Monday, May 24, 2010

persons and family relations

Abalos vs. Macatangay, G.R. No. 155043, September 30, 2004

---- Article 69 regarding ownership, administration, enjoyment and disposition of the community properties

FACTS: Spouses Arturo and Esther Abalos are the registered owners of a parcel of land with improvements located at Azucena St., Makati City, covered by Transfer Certificate of Title (TCT) No. 145316 of the Registry of Deeds of Makati. Arturo executed a Receipt and Memorandum of Agreement (RMOA), in favor for the respondent, binding himself to sell to respondent the subject property and not to offer the same to any other party within 30 days from date.
Respondent sent a letter to Arturo and Esther informing them of his readiness and willingness to pay the full amount of the purchase price and demanded upon the spouses to comply with their obligation to turn over possession of the property to him. Esther agreed to surrender possession of the property to respondent within 20 days, while the latter promised to pay the balance of the purchase price for P1, 290, 000.00 after being placed in possession of the property. Esther also obligated herself to execute and deliver to respondent a deed of absolute sale upon full payment.
Respondent informed the spouses that he had set aside P1, 290, 000.00 as evidenced by Citibank Check No. 278107 as full payment of the purchase price. But Arturo and Esther failed to deliver the property which prompted respondent to file a complaint for specific performance with damages against petitioners.

RULING: Contracts, in general, require the presence of three essential elements: (1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of the obligation which is established.
The nullity of the RMOA as a contract of sale emanates not only from lack of Esther’s consent thereto but also from want of consideration and absence of respondent’s signature thereon. This cannot be obliterated by Esther’s subsequent confirmation of the putative transaction as expressed in the Contract to Sell. Under the law, a void contract cannot be ratified and the action or defense for the declaration of the inexistence of a contract does not prescribe. A void contract produces no effect either against or in favor of anyone–it cannot create, modify or extinguish the juridical relation to which it refers.
The congruence of the wills of the spouses is essential for the valid disposition of conjugal property. Where the conveyance is contained in the same document which bears the conformity of both husband and wife, there could be no question on the validity of the transaction. But when there are 2 documents on which the signatures of the spouses separately appear, textual concordance of the documents is indispensable. Hence, in this case where the wife’s putative consent to the sale of conjugal property appears in a separate document which does not, however, contain the same terms and conditions as in the first document signed by the husband, a valid transaction could not have arisen.
The interest of each spouse is limited to the net remainder or "remanente liquido" (haber ganancial) resulting from the liquidation of the affairs of the partnership after its dissolution. Thus, the right of the husband or wife to one-half of the conjugal assets does not vest until the dissolution and liquidation of the conjugal partnership, or after dissolution of the marriage.
Significantly, the Family Code has introduced some changes particularly on the aspect of the administration of the conjugal partnership. The new law provides that the administration of the conjugal partnership is now a joint undertaking of the husband and the wife. In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal partnership, the other spouse may assume sole powers of administration. However, the power of administration does not include the power to dispose or encumber property belonging to the conjugal partnership. In all instances, the present law specifically requires the written consent of the other spouse, or authority of the court for the disposition or encumbrance of conjugal partnership property without which, the disposition or encumbrance shall be void.

oblicon finals

NPC vs. Dayrit (novation)

Held: It is elementary that novation is never presumed; it must be explicitly stated or there must be manifest incompatibility between the old and the new obligations in every aspect. Thus the Civil Code provides:
Art. 1292. In order that an obligation may be extinguished by another which substitutes the same, it is imperative that it be so declared in unequivocal terms, or that the old and the new obligations be on every point incompatible with each other.

In the case at bar there is nothing in the May 14, 1982, agreement which supports the petitioner's contention. There is neither explicit novation nor incompatibility on every point between the "old" and the "new" agreements.

Facts: Daniel Roxas sued NPC to compel the NPC to restore the contract of Roxas for security services which the former had terminated. However, they reached a compromise agreement, and the court approved it. One of the stipulations of the agreement was that the parties shall continue with the contract of security services under the same terms and conditions as the previous contract effective upon the signing thereof. Parties entered into another contract for security services but NPC refused to implement the new contract for which Daniel filed a Motion for Execution. The NPC assails the Order on the ground that it directs execution of a contract which had been novated by that of the new contracts. NPC contends there was novation because they executed the second contract with Josefina Roxas; therefore there was a change of party. Upon the other hand, Roxas claims that said contract was executed precisely to implement the compromise agreement for which reason there was no novation.

Inchausti vs. Yulo (novation)

The contract of May 12, 1911 does not constitute a novation of the former one of Aug.12, 1909, with respect to the other debtors who executed this contract. First, “in order that an obligation may be extinguished by another which substitutes it, it is necessary that it should be so expressly declared or that the old and the new be incompatible in all points(art. 1292). It is always necessary to state that it is the intentionof the contracting parties to extinguish the former obligation by the new one.” The obligation to pay a sum of money is not novated in a new instrument wherein the old is ratified, by changing only the term of payment and adding other obligations not incompatible with the old one.

The obligation being solidary, the remission of any part of the debt made by a creditor in favor of one or more of the solidary debtors necessarily benefits the others, and therefore there can be no doubt that, in accordance with the provision of Art. 1215, 1222, the defendant has the right to enjoy the benefits of the partial remission. At present judgment can be rendered only as to P112,500.

Facts: This suit is brought for the recovery of a certain sum of money, the balance of a current account opened by the firm of Inchausti & Company with Teodor Yulo and after his death continued by Gregorio Yulo as principal representative of his children. On Aug.12, 1909, Gregorio Yulo, in representation of his 3 siblings, executed a notarial instrument, ratifying all the contents of the prior document of Jan.26, 1908, severally and joint acknowledged their indebtedness for P253,445.42, 10 % per annum, 5 installments. Plaintiff brought an action againsta Gregorio for the payment of the said balance due. But on May 12, 1911, 3 siblings executed another instrument in recognition of the debt, reduced to P225,000, interest reduced to 6% per annum, installments increased to 8.

Kabankalan Sugar Co. vs. Pacheco (novation)

Held: When an easement of right way is one of the principal conditions of a contract, and the duration of said easement is specified, the reduction of said period in a subsequent contract, wherein the same obligation is one of the principal conditions, constitutes a novation and to that extent extinguishes the former contractual obligation.

In the contract of November 1, 1920, the duration of the right of way which the defendant bound herself to impose upon her estate in favor of the plaintiff was twenty years, while in the contract of September 29, 1922, that period was reduced to seven crops which is equivalent to seven years. There can be no doubt that these two contracts, in so far as the duration of the right of way is concerned, are incompatible with each other, for the second contract reduces the period agreed upon in the first contract, and so both contracts cannot subsist at the same time. The duration of the right of way is one of the principal conditions of the first as well as of the second contract, and inasmuch as said principal condition has been modified, the contract has been novated, in accordance with the provision quoted above.

Facts: Josefa Pacheco binds herself to acknowledge in favor of the Kabankalan Sugar Co., Inc., all the easements which the Kabankalan may consider convenient and necessary for its railroad on the Hilabañgan estate belonging to the Pacheco; the only differences being that the term of the contract of November 1, 1920, is twenty years, while that of the contract entered into on September 29, 1922, is seven crops (one of the stipulations of the contract).

Fua vs. Yap (novation)

Held: We concur in the theory that appellants liability under the judgment in civil case No. 42125 had been extinguished by the settlement evidenced by the mortgage executed by them in favor of the appellee on December 16, 1933. Although said mortgage did not expressly cancel the old obligation, this was impliedly novated by reason of incompatibly resulting from the fact that, whereas the judgment was for P1,538.04 payable at one time, did not provide for attorney's fees, and was not secured, the new obligation is or P1,200 payable in installments, stipulated for attorney's fees, and is secured by a mortgage.

Facts: By virtue of a judgment for P1,538.04 which Fua obtained against Yap, a writ of execution was issued in pursuance of which a parcel of land belonging to Yap was levied upon and its sale at public auction duly advertised. The sale was, however, suspended as a result of an agreement between the parties, by the terms of which the obligation under the judgment was reduced to P1,200 payable in four installments, and to secure the payment of this amount, the land levied upon with its improvement was mortgaged to appellee with the condition that in the event of appellants' default in the payment of any installment, they would pay 10 per cent of any unpaid balance as attorney's fees as well as the difference between the full judgment credit and the reduced amount thus agreed. Appellants failed to comply with the terms of the settlement, whereupon, appellee sought the execution of the judgment, and by virtue of an alias writ of execution, the land was sold at public auction to appellee and a final deed was executed in his favor. Appellants refused, however, to vacate the land and to recognize appellee's title thereto; hence, the latter instituted the present action for recovery.

Millar vs. CA (novation)

Held: No substantial incompatibility between the mortgage obligation and the judgment liability of the respondent sufficient to justify a conclusion of implied novation. The stipulation for the payment of the obligation under the terms of the deed of chattel mortgage serves only to provide an express and specific method for its extinguishment — payment in two equal installments. The chattel mortgage simply gave the respondent a method and more time to enable him to fully satisfy the judgment indebtedness. The chattel mortgage agreement in no manner introduced any substantial modification or alteration of the judgment. Instead of extinguishing the obligation of the respondent arising from the judgment, the deed of chattel mortgage expressly ratified and confirmed the existence of the same, amplifying only the mode and period for compliance by the respondent.

The defense of implied novation requires clear and convincing proof of complete incompatibility between the two obligations. The law requires no specific form for an effective novation by implication. The test is whether the two obligations can stand together. If they cannot, incompatibility arises, and the second obligation novates the first. If they can stand together, no incompatibility results and novation does not take place.

Facts: Millar obtained a favorable condemning Antonio P. Gabriel to pay him the sum of P1,746.98 with interest at 12% per annum from the date of the filing of the complaint, the sum of P400 as attorney's fees, and the costs of suit. The lower court issued the writ of execution on the basis of which the sheriff seized the respondent's Willy's Ford jeep. The respondent, however, pleaded with the petitioner to release the jeep under an arrangement whereby the respondent, to secure the payment of the judgment debt, agreed to mortgage the vehicle in favor of the petitioner. The petitioner agreed to the arrangement; thus, the parties executed a chattel mortgage on the jeep. Resolution of the controversy posed by the petition at bar hinges entirely on a determination of whether or not the subsequent agreement of the parties as embodied in the deed of chattel mortgage impliedly novated the judgment obligation.

Sandico vs. Piguing (novation)

Held: Reduction of the amount of money to be paid does not amount to novation. The payment by the respondent of the lesser amount of P4,000, accepted by the petitioners without any protest or objection and acknowledged by them as "in full satisfaction of the money judgment", completely extinguished the judgment debt and released the respondent from his pecuniary liability.

In the case at hand, we fail to see what new or modified obligation arose out of the payment by the respondent of the reduced amount of P4,000 and substitute the monetary liability for P6,000 of the said respondent under the appellate court's judgment. Additionally, to sustain novation necessitates that the same be so declared in unequivocal terms — clearly and unmistakably shown by the express agreement of the parties or by acts of equivalent import — or that there is complete and substantial incompatibility between the two obligations. 5

Facts: The appellate court's judgment obliges the respondent to do two things: (1) to recognize the easement, and (2) to pay the petitioners the sums of P5,000 actual and P500 exemplary damages and P500 attorney's fees, or a total of P6,000. The full satisfaction of the said judgment requires specific performance and payment of a sum of money by the respondent. The parties entered into an agreement reducing the payment to P4000, and was subsequently paid by respondent. Was there a novation?

Cui vs. Arellano University (contracts; contrary to public policy)

Held: The waiver signed by Cui was void as it was contrary to public policy; it was null and void.

Facts: Cui was a law scholar at the Arellano University; he paid the tuition fees but it was returned to him at the end of every semester. Before Arellano awarded the scholarship grant, Cui was made to sign a contract covenant and agreement saying that he waives his right to transfer to another school in consideration of the scholarship grant and if he transfers, he shall pay the tuition fees awarded to him while being a scholar. He transferred to another school to finish his last term in law school. When he was about to take the Bar, his TOR at Arellano was not issued unless he pays the amount of the tuition fees that were returned to him when he was still their scholar. He paid under protest.

RP vs. PLDT (contracts; autonomy of will)

Held: We agree with the court below that parties can not be coerced to enter into a contract where no agreement is had between them as to the principal terms and conditions of the contract. Freedom to stipulate such terms and conditions is of the essence of our contractual system, and by express provision of the statute, a contract may be annulled if tainted by violence, intimidation, or undue influence. But the court a quo has apparently overlooked that while the Republic may not compel the PLDT to celebrate a contract with it, the Republic may, in the exercise of the sovereign power of eminent domain, require the telephone company to permit interconnection of the government telephone system and that of the PLDT, as the needs of the government service may require, subject to the payment of just compensation to be determined by the court. Nominally, of course, the power of eminent domain results in the taking or appropriation of title to, and possession of, the expropriated property; but no cogent reason appears why the said power may not be availed of to impose only a burden upon the owner of condemned property, without loss of title and possession. It is unquestionable that real property may, through expropriation, be subjected to an easement of right of way. The use of the PLDT's lines and services to allow inter-service connection between both telephone systems is not much different. In either case private property is subjected to a burden for public use and benefit. If, under section 6, Article XIII, of the Constitution, the State may, in the interest of national welfare, transfer utilities to public ownership upon payment of just compensation, there is no reason why the State may not require a public utility to render services in the general interest, provided just compensation is paid therefor. Ultimately, the beneficiary of the interconnecting service would be the users of both telephone systems, so that the condemnation would be for public use.

Facts: The Bureau of Telecommunications had a contract with PLDT; that the Bureau would pay PLDT for the use the trunk lines of PLDT to establish phone lines in all government offices in the country. However, after sometime, the Bureau extended its services for commercial use as PLDT could not cope with the demands of the public for phone line connections. PLDT knew about the actuations of the Bureau but it took PLDT a long time to file a complaint for the Bureau’s act.

Saura vs. Sindico (contracts; contrary to public policy)

Held: Contract or agreement is a nullity. Among those that may not be the subject matter (object) of contracts are certain rights of individuals, which the law and public policy have deemed wise to exclude from the commerce of man. Among them are the political rights conferred upon citizens, including, but not limited to, once's right to vote, the right to present one's candidacy to the people and to be voted to public office, provided, however, that all the qualifications prescribed by law obtain. Such rights may not, therefore, be bargained away curtailed with impunity, for they are conferred not for individual or private benefit or advantage but for the public good and interest.

Facts: Saura and Sindico were contesting for nomination as the official candidate of the Nacionalista. On August 23, 1957, the parties entered into a written agreement bearing the same date, containing among other matters stated therein, a pledge that
Each aspirant shall respect the result of the aforesaid convention, i.e., no one of us shall either run as a rebel or independent candidate after losing in said convention.
Saura was elected and proclaimed the Party's official congressional candidate for the aforesaid district of Pangasinan. Nonetheless, Sindico filed her certificate of candidacy for election. Saura commenced this suit for the recovery of damages. RTC dismissed the complaint on the basis that the agreement sued upon is null and void, in that (1) the subject matter of the contract, being a public office, is not within the commerce of man; and (2) the "pledge" was in curtailment of the free exercise of elective franchise and therefore against public policy

Kauffman vs. PNB (contracts; stipulation pour autrui)

Held: Yes; it is a stipulation pour autrui.
Should the contract contain any stipulation in favor of a third person, he may demand its fulfillment, provided he has given notice of his acceptance to the person bound before the stipulation has been revoked. (Art. 1257, par. 2, Civ. Code.) In the light of the conclusion thus stated, the right of the plaintiff to maintain the present action is clear enough; for it is undeniable that the bank's promise to cause a definite sum of money to be paid to the plaintiff in NYC is a stipulation in his favor within the meaning of the paragraph above quoted; and the circumstances under which that promise was given disclose an evident intention on the part of the contracting parties that the plaintiff should have the money upon demand in NYC. The recognition of this unqualified right in the plaintiff to receive the money implies in our opinion the right in him to maintain an action to recover it.
It will be noted that under the paragraph cited a third person seeking to enforce compliance with a stipulation in his favor must signify his acceptance before it has been revoked. In this case the plaintiff clearly signified his acceptance to the bank by demanding payment; and although PNB had already directed its NY agency to withhold payment when this demand was made, the rights of the plaintiff cannot be considered to as there used, must be understood to imply revocation by the mutual consent of the contracting parties, or at least by direction of the party purchasing he exchange.
Note: Legniti vs. Mechanics, etc. Bank (130 N.E. Rep., 597), decided by CA of NYC on March 1, 1921, it was held that, by selling a cable transfer of funds on a foreign country in ordinary course, a bank incurs a simple contractual obligation, and cannot be considered as holding the money which was paid for the transfer in the character of a specific trust. Thus, it was said, "Cable transfers, therefore, mean a method of transmitting money by cable wherein the seller engages that he has the balance at the point on which the payment is ordered and that on receipt of the cable directing the transfer his correspondent at such point will make payment to the beneficiary described in the cable. All these transaction are matters of purchase and sale create no trust relationship."
Facts: Kauffman, based in NYC, was the president of a Philippine Company; he was entitled to receive a dividend so the treasurer of the company went to the exchange department of PNB and requested to that a telegraphic transfer of the money Kauffman was supposed to receive from the company. The PNB agreed with additional charges for the transaction. The treasurer issued a check to PNB and it was accepted. The PNB’s representative in New York sent a message suggesting the advisability of withholding this money from Kauffman, in view of his reluctance to accept certain bills of the company. PNB acquiesced in this and dispatched to its NY agency a message to withhold the Kauffman payment as suggested. Meanwhile, Wicks then he informed Kauffman that his dividends had been wired to his credit in the NY agency of PNB. So Kauffman went to PNB office in NYC and demanded the money, however, he was refused payment. So he filed this complaint. Does Kauffman have a right of action against PNB?

Florentino vs. Encarnacion (contracts; stipulation pour autrui)

Held: The stipulation embodied on religious expenses is not revocable at the unilateral option of the co-owners and neither is it binding to both parties
The stipulation in part of an extrajudicial partition duly agreed and signed by the parties, hence the sanie must bind the contracting parties thereto and its validity or compliance cannot be left to the will of one of them (Art. 1308, N.C.C.). Under Art 1311 of the New Civil Code, this stipulation takes effect between the parties, their assign and heirs. The article provides:
Art. 1311. — Contracts take effect only between the parties, their assigns and heirs, except in cases where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent.
If a contract should contain a stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person.
In the case at bar, the determining point is whether the co-owners intended to benefit the Church when in their extrajudicial partition of several parcels of land inherited by them from Doña Encarnacion Florendo they agreed that with respect to the land, the fruits thereof shall serve to defray the religious expenses. The evidence on record shows that the true intent of the parties is to confer a direct and material benefit upon the Church. The fruits of the aforesaid land were used thenceforth to defray the expenses of the Church in the preparation and celebration of the Holy Week.
We find that the trial court erred in holding that the stipulation, arrangement or grant is revocable at the option of the co-owners. While a stipulation in favor of a third person has no binding effect in itself before its acceptance by the party favored, the law does not provide when the third person must make his acceptance. As a rule, there is no time at such third person has after the time until the stipulation is revoked. Here, We find that the Church accepted the stipulation in its favor before it is sought to be revoked by some of the co-owners, namely the petitioners-appellants herein. It is not disputed that from the time of the will of Doña Encarnacion Florentino in 1941, as had always been the case since time immemorial up to a year before the filing of their application in May 1964, the Church had been enjoying the benefits of the stipulation. The enjoyment of benefits flowing therefrom for almost seventeen years without question from any quarters can only be construed as an implied acceptance by the Church of the stipulation pour autrui before its revocation.
The acceptance does not have to be in any particular form, even when the stipulation is for the third person an act of liberality or generosity on the part of the promisor or promise.
It need not be made expressly and formally. Notification of acceptance, other than such as is involved in the making of demand, is unnecessary.
A trust constituted between two contracting parties for the benefit of a third person is not subject to the rules governing donation of real property. The beneficiary of a trust may demand performance of the obligation without having formally accepted the benefit of the this in a public document, upon mere acquiescence in the formation of the trust and acceptance under the second paragraph of Art. 1257 of the Civil Code.

Bonifacio vs. Mora (contracts; stipulation pour autrui)

Held: The appellants seek to recover the insurance proceeds, and for this purpose, they rely upon paragraph 4 of the insurance contract document executed by and between the State Bonding & Insurance Company, Inc. and Enrique Mora. The appellants are not mentioned in the contract as parties thereto nor is there any clause or provision thereof from which we can infer that there is an obligation on the part of the insurance company to pay the cost of repairs directly to them. It is fundamental that contracts take effect only between the parties thereto, except in some specific instances provided by law where the contract contains some stipulation in favor of a third person. Such stipulation is known as stipulation pour autrui or a provision in favor of a third person not a pay to the contract. Under this doctrine, a third person is allowed to avail himself of a benefit granted to him by the terms of the contract, provided that the contracting parties have clearly and deliberately conferred a favor upon such person. Consequently, a third person not a party to the contract has no action against the parties thereto, and cannot generally demand the enforcement of the same. The question of whether a third person has an enforcible interest in a contract, must be settled by determining whether the contracting parties intended to tender him such an interest by deliberately inserting terms in their agreement with the avowed purpose of conferring a favor upon such third person. In this connection, this Court has laid down the rule that the fairest test to determine whether the interest of a third person in a contract is a stipulation pour autrui or merely an incidental interest, is to rely upon the intention of the parties as disclosed by their contract. In the instant case the insurance contract does not contain any words or clauses to disclose an intent to give any benefit to any repairmen or materialmen in case of repair of the car in question. The parties to the insurance contract omitted such stipulation, which is a circumstance that supports the said conclusion. On the other hand, the "loss payable" clause of the insurance policy stipulates that "Loss, if any, is payable to H.S. Reyes, Inc." indicating that it was only the H.S. Reyes, Inc. which they intended to benefit.

Another cogent reason for not recognizing a right of action by the appellants against the insurance company is that "a policy of insurance is a distinct and independent contract between the insured and insurer, and third persons have no right either in a court of equity, or in a court of law, to the proceeds of it, unless there be some contract of trust, expressed or implied between the insured and third person." In this case, no contract of trust, expressed or implied exists. We, therefore, agree with the trial court that no cause of action exists in favor of the appellants in so far as the proceeds of insurance are concerned. The appellants' claim, if at all, is merely equitable in nature and must be made effective through Enrique Mora who entered into a contract with the Bonifacio Bros. Inc.

Facts: Mora mortgaged his car to H.S Reyes with a condition that Mora would insure the car with H.S. Reyes Inc. as the beneficiary. State Bonding & Company insured the car and a motor car insurance policy was issued to Mora. Right after, the car met an accident. The insurance company then assigned the accident to the Bayne Adjustment Co. for investigation and appraisal of the damage. Mora, without the consent and knowledge of H.S. Reyes Inc., authorized Bonifacio Brothers Inc. to fix the car. For the cost of labor and materials, Enrique Mora was billed at P2,102.73 through the H.H. Bayne Adjustment Co. The insurance company after claiming a franchise in the amount of P100, drew a check in the amount of P2,002.73, as proceeds of the insurance policy, payable to the order of Enrique Mora or H.S. Reyes,. Inc., and entrusted the check to the H.H. Bayne Adjustment Co. for disposition and delivery to the proper party. In the meantime, the car was delivered to Enrique Mora without the consent of the H.S. Reyes, Inc., and without payment to the Bonifacio Bros. Inc. of the cost of repairs and materials. Upon the theory that the insurance proceeds should be paid directly to them, the Bonifacio Bros. Inc filed a complaint against Mora and the State Bonding & Insurance Co., Inc. for the collection of the sum of P2,002.73

Corpus vs. CA (innominate contracts)

Held: While there was no express agreement between petitioner Corpus and respondent David as regards attorney's fees, the facts of the case support the position of respondent David that there was at least an implied agreement for the payment of attorney's fees.

Payment of attorney's fees to respondent David may be justified by virtue of the innominate contract of facio ut des (I do and you give which is based on the principle that "no one shall unjustly enrich himself at the expense of another." Innominate contracts have been elevated to a codal provision in the New Civil Code by providing under Article 1307 that such contracts shall be regulated by the stipulations of the parties, by the general provisions or principles of obligations and contracts, by the rules governing the most analogous nominate contracts, and by the customs of the people.
WE reiterated this rule in Pacific Merchandising Corp. vs. Consolacion Insurance & Surety Co., Inc. (73 SCRA 564 [1976]) citing the case of Perez v. Pomar, supra thus:
Where one has rendered services to another, and these services are accepted by the latter, in the absence of proof that the service was rendered gratuitously, it is but just that he should pay a reasonable remuneration therefor because 'it is a well-known principle of law, that no one should be permitted to enrich himself to the damage of another.
Facts: David accepted the case of Corpus though there was no express agreement regarding attorney’s fees.
Corpus was administratively charged. He employed the services of David. David won the administrative case
For Copuz. Corpus gave a check to David, but was returned by David with the intention of getting paid after
the case is ruled with finality by the SC and Corpus gets his back salaries and wages. (Your appreciation of the
efforts I have invested in your case is enough compensation therefor, however, when you shall have obtained a
decision which would have finally resolved the case in your favor, remembering me then will make me happy.
In the meantime, you will make me happier by just keeping the check) David continued to fight for Corpus’
case and got a favorable judgment. Corpus refused to pay David contending that since David refused the first
check given by him, he gave his services gratuitously.

Daywalt vs. La Corporation de los Padres Agustinos Recoletos (Art 1314)

Held: “The most that can be said with reference to the conduct of Teodorica Endencia is that she refused to carry out a contract for the sale of certain land and resisted to the last an action for specific performance in court. The result was that the plaintiff was prevented during a period of several years from exerting that control over the property which he was entitled to exert and was meanwhile unable to dispose of the property advantageously. “The extent of the liability for the breach of a contract must be determined in the light of the situation in existence at the time the contract is made; and the damages ordinarily recoverable in all events limited to such as might be reasonably foreseen in the light of the facts then known to the contracting parties. Where the purchaser desires to protect himself, in the contingency of the failure of the vendor promptly to give possession, from the possibility of incurring other damages than such as are incident to the normal value of the use and occupation, he should cause to be inserted in the contract a clause providing for stipulated amount to be paid upon failure of the vendor to give possession; and no case has been called to our attention where, in the absence of such a stipulation, damages have been held to be recoverable by the purchase in excess of the normal value of use and occupation.

The damages recoverable in case of the breach of a contract are two sorts, namely, (1) the ordinary, natural, and in a sense, necessary damage; and (2) special damages. “Ordinary damages is found in all breaches of contract where there are no special circumstances to distinguish the case especially from other contracts. The consideration paid for an unperformed promise is an instance of this sort of damage. In all such cases the damages recoverable are such as naturally and generally would result from such a breach, “according to the usual course of things”. In cases involving only ordinary damage, it is conclusively presumed from the immediateness and inevitableness of the damage, and the recovery of such damage follows as a necessary legal consequence of the breach. Ordinary damage is assumed as a matter of law to be within the contemplation of the parties. “Special damage, on the other hand, is such as follows less directly from the breach than ordinary damage. It is only found in cases where some external condition, apart from the actual terms of the contract exists or intervenes, as it were, to give a turn to affairs and to increase damage in a way that the promissor, without actual notice of the external condition, could not reasonably be expected to foresee.

Plaintiff’s right chiefly as against Teodorica Endencia; and what has been said suffices in our opinion to demonstrate that the damages laid under the second cause of action in the complaint could not be recovered from her, first, because the damages in question are special damages which were not within contemplation of the parties when the contract was made, and secondly, because said damages are too remote to be subject of recovery. This conclusion is also necessarily fatal to the right of the plaintiff to recover such damages from the defendant corporation for, as already suggested, by advising Teodorica Endencia not to perform the contract, said corporation could in no event render itself more extensively liable than the principal in the contract. “Our conclusion is that the judgment of the trial court should be affirmed, and it is so ordered, with costs against the appellant.”

Facts: Teodorica Endencia obligated herself to sell a parcel of land to the plaintiff. It was agreed that the final deed of sale will be executed when the land was registered in Endencia’s name. Subsequently, the Torrens Title for the land was issued in her favor but in the course of the proceedings for registration it was found that the land involved in the sale contained a greater area than what Endencia originally thought and she became reluctant to consummate the sale of the land to the plaintiff. This reluctance was due to the advice of the defendant which exercised a great moral influence over her. However, in advising Endencia that she was not bound by her contract with the plaintiff, the defendant was not actuated with improper motives but did so in good faith believing that, under the circumstances, Endencia was not really bound by her contract with the plaintiff. In view of Endencia’s refusal to make the conveyance, the plaintiff instituted a complaint for specific performance against her and, upon appeal, the Supreme Court held that she was bound by the contract and she was ordered to make the conveyance of the land in question to the plaintiff. The plaintiff then instituted an action against the defendant to recover the following damages: (a) The amount of Pesos 24,000.00 for the use and occupation of the land in question by reason of the pasturing of cattle therein during the period that the land was not conveyed by Endencia to the plaintiff; (b) The amount of Pesos 500,000.00 for plaintiff’s failure to sell the land in question to a sugar growing and milling enterprise, the successful launching of which depended on the ability of Daywalt to get possession of the land and the Torrens Title. The lower court held that the defendant was liable to the plaintiff for the use and occupation of the land in question and condemned the defendant to pay the plaintiff Pesos 2,497.00 as damages. The Supreme Court affirmed this adjudication of the lower court. With respect to the claim of Pesos 500,000.00 damages, the Supreme Court.

Ong Yiu vs. CA (contracts of Adhesion)

Held: PAL did not act in bad faith therefore Petitioner is not granted moral and exemplary damages; liability if PAL is limited to P100 as stipulated in the ticket.

We agree with the foregoing finding. The pertinent Condition of Carriage printed at the back of the plane ticket reads:
8. BAGGAGE LIABILITY ... The total liability of the Carrier for lost or damaged baggage of the passenger is LIMITED TO P100.00 for each ticket unless a passenger declares a higher valuation in excess of P100.00, but not in excess, however, of a total valuation of P1,000.00 and additional charges are paid pursuant to Carrier's tariffs.

There is no dispute that petitioner did not declare any higher value for his luggage, much less did he pay any additional transportation charge.

But petitioner argues that there is nothing in the evidence to show that he had actually entered into a contract with PAL limiting the latter's liability for loss or delay of the baggage of its passengers, and that Article 1750 of the Civil Code has not been complied with.

While it may be true that petitioner had not signed the plane ticket, he is nevertheless bound by the provisions thereof. "Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the passenger regardless of the latter's lack of knowledge or assent to the regulation". 5 It is what is known as a contract of "adhesion", in regards which it has been said that contracts of adhesion wherein one party imposes a ready made form of contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. "A contract limiting liability upon an agreed valuation does not offend against the policy of the law forbidding one from contracting against his own negligence.

Facts: Petitioner was a frequent passenger of PAL. He travelled from Cebu to Butuan for a case bringing his luggage that contained his documents for the case. It was loaded to the wrong plane. Petitioner demanded the return of his luggage and PAL complied accordingly. It was delivered to him the next day but it was allegedly opened already and his case documents missing. Petitioner sued for damages contending that PAL acted in bad faith. RTC gave petitioner a favorable judgment but he appealed to CA for more damages. However, CA only granted him P100 as damages finding that PAL acted without bad faith and petitioner not being able to declare the contents and value of his luggage as stipulated in the PAL ticket.

Velasco vs. CA (Elements)
HELD: It is not difficult to glean from the aforequoted averments that the petitioners themselves admit that they and the respondent still had to meet and agree on how and when the down-payment and the installment payments were to be paid. Such being the situation, it cannot, therefore, be said that a definite and firm sales agreement between the parties had been perfected over the lot in question. Indeed, this Court has already ruled before that a definite agreement on the manner of payment of the purchase price is an essential element in the formation of a binding and unforceable contract of sale. 3 The fact, therefore, that the petitioners delivered to the respondent the sum of P10,000 as part of the down-payment that they had to pay cannot be considered as sufficient proof of the perfection of any purchase and sale agreement between the parties herein under article 1482 of the new Civil Code, as the petitioners themselves admit that some essential matter — the terms of payment — still had to be mutually covenanted.
Sir Mik: The manner of payment is NOT an essential element of a contract.

Bienvenido Babao vs. Florencio Perez (Article 1324; statute of fraud)

Held: Contracts which by their terms are not to be performed within one year, may be taken out of the statute through performance by one party thereto. All that is required in such case is complete performance within the year by one party, however many tears may have to elapse before the agreement is performed by the other party. But nothing less than full performance by one party will suffice, and it has been held that, if anything remains to be done after the expiration of the year besides the mere payment of money, the statute will apply. It is not therefore correct to state that Santiago Babao has fully complied with his part within the year from the alleged contract in question.

Having reached the conclusion that all the parol evidence of appellee was submitted in violation of the Statute of Frauds, or of the rule which prohibits testimony against deceased persons, we find unnecessary to discuss the other issues raised in appellants' brief.

The case is dismissed, with costs against appellee.

Facts: Santiago Babao married the niece of Celestina Perez. 1924, Santi and Celestina allegedly had a verbal agreement where Santi was bound to improve the land of Celestina by leveling, clearing, planting fruits and other crops; that he will act as the administrator of the land; that all expenses for labor and materials will be at his cost, in consideration of which Celestina in turn bound herself to convey to Santi or his wife ½ of the land,, with all the improvements after the death of Celestina. But, shortly before Celestina’s death, she sold the land to another part. Thus, Santi filed this complaint alleging the sale of the land as fraudulent and fictitious and prays to recover the ½ land or the expenses he incurred in improving the land.

Issue: whether or not the verbal agreement falls within the Stature of Frauds

Sanchez vs. Rigos (contracts;acceptance)
Held: The SC affirmed the decision appealed from, with costs against Severina Rigos.
1. Option to purchase not a contract to buy and sell
The option did not impose upon Sanchez the obligation to purchase Rigos’ property. The contract denominated as “Option to Purchase” is not a “contract to buy and sell,” it merely granted Sanchez an “option” to buy, and both parties so understood it, as indicated by the caption given by them to said instrument. Under the provisions thereof, Rigos “agreed, promised and committed” herself to sell the land therein described to Sanchez for P1,510.00, but there is nothing in the contract to indicate that her aforementioned agreement, promise and undertaking is supported by a consideration “distinct from the price” stipulated for the sale of the land.
2. Article 1354 applicable to contracts in general, Article 1479 refers to sales in particular
Relying upon Article 1354 of the Civil Code, which provides that “when the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal, except when the option is founded upon consideration, as something paid or promised,” the lower court presumed the existence of a consideration distinct from the price. It must be noted however that Article 1354 applies to contracts in general, whereas the second paragraph of Article 1479 refers to “sales” in particular, and, more specifically, to “an accepted unilateral promise to buy or to sell.” In other words, Article 1479 is controlling in the present case. Article 1479 provides that “A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. 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.”
3. Article 1479 imposes condition for a unilateral promise to be binding; Burden of proof
In order that a unilateral promise may be “binding” upon the promisor, Article 1479 requires the concurrence of a condition, namely, that the promise be “supported by a consideration distinct from the price.” Accordingly, the promisee can not compel the promisor to comply with the promise, unless the former establishes the existence of said distinct consideration. In other words, the promisee has the burden of proving such consideration. In the present case, Sanchez has not even alleged the existence thereof in his complaint.
4. Implied admission of the truth of the other party’s averment if party joins in the petition for a judgment based on the pleadings without introducing evidence
In the case of Bauermann v. Casas (14 March 1908), it was held that “one who prays for judgment on the pleadings without offering proof as to the truth of hie own allegations, and without giving the opposing party an opportunity to introduce evidence, must be understood to admit the truth of all the material and relevant allegations of the opposing party, and to rest his motion for judgment on those allegations taken together with such of his own as are admitted in the pleading. (La Yebana Company vs. Sevilla, 9 Phil. 210).” This view was reiterated in Evangelista V. De la Rosa and Mercy’s Incorporated v. Herminia Verde. In the present case, Rigos explicitly averred in her answer, and pleaded as a special defense, the absence of said consideration for her promise to sell and, by joining in the petition for a judgment on the pleadings, Sanchez has impliedly admitted the truth of said averment in Rigos’ answer.
5. Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co. case
The Court in the Southwestern Sugar case held that “under article 1479 of the new Civil Code ‘an option to sell,’ or ‘a promise to buy or to sell,’ as used in said article, to be valid must be ’supported by a consideration distinct from the price.’ This is clearly inferred from the context of said article that a unilateral promise to buy or to sell, even if accepted, is only binding if supported by a consideration. In other words, ‘an accepted unilateral promise’ can only have a binding effect if supported by a consideration, which means that the option can still be withdrawn, even if accepted, if the same is not supported by any consideration. Here it is not disputed that the option is without consideration. It can therefore be withdrawn notwithstanding the acceptance made of it by appellee. The Court held that the general rule regarding offer and acceptance under Article 1324 must be interpreted as modified by the provision of article 1479, which applies to ‘a promise to buy and sell’ specifically. In short, the rule requires that a promise to sell to be valid must be supported by a consideration distinct from the price.
6. Atkins, Kroll and Co. v. Cua Hian Tek
In the case of Atkins, Kroll and Co., Inc. v. Cua Hian Tek, decided later than Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co., the Court saw no distinction between Articles 1324 and 1479 of the Civil Code and applied the former where a unilateral promise to sell similar to the one sued upon here was involved, treating such promise as an option which, although not binding as a contract in itself for lack of a separate consideration, nevertheless generated a bilateral contract of purchase and sale upon acceptance.
7. Option is unilateral
Furthermore, an option is unilateral: a promise to sell at the price fixed whenever the offeree should decide to exercise his option within the specified time. After accepting the promise and before he exercises his option, the holder of the option is not bound to buy. He is free either to buy or not to buy later. In the present case, however, upon accepting Rigos’ offer a bilateral promise to sell and to buy ensued, and Sanchez ipso facto assumed the obligation of a purchaser. He did not just get the right subsequently to buy or not to buy. It was not a mere option then; it was bilateral contract of sale.
8. Option without consideration is a mere offer of a contract of sale, which is not binding until accepted
If the option is given without a consideration, it is a mere offer of a contract of sale, which is not binding until accepted. If, however, acceptance is made before a withdrawal, it constitutes a binding contract of sale, even though the option was not supported by a sufficient consideration. . . . (77 Corpus Juris Secundum p. 652. See also 27 Ruling Case Law 339 and cases cited.) It can be taken for granted that the option contract was not valid for lack of consideration. But it was, at least, an offer to sell, which was accepted by latter, and of the acceptance the offerer had knowledge before said offer was withdrawn. The concurrence of both acts — the offer and the acceptance — could at all events have generated a contract, if none there was before (arts. 1254 and 1262 of the Civil Code; Zayco vs. Serra, 44 Phil. 331.) In other words, since there may be no valid contract without a cause or consideration, the promisor is not bound by his promise and may, accordingly, withdraw it. Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of an offer to sell which, if accepted, results in a perfected contract of sale.
9. Proper construction of conflicting provisions of the same law; Harmonize to implement the same principle rather than to create exceptions
In line with the cardinal rule of statutory construction that, in construing different provisions of one and the same law or code, such interpretation should be favored as will reconcile or harmonize said provisions and avoid a conflict between the same. Indeed, the presumption is that, in the process of drafting the Code, its author has maintained a consistent philosophy or position. Moreover, the decision in Southwestern Sugar & Molasses Co. v. Atlantic Gulf & pacific Co., holding that Art. 1324 (on the general principles on contracts) is modified by Art. 1479 (on sales) of the Civil Code, in effect, considers the latter as an exception to the former, and exceptions are not favored, unless the intention to the contrary is clear, and it is not so, insofar as said 2 articles are concerned. What is more, the reference, in both the second paragraph of Art. 1479 and Art. 1324, to an option or promise supported by or founded upon a consideration, strongly suggests that the 2 provisions intended to enforce or implement the same principle.
10. Atkins, Kroll & Co. case modifies or abandons Southwestern Sugar case insofar as to inconsistencies
Upon mature deliberation, the Court is of the considered opinion that it should, as it hereby reiterates the doctrine laid down in the Atkins, Kroll & Co. case, and that, insofar all inconsistent therewith, the view adhered to in the South western Sugar & Molasses Co. case should be deemed abandoned or modified.
Facts: On 3 April 1961, Nicolas Sanchez and Severina Rigos executed an instrument, entitled “Option to Purchase,” whereby Mrs. Rigos “agreed, promised and committed . . . to sell” to Sanchez, for the sum of P1,510.00, a parcel of land situated in the barrios of Abar and Sibot, municipality of San Jose, province of Nueva Ecija, and more particularly described in TCT NT-12528 of said province, within two (2) years from said date with the understanding that said option shall be deemed “terminated and elapsed,” if “Sanchez shall fail to exercise his right to buy the property” within the stipulated period. Inasmuch as several tenders of payment of the sum of P1,510.00, made by Sanchez within said period, were rejected by Mrs. Rigos, on 12 March 1963, the former deposited said amount with the CFI Nueva Ecija and commenced against the latter the present action, for specific performance and damages. On 11 February 1964, after the filing of defendant’s answer, both parties, assisted by their respective counsel, jointly moved for a judgment on the pleadings. Accordingly, on 28 February 1964, the lower court rendered judgment for Sanchez, ordering Mrs. Rigos to accept the sum judicially consigned by him and to execute, in his favor, the requisite deed of conveyance. Mrs. Rigos was, likewise, sentenced to pay P200.00, as attorney’s fees, and the costs. Hence, the appeal by Mrs. Rigos to the Court of Appeals, which case was the certified by the latter court to the Supreme Court upon the ground that it involves a question purely of law.

Liguez vs. CA (void contracts)

Held: CA erred in applying to the present case the pari delicto rule. First, because it can not be said that both parties here had equal guilt when we consider that as against the deceased Salvador P. Lopez, who was a man advanced in years and mature experience, the appellant was a mere minor, 16 yrs of age, when the donation was made; that there is no finding made by CA that she was fully aware of the terms of the bargain entered into by and Lopez and her parents; that, her acceptance in the deed of donation (Art. 741) did not necessarily imply knowledge of conditions and terms not set forth therein; and that the substance of the testimony of the instrumental witnesses is that it was the appellant's parents who insisted on the donation before allowing her to live with Lopez. These facts are more suggestive of seduction than of immoral bargaining on the part of appellant. It must not be forgotten that illegality is not presumed, but must be duly and adequately proved. Second, the rule that parties to an illegal contract, if equally guilty, will not be aided by the law but will both be left where it finds them, has been interpreted by this Court as barring the party from pleading the illegality of the bargain either as a cause of action or as a defense.

CA correctly held that Lopez could not donate the entirety of the property in litigation, to the prejudice of his wife Maria Ngo, because said property was conjugal in character and the right of the husband to donate community property is strictly limited by law

ART. 1409. The conjugal partnership shall also be chargeable with anything which may have been given or promised by the husband alone to the children born of the marriage in order to obtain employment for them or give then, a profession or by both spouses by common consent, should they not have stipulated that such expenditures should be borne in whole or in part by the separate property of one of them.".
ART. 1415. The husband may dispose of the property of the conjugal partnership for the purposes mentioned in Article 1409.)
ART. 1413. In addition to his powers as manager the husband may for a valuable consideration alienate and encumber the property of the conjugal partnership without the consent of the wife.
The text of the articles makes it plain that the donation made by the husband in contravention of law is not void in its entirety, but only in so far as it prejudices the interest of the wife. In this regard, as Manresa points out the law asks no distinction between gratuitous transfers and conveyances for a consideration. To determine the prejudice to the widow, it must be shown that the value of her share in the property donated can not be paid out of the husband's share of the community profits. The requisite data, however, are not available to us and necessitate a remand of the records to the court of origin that settled the estate of the late Salvador P. Lopez.
The decisions appealed from are reversed and set aside, and the appellant Conchita Liguez declared entitled to so much of the donated property as may be found, upon proper liquidation, not to prejudice the share of the widow Maria Ngo in the conjugal partnership with Salvador P. Lopez or the legitimes of the forced heirs of the latter.

Plaintiff averred to be a legal owner, pursuant to a deed of donation of a land, executed in her favor by the late owner, Salvador P. Lopez, on 18 May 1943. The defense interposed was that the donation was null and void for having an illicit causa or consideration, which was the plaintiff's entering into marital relations with Salvador P. Lopez, a married man; and that the property had been adjudicated to the appellees as heirs of Lopez by the court of First Instance, since 1949.
The Court of Appeals rejected the appellant's claim on the basis of the well- known rule "in pari delicto non oritur actio" as embodied in Article 1306 of 1889 (reproduced in Article 1412 of the new Civil Code):
ART. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed:
(1) When the fault is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the other's undertaking;
(2) When only one of the contracting parties is at fault, he cannot recover, what he has given by reason of the contract, or ask for fulfillment of what has been promised him. The other, who is not at fault, may demand the return of what he has given without any obligation to comply with his promise.

oblicon digests

71 PHIL. 346

Magdalena Estate, Inc. sold to Louis Myrick lots
No. 28 and 29 of Block 1, Parcel 9 of the San Juan
Subdivision, San Juan, Rizal. Their contract of sale
provides that the Price of P7,953 shall be payable in 120
equal monthly installments of P96.39 each on the second
day of every month beginning the date of execution of the

In pursuance of said agreement, the vendee made
several payments amounting to P2,596.08, the last being
due and unpaid was that of May 2, 1930. By reason of this,
the vendor, through its president, notified the vendee that,
in view of his inability to comply with the terms of their
contract, said agreement had been cancelled, relieving him
of any further obligation thereunder, and that all amounts
paid by him had been forfeited in favor of the vendor. To
this communication, the vendee did not reply, and it
appears likewise that the vendor thereafter did not require
him to make any further disbursements on account of the
purchase price.

Was the petitioner authorized to forfeit the
purchase price paid?

No. The contract of sale contains no provision
authorizing the vendor, in the event of failure of the vendee
to continue in the payment of the stipulated monthly
installments, to retain the amounts paid to him on account
of the purchase price. The claim therefore, of the petitioner
that it has the right to forfeit said sums in its favor is
untenable. Under Article 1124 of the Civil Code, however,
he may choose between demanding the fulfillment of the
contract or its resolution. These remedies are alternative
and not cumulative, and the petitioner in this case, having
elected to cancel the contract cannot avail himself of the
other remedy of exacting performance. As a consequence
of the resolution, the parties should be restored, as far as
practicable, to their original situation which can be
approximated only be ordering the return of the things
which were the object of the contract, with their fruits and
of the price, with its interest, computed from the date of
institution of the action.

33 SCRA 1

This is a petition for certiorari by the UFC against
the CA decision of February 13, 1968 declaring the BILL
OF ASSIGNMENT rescinded, ordering UFC to return to
Magdalo Francisco his Mafran sauce trademark and to pay
his monthly salary of P300.00 from Dec. 1, 1960 until the
return to him of said trademark and formula.

In 1938, plaintiff Magdalo V. Francisco, Sr.
discovered a formula for the manufacture of a food
seasoning (sauce) derived from banana fruits popularly
known as MAFRAN sauce. It was used commercially since
1942, and in the same year plaintiff registered his
trademark in his name as owner and inventor with the
Bureau of Patents. However, due to lack of sufficient
capital to finance the expansion of the business, in 1960,
said plaintiff secured the financial assistance of Tirso T.
Reyes who, after a series of negotiations, formed with
others defendant Universal Food Corporation eventually
leading to the execution on May 11, 1960 of the
aforequoted "Bill of Assignment" (Exhibit A or 1).

On May 31, 1960, Magdalo Francisco entered into
contract with UFC stipulating among other things that he
be the Chief Chemist and Second Vice-President of UFC
and shall have absolute control and supervision over the
laboratory assistants and personnel and in the purchase
and safekeeping of the chemicals used in the preparation
of said Mafran sauce and that said positions are permanent
in nature.

In line with the terms and conditions of the Bill of
Assignment, Magdalo Francisco was appointed Chief
Chemist with a salary of P300.00 a month. Magdalo
Francisco kept the formula of the Mafran sauce secret to
himself. Thereafter, however, due to the alleged scarcity
and high prices of raw materials, on November 28, 1960,
Secretary-Treasurer Ciriaco L. de Guzman of UFC issued a
Memorandum duly approved by the President and General
Manager Tirso T. Reyes that only Supervisor Ricardo
Francisco should be retained in the factory and that the
salary of plaintiff Magdalo V. Francisco, Sr., should be
stopped for the time being until the corporation should
resume its operation. On December 3, 1960, President and
General Manager Tirso T. Reyes, issued a memorandum to
Victoriano Francisco ordering him to report to the factory
and produce "Mafran Sauce" at the rate of not less than
100 cases a day so as to cope with the orders of the
corporation's various distributors and dealers, and with
instructions to take only the necessary daily employees
without employing permanent employees. Again, on
December 6, 1961, another memorandum was issued by
the same President and General Manager instructing the
Assistant Chief Chemist Ricardo Francisco, to recall all
daily employees who are connected in the production of
Mafran Sauce and also some additional daily employees
for the production of Porky Pops. On December 29, 1960,
another memorandum was issued by the President and
General Manager instructing Ricardo Francisco, as Chief
Chemist, and Porfirio Zarraga, as Acting Superintendent,
to produce Mafran Sauce and Porky Pops in full swing
starting January 2, 1961 with further instructions to hire
daily laborers in order to cope with the full blast operation.
Magdalo V. Francisco, Sr. received his salary as Chief
Chemist in the amount of P300.00 a month only until his
services were terminated on November 30, 1960. On
January 9 and 16, 1961, UFC, acting thru its President and
General Manager, authorized Porfirio Zarraga and Paula
de Bacula to look for a buyer of the corporation including
its trademarks, formula and assets at a price of not less
than P300,000.00. Due to these successive memoranda,
without plaintiff Magdalo V. Francisco, Sr. being recalled
back to work, he filed the present action on February 14,
1961. Then in a letter dated March 20, 1961, UFC requested
said plaintiff to report for duty, but the latter declined the
request because the present action was already filed in

1. Was the Bill of Assignment really one that
involves transfer of the formula for Mafran sauce itself?
2. Was petitioner’s contention that Magdalo
Francisco is not entitled to rescission valid?


1. No. Certain provisions of the bill would lead
one to believe that the formula itself was transferred. To
quote, “the respondent patentee "assign, transfer and
convey all its property rights and interest over said
Mafran trademark and formula for MAFRAN SAUCE
unto the Party of the Second Part," and the last
paragraph states that such "assignment, transfer and
conveyance is absolute and irrevocable (and) in no case
shall the PARTY OF THE First Part ask, demand or sue
for the surrender of its rights and interest over said
MAFRAN trademark and mafran formula."

“However, a perceptive analysis of the entire
instrument and the language employed therein would lead
one to the conclusion that what was actually ceded and
transferred was only the use of the Mafran sauce formula.
This was the precise intention of the parties.”

The SC had the following reasons to back up the
above conclusion. First, royalty was paid by UFC to
Magdalo Francisco. Second, the formula of said Mafran
sauce was never disclosed to anybody else. Third, the Bill
acknowledged the fact that upon dissolution of said Corporation, the patentee rights and interests of said
trademark shall automatically revert back to Magdalo
Francisco. Fourth, paragraph 3 of the Bill declared only
the transfer of the use of the Mafran sauce and not the
formula itself which was admitted by UFC in its answer.
Fifth, the facts of the case undeniably show that what was
transferred was only the use. Finally, our Civil Code allows
only “the least transmission of right, hence, what better
way is there to show the least transmission of right of the
transfer of the use of the transfer of the formula itself.”

2. No. Petitioner’s contention that Magdalo
Francisco’s petition for rescission should be denied
because under Article 1383 of the Civil Code of the
Philippines rescission can not be demanded except when
the party suffering damage has no other legal means to
obtain reparation, was of no merit because “it is predicated
on a failure to distinguish between a rescission for breach
of contract under Article 1191 of the Civil Code and a
rescission by reason of lesion or economic prejudice, under
Article 1381, et seq.” This was a case of reciprocal
obligation. Article 1191 may be scanned without disclosing
anywhere that the action for rescission thereunder was
subordinated to anything other than the culpable breach of
his obligations by the defendant. Hence, the reparation of
damages for the breach was purely secondary. Simply put,
unlike Art. 1383, Art. 1191 allows both the rescission and
the payment for damages. Rescission is not given to the
party as a last resort, hence, it is not subsidiary in nature.

35 SCRA 102

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

On December 8, 1964, ALUMCO incurred an
unpaid account of P219,362.94. Despite repeated
demands, ALUMCO still failed to pay, so UP sent a notice
to rescind the logging agreement. On the other hand,
ALUMCO executed an instrument entitled
“Acknowledgment of Debt 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 liquidate the foregoing indebtedness,
the balance outstanding after the said payments
have been applied shall be paid by the debtor in
full no later than June 30, 1965.
5. In the event that the debtor fails to comply with
any of its promises, the Debtor agrees without
reservation that Creditor shall have the right to
consider the Logging Agreement rescinded,
without the necessity of any judicial suit…
ALUMCO continued its logging operations, but
again incurred an unpaid account. On July 19,1965, UP
informed ALUMCO that it had, as of that date, considered
rescinded and of no further legal effect the logging
agreement, and that UP had already taken steps to have
another concessionaire take over the logging operation.
ALUMCO filed a petition to enjoin UP from conducting the
bidding. The lower court ruled in favor of ALUMCO,
hence, this appeal.

Can petitioner UP treat its contract with ALUMCO
rescinded, and may disregard the same before any judicial
pronouncement to that effect?

Yes. In the first place, UP and ALUMCO had
expressly stipulated that upon default by the debtor, UP
has the right and the power to consider the Logging
Agreement of December 2, 1960 as rescinded without the necessity of any judicial suit. As to such special stipulation
and in connection with Article 1191 of the Civil Code, the
Supreme Court, stated in Froilan vs. Pan Oriental Shipping
“There is nothing in the law that prohibits the
parties from entering into agreement that violation
of the terms of the contract would cause
cancellation thereof, even without court
intervention. In other words, it is not always
necessary for the injured party to resort to court
for rescission of the contract.”

135 SCRA 323

On December 19, 1957, defendants-appellants
Ursula Torres Calasanz and plaintiffs-appellees
Buenaventura Angeles and Teofila Juani entered into a
contract to sell a piece of land located in Cainta, Rizal for
the amount of P3,920.00 plus 7% interest per annum. The
plaintiffs-appellees made a downpayment of P392.00 upon
the execution of the contract. They promised to pay the
balance in monthly installments of P41.20 until fully paid,
the installment being due and payable on the 19th day of
each month. The plaintiffs-appellees paid the monthly
installments until July 1966, when their aggregate
payment already amounted to P4,533.38.

On December 7, 1966, the defendants-appellants
wrote the plantiffs-appellees a letter requesting the
remittance of past due accounts. On January 28, 1967, the
defendants-appellants cancelled the said contract because
the plaintiffs failed to meet subsequent payments. The
plaintiffs’ letter with their plea for reconsideration of the
said cancellation was denied by the defendants.

The plaintiffs-appellees filed a case before the
Court of First Instance to compel the defendant to execute
in their favor the final deed of sale alleging inter alia that
after computing all subsequent payments for the land in
question, they found out that they have already paid the
total amount including interests, realty taxes and
incidental expenses. The defendants alleged in their
answer that the plaintiffs violated par. 6 of the contract to
sell when they failed and refused to pay and/or offer to pay
monthly installments corresponding to the month of
August, 1966 for more than 5 months, thereby
constraining the defendants to cancel the said contract.

The Court of First Instance rendered judgment in
favor of the plaintiffs, hence this appeal.

Has the Contract to Sell been automatically and
validly cancelled by the defendants-appellants?

No. While it is true that par.2 of the contract
obligated the plaintiffs-appellees to pay the defendants the
sum of P3,920 plus 7% interest per annum, it is likewise
true that under par 12 the seller is obligated to transfer the
title to the buyer upon payment of the said price.

The contract to sell, being a contract of adhesion,
must be construed against the party causing it. The
Supreme Court agree with the observation of the plaintiffsappellees
to the effect that the terms of a contract must be
interpreted against the party who drafted the same,
especially where such interpretation will help effect justice
to buyers who, after having invested a big amount of
money, are now sought to be deprived of the same thru the
prayed application of a contract clever in its phraseology,
condemnable in its lopsidedness and injurious in its effect
which, in essence, and its entirety is most unfair to the

Thus, since the principal obligation under the
contract is only P3,920.00 and the plaintiffs-appellees
have already paid an aggregate amount of P4,533.38, the
courts should only order the payment of the few remaining
installments but not uphold the cancellation of the
contract. Upon payment of the balance of P671.67 without
any interest thereon, the defendant must immediately
execute the final deed of sale in favor of the plaintiffs and
execute the necessary transfer of documents, as provided
in par.12 of the contract.

Sagrada Orden vs. Nacoco 91 Phil. 503 (1952)
Nature: appeal from judgment of CFI of Manila

Facts and Background of the Case
- On Jan 4, 1942, during the Japanese occupation, Taiwan Tekkosho (Japanese corporation) acquired the plaintiff’s property (land with warehouse in Pandacan, Manila) for Php140K
- On April 4, 1946, after the liberation, the US took control and custody of the aforementioned enemy’s land under Sect 12 of the Trading with the Enemy Act
- In the same year, the Copra Export Management Company occupied the property under custodianship agreement with the United States Alien Property Custodian
- In August 1946, when the Copra Export Management Co. vacated the property, the National Coconut Corporation (NACOCO), the defendant, occupied it next
- Sagrada Orden (plaintiff) files claims on the property with the Court of First Instance of Manila and against the Philippine Alien Property Administrator
- Plaintiff petitions that the sale of the property to Taiwan Tekkosho should be declared null and void as it was executed under duress, that the interest of the Alien Property Custodian be cancelled, and that NACOCO be given until February 28, 1949 to recover its equipment form the property and vacate the premise
- The Republic of the Philippines is allowed to intervene
- CFI: the defendant (Philippine Alien Property Administrator) and the intervenor (RP) are released from any liability but the plaintiff may reserve the right to recover from NACOCO reasonable rentals for the use and occupation of the premises
- The sale of the property to the Taiwan Takkesho was declared void and the plaintiff was given the right to recover Php3,000/month as reasonable rental from August 1946 (date when NACOCO occupied property) to the date NACOCO vacates the premises
- the judgment is appealed to the SC

Legal Issues
1. WON the defendant is liable to pay rent for occupying the property in question

1. The CFI’s decision that the defendant should pay rent from August 1946 to February 28, 1949 was reversed, costs against the plaintiff

Obligations can only arise from four sources: law, contracts or quasi-contracts, crime, or negligence (Art 1089, Spanish Civil Code).

There were no laws or an express agreement between the defendant or the Alien Property Custodian with the plaintiff regarding payment of rent. The property was acquired by the Alien Property Administrator through law (Trading with the Enemy Act) on the seizure of alien property and not as a successor to the interests of the latter. There was no contract of rental b/w them and Taiwan Takkesho. NACOCO entered possession of the property from the Alien Property Custodian without any expectation of liability for its use. NACOCO did not commit any negligence or offense, and there was no contract, implied or otherwise, entered into, that can be used as basis for claiming rent on the property before the plaintiff obtained the judgment annulling the sale to Taiwan Takkesho. The plaintiff has no right to claim rent from NACOCO.

Important Notes
Article 1157 of the New Civil Code states that there are 5 sources of obligations: laws, contracts, quasi-contracts, felonies (acts or omissions punished by law), and quasi-delicts.

Sagrada Orden Vs Nacoco –Kinuha ng Hapon
ang lupa.
Action to recover parcel of land owned by P, and
then because of Japanese war was acquired by
other parties, then possessed by the US govt thru
its custodian then possessed by the defendant
without agreement with the US or with the
plaintiff, and def then leased a part of the land.

Issue: WON defendant is liable to Sagrada and
must pay the rentals.

Held: No. If liable at all must arise from any of
the four sources of obligations. APA was a trustee
of the US and if def liable, not to plaintiff but to
US govt. But defendant not liable for rentals bec
no express agreement bet the APA and Nacoco.
Existence of implied agreement is contrary to
the circumstances.
Source: Contract. But there was none.

Pelayo vs. Lauron –husband vs. in-laws
1906-Pelayo complained against Lauron and
Abella. Pelayo a doctor, rendered service to
daughter-in-law then demanded P500 from def.

Issue: WON Lauron is liable.

Held: No. Husband liable. Art. 142 and 143 or
Family Code. Rendering medical assistance,
mutual oblig. Oblig not presumed. Those
expressly determined in the Code or in special
laws are the only demandable ones.
Source: Laws. Family Code.

Leung Ben vs. O’Brien - Gambling
O’ Brien filed an action in the court of CFGI of
Manila to recover from Leung Ben the sum of
P15,000 alleged to have been lost by O’Brien to
Leung Ben in a series of gambling, banking and
percentage games:

Issue: WON O’Brien can recover the money from

Leung Ben.
Held: Yes. Upon general principles, recognized
both in the civil and common law, money lost in
gambling and voluntary paid by the loser to the
winner cannot, in the absence of statute, be
recovered in a civil action. But Act. No. 1757 of
the Phil. Comm, which defines and penalized
different forms of gambling contains numerous
provisions recognizing the right to recover money
lost in gambling. It must therefore be assumed
that the action of plaintiff was based upon the
right to recovery given by section 7 of said Act,
which declares that an action may be brought
against the banker by any person losing money at
a banking or percentage game.
Source: Law. Phil Comm and Civil Code.

G.R. No. L-4920 June 29, 1953
FRANCISCO DIANA and SOLEDAD DIANA, plaintiffs-appellants,
BATANGAS TRANSPORTATION CO., defendant-appellee.
Zosimo D. Tanalega for appellants.
Gibbs, Gibbs, Chuidian and Quasha for appellee.
The present appeal stems from a case originally instituted in the Court of First Instance of Laguna wherein plaintiffs seek to recover from defendant as a party subsidiarily liable for the crime committed by an employee in the discharge of his duty the sum of P2,500 as damages, plus legal interest, and the costs of action.
The appeal was originally taken to the Court of Appeals but the case was certified to this court on the ground that it poses merely a question of law.
Plaintiffs are the heirs of one Florenio Diana, a former employee of the defendant. On June 21, 1945, while Florenio Diana was riding in Truck No. 14, belonging to the defendant, driven by Vivencio Bristol, the truck ran into a ditch at Bay, Laguna, resulting in the death of Florenio Diana and other passengers. Subsequently, Vivencio Bristol was charged and convicted of multiple homicide through reckless imprudence wherein, among other things, he was ordered to indemnify the heirs of the deceased in the amount of P2,000. When the decision became final, a writ of execution was issued in order that the indemnity may be satisfied but the sheriff filed a return stating that the accused had no visible leviable property. The present case was started when defendant failed to pay the indemnity under its subsidiary liability under article 103 of the Revised Penal Code. The complaint was filed on October 19, 1948 (civil case No. 9221).
On December 13, 1948, defendant filed a motion to dis- miss on the ground that there was another action pending between the same parties for the same cause (civil case No. 8023 of the Court of First Instance of Laguna) in which the same plaintiffs herein sought to recover from the same defendant the amount of P4,500 as damages resulting from the death of Florenio Diana who died while on board a truck of defendant due to the negligent act of the driver Vivencio Bristol. This first action was predicated on culpa aquiliana.
On December 16, 1948, plaintiffs filed a written opposition to the motion to dismiss. On February 3, 1949, the lower court, having found the motion well founded, dismissed the complaint, without special pronouncement as to costs; and their motion for reconsideration having been denied, plaintiffs took the present appeal.
The only question to be determined is whether the lower court correctly dismissed the complaint on the sole ground that there was another action pending between the same parties for the same cause under Rule 8, section 1(d) of the Rules of Court.
The determination of this issue hinges on the proper interpretation of Rule 8, section 1 (d) which allows the dismissal of a case on the ground that "there is another action pending between the same parties for the same cause." Former Justice Moran, commenting on this ground, says: "In order that this ground may be invoked, there must be between the action under consideration and the other action, (1) identity of parties, or at least such as representing the same interest in both actions; (2) identity of rights asserted and relief prayed for, the relief being found on the same facts; and (3) the identity on the two preceding particulars should be such that any judgment which may be rendered on the other action will, regardless of which party is successful, amount to res adjudicata in the action under consideration." [I Moran, Comments on the Rules of Court, (1952), p. 168.].
There is no doubt with regard to the identity of parties. In both cases, the plaintiffs and the defendant are the same. With regard to the identity of reliefs prayed for, a different consideration should be made. It should be noted that the present case (civil case No. 9221) stems from a criminal case in which the driver of the defendant was found guilty of multiple homicide through reckless imprudence and was ordered to pay an indemnity of P2,000 for which the defendant is made subsidiarily liable under article 103 of the Revised Penal Code, while the other case (civil case No. 8023) is an action for damages based on culpa aquiliana which underlies the civil liability predicated on articles 1902 to 1910 of the old Civil Code. These two cases involve two different remedies. As this court aptly said: "A quasi-delict or culpa aquiliana is a separate legal institution under the Civil Code, with a substantivity all its own, and individuality that is entirely apart and independent from a delict or crime. * * *. A distinction exists between the civil liability arising from a crime and the responsibility for cuasi-delictos or culpa extra-contractual. The same negligent act causing dam- ages may produce civil liability arising from a crime under article 100 of the Revised Penal Code, or create an action for cuasi-delito or culpa extra-contractual under articles 1902-1910 of the Civil Code (Barredo vs. Garcia and Al- mario, 73 Phil., 607). The other differences pointed out between crimes and culpa aquiliana are:.
1. That crimes affect the public interest, while cuasi-delitos are only of private concern.
2. That, consequently, the Penal Code punishes or corrects the criminal act, while the Civil Code, by means of indemnification, merely repairs the damage.
3. That delicts are not as broad as quasi-delicts, because the former are punished only if there is a penal law clearly covering them, while the latter, cuasi-delitos, include all acts in which 'any kind of fault or negligence intervenes. (P. 611, supra.).
Considering the distinguishing characteristics of the two cases, which involve two different remedies, it can hardly be said that there is identity of reliefs in both actions as to make the present case fall under the operation of Rule 8, section 1(d) of the Rules of Court. In other words, it is a mistake to say that the present action should be dismissed because of the pendency of another action between the same parties involving the same cause. Evidently, both cases involve different causes of action. In fact, when the Court of Appeals dismissed the action based on culpa aquiliana (civil case No. 8023), this distinction was stressed. It was there said that the negligent act committed by defendant's employee is not a quasi crime, for such negligence is punishable by law. What plaintiffs should have done was to institute an action under article 103 of the Revised Penal Code (CA-G.R. No. 3632-R). And this is what plaintiffs have done. To deprive them now of this remedy, after the conviction of defendant's employee, would be to deprive them altogether of the indemnity to which they are entitled by law and by a court decision, which injustice it is our duty to prevent.
Wherefore, the order appealed from is reversed and the case is hereby remanded to the lower court for further proceedings. No pronouncement as to costs.
Paras, C.J., Pablo, Bengzon, Padilla, Tuason, Montemayor, Jugo, and Labrador, JJ., concur.

G.R. No. 109125 December 2, 1994
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 complaint and interposing a special defense of lack of cause of action.
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.
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.
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 the Notice 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.
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.
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 of consummation 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 Parañaque, 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.

G.R. NO. L-39378 AUGUST 28, 1984

Defendants, Nicolas Adamos and Vicente Feria,
purchased two lots forming part of the Piedad Estate in
Quezon City, from Juan Porciuncula. Thereafter, the
successors-in-interest of the latter filed Civil Case No. 174
for annulment of the sale and the cancellation of TCT No.
69475, which had been issued to defendants-appellants by
virtue of the disputed sale. The Court rendered a Decision
annulling the saleThe said judgment was affirmed by the
Appellate Court and had attained finality.

Meanwhile, during the pendency of the case above,
defendants sold the said two lots to Petitioner Generosa
Ayson-Simon for Php3,800.00 plus Php800.00 for
facilitating the issuance of the new titles in favor of
petitioner. Due to the failure of the defendants to deliver
the said lots, petitioner filed a civil case for specific
performance. The trial court rendered judgment to
petitioner’s favor. However, defendants could not deliver
the said lots because the CA had already annulled the sale
of the two lots in Civil Case No. 174. Thus, petitioner filed
another civil case for the rescission of the contract.

Defendants were contending that petitioner cannot choose
to rescind the contract since petitioner chose for specific
performance of the obligation. Also, even though
petitioner can choose to rescind the contract, it would not
be possible, because it has already prescribed.

1. Can petitioner choose to rescind the contract even after choosing for the specific performance of the obligation?
2. Had the option to rescind the contract prescribed?

1. Yes. The rule that the injured party can
only choose between fulfillment and rescission of the
obligation, and cannot have both, applies when the
obligation is possible of fulfillment. If, as in this case, the
fulfillment has become impossible, Article 1191 allows the injured party to seek rescission even after he has chosen

2. No. Article 1191 of the Civil Code provides
that the injured party may also seek rescission, if the
fulfillment should become impossible. The cause of action
to claim rescission arises when the fulfillment of the
obligation became impossible when the Court of First
Instance of Quezon City in Civil Case No. 174 declared the
sale of the land to defendants by Juan Porciuncula a
complete nullity and ordered the cancellation of Transfer
Certificate of Title No. 69475 issued to them. Since the two
lots sold to plaintiff by defendants form part of the land
involved in Civil Case No. 174, it became impossible for
defendants to secure and deliver the titles to and the
possession of the lots to plaintiff. But plaintiff had to wait
for the finality of the decision in Civil Case No. 174,
According to the certification of the clerk of the Court of
First Instance of Quezon City (Exhibit "E-2"), the decision
in Civil Case No. 174 became final and executory "as per
entry of Judgment dated May 3, 1967 of the Court of
Appeals." The action for rescission must be commenced
within four years from that date, May 3, 1967. Since the
complaint for rescission was filed on August 16, 1968, the
four year period within which the action must be
commenced had not expired.

20 SCRA 330

J. M. Tuason & Co., Inc. is the owner of a big tract
land situated in Quezon City, and on July 28, 1950,
[through Gregorio Araneta, Inc.] sold a portion thereof to
Philippine Sugar Estates Development Co., Ltd.
The parties stipulated, among in the contract of
purchase and sale with mortgage, that the buyer will build
on the said parcel land the Sto. Domingo Church and
Convent while the seller for its part will construct streets.

But the seller, Gregorio Araneta, Inc., which began
constructing the streets, is unable to finish the
construction of the street in the Northeast side because a
certain third-party, by the name of Manuel Abundo, who
has been physically occupying a middle part thereof,
refused to vacate the same;
Both buyer and seller know of the presence of
squatters that may hamper the construction of the streets
by the seller. On May 7, 1958, Philippine Sugar Estates
Development Co., Lt. filed its complaint against J. M.
Tuason & Co., Inc., and instance, seeking to compel the
latter to comply with their obligation, as stipulated in the
above-mentioned deed of sale, and/or to pay damages in
the event they failed or refused to perform said obligation.

The lower court and the appellate court ruled in
favor of Phil. Sugar estates, and gave defendant Gregorio
Araneta, Inc., a period of two (2) years from notice hereof,
within which to comply with its obligation under the
contract, Annex "A".

Gregorio Araneta, Inc. resorted to a petition for
review by certiorari to this Court.

Was there a period fixed?

Yes. The fixing of a period by the courts under
Article 1197 of the Civil Code of the Philippines is sought to
be justified on the basis that petitioner (defendant below)
placed the absence of a period in issue by pleading in its
answer that the contract with respondent Philippine Sugar
Estates Development Co., Ltd. gave petitioner Gregorio
Araneta, Inc. "reasonable time within which to comply
with its obligation to construct and complete the streets."
If the contract so provided, then there was a period fixed, a
"reasonable time;" and all that the court should have done
was to determine if that reasonable time had already
elapsed when suit was filed if it had passed, then the court
should declare that petitioner had breached the contract,
Was it within the powers of the lower court to set the
performance of the obligation in two years time?

NO. Even on the assumption that the court should have
found that no reasonable time or no period at all had been
fixed (and the trial court's amended decision nowhere
declared any such fact) still, the complaint not having
sought that the Court should set a period, the court could
not proceed to do so unless the complaint included it as
first amended;
Granting, however, that it lay within the Court's power to
fix the period of performance, still the amended decision is
defective in that no basis is stated to support the conclusion that the period should be set at two years after
finality of the judgment. The list paragraph of Article 1197
is clear that the period can not be set arbitrarily. The law
expressly prescribes that “the Court shall determine such
period as may under the circumstances been probably
contemplated by the parties.”

It must be recalled that Article 1197 of the Civil Code
involves a two-step process. The Court must first
determine that "the obligation does not fix a period" (or
that the period is made to depend upon the will of the
debtor)," but from the nature and the circumstances it can
be inferred that a period was intended" (Art. 1197, pars. 1
and 2). This preliminary point settled, the Court must then
proceed to the second step, and decide what period was
"probably contemplated by the parties" (Do., par. 3). So
that, ultimately, the Court can not fix a period merely
because in its opinion it is or should be reasonable, but
must set the time that the parties are shown to have
intended. As the record stands, the trial Court appears to
have pulled the two-year period set in its decision out of
thin air, since no circumstances are mentioned to support
it. Plainly, this is not warranted by the Civil Code.
Does “reasonable time” mean that the date of performance
would be indefinite?

The Court of Appeals objected to this conclusion that it
would render the date of performance indefinite. Yet, the
circumstances admit no other reasonable view; and this
very indefiniteness is what explains why the agreement did
not specify any exact periods or dates of performance.

77 PHIL 470

Vicente Singson Encarnacion leased his house to
Jacinta Baldomar and her son, Lefrando Fernando upon a
month-to-month basis. After Manila was liberated in the
last war, Singson Encarnacio notified Baldomar and her
son Fernando to vacate the house because he needed it for
his office as a result of the destruction of the building
where he had his office before. Despite the demand, the
Baldomar and Fernando continued their occupancy.

The defense of Baldomar and Fernando was that the
contract with Singson Encarnacion authorized them to
continue occupancy indefinitely while they should
faithfully fulfill their obligation with respect to payment of
rentals. Singson Encarnacion contended that the lease had
always and since the beginning been upon a month-tomonth

Was it tenable for Singson Encarnacion to discontinue
the lease of Baldomar and her son?

The continuance and fulfillment of the contract of lease
cannot be made to depend solely and exclusively upon the
free and uncontrolled choice of the lessees between
continuing paying the rentals or not, completely depriving
the owner of all say in the matter. The defense of Baldomar
and Fernando would leave to the sole and exclusive will of
one of the contracting parties the validity and fulfillment of
the contract of lease, within the meaning of Article 1256 of
the Civil Code. For if this were allowed, so long as the
lessee elected to continue the lease by continuing the
payment of the rentals the owner would never be able to
discontinue the lease; conversely, although the owner
should desire the lease to continue, the lessee could
effectively thwart his purpose if he should prefer to
terminate the contract by the simple expedient of stopping
payment of the rentals.

Ong vs. Century (kf)
The Court of First Instance of Iloilo rendered a judgment in favor of the plaintiff, sentencing the defendant company to pay him the sum of P45,000, the value of certain policies of fire insurance, with legal interest thereon from February 28, 1923, until payment, with the costs. The defendant company appealed from this judgment, and now insists that the same must be modified and that it must be permitted to rebuild the house burnt, subject to the alignment of the street where the building was erected, and that the appellant be relieved from the payment of the sum in which said building was insured.
The appellant contends that under clause 14 of the conditions of the policies, it may rebuild the house burnt, and although the house may be smaller, yet it would be sufficient indemnity to the insured for the actual loss suffered by him.
If this clause of the policies is valid, its effect is to make the obligation of the insurance company an alternative one, that is to say, that it may either pay the insured value of house, or rebuild it. It must be noted that in alternative obligations, the debtor, the insurance company in this case, must notify the creditor of his election, stating which of the two prestations he is disposed to fulfill, in accordance with article 1133 of the Civil Code. The object of this notice is to give the creditor, that is, the plaintiff in the instant case, opportunity to express his consent, or to impugn the election made by the debtor, and only after said notice shall the election take legal effect when consented by the creditor, or if impugned by the latter, when declared proper by a competent court. In the instance case, the record shows that the appellant company did not give a formal notice of its election to rebuild, and while the witnesses, Cedrun and Cacho, speak of the proposed reconstruction of the house destroyed, yet the plaintiff did not give his assent to the proposition, for the reason that the new house would be smaller and of materials of lower kind than those employed in the construction of the house destroyed. Upon this point the trial judge very aptly says in his decision: "It would be an imposition unequitable, as well as unjust, to compel the plaintiff to accept the rebuilding of a smaller house than the one burnt, with a lower kind of materials than those of said house, without offering him an additional indemnity for the difference in size between the two house, which circumstances were taken into account when the insurance applied for by the plaintiff was accepted by the defendant."
Election alleged by the appellant to rebuild the house burnt instead of paying the value of the insurance is improper.

G.R. No. L-55138

Petitioner Ernesto V. Ronquillo was one of four (4)
defendants for the collection of the sum of P117,498.98
plus attorney's fees and costs. The other defendants were
Offshore Catertrade, Inc., Johnny Tan and Pilar Tan.
On December 13, 1979, the lower court rendered
its Decision based on the compromise agreement, which
stipulates, among others, that the Plaintiff agrees to reduce
its total claim of P117,498.95 to only P110,000.00 and
defendants agree to acknowledge the validity of such claim
and further bind themselves to initially pay out of the total
indebtedness of P110,000.00 the amount of P55,000.00
on or before December 24, 1979, the balance of
P55,000.00, defendants individually and jointly agree to
pay within a period of six months from January 1980, or
before June 30, 1980.

Upon the defendant’s default, herein private
respondent (then plaintiff) filed a Motion for Execution.
Ronquillo and another defendant Pilar Tan offered to pay
their shares of the 55,000 already due.

But on January 22, 1980, private respondent
Antonio So moved for the reconsideration and/or
modification of the aforesaid Order of execution and
prayed instead for the "execution of the decision in its
entirety against all defendants, jointly and severally.

Petitioner opposed the said motion arguing that
under the decision of the lower court being executed which
has already become final, the liability of the four (4)
defendants was not expressly declared to be solidary,
consequently each defendant is obliged to pay only his own
pro-rata or 1/4 of the amount due and payable.

What is the nature of the liability of the defendants
(including petitioner), was it merely joint, or was it several
or solidary?



In this regard, Article 1207 and 1208 of the Civil
Code provides -
"Art. 1207. The concurrence of two or more
debtors in one and the same obligation does not imply that
each one of the former has a right to demand, or that each
one of the latter is bound to render, entire compliance with
the prestation. There is a solidary liability only when the
obligation expressly so states, or when the law or the
nature of the obligation requires solidarity.

Art. 1208. If from the law, or the nature or the
wording of the obligation to which the preceding article
refers the contrary does not appear, the credit or debt shall
be presumed to be divided into as many equal shares as
there are creditors and debtors, the credits or debts being
considered distinct from one another, subject to the Rules
of Court governing the multiplicity of suits."

Clearly then, by the express term of the
compromise agreement, the defendants obligated
themselves to pay their obligation "individually and

The term "individually" has the same meaning as
"collectively", "separately", "distinctively", respectively or
"severally". An agreement to be "individually liable"
undoubtedly creates a several obligation, and a "several
obligation" is one by which one individual binds himself to
perform the whole obligation.

The obligation in the case at bar being described as
"individually and jointly", the same is therefore enforceable against one of the numerous obligors.

PNB vs. Independent Planters Association (kf)
Appeal by PNB from the Order of the defunct Court of First Instance of Manila dismissing PNB's complaint against several solidary debtors for the collection of a sum of money on the ground that one of the defendants (Ceferino Valencia) died during the pendency of the case (i.e., after the plaintiff had presented its evidence) and therefore the complaint, being a money claim based on contract, should be prosecuted in the testate or intestate proceeding for the settlement of the estate of the deceased defendant pursuant to Section 6 of Rule 86 of the Rules of Court which reads: SEC. 6. Solidary obligation of decedent.— the obligation of the decedent is solidary with another debtor, the claim shall be filed against the decedent as if he were the only debtor, without prejudice to the right of the estate to recover contribution from the other debtor. In a joint obligation of the decedent, the claim shall be confined to the portion belonging to him.
The appellant assails the order of dismissal, invoking its right of recourse against one, some or all of its solidary debtors under Article 1216 of the Civil Code — ART. 1216. The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others, so long as the debt has not been fully collected.
ISSUE: whether in an action for collection of a sum of money based on contract against all the solidary debtors, the death of one defendant deprives the court of jurisdiction to proceed with the case against the surviving defendants.
HELD: It is now settled that the quoted Article 1216 grants the creditor the substantive right to seek satisfaction of his credit from one, some or all of his solidary debtors, as he deems fit or convenient for the protection of his interests; and if, after instituting a collection suit based on contract against some or all of them and, during its pendency, one of the defendants dies, the court retains jurisdiction to continue the proceedings and decide the case in respect of the surviving defendants.
Similarly, in PNB vs. Asuncion, A cursory perusal of Section 6, Rule 86 of the Revised Rules of Court reveals that nothing therein prevents a creditor from proceeding against the surviving solidary debtors. Said provision merely sets up the procedure in enforcing collection in case a creditor chooses to pursue his claim against the estate of the deceased solidary, debtor.
It is crystal clear that Article 1216 of the New Civil Code is the applicable provision in this matter. Said provision gives the creditor the right to 'proceed against anyone of the solidary debtors or some or all of them simultaneously.' The choice is undoubtedly left to the solidary, creditor to determine against whom he will enforce collection. In case of the death of one of the solidary debtors, he (the creditor) may, if he so chooses, proceed against the surviving solidary debtors without necessity of filing a claim in the estate of the deceased debtors. It is not mandatory for him to have the case dismissed against the surviving debtors and file its claim in the estate of the deceased solidary debtor . . .
Section 6, Rule 86 of the Revised Rules of Court cannot be made to prevail over Article 1216 of the New Civil Code, the former being merely procedural, while the latter, substantive.

133 SCRA 317, November 21, 1984

Felicisimo V. Reyers and his wife Emilia T. David,
herein defendant-appellant, executed 2 indemnity
agreements in favor of appellee The Imperial Insurance
Inc, jointly and severally to assure indemnification of the
latter of whatever liability it may incur in connection with
its posting the security bonds to lift the attachments in 2
civil cases instituted for the amount of P60, 000 and
P40,000, for the benefit of Felicisimo V. Reyes.

The spouses jointly and severally, executed
another indemnity agreement in favor of appellee to assure
indemnification of the latter under a homestead bond for
the sum of P7, 500.00 it had executed jointly and severally
with them in favor of the Development Bank of the
Felicisimo later died and Special Proceedings
entitled “In the Matter of the Intestate Estate of Felicisimo
V. Reyes,” commenced. His wife qualified and took her
oath of office as the administratix of the said intestate

Meanwhile, judgment was rendered in the two
Civil Cases against the spouses. Appellee made demands
on Emilia David to pay the amounts of P60,000 and P40,
000 under the surety bonds and arrears in premiums
thereon. A motion to dismiss was filed by the appellant on
the ground the plaintiff’s cause of action, if there be any,
have been barred for its failure to file its claims against the
estate of the deceased Felicisimo V. Reyes in due time. She
contends that appellee’s claim should have been presented
according to Rule 86 of the Revised Rules of Court and its
failure to do so operates to bar its claim forever.
After trial, the court rendered judgment against
the herein appellant Emilia T. David.

Can the creditor choose to proceed against the
surviving solidary debtor instead of bringing an action in
accordance with Rule 86 (sec. 5) of the Revised Rules of

Yes. Under the law and well-settled jurisprudence,
when the obligation is a solidary one, the creditor may
bring his action in toto against any of the debtors obligated
in solidum. In the case at bar, appellant signed a joint and
several obligation with her husband in favor of herein
appellee; as a consequence, the latter may demand from
either of them the whole obligation. As distinguished from
a joint obligation where each of the debtor is entitled only
for a proportionate part of the debt and the creditor is
entitled only to a proportionate part of the credit, in a
solidary obligation the creditor may enforce the entire
obligation against one of the debtors. Moreover, in the case
of Philippine International Surety vs. Gonzales, “Where the
obligation assumed by several persons is joint and several,
each of the debtors is answerable for the whole obligation
with the right to seek contribution from his co-debtors.”
Article 1216 of the Civil Code also states that, “The creditor
may proceed against any one of the solidary debtors or
some or all of them simultaneously. The demand made
against one of them shall not be an obstacle to those
which may subsequently be directed against the others, so
long as the debt has not been fully collected.” There is
nothing improper, as held in Manila Surety & Fidelity Co.
vs. Villarama, in the creditor’s filing of an action against
the surviving solidary debtor alone, instead of instituting a
proceeding for the settlement of the deceased debtor
wherein his claim would be filed.

Lambert vs. Fox 26 phil 588 (kf)
This is an action brought to recover a penalty prescribed on a contract as punishment for the breach thereof.
Early in 1911 the firm known as John R. Edgar & Co., engaged in the retail book and stationery business, found itself in such condition financially that its creditors, including the plaintiff and the defendant, together with many others, agreed to take over the business, incorporate it and accept stock therein in payment of their respective credits. A few days after the incorporation was completed plaintiff and defendant entered into the following agreement: xxx the undersigned mutually and reciprocally agree not to sell, transfer, or otherwise dispose of any part of their present holdings of stock in said John R. Edgar & Co. Inc., till after one year from the date hereof. Either party violating this agreement shall pay to the other the sum of one thousand (P1,000) pesos as liquidated damages, unless previous consent in writing to such sale, transfer, or other disposition be obtained.
Notwithstanding this contract the defendant Fox sold his stock in the said corporation to E. C. McCullough of the firm of E. C. McCullough & Co. of Manila, a strong competitor of the said John R. Edgar & Co., Inc.
The learned trial court decided the case in favor of the defendant upon the ground that the intention of the parties as it appeared from the contract in question was to the effect that the agreement should be good and continue only until the corporation reached a sound financial basis, and that that event having occurred some time before the expiration of the year mentioned in the contract, the purpose for which the contract was made and had been fulfilled and the defendant accordingly discharged of his obligation thereunder. The complaint was dismissed upon the merits.
ISSUE: Did the court erred in the construction of the contract?
HELD: "As for us, we do not construe or interpret this law. It does not need it. We apply it. By applying the law, we conserve both provisions for the benefit of litigants. The first and fundamental duty of courts, in our judgment, is to apply the law. Construction and interpretation come only after it has been demonstrated that application is impossible or inadequate without them. They are the very last functions which a court should exercise. The majority of the law need no interpretation or construction. They require only application, and if there were more application and less construction, there would be more stability in the law, and more people would know what the law is."
In the case at bar the parties expressly stipulated that the contract should last one year. No reason is shown for saying that it shall last only nine months. Whatever the object was in specifying the year, it was their agreement that the contract should last a year and it was their judgment and conviction that their purposes would not be subversed in any less time. What reason can give for refusing to follow the plain words of the men who made the contract? We see none.
In this jurisdiction penalties provided in contracts of this character are enforced . It is the rule that parties who are competent to contract may make such agreements within the limitations of the law and public policy as they desire, and that the courts will enforce them according to their terms. (Civil Code, articles 1152, 1153, 1154, and 1155; Fornow vs. Hoffmeister, 6 Phil. Rep., 33; Palacios vs. Municipality of Cavite, 12 Phil. Rep., 140; Gsell vs. Koch, 16 Phil. Rep., 1.) The only case recognized by the Civil Code in which the court is authorized to intervene for the purpose of reducing a penalty stipulated in the contract is when the principal obligation has been partly or irregularly fulfilled and the court can see that the person demanding the penalty has received the benefit of such or irregular performance. In such case the court is authorized to reduce the penalty to the extent of the benefits received by the party enforcing the penalty.
In this jurisdiction, there is no difference between a penalty and liquidated damages, so far as legal results are concerned. In either case the party to whom payment is to be made is entitled to recover the sum stipulated without the necessity of proving damages. Indeed one of the primary purposes in fixing a penalty or in liquidating damages, is to avoid such necessity.
The suspension of the power to sell has a beneficial purpose, results in the protection of the corporation as well as of the individual parties to the contract, and is reasonable as to the length of time of the suspension. We do not here undertake to discuss the limitations to the power to suspend the right of alienation of stock, limiting ourselves to the statement that the suspension in this particular case is legal and valid.
The judgment is reversed, the case remanded with instructions to enter a judgment in favor of the plaintiff and against the defendant for P1,000, with interest; without costs in this instance.

G.R. 967

This suit concerns the lease of a piece of land for a
fixed consideration and to endure at the will of the lessee.
By the contract of lease the lessee is expressly authorized
to make improvements upon the land, by erecting
buildings of both permanent and temporary character, by
making fills, laying pipes, and making such other
improvements as might be considered desirable for the
comfort and amusement of the members.

With respect to the term of the lease the present
question has arisen. In its decision three theories have been presented: One which makes the duration depend upon the will of the lessor, who, upon one month's notice
given to the lessee, may terminate the lease so stipulated;
another which, on the contrary, makes it dependent upon
the will of the lessee, as stipulated; and the third, in
accordance with which the right is reversed to the courts to
fix the duration of the term.

The first theory is that which has prevailed in the
judgment below, as appears from the language in which
the basis of the decision is expressed: "The court is of the
opinion that the contract of lease was terminated by the
notice given by the plaintiff on August 28 of last year . . . ."
And such is the theory maintained by the plaintiffs, which
expressly rests upon article 1581 of the Civil Code, the law
which was in force at the time the contract was entered
into (January 25, 1890). The judge, in giving to this notice
the effect of terminating the lease, undoubtedly considers
that it is governed by the article relied upon by the
plaintiffs, which is of the following tenor: "When the term
has not been fixed for the lease, it is understood to be for
years when an annual rental has been fixed, for months
when the rent is monthly. . . ." The second clause of the
contract provides as follows: "The rent of the said land is
fixed at 25 pesos per month."

Was there a conventional term, a duration, agreed
upon in the contract in question?

Yes. The obligations which, with the force of law,
the lessors assumed by the contract entered into, so far as
pertaining to the issues, are the following: "First. . . . They
lease the above-described land to Mr. Williamson, who
takes it on lease . . . for all the time the members of the
said club may desire to use it . . . Third. . . . the owners of
the land undertake to maintain the club as tenant as long
as the latter shall see fit, without altering in the slightest
degree the conditions of this contract, even though the
estate be sold."
In view of these clauses, it can not be said that
there is no stipulation with respect to the duration of the
lease, or that, notwithstanding these clauses, article 1581,
in connection with article 1569, can be applied. If this were
so, it would be necessary to hold that the lessors spoke in
vain that their words are to be disregarded a claim which
can not be advanced by the plaintiffs nor upheld by any
court without citing the law which detracts all legal force
from such words or despoils them of their literal sense.