collaterals and any other steps or action which may be adoptedby the majority lender. The four remedies are alternative, with the right of choice given to thelenders, in this case the respondents. Under Article 1201 of the Civil Code, the choice shallproduce no effect except from the time it has been communicated. In the present case, we findthat written notices were sent to the petitioner by the respondents. The notices clearly indicaterespondents choice of remedy: to accelerate all payments payable under the loan agreement Itshould be noted that the agreement also provides that the choice of remedy is without prejudice

to the action on the collaterals. Thus, respondents could properly file an action for foreclosure ofthe leasehold rights to obtain payment for the amount demanded.


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February 2, 2010

LEON versus ONG

FACTS:

On March 10, 1993, petitioner Raymundo S. de Leon sold three parcels of land withimprovements situated in Antipolo, Rizal to respondent Benita T. Ong. As these properties weremortgaged to Real Savings and Loan Association, Incorporated (RSLAI), petitioner andrespondent executed a notarized deed of absolute sale with assumption of mortgage.On June 18, 1993, respondent filed a complaint for specific performance, declaration of nullityof the second sale and damages against petitioner and Viloria in the Regional Trial Court (RTC)of Antipolo, Rizal, Branch 74. She claimed that since petitioner had previously sold theproperties to her on March 10, 1993, he no longer had the right to sell the same to Viloria. Thus,petitioner fraudulently deprived her of the properties.

Petitioner, on the other hand, insisted that respondent did not have a cause of actionagainst him and consequently prayed for the dismissal of the complaint. He claimed that sincethe transaction was subject to a condition (i.e., that RSLAI approve the assumption of mortgage),they only entered into a contract to sell. Inasmuch as respondent did apply for a loan fromRSLAI, the condition did not arise. Consequently, the sale was not perfected and he could freelydispose of the properties. Furthermore, he made a counter-claim for damages as respondent filedthe complaint allegedly with gross and evident bad faith.

ISSUE:

Whether or not the respondent is a purchaser in good faith making her the lawful owner

thereof.

HELD:

Since respondents obligation to assume petitioners outstanding balance with RSLAIbecame impossible without her fault, she was released from the said obligation. Moreover,because petitioner himself willfully prevented the condition vis--vis the payment of theremainder of the purchase price, the said condition is considered fulfilled pursuant to Article1186 of the Civil Code. For purposes, therefore, of determining whether respondent was apurchaser in good faith, she is deemed to have fully complied with the condition of the paymentof the remainder of the purchase price.

Respondent was not aware of any interest in or a claim on the properties other than themortgage to RSLAI which she undertook to assume. Moreover, Viloria bought the propertiesfrom petitioner after the latter sold them to respondent. Respondent was therefore a purchaser ingood faith. Hence, the rules on double sale are applicable.

Article 1544 of the Civil Code provides that when neither buyer registered the sale of theproperties with the registrar of deeds, the one who took prior possession of the properties shall bethe lawful owner thereof.


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In this instance, petitioner delivered the properties to respondent when he executed the notarizeddeed and handed over to respondent the keys to the properties. For this reason, respondent tookactual possession and exercised control thereof by making repairs and improvements thereon.Clearly, the sale was perfected and consummated on March 10, 1993. Thus, respondent becamethe lawful owner of the properties.

Nonetheless, while the condition as to the payment of the balance of the purchase pricewas deemed fulfilled, respondents obligation to pay it subsisted. Otherwise, she would beunjustly enriched at the expense of petitioner.

Therefore, respondent must pay petitioner P684,500, the amount stated in the deed. Thisis because the provisions, terms and conditions of the contract constitute the law between theparties. Moreover, the deed itself provided that the assumption of mortgage was without anyfurther cost whatsoever. Petitioner, on the other hand, must deliver the certificates of title torespondent. We likewise affirm the award of damages

June 01 2011G.R. No. 188064

MILA A. REYES versus VICTORIA T. TUPARAN

FACTS:

On September 10, 1992, Mila A. Reyes (petitioner) filed a complaint for Rescission ofContract with Damages against Victoria T. Tuparan (respondent). In her Complaint, petitioneralleged, among others, that she was the registered owner of a 1,274 square meter residential and

commercial lot located in Karuhatan, Valenzuela City and that; in December 1989, respondentleased from petitioner a space on the ground floor of the RBJ Building for her pawnshopbusiness for a monthly rental of 4,000.00. A close friendship developed between the two which

led to the respondent investing thousands of pesos in petitioners financing/lending businessfrom February 7- MAY 27, 1990 , with interest at the rate of 6% a month; that on June 20, 1988,petitioner mortgaged the subject real properties to the (FSL Bank). Petitioner then decided to sellher real properties for at least 6,500,000.00 so she could liquidate her bank loan and finance herbusinesses. As a gesture of friendship, respondent verbally offered to conditionally buypetitioners real properties for 4,200,000.00 payable on installment basis without interest and toassume the bank loan.The respondent counters that the subject Deed of Conditional Sale withAssumption of Mortgage entered into between the parties is a contract to sell and not a contract

of sale because the title of the subject properties still remains with the petitioner as she failed topay the installment payments in accordance with their agreement.

ISSUE:

Whether or not the contract executed by petitioner and respondent is a contract to sell ora contract of sale.


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HELD:

The subject Deed of Conditional Sale with Assumption of Mortgage entered into by andamong the two parties and FSL Bank on November 26, 1990 is a contract to sell and not acontract of sale.A contract of sale is defined in Article 1458 of the Civil Code, thus: Art. 1458.

By the contract of sale, one of the contracting parties obligates himself to transfer the ownershipof and to deliver a determinate thing, and the other to pay therefore a price certain in money orits equivalent.Sale, by its very nature, is a consensual contract because it is perfected by mereconsent. In a contract to sell, the prospective seller explicitly reserves the transfer of title to theprospective buyer, meaning, the prospective seller does not as yet agree or consent to transferownership of the property subject of the contract to sell until the happening of an event, whichfor present purposes shall take as the full payment of the purchase price. the full payment of thepurchase price partakes of a suspensive condition, the non-fulfillment of which prevents theobligation to sell from arising and, thus, ownership is retained by the prospective seller withoutfurther remedies by the prospective buyer.

GR. NO. 105774, April 25 2011

GREAT ASIAN versus COURT OF APPEAL

FACTS:

Great Asian is engaged in the business of buying and selling household appliances. InMarch 1981, the board of directors of Great Asian approved a resolution authorizing its

Treasurer and GM, Arsenio Lim Piat, Jr. to secure a loan from Banc Asia in an amount not toexceed P1M and also authorized Arsenio to sign all papers, documents or promissory notesnecessary to secure the loan. In Feb. 1982, the board of directors of Great Asian approved andresolution authorizing Great Asian to secure a discounting line with Banc Asia in an amount notexceeding P2M and also designated Arsenio as the authorized signatory to sign all instruments,documents and checks necessary to secure the discounting line. Great Asian, through Arsenio,signed 4 Deeds of Assignment of Receivables, assigning to Banc Asia 15 postdated checksissued by various customers in payment for appliances and other merchandise. Arsenio endorseall the 15 checks by signing his name at the back of the checks. Eight of the dishonored checksbore the endorsement of Arsenio below the stamped name of Great Asian Sales Center, whilethe rest of the dishonored checks just bore the signature of Arsenio. The drawee banks

dishonored the fifteen checks on maturity when deposited for collection by Banc Asia, with anyof the following as reason for the dishonor: account closed, payment stopped, account

under garnishment, and insufficiency of funds. After the drawee bank dishonored the checks,Banc Asia sent letters to Tan Chong Lin, notifying him of the dishonor and demanding paymentfrom him. Neither Great Asian nor Tan Chong Lin paid Banc Asia the dishonored checks.-InJune 1982, Banc Asia filed a complaint for collection of a sum of money against Great Asian andTan Chong Lin. Great Asian raised the alleged lack of authority of Arsenio to sign the Deeds of


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Assignment as well as the absence of consideration and consent of all the parties to the SuretyAgreements signed by Tan Chong Lin.

ISSUE:

Whether or not Arsenio had authority to execute the Deeds of Assignment and thus bindGreat Asian

HELD:

YES. The Corporation Code of the Philippines vests in the board of directors the exerciseof the corporate powers of the corporation, save in those instances where the Code requiresstockholders approval for certain specific acts. In the ordinary course of business, a corporationcan borrow funds or dispose of assets of the corporation only on authority of the board of

directors. The board of directors normally designates one or more corporate officers to sign loandocuments or deeds of assignment for the corporation.-To secure a credit accommodation fromBancasia, the board of directors of Great Asian adopted 2 board resolutions on different dates.(text of resolutions shown in case) As plain as daylight, the 2 board resolutions clearlyauthorized Great Asian to secure a loan or discounting line from Banc Asia. The 2 boardresolutions also categorically designated Arsenio as the authorized signatory to sign and deliverall the implementing documents, including checks, for Great Asian. There is no iota of doubtwhatsoever about the purpose of the 2 board resolutions, and about the authority of Arsenio toact and sign for Great Asian. Arsenio had all the proper and necessary authority from the boardof directors of Great Asian to sign the Deeds of Assignment and to endorse the fifteen postdatedchecks. Arsenio signed the Deeds of Assignment as agent and authorized signatory of Great

Asian under an authority expressly granted by its board of directors. The signature of Arsenio onthe Deeds of Assignment is effectively also the signature of the board of directors of GreatAsian, binding on the board of directors and on Great Asian itself.

122 SCRA 280, May 16, 1983G.R. No. L-58286

DUCUSIN versus COURT OF APPEAL

FACTS:

The Baliola spouses occupied the apartment for almost two (2) years, paying its rentalswhen on January 18, 1977, petitioner Ducusin sent a "Notice to Terminate Lease Contract" toprivate respondents Baliolas terminating the lease and giving them until March 15, 1977 withinwhich to vacate the premises for the reason that his two children were getting married and willneed the apartment for their own use and residence (Exhibit "B"). A second letter dated February


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14, 1977 was thereafter sent by Ducusin to respondents Baliolas making an inquiry on any actionthe latter had taken on the previous notice to terminate the lease contract. Respondents made noreply to the "Notice to Terminate Lease Contract". Indeed, they wrote a letter to the Secretary ofNational Defense dated February 12, 1977, reporting that Ducusin was intent on evicting themfrom the leased premises (Exhibit "6").

So on April 14, 1977, petitioners filed an action for ejectment against the Baliola spousesin the City Court of Manila, Branch XVI, alleging that having constructed the apartmentcomplex for the use and residence of his children (each to a unit) if and when they decide tomarry and live independently and that the apartment unit located at 3319-A MagistradoAraulloSt., Bacood, Manila having been allotted to his son, AgapitoDucusin, Jr., the said unit is nowneeded by Agapito, Jr. who is getting married in the month of May, 1977 and that said Agapito,Jr. has decided to live independently. The complaint for eviction further alleged that the lesseeshave violated the terms of the contract by subleasing the premises; that the lessees have not usedthe premises solely for residential purposes but have used the same as factory and/ormanufacturing premises for their commercial goods; and that they have neglected to undertakerepairs of the apartment and the premises according to their agreement.

The lessees denied the allegations of the lessor and claimed in their Answer that the ejectmentsuit "is a well-planned scheme to rid the defendants and family out of their apartment, and tocircumvent the law prohibiting raising the rental of apartments and houses."

ISSUE:

Whether or not the happening of the resolutory condition re: the need of the immediatemembers of the family of the lessor of the leased premises - has been established by apreponderance of evidence.

HELD:

The intention to use the leased premises as the residence of Ducusin Jr. has beensatisfactorily and sufficiently proved by clear, strong, and substantial evidence found in therecords of the case. The testimony of the petitioner, Ducusin Sr., that his son needs the leasedpremises as he was getting married and did in fact got married, for which reason petitioner sentthe "Notice to Terminate His Contract" (Exh. "B"); the testimony of Arturo Ducusin -that he hadan overseas telephone talk with his brother Agapito Jr. informing that the latter was cominghome and that he and his wife were preparing their documents and arriving within the month(t.s.n., pp. 13, 17, June 5, 1979; p. 15, Records) and the documentary evidence (Exh. "F" and"G") which is the letter of the private respondent AgapitoDucusin, Jr. where it stated that heintended to settle in the Philippines instead of Canada where he was presently residing with his

wife (CA decision, p. 108, Records) - an these evidence clearly and competently prove theintention of petitioner Agapito Ducusin, Jr. to re side in the Philippines and use the leasedpremises for his residence and his wife.


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151 SCRA 484

MILLARE versus HERNANDO

FACTS:

Petitioner Pacifica Millare as lessor and private respondent Elsa Co, as lessee executed a5-year contract of lease. The parties agreed to rent out a commercial unit for a monthly rate ofP350. Before the expiration of the lease contract, the lessor informed them that the lessee cancontinue renting the unit as they were amenable to paying increased rentals of P1,200.00 amonth. In response, a counteroffer of P700.00 a month was made by the lessee. At this point, thelessor allegedly stated that the amount of monthly rentals could be resolved at a later time since"the matter is simple among us", which alleged remark was supposedly taken by the spouses Coto mean that the Contract of Lease had been renewed. On 22 July 1980, Mrs. Millare wrote theCo spouses requesting them to vacate the leased premises as she had no intention of renewing the

Contract of Lease. Lessees responded by reiterated their unwillingness to pay the Pl,200.00monthly rentals and by depositing the P700 monthly rentals in court. on 1 September 1980, Mrs.Millare filed an ejectment case against the Co spouses in the Municipal Court of Bangued, Abra.The judge rendered a "Judgment by Default" ordering the renewal of the lease contract for a termof 5 years counted from the expiration date of the original lease contract, and fixing monthlyrentals thereunder at P700.00 a month, payable in arrears.

ISSUE:

Whether or not private respondents have a valid cause of action against petitioner

Whether or not the trial court acquired jurisdiction over Civil Case No. 1434

HELD:

In the instant case, the lessor and the lessee conspicuously failed to reach agreement bothon the amount of the rental to be payable during the renewal term, and on the term of therenewed contract. The respondent judge cited Articles 1197 and 1670 of the Civil Code tosustain the "Judgment by Default" by which he ordered the renewal of the lease for another termof five years and fixed monthly rentals thereunder at P700.00 a month. The first paragraph ofArticle 1197 is clearly inapplicable, since the Contract of Lease did in fact fix an original periodof five years. The second paragraph of Article 1197 is equally clearly inapplicable since the

duration of the renewal period was not left to the will of the lessee alone, but rather to the will ofboth the lessor and the lessee. The implied new lease during the continued occupancy could notpossibly have a period of five years, but rather would have been a month-to-month lease sincethe rentals (under the original contract) were payable on a monthly basis. It follows that therespondent judge's decision requiring renewal of the lease has no basis in law or in fact sincecourts have no authority to prescribe the terms and conditions of a contract for the parties.


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OCTOBER 11, 1995G.R. NO. 117009

SECURITY AND TRUST COMPANY AND R. MANHITVS CA ANDFERRER

FACTS:

Ferrer was contracted by the SBTC to construct a bldg in Davao. The contract providedthat it be finished within 200 working days, it was finished upon stipulated time but additionalexpenses were incurred amounting to 300k on top of the original cost, these expenses were madeknown to SBTC and timely demands for the payment of the increased cost were done by Ferrerto SBTC, the latter only recommended that the verified cost is 200k. SBTC contend that in thecontract, should there be any increase in the expenses, the owner shall equitably make the

appropriate adjustment on mutual agreement of both parties. Ferrer filed for damages and the

trial court ruled in his favor, the defendants were ordered to pay. On appeal, CA affirmed the tcsdecision.

ISSUE:

Whether or not SBTC is liable for damages and payment of the additional expenses.

HELD:

Under article 1182 if the conditional obligation depends solely upon the will of thedebtor the obligation is void, in the instant case the mutual agreement the absence of which the

petitioner bank depend on to support their non-liability is in effect a conditional obligation purelydepends on the will of the petitioner bank. Art. 22 states that, Every person who through an actor performance by another or any other means, acquires or comes into possession of somethingat the expense of the latter without just or legal ground, shall return the same to him.It is not denied that private respondent incurred additional expenses in constructing petitionerbanks bldg due to a drastic and unexpected in construction cost. Hence, to allow petitioner bankto acquire the constructed bldg at a price far below its actual cost would undoubtedly constituteunjust enrichment for the bank to the prejudice of Ferrer, such cannot be allowed by law.

214 scra 665

RUSTAN PULP versus INTER APPELATE COURT

FACTS:

Petitioner Rustan established a pulp and paper mill in Baloi, Lanao del Norte.Respondent Romeo A. Lluch propose to be Rustan's supplier of raw materials. Petitioner agreedbut on the following conditions:


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a. The contract to supply is not exclusive and Rustan shall have the option to buy from otherqualified suppliers.b. Seller has the priority to supply the materials to the buyerc. Buyer shall have the right to stop delivery when supply has become sufficient until when saidmaterials become necessary, provided that the seller is given sufficient notice.

In the installation of the plant facilities, the technical staff of Rustan Pulp and Paper Mills, Inc.recommended the acceptance of deliveries from other suppliers of materials. But during the testrun of the pulp mill, the machinery line thereat had major defects while deliveries of the rawmaterials piled up, which prompted the Japanese supplier of the machinery to recommend thestoppage of the deliveries. A letter was sent to respondent asking to suspend delivery for 30 days.Respondent sought to clarify the tenor of the letter as to whether stoppage of delivery ortermination of the contract of sale was intended, but the query was not answered by petitioners.This led to the filing of a complaint for a breach of contract.

ISSUE:

Whether or not Rustan's condition invalidates the contract.

HELD:

Respondent Court found it ironic that petitioners had to exercise the prerogativeregarding the stoppage of deliveries because petitioners never really stopped accepting deliveriesfrom private respondents until December 23, 1968. The fact that appellees were buying andaccepting pulp wood materials from other sources other than the appellants even after September30, 1968 belies that they have more than sufficient supply of pulp wood materials, or that they

are unable to go into full commercial operation or that their machineries are defective or eventhat the pulp wood materials coming from appellants are sub-standard. If the plant could not beoperated on a commercial scale, it would then be illogical for defendant Rustan to continueaccepting deliveries of raw materials. It would be unjust for the court a quo to rule that thecontract of sale be temporarily suspended until Rustan, et al., are ready to accept deliveries fromappellants. This would make the resumption of the contract purely dependent on the will of onepartyPetitioner Rustan. Petitioners can stop delivery of pulp wood from private respondents ifthe supply at the plant is sufficient as ascertained by petitioners, subject to re-delivery when theneed arises as determined likewise by petitioners. There is no doubt that the contract speaksloudly about petitioners' prerogative but what diminishes the legal efficacy of such right is thecondition attached to it which, as aforesaid, is dependent exclusively on their will for which

reason, We have no alternative but to treat the controversial stipulation as inoperative. We arenot inclined to follow the interpretation of petitioners that the suspension of delivery was merelytemporary since the nature of the suspension itself is again conditioned upon petitioner'sdetermination of the sufficiency of supplies at the plant. Neither are We prepared to acceptpetitioners' exculpation grounded on frustration of the commercial object under Article 1267 ofthe New Civil Code, because petitioners continued from the suppliers. Petitioner Rustan Pulpand Paper Mills is ordered to pay moral damages and attorney's fees as awarded by respondentCourt.


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35 SCRA 102

UNIVERSITY OF THE PHILIPPINES versus DE LOS ANGELES

FACTS:

On November 2, 1960, UP and ALUMCO entered into a logging agreement whereby thelatter was granted exclusive authority to cut, collect and remove timber from the Land Grant fora period starting from the date of agreement to December 31, 1965, extendible for a period of 5years.by.mutual.agreement.

On December 8, 1964, ALUMCO incurred an unpaid account of P219,362.94. Despiterepeated demands, ALUMCO still failed to pay, so UP sent a notice to rescind the loggingagreement. On the other hand, ALUMCO executed an instrument entitled Acknowledgment ofDebt and Proposed Manner of Payments. It was approved by the president of UP, which

stipulated the following: 3. In the event that the payments called for are not sufficient to liquidatethe foregoing indebtedness, the balance outstanding after the said payments have been appliedshall be paid by the debtor in full no later than June 30, 1965. 5. In the event that the debtor failsto comply with any of its promises, the Debtor agrees without reservation that Creditor shallhave the right to consider the Logging Agreement rescinded, without the necessity of anyjudicial 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 ofno further legal effect the logging agreement, and that UP had already taken steps to haveanother concessionaire take over the logging operation. ALUMCO filed a petition to enjoin UPfrom 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?

HELD:

Yes. In the first place, UP and ALUMCO had expressly stipulated that upon default bythe 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. PanOriental Shipping Co: There is nothing in the law that prohibits theparties from entering intoagreement that violation of the terms of the contract would cause cancellation thereof, evenwithout court intervention. In other words, it is not always necessary for the injured party toresort to court for rescission of the contract.


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on his part. This couldnt be accepted because the insured signed the form. He affirmed the

correctness of all the entries.The company records show that the deceased was examined by Dr. Victoriano Lim and

was found to be diabetic and hypertensive. He was also found to have suffered from hepatoma.Because of the concealment made by the deceased, the company was thus misled into accepting

the risk and approving his application as medically fit.

312 SCRA 528, Aug 17, 1999G.R. No. 112330,

Spouses Henry and Elizabeth Co. and Melody Co, petitioners, versusCourt of Appeals and Mrs. Adoracion Custodio, represented by her

Attorney-in-fact, Trinidad Kalagayan, respondents

FACTS:

On October 9, 1984, the spouses Co entered into a verbal contract with Custodio for herpurchase of the their house and lot worth $100,000.00. One week thereafter, and shortly beforeshe left for the United States she paid amounts of $1,000.00and P40,000.00 as earnest money, inorder that the same may be reserved for her purchase, said earnest money to be deducted fromthe total purchase price. The purchase price of $100,000.00 is payable in two payments$40,000.00 on December 4, 1984 and the balance of $60,000.00 on January 5, 1985. On January

25, 1985, although the period of payment had already expired, she paid to the defendant MelodyCo in the United States, the sum of $30,000.00, as partial payment of the purchase price. SpousesCos counsel, Atty. Leopoldo Cotaco, wrote a letter to the plaintiff dated March15,1985,demanding that she pay the balance of $70,000.00 and not receiving any response thereto, saidlawyer wrote another letter to plaintiff dated August 8,1986, informing her that she has lost heroption to purchase the property subject of this case and offered tosell her another property.Atty. Estrella O. Laysa, counsel of Custodio, wrote a letter to Atty. Leopoldo Cotaco informinghim that Custodio is now ready to pay the remaining balance to complete the sum of$100,000.00, the agreed amount as selling price and on October 24, 1986, plaintiff filed theinstant complaint.

The trial court ruled in favor of Custodio and ordered the spouses Co to refund the

amount of $30,000.00. Not satisfied with the decision, the spouses Co appealed to the Court ofAppeals, which affirmed the decision of the RTC. Hence, this appeal.

ISSUE:

Whether or not the Court of Appeals erred in ordering the Cos to return the $30,000.00paid by Custodio pursuant to the option granted to her.


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incumbent upon him, (Article 1191, sameCode). Rescission creates the obligation to return thethings which were the object of the contract, together with their fruits, and the price with itsinterest (Article1385, same Code). In the case at bar, the property involved has not beendelivered to the appellee. She has therefore nothing to return to the appellants. The price receivedby the appellants has to be returned to the appellee as aptly ruled by the lower court, for such is a

consequence of rescission, which is to restore the parties in their former situations. Petitiondenied. Decision affirmed.

September 21, 1983G.R. No. L-56076

PALAY, INC. and ALBERT ONSTOTT, petitioner,

versusJACOBO C. CLAVE, Presidential Executive AssistantNATIONAL HOUSING AUTHORITY and NAZARIO

DUMPIT respondents.

FACTS:

That Palay, Inc., through its President, Albert Onstott executed in favor of privaterespondent, Nazario Dumpit, a Contract to Sell for parcel of land payable with a down payment

and monthly installments until fully paid. Paragraph 6 of the contract provided for automaticextrajudicial rescission upon default in payment of any monthly installment after the lapse of 90days from the expiration of the grace period of one month, without need of notice and withforfeiture of all installments paid. Private respondent Dumpit paid the down payment and severalinstallments. However, Dumpit failed to continue paying the installments for almost 6 years.Thereafter, Dumpit wrote petitioner offering to update all his overdue accounts with interest, andseeking its written consent to the assignment of his rights to a certain Lourdes Dizon. Petitionersreplied that the Contract to Sell had long been rescinded pursuant to paragraph 6 of the contract,and that the lot had already been resold. Consequently, Dumpit filed a complaint questioning thevalidity of the rescission with the National Housing Authority (NHA) for reconveyance with analternative prayer for refund. The NHA found the rescission void in the absence of either judicial

or notarial demand. Thus, it ordered Palay, Inc. and Alberto Onstott in his capacity as Presidentof the corporation, jointly and severally, to refund immediately to Dumpit the amount paid with12% interest from the filing of the complaint. On appeal, respondent Clave, the PresidentialExecutive Assistant affirmed. Hence, this petition.


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ISSUE:

(1) Whether or not the doctrine of piercing the veil of corporate fiction applies.

(2) Whether or not petitioner Onstott is solidarily liable with Palay, Inc. for the refund.

HELD:

(1) No. The Supreme Court held that a corporation is invested by law with a personalityseparate and distinct from those of the persons composing it as well as from that of any otherlegal entity to which it may be related. As a general rule, a corporation may not be made toanswer for acts or liabilities of its stockholders or those of the legal entities to which it may beconnected and vice versa. However, the veil of corporate fiction may be pierced when it is usedas a shield to further an end subversive of justice; or for purposes that could not have beenintended by the law that created it; or to defeat public convenience, justify wrong, protect fraud,

or defend crime; or to perpetuate fraud or confuse legitimate issues; or to circumvent the law orperpetuate deception; or as an alter ego, adjunct or business conduit for the sole benefit of thestockholders.

In this case, there was no finding of fraud on petitioners' part. They had literally relied,although mistakenly, on paragraph 6 of its contract with private respondent when it rescinded thecontract to sell extra judicially and had sold it to a third person.

(2) No. The Supreme Court held that no sufficient proof exists on record that saidpetitioner used the corporation to defraud private respondent. He cannot, therefore, be madepersonally liable just because he "appears to be the controlling stockholder". Mere ownership by

a single stockholder or by another corporation is not of itself sufficient ground for disregardingthe separate corporate personality.

May 26, 2005G.R. No. 139523

SPOUSES FELIPE AND LETICIA CANNU, petitioners, vs. SPS. GIL AND

FERNANDINA GALANG AND NATIONAL HOME MORTGAGEFINANCE CORPORATION, respondents.

FACTS:

Respondent spouses Gil and Fernandina Galang agreed to sell their house and lot subjectto mortgage with the National Home Mortgage Finance Corp (NHMFC). Petitioner Leticia


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Cannu agreed to buy the property for 120K & to assume the mortgage obligations with theNHMFC. A deed of sale & assumption of mortgage was executed & petitioners immediatelytook possession & occupied the house & lot. Despite requests from Adelina R. Timbang(attorney-in-fact) and Fernandina Galang to pay the balance of P45,000.00 or in the alternative tovacate the property in question, petitioners refused to do so. Because the Cannus failed to fully

comply with their obligations, respondent Fernandina Galang, on 21 May 1993, paid P233K asfull payment of her remaining mortgage loan with NHMFC. 8 years had already elapsed andpetitioners have not yet complied with the obligation.The RTC ordered the deed of sale with Assumption of Mortgage as rescinded as well as orderedmutual restitution.

ISSUE:

1.WON.the.breach.of.obligation.is.substantial?2..WON.respondent.waived.their.right.of.rescission?3. WON rescission is subsidiary? NO

HELD:1.

We consider this breach to be substantial. Cannu failed to comply with her obligation topay the monthly amortizations due on the mortgage. Also, the tender made by Cannu only afterthe filing of this case cannot be considered as an effective mode of payment.Resolution of a party to an obligation under Article 1191 is predicated on a breach of faith by theother party that violates the reciprocity between them. In the case at bar, Cannus failure to paythe remaining balance of 45K to be substantial. To give petitioners additional time to complywith their obligation will be putting premium on their blatant non-compliance of their obligation.They had all the time to do what was required of them (i.e., pay the P45,000.00 balance and to

properly assume the mortgage loan with the NHMFC), but still they failed to comply. Despitedemands for them to pay the balance, no payments were made.Rescission will not be permitted for a slight or casual breach of the contract. Rescission may behad only for such breaches that are substantial and fundamental as to defeat the object of theparties in making the agreement.

2.The fact that Galang accepted payments in installments does not constitute waiver on

their part to exercise their right to rescind the Deed of Sale with Assumption of Mortgage.Galang accepted the installment payments as an accommodation to petitioners since they kept onpromising they would pay. However, after the lapse of considerable time (18 months from last

payment) and the purchase price was not yet fully paid, Galang exercised their right of rescissionwhen they paid the outstanding balance of the mortgage loan with NHMFC. It was only afterpetitioners stopped paying that respondents-spouses moved to exercise their right of rescission.

3.The provision that applies in the case at bar is Article 1191. The subsidiary character of

the action for rescission applies to contracts enumerated in Articles 138148 of the Civil Code.


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The rescission in this case is not predicated on injury to economic interests of the party plaintiffbut on the breach of faith by the defendant, that violates the reciprocity between the parties. It isnot a subsidiary action. The rescission in 1191 is a principal action retaliatory in character, itbeing unjust that a party be held bound to fulfill his promises when the other violates his.

151 SCRA 661, June 30, 1987G.R. No. 73893

MARGARITA SURIA AND GRACIA R. JOVEN, petitioners,versus

HON. INTERMEDIATE APPELLATE COURT, HON. JOSE MARGARCIA (Presiding Judge of the RTC of Laguna, Branch XXIV, Bian,Laguna), and SPOUSES HERMINIO A. CRISPIN and NATIVIDAD C.

CRISPIN

FACTS:

Plaintiffs entered into a Deed of Sale with Mortgage with defendants over a parcelof land in Laguna. Defendants violated the terms and conditions of the contract by failing to paythe stipulated installments and only one installment was made, despite repeated demands.They formally offered to pay the outstanding balance under the Deed of Sale of Mortgage whichwas rejected.

ISSUE:

Whether or not the subsidiary and equitable remedy of rescission available in thepresence of the remedy of foreclosure in the light of Art. 1383.

HELD:

The parties entered into a contract of sale where the vendor obligates himself to transferthe ownership of and to deliver a determinate thing to the buyer, who is obligated to pay a pricecertain in money or its equivalent. The respondents have complied with their part and parted with

the title. The buyer fulfilled his end of the bargain when he executed the deed of mortgage. Therelationship between the parties is no longer as buyer and seller, because the contract of sale hasbeen perfected and consummated and it is already of a mortgager and mortgagee. Thepetitioners breach of obligation isnot with respect to the perfected contract of sale but in theobligations created by the mortgage contract. The remedy of rescission is not a principal actionretaliatory in character but becomes a subsidiary one which by law is available only in theabsence of any other legal remedy. Foreclosure here is not a remedy accorded by law but is aspecific provision found in the contract


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G.R. No. 188064

MILA A. REYES versus VICTORIA T. TUPARAN

FACTS:

On September 10, 1992, Mila A. Reyes (petitioner) filed a complaint for Rescission ofContract with Damages against Victoria T. Tuparan (respondent) before the RTC. In herComplaint, petitioner alleged, among others, that she was the registered owner of a 1,274 squaremeter residential and commercial lot located in Karuhatan, Valenzuela City and that; inDecember 1989, respondent leased from petitioner a space on the ground floor of the RBJBuilding for her pawnshop business for a monthly rental of 4,000.00. A close friendshipdeveloped between the two which led to the respondent investing thousands of pesos inpetitioners financing/lending business from February 7, 1990 to May 27, 1990, with interest at

the rate of 6% a month; that on June 20, 1988, petitioner mortgaged the subject real properties tothe Farmers Savings Bank and Loan Bank, Inc. (FSL Bank). Petitioner then decided to sell herreal properties for at least 6,500,000.00 so she could liquidate her bank loan an d finance herbusinesses. As a of friendship, respondent verbally offered to conditionally buy petitioners realproperties for 4,200,000.00 payable on installment basis without interest and to assume the

bank loan.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 Mortgagewas actually a pure and absolute contract of sale with a term period. It could not be considered aconditional sale because the acquisition of contractual rights and the performance of theobligation therein did not depend upon a future and uncertain event. Moreover, the capital gains

and documentary stamps and other miscellaneous expenses and real estate taxes up to 1990 weresupposed to be paid by petitioner but she failed to do so.The respondent counters that the subject Deed of Conditional Sale with Assumption of Mortgageentered into between the parties is a contract to sell and not a contract of sale because the title ofthe subject properties still remains with the petitioner as she failed to pay the installmentpayments in accordance with their agreement.

ISSUE:Whether or not the contract executed by the petitioner and the respondent is a contract to

sell or a contract of sale.

HELD:

The Court agrees with the ruling of the lower courts below that the subject Deed ofConditional Sale with Assumption of Mortgage entered into by and among the two parties andFSL Bank on November 26, 1990 is a contract to sell and not a contract of sale. A contract ofsale is defined in Article 1458 of the Civil Code, thus: Art. 1458. By the contract of sale, one of


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the contracting parties obligates himself to transfer the ownership of and to deliver a determinatething, and the other to pay therefore a price certain in money or its equivalent. Sale, by its verynature, is a consensual contract because it is perfected by mere consent. The essential elementsof a contract of sale are the following:

a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for theprice;b) Determinate subject matter; andc) Price certain in money or its equivalent.

Under this definition, a Contract to Sell may not be considered as a Contract of Salebecause the first essential element is lacking. In a contract to sell, the prospective seller explicitlyreserves the transfer of title to the prospective buyer, meaning, the prospective seller does not asyet agree or consent to transfer ownership of the property subject of the contract to sell until thehappening of an event, which for present purposes we shall take as the full payment of thepurchase price. What the seller agrees or obliges himself to do is to fulfill his promise to sell the

subject property when the entire amount of the purchase price is delivered to him. In otherwords, the full payment of the purchase price partakes of a suspensive condition, the non-fulfillment of which prevents the obligation to sell from arising and, thus, ownership is retainedby the prospective seller without further remedies by the prospective buyer.

May 18, 2004G.R. No. 157568

CHUA versus VICTORIO

FACTS:

Respondent Mutya Victorio is the owner of the property in Panganiban Street, Santiago,Isabela where petitioners Chua and Yong Tian are lessees.

In 1990, Victorio effected an ejectment suit against the petitioners who were not fulfillingtheir obligations as lessees, but a compromise agreement supervened this. In 1994, Victorioraised the rentals and petitioners did not comply with such payments. She then again moved for

an ejectment suit. The RTC and CA ordered respondents to vacate the property. But this did nothappen because respondents agreed as to the new rentals and there again continued occupation ofthe property.

In 1998, Victorio wanted to increase again the rentals. They again failed to pay such rents andrespondent filed again for ejectment suit.


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Petitioners impugn such raises in rents, invoking the provisions of the compromise agreementthat the two parties executed sometime in 1991. They contend that there can be no increase ofmore than 25% in a span of 4 years.

ISSUE:

1. WON the petitioners can invoke the provisions of the compromise agreement in order to holdrespondent stopped from making raises in leases NO2. WON Victorio may rescind the contract of lease? YES

HELD:

1.

The compromise agreement executed in 1991 is without moment as to petitioners claim. Accordingly, in 1994, the juridical relation between the parties was severed when the CA

ordered ejectment of the petitioners. The lessors acceptance of the increased rentals in 1996 didnot have the effect of reviving the earlier contract of lease. Upon the moment of acquiescence byrespondents to the increased amount, an entirely new contract of lease was entered into, forgingan entirely new juridical relation. Since payment of rent was made on a monthly basis, and

pursuant to Article 1687 of the Civil Code, the period of this lease contract was monthly. Uponthe expiration of every month, the lessor could increase the rents and demand that the lesseevacate the premises upon non-compliance with increased terms.

2.

The right of rescission is statutorily recognized in reciprocal obligations, such ascontracts of lease. In addition to the general remedy of rescission granted under Article 1191 of

the Civil Code, there is an independent provision granting the remedy of rescission for breach ofany of the lessor or lessees statutory obligations. Under Article 1659 of the Civil Code, the

aggrieved party may, at his option, ask for (1) the rescission of the contract; (2) rescission andindemnification for damages; or (3) only indemnification for damages, allowing the contract to

remain in force.

Payment of the rent is one of a lessees statutory obligations. The law grants the lessorthe option of extrajudicially terminating the contract of lease by simply serving a written noticeupon the lessee. This extrajudicial termination has the same effect as rescission. Rescission oflease contracts under Article 1659 of the Civil Code does not require an independent action,unlike resolution of reciprocal obligations under Article 1191 of said Code.


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314 SCRA 69, May 21, 1988G.R. No. 77465

SPOUSES UY TONG & KHO PO GIOK, petitioners,versus

HONORABLE COURT OF APPEALS, HONORABLE BIENVENIDO C.EJERCITO, Judge of the Court of First Instance of Manila, Branch XXXVIIand BAYANIHAN AUTOMOTIVE CORPORATION, respondents

FACTS:

Spouses Tong failed to pay the balance of the purchased , due to Bayanihan, who filed anaction for specific performance against spouses. The trial court rendered a judgment in favor ofBayanihan ordering the defendant to pay the balance to the plaintiff and in the event of failure to

do so , they are hereby to execute the deed of absolute sale and or the assignment of theleasehold right. An order for execution pending appeal was issued by the trial court and a deed ofassignment was executed by the Spouses over the apartment together with the leasehold rightover the land on which the building stands. Notwithstanding the execution of the deedof assignment the SPOUSES remained in possession of the premises. Despite the expiration ofthe said period, the SPOUSES failed to surrender possession of the premises in favor ofBAYANIHAN. This prompted BAYANIHAN to file an ejectment case against them. This actionwas however dismissed on the ground that BAYANIHAN was not the real party in interest, notbeing the owner of the building. After demands to vacate the subject apartment madeby BAYANIHAN's counsel was again ignored by the SPOUSES, an action for recoveryof possession with damages was filed. The case was decided in favor of bayanihan. Not satisfied

with this decision, the SPOUSES appealed to the Court of Appeals. The respondent Court ofAppeals affirmed in toto the decision appealed from. A motion for reconsideration of the saiddecision was denied by the respondent Court.

ISSUE:

Whether or not the deed of assignment is null and void because it is in the nature ofa Pactum commissoriumand/or was borne out of the same.

HELD:

The prohibition onpactum commissoriumstipulations is provided for by Article 2088 ofthe Civil Code: Art. 2088. The creditor cannot appropriate the things given by way of pledgeor mortgage, or dispose of the same. Any stipulation to the contrary is null and void. Theaforequoted provision furnishes the two elements forpactum commissoriumto exist:(1) that there should be a pledge or mortgage wherein a property is pledged or mortgaged by wayof security for the payment of the principal obligation; and


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(2) that there should be a stipulation for an automatic appropriation by the creditor of the thingpledged or mortgaged in the event of non-payment of the principal obligation within thestipulated period. A perusal of the terms of the questioned agreement evinces no basis for theapplication of thepactum commissoriumprovision. First, there is no indication of 'any contractof mortgage entered into by the parties. It is a fact that the parties agreed on the sale and

purchase of trucks. Second, there is no case of automatic appropriation of the property byBAYANIHAN. When the SPOUSES defaulted in their payments of the second and thirdinstallments of the trucks they purchased, BAYANIHAN filed an action in court for specificperformance. The trial court rendered favorable judgment for BAYANIHAN and ordered theSPOUSES to pay the balance of their obligation and in case of failure to do so, to execute a deedof assignment over the property involved in this case. The SPOUSES elected to execute the deedof assignment pursuant to said judgment.

May 6, 2005G.R. No. 157480

PRYCECORPORATION (formerly PRYCE PROPERTIESCORPORATION), petitioner, vs. PHILIPPINE AMUSEMENT AND

GAMING CORPORATION, respondent.

FACTS:

PAGCOR set up a casino in Pryce Plaza Hotel for a period of 3 years. However, there hasbeen interruptions in the operations which ultimately caused the operations to cease prematurelyupon order of the Office of the President.

The CA ruled that the PAGCOR'S pretermination of the Contract of Lease wasunjustified. The appellate court explained that public demonstrations and rallies could not beconsidered as fortuitous events that would exempt the gaming corporation from complying withthe latter's contractual obligations. Therefore, the Contract continued to be effective until PPCelected to terminate it on November 25, 1993.Regarding the contentions of PPC, the CA held that under Article 1659 of the Civil Code, PPChad the right to ask for (1) rescission of the Contract and indemnification for damages; or (2)only indemnification plus the continuation of the Contract. These two remedies were alternative,not cumulative, ruled the CA.

As PAGCOR had admitted its failure to pay the rentals for September to November 1993,PPC correctly exercised the option to terminate the lease agreement.

ISSUE:

1. Whether or not Pryce is entitled to future rentals as provided in the contract even if PAGCORcontends, as the CA ruled, that Article 1659 of the Civil Code governs; hence, PPC is allegedlyno longer entitled to future rentals, because it chose to rescind the Contract.


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2. Whether or not PAGCOR should be exempt from complying with its contractual obligationsdue to fortuitous events3. Whether or not the future rentals constitute a penalty clause

HELD:

1. Pryce is entitled to future rentals as the provisions are not contrary to law, morals, publicorder, or public policy.The above provisions leave no doubt that the parties have covenanted:A. to give PPC the right to terminate and cancel the Contract in the event of a default or breachby the lessee; andB. to make PAGCOR fully liable for rentals for the remaining term of the lease, despite theexercise of such right to terminate. Plainly, the parties have voluntarily bound themselves torequire strict compliance with the provisions of the Contract by stipulating that a default or

breach, among others, shall give the lessee the termination option, coupled with the lessor'sliability for rentals for the remaining term of the lease. Article XX (c) provides that, aside fromthe payment of the rentals corresponding to the remaining term of the lease, the lessee shall alsobe liable "for any and all damages, actual or consequential, resulting from such default andtermination of this contract." Having entered into the Contract voluntarily and with fullknowledge of its provisions, PAGCOR must be held bound to its obligations. It cannot evadefurther liability for liquidated damages.

2. PAGCOR is not exempt from complying with the provisions as rallies and demonstrations arenot considered fortuitous events. In this case, PAGCOR's breach was occasioned by events that,although not fortuitous in law, were in fact real and pressing. From the CA's factual findings,

which are not contested by either party, we find that PAGCOR conducted a series of negotiationsand consultations before entering into the Contract. It did so not only with the PPC, but also withlocal government officials, who assured it that the problems were surmountable. Likewise,PAGCOR took pains to contest the ordinances before the courts, which consequently declaredthem unconstitutional. On top of these developments, the gaming corporation was advised by theOffice of the President to stop the games in Cagayan de Oro City, prompting the former to ceaseoperations prior to September 1993.Also worth mentioning is the CA's finding that PAGCOR's casino operations had to besuspended for days on end since their start in December 1992; and indefinitely from July 15,1993, upon the advice of the Office of President, until the formal cessation of operations inSeptember 1993. Needless to say, these interruptions and stoppages meant that PAGCOR

suffered a tremendous loss of expected revenues, not to mention the fact that it had fullyoperated under the Contract only for a limited time.

3. Pryce's right to penalty is affirmed but proved iniquitous.While petitioner's right to a stipulated penalty is affirmed, we consider the claim for futurerentals to the tune of P7,037,835.40 to be highly iniquitous. The amount should be equitablyreduced. Under the circumstances, the advanced rental deposits in the sum of P687,289.50should be sufficient penalty for respondent's breach.


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Accordingly, respondent is ordered to pay petitioner the additional amount ofP687,289.50 as penalty, which may be set off or applied against the former's advanced rentaldeposits.

In legal contemplation, the termination of a contract is not equivalent to its rescission.When an agreement is terminated, it is deemed valid at inception. Prior to termination, the

contract binds the parties, who are thus obliged to observe its provisions. However, when it isrescinded, it is deemed inexistent, and the parties are returned to their status quo ante. Hence,there is mutual restitution of benefits received. The consequences of termination may beanticipated and provided for by the contract. As long as the terms of the contract are not contraryto law, morals, good customs, public order or public policy, they shall be respected by courts.The judiciary is not authorized to make or modify contracts; neither may it rescue parties fromdisadvantageous stipulations. Courts, however, are empowered to reduce iniquitous orunconscionable liquidated damages, indemnities and penalties agreed upon by the parties.

113 SCRA 21, March 25, 1982G.R. No. L-49659

ROXAS versus ALCANTARA

FACTS:

This is an ejectment case which commenced in the Municipal Court of Tarlac, Tarlac

filed by herein petitioner Ruben Roxas, as lessor, against private respondent Ricardo Sy, aslessee. On October 16, 1967 the petitioner and the respondent entered into a lease contract whichthe latter agreed to occupy a two storey concrete building for ten (10) years with a monthly rentalof P550.00 per month, for his business named U.S. Hardware and Construction Material. In themiddle life of the contract the petitioner sent a letter-request to increase the rental of the saidbuilding, but the defendant, in strict adherence to the contract, declined to which plaintiffevidently succumbed. On august 11, 1977 wrote again a letter reminding the defendant theupcoming termination of the lease contract and it will expiration or beginning on October 1977in addition the rental will increase from P550.00 to P4,000.00 a month with three (3) years to bepaid in advance together with a yearly increase of 15% of the same rental. With the indecision ofthe defendant the petitioner sent him again a letter demanding to vacate the premises within five

(5) days from receipt.On appeal by both parties, the Court of First Instance of Tarlac, Branch I, rendered the

decision now before Us for review which modified the judgment of the Municipal Court byordering herein respondent-lessee Sy to pay to herein petitioner-lessor Roxas "the amount ofP1,500.00 monthly rental for ten (10) years effective October, 1977.


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ISSUE:

Whether or not the petitioner has the right to increase the rental of the said premises.

HELD:

The rule is settled that the owner of the land leased has the right not only to terminate thelease at the expiration of the term, but also to demand a new rate of rent. The tenant or lessee hasthe option either to accept the new rent or vacate the premises. (Iturralde vs. Alfonso 7 Phil. 576;Iturralde vs. Evangelista, 7 Phil., 588; Iturralde vs. Magcauas, 9 Phil. 599; Cortez vs. Ra

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