ObliCon Ch 3 Pt1 Full Cases

7/26/2019 ObliCon Ch 3 Pt1 Full Cases

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http://philippinelaw.info/jurisprudence/gr7859-seoane-v-franco.html

February !"# !9!$

%.&. 'o. 7859

()*+,&) ,'# administratri0 of +he )ntestate state of duardo Fargas# plaintiff-appellee#vs.*+1)' F&'*,# administratri0 of +he )ntestate state of 2anuel Franco# defendant-appellant.

&amon alinas# for appellant.%ibbs# 2c3onough and 4lanco# for appellee.

2,&1'3# .:

+his is an appeal from a judgment of the *ourt of First )nstance of 6amboanga in favor of the plaintiff#holding that the right of action upon the mortgage debt which was the basis of the claim presentedagainst the plaintiffs estate had prescribed.

+he mortgage in uestion was e0ecuted on the !$th of ,ctober# !88# to secure the payment of the sumof #87;.


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+he clause on which the case turns is as follows @p. $!"A:

2r. >illiamson# or whoever may succeed him as secretary of the club# may terminate this leasewhenever desired without other formality than that of giving a months notice. +he owners of the landundertaBe to maintain the club as tenant as long as the latter shall see fit.

*onsidering the case the court said @$!A:+he *ivil *ode has made provision for such a case in all Binds of obligations. )n speaBing in general ofobligations with a term it has supplied the deficiency of the former law with respect to the =duration ofthe term when it has been left to the will of the debtor#= and provides that in this case the term shall befi0ed by the courts. @rt. !!"8# sec. ".A )n every contract# as laid down by the authorities# there isalways a creditor who is entitled to demand the performance# and a debtor upon whom rests theobligation to perform the undertaBing. )n bilateral contracts the contracting parties are mutuallycreditors and debtors. +hus# in this contract of lease# the lessee is the creditor with respect to the rightsenumerated in article !55# and is the debtor with respect to the obligations imposed by articles !555and !5;!. +he term within which performance of the latter obligation is due is what has been left to thewill of the debtor. +his term it is which must be fi0ed by the courts.

+he only action which can be maintained under the terms of the contract is that bywhich it is sought tobe obtain from the judge the determination of this period# and not the unlawful detainer action whichhas been brought D an action which presupposes the e0piration of the term and maBes it the duty ofthe judge to simply the decree the eviction. +o maintain the latter action it is sufficient to show thee0piration of the term of the contract# whether conventional or legalC in order to decree the relief to begranted in the former action it is necessary for the judge to looB into the character and conditions of themutual undertaBings with a view to supplying the lacBing element of a time at which the lease is toe0pire.

+he case of 4arreto vs. +he *ity of 2anila @7 hil. &ep.# !;A dealt with a case where the terms of adonation did not fi0 the time of the performance of the condition placed upon the donation# and thecourt held that the period must be determined by the court in a proper action in accordance with article!!"8 of the *ivil *ode# saying @p. "


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falls within the provisions of article !!"8 of the *ivil *ode. . . .

+he obligation being manifestly defective with regard to the duration of the period granted to thedebtor# that is# to the defendant# that defect must be cured by the courts through judicial decision whichshall determine the said duration# under the power e0pressly granted them for such purpose by the legalprovisions just above transcribed.

+he trial court# therefore# acted in accordance with the law in e0ercising the said power in the presentcase# by fi0ing the duration of the period on the basis that the payment of the debt should be made atthe rate of ">hile the e0pression of an opinion as to the prescription of the action to fi0 a date for the maturity ofthe obligation in uestion is unnecessary for a complete resolution of the case before us# still we do nothesitate to e0press that opinion for the reasons which we have heretofore given in one or two cases#particularly that of 1ichauco vs. 1imjuco @!9 hil. &ep.# !"A. +hat case went off upon the finding of thecourt that the action could not be maintained by the plaintiff# 1ichauco# on behalf of his brothers andsisters and upon that finding the complaint was dismissed. >hile the merits in that case were not


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necessarily before us# we nevertheless tooB up the facts as they appeared and e0pressed our opinion ofwhat the result of the case would be upon the merits if it subseuently came before us upon the samefacts. )n that case we said @p. !7A:

>e believe# however# that# for the information of the parties interested in the subject matter of thisaction and to the end that unnecessary litigation may be avoided# the opinion of the court should be

given upon the facts presented in this case. Inowing what our opinion is upon these facts it is probablethat the heirs will not care to pursue the litigation further unless# which is somewhat unliBely# they areable to present new facts. >e# therefore# proceed to a consideration of the case upon the merits aspresented by the record.

+he judgment is affirmed# with the costs against the appellant. o ordered.

rellano# *..# +orres# 2apa# and +rent# .# concur.

http://www.lawphil.net/judjuris/juri!9";/jul!9";/grJl-"!9


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+he plaintiff has no right of action. )f he has any# it is only by virtue of the sale of this parcel made by*oncepcion *irer and ames Gill in his favor on anuary !5# !9"!# but that sale cannot have any effect.+his parcel having been donated by *oncepcion *irer and ames Gill to the municipality of +arlac#which donation was accepted by the latter# the title to the property was transferred to the municipalityof +arlac. )t is true that the donation might have been revoBed for the causes# if any# provided by the

law# but the fact is that it was not revoBed when *oncepcion *irer and ames Gill made the sale of thisparcel to the plaintiff. ven supposing that causes e0isted for the revocation of this donation# still# itwas necessary# in order to consider it revoBed# either that the revocation had been consented to by thedonee# the municipality of +arlac# or that it had been judicially decreed. 'one of these circumstancese0isted when *oncepcion *irer and ames Gill sold this parcel to the plaintiff. *onseuently# when thesale was made *oncepcion *irer and ames Gill were no longer the owners of this parcel and could nothave sold it to the plaintiff# nor could the latter have acuired it from them.

4ut the appellant contends that a condition precedent having been imposed in the donation and thesame not having been complied with# the donation never became effective. >e find no merit in thiscontention. +he appellant refers to the condition imposed that one of the parcels donated was to be usedabsolutely and e0clusively for the erection of a central school and the other for a public parB# the worBto commence in both cases within the period of si0 months from the date of the ratification by thepartes of the document evidencing the donation. )t is true that this condition has not been compliedwith. +he allegation# however# that it is a condition precedent is erroneous. +he characteristic of acondition precedent is that the acuisition of the right is not effected while said condition is notcomplied with or is not deemed complied with. 2eanwhile nothing is acuired and there is only ane0pectancy of right. *onseuently# when a condition is imposed# the compliance of which cannot beeffected e0cept when the right is deemed acuired# such condition cannot be a condition precedent. )nthe present case the condition that a public school be erected and a public parB made of the donatedland# worB on the same to commence within si0 months from the date of the ratification of the donationby the parties# could not be complied with e0cept after giving effect to the donation. +he donee couldnot do any worB on the donated land if the donation had not really been effected# because it would bean invasion of anothers title# for the land would have continued to belong to the donor so long as thecondition imposed was not complied with.

+he appellant also contends that# in any event# the condition not having been complied with# evensupposing that it was not a condition precedent but subseuent# the non-compliance thereof is sufficientcause for the revocation of the donation. +his is correct. 4ut the period for bringing an action for therevocation of the donation has prescribed. +hat this action is prescriptible# there is no doubt. +here isno legal provision which e0cludes this class of action from the statute of limitations. nd not only this#D the law itself recogni?es the prescriptibility of the action for the revocation of a donation# providinga special period of five years for the revocation by the subseuent birth of children @art. ;;# *ivil*odeA# and one year for the revocation by reason of ingratitude. )f no special period is provided for theprescription of the action for revocation for noncompliance of the conditions of the donation @art. ;7#*ivil *odeA# it is because in this respect the donation is considered onerous and is governed by the lawof contracts and the general rules of prescription. Hnder the law in force @sec. $# *ode of *iv. roc.Athe period of prescription of this class of action is ten years. +he action for the revocation of thedonation for this cause arose on pril !9# !9!!# that is si0 months after the ratification of the instrumentof donation of ,ctober !8# !9!


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o ordered.

treet# (illamor# ,strand# ohns# &omualde? and (illa-&eal# .# concur.

http://www.lawphil.net/judjuris/juri!99'+K +G,H'3 , @!"


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+hat ) hereby agree to sign and endorse the stocB certificate in favor of 2r. M 2rs. ose 2. avier# assoon as stocB certificates are issued.

000 000 000

t the time the said deed of assignment was e0ecuted# private respondent had a pending application#

dated ,ctober "!# !9;5# for an additional forest concession covering an area of "#1+G *,&,&+),'# +&11 F. ()& and , 2. () both directorsand stocBholders of said corporation# do hereby undertaBe to pay 1,'&3, +)&,# as soon as saidadditional area is approved and transferred to +)24&>1+G *,&,&+),' the sum of+G)&+K +G,H'3 , @$


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greement as incorporators. 9

,n uly !;# !9;8# for failure of petitioners to pay the balance due under the two deeds of assignment#private respondent filed an action against petitioners# based on the said contracts# for the payment of theamount of 8$#!$8.!5 with interest at ;N per annum from pril !


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+he motion for reconsideration filed on pril !!# !978 by counsel for defendants-appellees is denied.+hey did not file any brief in this case. s a matter of fact this case was submitted for decision withoutappellees brief. )n their said motion# they merely tried to refute the rationale of the *ourt in deciding toreverse the appealed judgment. !;

etitioners then sought relief in this *ourt in the present petition for review on certiorari. rivaterespondent filed his comment# reiterating his stand that the decision of the *ourt of ppeals underreview is already final and e0ecutory.

etitioners countered in their reply that their petition for review presents substantive and fundamentaluestions of law that fully merit judicial determination# instead of being suppressed on technical andinsubstantial reasons. 2oreover# the aforesaid one @!A day delay in the filing of their motion fore0tension is e0cusable# considering that petitioners had to change their former counsel who failed tofile their brief in the appellate court# which substitution of counsel tooB place at a time when there weremany successive intervening holidays.

,n uly ";# !978# we resolved to give due course to the petition.

+he one @!A day delay in the filing of the said motion for e0tension can justifiably be e0cused#considering that aside from the change of counsel# the last day for filing the said motion fell on aholiday following another holiday# hence# under such circumstances# an outright dismissal of thepetition would be too harsh. 1itigations should# as much as possible# be decided on their merits and noton technicalities. )n a number of cases# this *ourt# in the e0ercise of euity jurisdiction# has rela0ed thestringent application of technical rules in order to resolve the case on its merits. !7 &ules of procedureare intended to promote# not to defeat# substantial justice and# therefore# they should not be applied in avery rigid and technical sense.

>e now proceed to the resolution of this case on the merits.

+he assignment of errors of petitioners hinges on the central issue of whether the deed of assignmentdated February !5# !9;; and the agreement of February "8# !9;; are null and void# the former for totalabsence of consideration and the latter for non-fulfillment of the conditions stated therein.

etitioners contend that the deed of assignment conveyed to them the shares of stocBs of privaterespondent in +imberwealth *orporation# as stated in the deed itself. ince said corporation never cameinto e0istence# no share of stocBs was ever transferred to them# hence the said deed is null and void forlacB of cause or consideration.

>e do not agree. s found by the *ourt of ppeals# the true cause or consideration of said deed was thetransfer of the forest concession of private respondent to petitioners for !"


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$. etitioners# after the e0ecution of the deed of assignment# assumed the operation of the loggingconcessions of private respondent. !9

. +he statement of advances to respondent prepared by petitioners stated: =55#!8;.$9 advancesto 1.. +iro be applied to succeeding shipments. 4ased on the agreement# we pay !


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+he said agreement is a bilateral contract which gave rise to reciprocal obligations# that is# theobligation of private respondent to transfer his rights in the forest concession over the additional areaand# on the other hand# the obligation of petitioners to pay $ith the enactment of the 'ew *ivil *ode# a new provision was included therein# namely# rticle !";7
http://www.lawphil.net/judjuris/juri1994/feb1994/gr_107112_1994.htmlhttp://www.lawphil.net/judjuris/juri1994/feb1994/gr_107112_1994.html


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which provides:

>hen the service has become so difficult as to be manifestly beyond the contemplation of the parties#the obligor may also be released therefrom# in whole or in part.

)n the report of the *ode *ommission# the rationale behind this innovation was e0plained# thus:

+he general rule is that impossibility of performance releases the obligor. Gowever# it is submitted thatwhen the service has become so difficult as to be manifestly beyond the contemplation of the parties#the court should be authori?ed to release the obligor in whole or in part. +he intention of the partiesshould govern and if it appears that the service turns out to be so difficult as to have been beyond theircontemplation# it would be doing violence to that intention to hold their contemplation# it would bedoing violence to that intention to hold the obligor still responsible. "

)n other words# fair and suare consideration underscores the legal precept therein.

'aga +elephone *o.# )nc. remonstrates mainly against the application by the *ourt of ppeals ofrticle !";7 in favor of *amarines ur )) lectric *ooperative# )nc. in the case before us. tateddifferently# the former insists that the complaint should have been dismissed for failure to state a causeof action.

+he antecedent facts# as narrated by respondent *ourt of ppeals are# as follows:

etitioner 'aga +elephone *o.# )nc. @'+1*,A is a telephone company rendering local as well aslong distance telephone service in 'aga *ity while private respondent *amarines ur )) lectric*ooperative# )nc. @*H&*, ))A is a private corporation established for the purpose of operating anelectric power service in the same city.

,n 'ovember !# !977# the parties entered into a contract @0h. ==A for the use by petitioners in theoperation of its telephone service the electric light posts of private respondent in 'aga *ity. )nconsideration therefor# petitioners agreed to install# free of charge# ten @!


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terminate when for any reason whatsoever# the party of the second part is forced to stop# abandonedEsic its operation as a public service and it becomes necessary to remove the electric lightpostC @sicA

)t was prepared by or with the assistance of the other petitioner# tty. 1uciano 2. 2aggay# then amember of the 4oard of 3irectors of private respondent and at the same time the legal counsel ofpetitioner.

fter the contract had been enforced for over ten @!


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@!A 3ioscoro &agragio# one of the two officials who signed the contract in its behalf# declared that itwas petitioner 2aggay who prepared the contractC that the understanding between private respondentand petitioners was that the latter would only use the posts in 'aga *ity because at that time#petitioners capability was very limited and they had no e0pectation of e0pansion because of legalsuabbles within the companyC that private respondent agreed to allow petitioners to use its posts in

'aga *ity because there were many subscribers therein who could not be served by them because oflacB of facilitiesC and that while the telephone lines strung to the posts were very light in !977# saidposts have become heavily loaded in !989.

@"A ngr. ntonio 4orja# *hief of private respondents 1ine ,peration and 2aintenance3epartment# declared that the posts being used by petitioners totalled !#


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member of the 4oard of 3irectors of private respondent# was the one who saw to it that the contractwas fair to both parties.

@"A >ith regard to the first cause of action:

@aA rivate respondent has the right under the contract to use ten @!


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,n private respondents second cause of action# the trial court found that the contract does not mentionanything about the use by petitioners of private respondents posts outside 'aga *ity. +herefore# thetrial court held that for reason of euity# the contract should be reformed by including therein theprovision that for the use of private respondents posts outside 'aga *ity# petitioners should pay amonthly rental of !


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e0press the true intention of the parties due to error or mistaBe# accident# or fraud. )ndeed# inembodying the euitable remedy of reformation of instruments in the 'ew *ivil *ode# the *ode*ommission gave its reasons as follows:

uity dictates the reformation of an instrument in order that the true intention of the contractingparties may be e0pressed. +he courts by the reformation do not attempt to maBe a new contract for the

parties# but to maBe the instrument e0press their real agreement. +he rationale of the doctrine is that itwould be unjust and ineuitable to allow the enforcement of a written instrument which does not reflector disclose the real meeting of the minds of the parties. +he rigor of the legalistic rule that a writteninstrument should be the final and infle0ible criterion and measure of the rights and obligations of thecontracting parties is thus tempered to forestall the effects of mistaBe# fraud# ineuitable conduct# oraccident. @pp. 55-5;# &eport of *ode *ommissionA

+hus# rticles !$59# !$;!# !$;"# !$;$ and !$; of the 'ew *ivil *ode provide in essence that wherethrough mistaBe or accident on the part of either or both of the parties or mistaBe or fraud on the part ofthe clerB or typist who prepared the instrument# the true intention of the parties is not e0pressed therein#then the instrument may be reformed at the instance of either party if there was mutual mistaBe on theirpart# or by the injured party if only he was mistaBen.

Gere# plaintiff-appellee did not allege in its complaint# nor does its evidence prove# that there was amistaBe on its part or mutual mistaBe on the part of both parties when they entered into the agreement0h. ==# and that because of this mistaBe# said agreement failed to e0press their true intention. &ather#plaintiffs evidence shows that said agreement was prepared by tty. 1uciano 2aggay# then a memberof plaintiffs 4oard of 3irectors and its legal counsel at that time# who was also the legal counsel fordefendant-appellant# so that as legal counsel for both companies and presumably with the interests ofboth companies in mind when he prepared the aforesaid agreement# tty. 2aggay must haveconsidered the same fair and euitable to both sides# and this was affirmed by the lower court when itfound said contract to have been fair to both parties at the time of its e0ecution. )n fact# there were nocomplaints on the part of both sides at the time of and after the e0ecution of said contract# andaccording to 7$-year old ustino de esus# (ice resident and %eneral manager of appellant at the timewho signed the agreement 0h. == in its behalf and who was one of the witnesses for the plaintiff@sicA# both parties complied with said contract =from the very beginning= @p. 5# tsn# pril !7# !989A.

+hat the aforesaid contract has become ineuitous or unfavorable or disadvantageous to the plaintiffwith the e0pansion of the business of appellant and the increase in the volume of its subscribers in'aga *ity and environs through the years# necessitating the stringing of more and bigger telephonecable wires by appellant to plaintiffs electric posts without a corresponding increase in the ten @!


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the present action. +he fact that said contract has become ineuitous or disadvantageous to plaintiff asthe years went by did not# however# give plaintiff a cause of action for reformation of said contract# forthe reasons already pointed out earlier. 4ut this does not mean that plaintiff is completely without aremedy# for we believe that the allegations of its complaint herein and the evidence it has presentedsufficiently maBe out a cause of action under rt. !";7 of the 'ew *ivil *ode for its release from theagreement in uestion.

000 000 000

+he understanding of the parties when they entered into the greement 0h. == on 'ovember !# !977and the prevailing circumstances and conditions at the time# were described by 3ioscoro &agragio# theresident of plaintiff in !977 and one of its two officials who signed said agreement in its behalf# asfollows:

,ur understanding at that time is that we will allow '+1*, to utili?e the posts of *H&*, ))only in the *ity of 'aga because at that time the capability of '+1*, was very limited# as a matterof fact we do Esic not e0pect to be able to e0pand because of the legal suabbles going on in the'+1*,. o# even at that time there were so many subscribers in 'aga *ity that cannot be served bythe '+1*,# so as a mater of public service we allowed them to sue @sicA our posts within the 'aga*ity. @p. 8# tsn pril $# !989A

&agragio also declared that while the telephone wires strung to the electric posts of plaintiff were verylight and that very few telephone lines were attached to the posts of *H&*, )) in !977# said postshave become =heavily loaded= in !989 @tsn# id.A.

)n truth# as also correctly found by the lower court# despite the increase in the volume of appellantssubscribers and the corresponding increase in the telephone cables and wires strung by it to plaintiffselectric posts in 'aga *ity for the more !< years that the agreement 0h. == of the parties has been ineffect# there has been no corresponding increase in the ten @!


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>e therefore# find nothing wrong with the ruling of the trial court# although based on a different andwrong premise @i.e.# reformation of contractA# that from the date of the filing of this case# appellant mustpay for the use of plaintiffs electric posts in 'aga *ity at the reasonable monthly rental of !e rationali?ed that the *ourt of ppeals misapplied rticle !";7 because:

. . . respondents complaint seeBs not release from the subdivision contract but that the court =renderjudgment modifying the terms and conditions of the contract . . . by fi0ing the proper shares that shouldpertain to the herein parties out of the gross proceeds from the sales of subdivided lots of subjectsubdivision=. +he cited article @rticle !";7A does not grant the courts @theA authority to remaBe#modify or revise the contract or to fi0 the division of shares between the parties as contractuallystipulated with the force of law between the parties# so as to substitute its own terms for thosecovenanted by the parties themselves. &espondents complaint for modification of contract manifestlyhas no basis in law and therefore states no cause of action. Hnder the particular allegations ofrespondents complaint and the circumstances therein averred# the courts cannot even in euity grantthe relief sought. !!

+he ruling in the ,cceOa case is not applicable because we agree with respondent court that theallegations in private respondents complaint and the evidence it has presented sufficiently made out acause of action under rticle !";7. >e# therefore# release the parties from their correlative obligationsunder the contract. Gowever# our disposition of the present controversy does not end here. >e have totaBe into account the possible conseuences of merely releasing the parties therefrom: petitioners willremove the telephone wires/cables in the posts of private respondent# resulting in disruption of their


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service to the publicC while private respondent# in consonance with the contract !" will return all thetelephone units to petitioners# causing prejudice to its business. >e shall not allow such eventuality.&ather# we reuire# as ordered by the trial court: !A petitioners to pay private respondent for the use ofits posts in 'aga *ity and in the towns of 2ilaor# *anaman# 2agarao and ili# *amarines ur and inother places where petitioners use private respondents posts# the sum of ten @!


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decision of our upreme *ourt through the pen of merican jurist dam *. *arson:

=Hnder our system of pleading it is the duty of the courts to grant the relief to which the parties areshown to be entitled by the allegations in their pleadings and the facts proven at the trial# and the merefact that they themselves misconstrue the legal effect of the facts thus alleged and proven will notprevent the court from placing the just construction thereon and adjudicating the issues accordingly.=

@l?ua v. ohnson# "! hil. $e rule that the respondent court did not commit any error in taBing cogni?ance of the aforesaid issues#although not raised before the trial court. +he presence of strong consideration of substantial justice hasled this *ourt to rela0 the well-entrenched rule that# e0cept uestions on jurisdiction# no uestion willbe entertained on appeal unless it has been raised in the court below and it is within the issues made bythe parties in their pleadings @*ordero v. *abral# 1-$;789# uly "5# !98$# !"$ *& 5$"A. . . .

>e believe that the above authorities suffice to show that this *ourt did not err in applying rt. !";7 ofthe 'ew *ivil *ode to this case. 3efendant-appellant stresses that the applicability of said provision isa uestion of fact# and that it should have been given the opportunity to present evidence on saiduestion. 4ut defendant-appellant cannot honestly and truthfully claim that it @didA not @haveA theopportunity to present evidence on the issue of whether the continued operation of the contract 0h.== has now become too one-sided in its favor and too ineuitous# unfair# and disadvantageous toplaintiff. s held in our decision# the abundant and copious evidence presented by both parties in thiscase and summari?ed in said decision established the following essential and vital facts which led us toapply rt. !";7 of the 'ew *ivil *ode to this case:

000 000 000 !5

,n the issue of prescription of private respondents action for reformation of contract# petitioners allegethat respondent courts ruling that the right of action =arose only after said contract had already becomedisadvantageous and unfair to it due to subseuent events and conditions# which must be sometimeduring the latter part of !98" or in !98$ . . .= !; is erroneous. )n reformation of contracts# what isreformed is not the contract itself# but the instrument embodying the contract. )t follows that whetherthe contract is disadvantageous or not is irrelevant to reformation and therefore# cannot be an elementin the determination of the period for prescription of the action to reform.

rticle !! of the 'ew *ivil *ode provides# inter alia# that an action upon a written contract must bebrought within ten @!


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of either party because petitioners permission for free use of telephones is not made to depend purelyon their will# neither is private respondents permission for free use of its posts dependent purely on itswill.

part from applying rticle !";7# respondent court cited another legal remedy available to privaterespondent under the allegations of its complaint and the preponderant evidence presented by it:

. . . we believe that the provision in said agreement D

@aA +hat the term or period of this contract shall be as long as the party of the first part Ehereinappellant has need for the electric light posts of the party of the second part Eherein plaintiff it beingunderstood that this contract shall terminate when for any reason whatsoever# the party of the secondpart is forced to stop# abandoned Esic its operation as a public service and it becomes necessary toremove the electric light post Esic=C @mphasis suppliedA

is invalid for being purely potestative on the part of appellant as it leaves the continued effectivity ofthe aforesaid agreement to the latters sole and e0clusive will as long as plaintiff is in operation. similar provision in a contract of lease wherein the parties agreed that the lessee could stay on theleased premises =for as long as the defendant needed the premises and can meet and pay said increases=was recently held by the upreme *ourt in 1im v. *..# !9! *& !5


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provision# to wit:

. . . it being understood that this contract shall terminate when for any reason whatsoever# the party ofthe second part @private respondentA is forced to stop# abandoned @sicA its operation as a public serviceand it becomes necessary to remove the electric light post @sicAC

which are casual conditions since they depend on chance# ha?ard# or the will of a third person. "< )nsum# the contract is subject to mi0ed conditions# that is# they depend partly on the will of the debtor andpartly on chance# ha?ard or the will of a third person# which do not invalidate the aforementionedprovision. "! 'evertheless# in view of our discussions under the first and second issues raised bypetitioners# there is no reason to set aside the uestioned decision and resolution of respondent court.

>G&F, the petition is hereby 3')3. +he decision of the *ourt of ppeals dated 2ay "8#!99" and its resolution dated eptember !itt and >illiam *. 4rady for plaintiff-appellant.%abriel 1a , for defendant-appellant Hy +ieng iao.*rossfield and ,4rien for +an 1iuan and +an 1iyan and *o.

+&+# .:

+his case comes by appeal from the *ourt of First )nstance of the city of 2anila# in a case where thecourt awarded to the plaintiff the sum of $


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domestic consumption# and a residence to live in# or in lieu thereof ;< per month.

t the time this agreement was made the machinery for the contemplated factory had not beenacuired# though ten e0pellers had been ordered from the Hnited tatesC and among the stipulationsinserted in the contract with the plaintiff was a provision to the following effect:

)t is understood and agreed that should the machinery to be installed in the said factory fail# for anyreason# to arrive in the city of 2anila within a period of si0 months from date hereof# this contract maybe cancelled by the party of the second part at its option# such cancellation# however# not to occurbefore the e0piration of such si0 months.

+he machinery above referred to did not arrive in the city of 2anila within the si0 months succeedingthe maBing of the contractC nor was other euipment necessary for the establishment of the factory atany time provided by the defendants. +he reason for this does not appear with certainty# but apreponderance of the evidence is to the effect that the defendants# in the first months of !9!9# seeingthat the oil business no longer promised large returns# either cancelled the order for the machinery fromchoice or were unable to supply the capital necessary to finance the project. t any rate on une "8#!9!9# availing themselves in part of the option given in the clause above uoted# the defendantscommunicated in writing to the plaintiff the fact that they had decided to rescind the contract# effectiveune $


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much in the fulfillment of the contract as any other act which may have been the subject of agreement.)ndeed# the cancellation of a contract in accordance with conditions agreed upon beforehands isfulfillment.

)n this connection# we note that the commentator 2anresa has the following observation with respect toarticle !"5; of the *ivil *ode. ays he: =)t is entirely licit to leave fulfillment to the will of either of the

parties in the negative form of rescission# a case freuent in certain contracts @the letting of service forhire# the supplying of electrical energy# etc.A# for in such supposed case neither is the article infringed#nor is there any lacB of euality between the persons contracting# since they remain with the samefaculties in respect to fulfillment.= @2anresa# "d ed.# vol. 8# p. ;!


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+he view already e0pressed with regard to the legality and interpretation of the clause underconsideration disposes in a great measure of the argument of the appellant in so far as the same is basedon article !!!9 of the *ivil *ode. +his provision supposes a case where the obligor intentionallyimpedes the fulfillment of a condition which would entitle the obligee to e0act performance from theobligorC and an assumption underlying the provision is that the obligor prevents the obligee from

performing some act which the obligee is entitled to perform as a condition precedent to the e0action ofwhat is due to him. uch an act must be considered unwarranted and unlawful# involving per se abreach of the implied terms of the contract. +he article can have no application to an e0ternalcontingency which# liBe that involved in this case# is lawfully within the control of the obligor.

)n panish jurisprudence a condition liBe that here under discussion is designated by 2anresa afacultative condition @vol. 8# p. ;!!A# and we gather from his comment on articles !!!5 and !!!9 of the*ivil *ode that a condition# facultative as to the debtor# is obno0ious to the first sentence contained inarticle !!!5 and renders the whole obligation void @vol. 8# p. !$!A. +hat statement is no doubt correct inthe sense intended by the learned author# but it must be remembered that he evidently has in mind thesuspensive condition# such as is contemplated in article !!!5. aid article can have no application to theresolutory condition# the validity of which is recogni?ed in article !!!$ of the *ivil *ode. )n otherwords# a condition at once facultative and resolutory may be valid even though the condition is made todepend upon the will of the obligor.

)f it were apparent# or could be demonstrated# that the defendants were under a positive obligation tocause the machinery to arrive in 2anila# they would of course be liable# in the absence of affirmativeproof showing that the nonarrival of the machinery was due to some cause not having its origin in theirown act or will. +he contract# however# e0presses no such positive obligation# and its e0istence cannotbe implied in the fact of stipulation# defining the conditions under which the defendants can cancel thecontract.

,ur conclusion is that the *ourt of First )nstance committed no error in rejecting the plaintiffs claim inso far as damages are sought for the period subseuent to the e0piration of the first si0 months# but inassessing the damages due for the si0-month period# the trial judge evidently overlooBed the item of;


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http://www.lawphil.net/judjuris/juri!995/oct!995/grJ!!7


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cA "


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beings and for the stability of the social order# . . . designed to indicate certain norms that spring fromthe fountain of good conscience# . . . guides for human conduct Ethat should run as golden threadsthrough society to the end that law may approach its supreme ideal which is the sway and dominance ofjustice.= "

)n the present case# petitioners arguments to support absence of liability for the cost of construction

beyond the original contract price are not persuasive.Hnder the previously uoted rticle )R of the construction contract# petitioners would maBe theappropriate adjustment to the contract price in case the cost of the project increases through no fault ofthe contractor @private respondentA. rivate respondent informed petitioners of the drastic increase inconstruction cost as early as 2arch !98hen private respondent demandedpayment of "59#!7."$# petitioner banBs (ice-resident &osito *. 2anhit and the banBs architecturalconsultant were directed by the banB to verify and compute private respondents claims of increasedcost. recommendation was then made to settle private respondents claim for "


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fees is thus reduced to !

&,1'3, +. *+H'%1# , +. *+H'%1# &.# *&,1K' +. *+H'%1 '3&1)'3 *+H'%1->1# +)+),' (. '%1 . &,3&)%H6# &,'3'+.

3 * ) ) , '

1,'&3,-3 *+&,# .:

4efore the *ourt is a etition for &eview on *ertiorari# assailing the following issuances of the *ourtof ppeals in *-%.&. *( 'o. '+KE-F)( 2)11),' ,@UV"5#


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agreement# receipt of which sum is hereby acBnowledged in full from the ('3.

b. +he balance of +>'+KE-F,H& 2)11),' F)( GH'3&3 +G,H'3 ,@"#5


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other buyers.

)n a letter dated 'ovember # !99


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ubseuently# on anuary $


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Hrgent 2otion to 3ismiss for violation of the rules and for being repetitious and having beenpreviously denied. Gowever# tty. *atungal refused to enter into pre-trial which prompted the trialcourt to declare the defendants in default and to set the presentation of the plaintiffs evidence onFebruary !# !99"CE$"

,n 3ecember "$# !99!# the *atungals filed a motion for reconsiderationE$$ of the 3ecember "


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1%1 +'3)'% )' *,H&+ >G' + 2,+ +GK *,H13 ,'1K 4 *,')3&3 )'3FH1+ '3 +)11 '+)+13 +, ',+)* ,F 11 FH&+G& &,*3)'%*)11K F+& +GK G3 F)13 +G 2,+),' +, 1)F+ +G ,&3& ,F 3FH1+.

(

+G *,H&+ WH, &&3 )' )H)'% +G >&)+ E,F &1)2)'&K )'H'*+),'&+&)')'% +G R&*) ,F *+ ,F ,>'&G) '3 ,+G& &)%G+ ,(& &1&,&+K ,H+)3 ,F +G *,H&+ +&&)+,&)1 H&)3)*+),' '3 )'*1H3)'%&,' >G, >& ',+ 4&,H%G+ H'3& )+ H&)3)*+),'# +GH +G 'H11)+K ,F+G >&)+.

()

+G *,H&+ WH, &&3 )' ',+ &+&)')'% )+1F 2,+H &,E&), F&,2*,'+)'H)'% >)+G +G &,*3)'% )' +G * '3 )' &'3&)'% 3*)),'+G&)' )F ,'1K F,& &,' ,F *,H&+K '3 F)&' 4)'% 2'3+3 3)'& ,F F)& '3 WH1 H+)* +, 11 '3 H'3&K >)+G,H+ F& ,&F(,& )+ G()'% 4' &(3 &1)& >)+G *,K ,F +G +)+),' F,&*&+),&&) WH+),')'% )+ ('H '3 H&)3)*+),' )' *-%.&. ',. "75;5 )'F*+ ',+)* F,& +G F)1)'% ,F *,22'+ +G&+, G3 1&3K 4' '+,H+ 4K +G G,',&41 *,H&+ ,F 1# *,'3 3)()),'# '3 +G *,H&+ WH, > FH&')G3 >)+G *,K ,F )3 ',+)*.

())

+G *,H&+ WH, &&3 )' 3*)3)'% +G * )' F(,& ,F +G 1)'+)FF '3%)'+ +G 3F'3'+ ,' +G 4) ,F ()3'* >G)*G & )2%)'&K#F4&)*+3# '3 3(,)3 ,F +&H+G# +, 4 ++3 )' 3+)1 )' +G 3)*H),' ,F+G) &+)*H1& &&, '3# +G&F, +G 3*)),' ) &(&)41.E$9

,n ugust $!# !995# after being granted several e0tensions# &odrigue? filed his appellees brief#E


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)n a 2otion for &econsideration dated ugust "!# "


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@A 2atters not specifically assigned as errors on appeal but raised in the trial court and are matters ofrecord having some bearing on the issue submitted which the parties failed to raise or which the lowercourt ignoredC

@5A 2atters not assigned as errors on appeal but closely related to an error assignedC and

@;A 2atters not assigned as errors but upon which the determination of a uestion properly assigned isdependent.

>e are not persuaded.

+his is not an instance where a party merely failed to assign an issue as an error in the brief nor failedto argue a material point on appeal that was raised in the trial court and supported by the record.'either is this a case where a party raised an error closely related to# nor dependent on the resolutionof# an error properly assigned in his brief. +his is a situation where a party completely changes histheory of the case on appeal and abandons his previous assignment of errors in his brief# which plainlyshould not be allowed as anathema to due process.

etitioners should be reminded that the object of pleadings is to draw the lines of battle between thelitigants and to indicate fairly the nature of the claims or defenses of both parties.E5; )n hilippine'ational *onstruction *orporation v. *ourt of ppeals#E57 we held that =Ewhen a party adopts acertain theory in the trial court# he will not be permitted to change his theory on appeal# for to permithim to do so would not only be unfair to the other party but it would also be offensive to the basic rulesof fair play# justice and due process.=

>e have also previously ruled that =courts of justice have no jurisdiction or power to decide a uestionnot in issue. +hus# a judgment that goes beyond the issues and purports to adjudicate something onwhich the court did not hear the parties# is not only irregular but also e0trajudicial and invalid. +he rulerests on the fundamental tenets of fair play.=E59

3uring the proceedings before the trial court# the spouses *atungal never claimed that the provisions inthe *onditional 3eed of ale# stipulating that the payment of the balance of the purchase price wascontingent upon the successful negotiation of a road right of way @paragraph !EbA and granting&odrigue? the option to rescind @paragraph 5A# were void for allegedly maBing the fulfillment of thecontract dependent solely on the will of &odrigue?.

,n the contrary# with respect to paragraph !@bA# the *atungals did not aver in the nswer @and itsamended versionsA that the payment of the purchase price was subject to the will of &odrigue? butrather they claimed that paragraph !@bA in relation to !@cA only presupposed a reasonable time be givento &odrigue? to negotiate the road right of way. Gowever# it was petitioners theory that more thansufficient time had already been given &odrigue? to negotiate the road right of way. *onseuently#&odrigue?s refusal/failure to pay the balance of the purchase price# upon demand# was allegedlyindicative of lacB of funds and a breach of the contract on the part of &odrigue?.

nent paragraph 5 of the *onditional 3eed of ale# regarding &odrigue?s option to rescind# it waspetitioners theory in the court a uo that notwithstanding such provision# they retained the right torescind the contract for &odrigue?s breach of the same under rticle !!9! of the *ivil *ode.

(erily# the first time petitioners raised their theory of the nullity of the *onditional 3eed of ale in


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view of the uestioned provisions was only in their 2otion for &econsideration of the *ourt ofppeals 3ecision# affirming the trial courts judgment. +he previous filing of various citations ofauthorities by tty. 4orromeo and the *ourt of ppeals resolutions noting such citations were of nomoment. +he citations of authorities merely listed cases and their main rulings without even anymention of their relevance to the present case or any prayer for the *ourt of ppeals to consider them.)n sum# the *ourt of ppeals did not err in disregarding the citations of authorities or in denying

petitioners motion for reconsideration of the assailed ugust 8# "


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)n a manner of speaBing# such a condition is liBewise dependent on chance as there is no guarantee thatrespondent and the third party-landowners would come to an agreement regarding the road right ofway. +his type of mi0ed condition is e0pressly allowed under rticle !!8" of the *ivil *ode.

nalogous to the present case is &omero v. *ourt of ppeals#E;" wherein the *ourt interpreted thelegal effect of a condition in a deed of sale that the balance of the purchase price would be paid by the

vendee when the vendor has successfully ejected the informal settlers occupying the property. )n&omero# we found that such a condition did not affect the perfection of the contract but only imposed acondition on the fulfillment of the obligation to pay the balance of the purchase price# to wit:

From the moment the contract is perfected# the parties are bound not only to the fulfillment of what hasbeen e0pressly stipulated but also to all the conseuences which# according to their nature# may be inBeeping with good faith# usage and law. Hnder the agreement# private respondent is obligated to evictthe suatters on the property. +he ejectment of the suatters is a condition the operative act of whichsets into motion the period of compliance by petitioner of his own obligation# i.e.# to pay the balance ofthe purchase price. rivate respondents failure =to remove the suatters from the property= within thestipulated period gives petitioner the right to either refuse to proceedP with the agreement or waive thatcondition in consonance with rticle !55 of the *ivil *ode. +his option clearly belongs to petitionerand not to private respondent.

>e share the opinion of the appellate court that the undertaBing reuired of private respondent does notconstitute a =potestative condition dependent solely on his will= that might# otherwise# be void inaccordance with rticle !!8" of the *ivil *ode but a =mi0ed= condition =dependent not on the will ofthe vendor alone but also of third persons liBe the suatters and government agencies and personnelconcerned.= >e must hasten to add# however# that where the so-called =potestative condition= isimposed not on the birth of the obligation but on its fulfillment# only the condition is avoided# leavingunaffected the obligation itself.E;$ @mphases supplied.A

From the provisions of the *onditional 3eed of ale subject matter of this case# it was the vendee@&odrigue?A that had the obligation to successfully negotiate and secure the road right of way.Gowever# in the decision of the trial court# which was affirmed by the *ourt of ppeals# it was foundthat respondent &odrigue? diligently e0erted efforts to secure the road right of way but the spouses*atungal# in bad faith# contributed to the collapse of the negotiations for said road right of way. +ouote from the trial courts decision:

)t is therefore apparent that the vendees obligations @sicA to pay the balance of the purchase price arisesonly when the road-right-of-way to the property shall have been successfully negotiated# secured andprovided. )n other words# the obligation to pay the balance is conditioned upon the acuisition of theroad-right-of-way# in accordance with paragraph " of rticle !!8! of the 'ew *ivil *ode. ccordingly#=an obligation dependent upon a suspensive condition cannot be demanded until after the conditiontaBes place because it is only after the fulfillment of the condition that the obligation arises.= @aviervEs * !8$ *&A 0hibits G# 3# # +# FF and show that plaintiff E&odrigue? indeed wasdiligent in his efforts to negotiate for a road-right-of-way to the property. +he written offers# proposalsand follow-up of his proposals show that plaintiff E&odrigue? went all out in his efforts to immediatelyacuire an access road to the property# even going to the e0tent of offering $#


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plaintiffs E&odrigue?s effort in acuiring the road-right-of-way to the property. 3efendants Ethe*atungals cannot now invoBe the non-fulfillment of the condition in the contract as a ground forrescission when defendants Ethe *atungals themselves are guilty of preventing the fulfillment of suchcondition.

From the foregoing# this *ourt is of the considered view that rescission of the conditional deed of sale

by the defendants is without any legal or factual basis.E; 0 0 0. @mphases supplied.A)n all# we see no cogent reason to disturb the foregoing factual findings of the trial court.

Furthermore# it is evident from the language of paragraph !@bA that the condition precedent @forrespondents obligation to pay the balance of the purchase price to ariseA in itself partly involves anobligation to do# i.e.# the undertaBing of respondent to negotiate and secure a road right of way at hisown e0pense.E;5 )t does not escape our notice as well# that far from disclaiming paragraph !@bA asvoid# it was the *atungals contention before the trial court that said provision should be read in relationto paragraph !@cA which stated:

c. +hat the access road or &oad &ight of >ay leading to 1ot !


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written notice relinuishing his rights over the property. +he ('3 shall then be reimbursed by the('3,& the sum of F)( GH'3&3 +G,H'3 , @UV5


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mind# the reason only the downpayment was stipulated to be returned is that the vendees option torescind can only be e0ercised in the event that no road right of way is secured and# thus# the vendee hasnot made any additional payments# other than his downpayment.

)n sum# &odrigue?s option to rescind the contract is not purely potestative but rather also subject to thesame mi0ed condition as his obligation to pay the balance of the purchase price - i.e.# the negotiation of

a road right of way. )n the event the condition is fulfilled @or the negotiation is successfulA# &odrigue?must pay the balance of the purchase price. )n the event the condition is not fulfilled @or the negotiationfailsA# &odrigue? has the choice either @aA to not proceed with the sale and demand return of hisdownpayment or @bA considering that the condition was imposed for his benefit# to waive the conditionand still pay the purchase price despite the lacB of road access. +his is the most just interpretation of theparties contract that gives effect to all its provisions.

)n any event# even if we assume for the saBe of argument that the grant to &odrigue? of an option torescind# in the manner provided for in the contract# is tantamount to a potestative condition# not being acondition affecting the perfection of the contract# only the said condition would be considered void andthe rest of the contract will remain valid. )n &omero# the *ourt observed that =where the so-calledpotestative condition is imposed not on the birth of the obligation but on its fulfillment# only thecondition is avoided# leaving unaffected the obligation itself.=E7!

)t cannot be gainsaid that =contracts have the force of law between the contracting parties and should becomplied with in good faith.= >e have also previously ruled that =Ebeing the primary law between theparties# the contract governs the adjudication of their rights and obligations. court has no alternativebut to enforce the contractual stipulations in the manner they have been agreed upon and written.= >efind no merit in petitioners contention that their parents were merely =duped= into accepting theuestioned provisions in the *onditional 3eed of ale. >e note that although the contract was betweengapita *atungal and &odrigue?# ose *atungal nonetheless signed thereon to signify his maritalconsent to the same. >e concur with the trial courts finding that the spouses *atungals claim of beingmisled into signing the contract was contrary to human e0perience and conventional wisdom since itwas ose *atungal who was a practicing lawyer while &odriue? was a non-lawyer.E7 )t can bereasonably presumed that tty. *atungal and his wife reviewed the provisions of the contract#understood and accepted its provisions before they affi0ed their signatures thereon.

fter thorough review of the records of this case# we have come to the conclusion that petitioners failedto demonstrate that the *ourt of ppeals committed any reversible error in deciding the presentcontroversy. Gowever# having made the observation that it was desirable for the *atungals to file aseparate action to fi0 the period for respondent &odrigue?s obligation to negotiate a road right of way#the *ourt finds it necessary to fi0 said period in these proceedings. )t is but euitable for us to maBe adetermination of the issue here to obviate further delay and in line with the judicial policy of avoidingmultiplicity of suits.

)f still warranted# &odrigue? is given a period of thirty @$


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balance of the deducted purchase price as determined in the &+* 3ecision dated 2ay $


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finding that the appellant rescinded without sufficient cause the contract for the sale of molassese0ecuted by it and the appellee. ))). +he lower court erred in rendering judgment in favor of theappellee and not in favor of the appellant in accordance with the prayer of its answer and cross-complaint. )(. +he lower court erred in denying appellants motion for a new trial.= +he specified errorsraise three uestions which we will consider in the order suggested by the appellant.

!. 3id the defendant agree to sell to the plaintiff


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2essrs. G>))'-G)1))' *,.# ilay# 'eg. ,cc.# .).

3& )&: >e are in receipt of your favours dated the 9th and the !$th inst. and understood all theircontents.

)n connection to yours of the !$th inst. we regret to hear that you mentioned 2r. ong Fo the one whovisited your *entral# but it was not for he was 2r. ong Geng# the representative and the manager of2essrs. ong Fo M *o.

>ith reference to the contents of your letter dated the !$th inst. we confirm all the arrangements youhave stated and in order to maBe the contract clear# we hereby uote below our old contract asamended# as per our new arrangements.

@aA rice# at " cents per gallon delivered at the central.

@bA ll handling charges and e0penses at the central and at the docB at 2ambaguid for our account.

@cA For services of one locomotive and flat cars necessary for our si0 tanBs at the rate of 8 for theround trip docB to central and central to docB. +his service to be restricted to one trip for the si0 tanBs.

Kours very truly#

,'% F, M *,2'K4y JJJJJJJJJJJJJJJJJJJJJJJJJJ 2anager.

>e agree with appellant that the above uoted correspondence is susceptible of but one interpretation.+he Gawaiian-hilippine *o. agreed to deliver to ong Fo M *ompany $


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contract clear# we hereby uote below our old contract as amended# as per our new arrangements. @aArice# at " cents per gallon delivered at the central.= )n connection with the portion of the contracthaving reference to the payment for the molasses# the parties have agree on a table showing the date ofdelivery of the molasses# the amount and date thereof# the date of receipt of account by plaintiff# anddate of payment. +he table mentioned is as follows:

3ate of deliveryccount and date thereof

3ate of receipt of account by plaintiff

3ate of payment

!9""

!9"$

!9"$

3ec. !8

"


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2ar. $!

Feb. !"

"


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do

3o

2ar. "9

"arner# 4arnes M *o.# 1td.# the agent of theGawaiian-hilippine *o. to ong Fo M *ompany# mentions =payment on presentation of bills for eachdelivery.= 0hibit ,# another letter from >arner# 4arnes M *o.# 1td. to ong Fo M *ompany datedpril "# !9"$# is of a similar tenor. 0hibit # a communication sent direct by the Gawaiian-hilippine*o. to ong Fo M *ompany on pril "# !9"$# by which the Gawaiian-hilippine *o. gave notice of thetermination of the contract# gave as the reason for the rescission# the breach by ong Fo M *ompany ofthis condition: =Kou will recall that under the arrangements made for taBing our molasses# you were tomeet our accounts upon presentation and at each delivery.= 'ot far removed from this statement# is theallegation of plaintiff in its complaint that =plaintiff agreed to pay defendant# at the end of each monthupon presentation accounts.=

&esolving such ambiguity as e0ists and having in mind ordinary business practice# a reasonablededuction is that ong Fo M *ompany was to pay the Gawaiian-hilippine *o. upon presentation ofaccounts at the end of each month. Hnder this hypothesis# ong Fo M *ompany should have paid forthe molasses delivered in 3ecember# !9""# and for which accounts were received by it on anuary 5#!9"$# not later than anuary $! of that year. )nstead# payment was not made until February "


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5e rule that the appellant had no legal right to rescind the contract of sale because of the failure ofong Fo M *ompany to pay for the molasses within the time agreed upon by the parties. >e sustain thefinding of the trial judge in this respect.

$. ,n the basis first# of a contract for $


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part.

greeable to the foregoing# the judgment appealed from shall be modified and the plaintiff shall haveand recover from the defendant the sum of $#


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rendered its decision denying the petition for certiorari and review to annul and set aside the order ofthe lower court granting the 2otion for 0ecution pending appeal.

2eanwhile herein private respondents filed a motion to dismiss the appeal of petitioners in the originalcomplaint on the ground of alleged abandonment thereof by reason of the failure of the petitioners toamend their record on appeal so as to include in their &ecord on ppeal two important orders of the

lower court dated uly $


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nent petitioners grounds for appealing# petitioners aver that they have good and valid grounds. )nrescinding the contract of lease between petitioner Filoil &efinery *orporation and private respondents#the lower court found that petitioners illegally subleased the lot to petitioner Filoil 2arBeting*orporation and that the latter# in turn# assigned its sublease to petitioner etrophil *orporation.Gowever an e0amination of the lease contract reveals that there is no e0press prohibition against theassignment of the leasehold right. Hnder the law# when there is no e0press prohibition# the lessee may

sublet the thing leased " and all rights acuired by virtue of an obligation are transmissible# if there hasbeen no stipulation to the contrary. $

etitioners admit that on a few occasions# they were late in paying the rentals which were due withinthe first !5 days of each month but their delay was only for a few days. +he delayed rentals for themonths of 2ay# uly# ugust and eptember# !97 were remitted to private respondents on 2ay "!#uly !9# ugust !9 and eptember !;# !97# respectively. uch breaches were not so substantial andfundamental as to defeat the object of the parties in maBing the agreement because the law is notconcerned with such trifles.

ll these arguments however have become moot and academic considering that the contract of leasesought to be rescinded e0pired or terminated last eptember !;# !98" or almost 5 years ago by its ownterms as provided for in the 1ease *ontract. etitioners have won the case without the necessity of anorder by this *ourt to reverse the judgment of the respondent court and/or to grant the petition asprayed for.

>G&F,& premises considered the petition is hereby 3)2)3# with the petitioners ordered to(*+ the premises.

, ,&3&3.

Fernan @*hairmanA# %utierre?# r.# adilla# 4idin and *ortes# .# concur.

http://www.lawphil.net/judjuris/juri!97/jan!97/grJlJ";578J!97.html

%.&. 'o. 1-";578 anuary "8# !97

1%&3 G&2', and , 1%&3# petitioners#vs.F1) 13L and *,H&+ ,F 1 @F)F+G 3)()),'A Q respondents.

2anuel K. 2acias for petitioners.

2ario . ,ngBiBo for private respondent.

+G'I# .:!XwphY!.OZt

+he *ourt# in affirming the decision under review of the *ourt of ppeals# which holds that therespondent buyer of two small residential lots on installment contracts on a ten-year basis who hasfaithfully paid for eight continuous years on the principal alone already more than the value of one lot#besides the larger stipulated interests on both lots# is entitled to the conveyance of one fully paid lot of
http://www.lawphil.net/judjuris/juri1974/jan1974/gr_l_26578_1974.htmlhttp://www.lawphil.net/judjuris/juri1974/jan1974/gr_l_26578_1974.html


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his choice# rules that the judgment is fair and just and in accordance with law and euity.

+he action originated as a complaint for delivery of two parcels of land in ampaloc# 2anila and fore0ecution of the corresponding deed of conveyance after payment of the balance still due on theirpurchase price. rivate respondent as plaintiff had entered into two written contracts with petitioner1egarda Germanos as defendant subdivision owner# whereby the latter agreed to sell to him 1ots 'os. 7

and 8 of blocB 'o. 5' of the subdivision with an area of !5< suare meters each# for the sum of!#5


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because the defendants-owners failed to maBe improvements on the premises# such as roads# filling ofthe submerged areas# etc.# despite repeated promises of their representative# the said 2r. *enon. sregards the supposed cancellation of the contracts# plaintiff averred that no demand has been madeupon him regarding the unpaid installments# and for this reason he could not be declared in default soas to entitle the defendants to cancel the said contracts.

+he issue# therefore# is: Hnder the above facts# may defendants be compelled# or not# to allow plaintiffto complete payment of the purchase price of the two lots in dispute and thereafter to e0ecute the finaldeeds of conveyance thereof in his favorS

000 000 000

>hether or not plaintiffs e0planation for his failure to pay the remaining installments is true#considering the circumstances obtaining in this case# we elect to apply the broad principles of euityand justice. )n the case at bar# we find that the plaintiff has paid the total sum of $#58".


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the present case# with the respondent at bar being granted lesser benefits# since no rescission of contractwas therein permitted. +here# where the therein buyer-appellee identically situated as herein respondentbuyer had liBewise defaulted in completing the payments after having religiously paid the stipulatedmonthly installments for almost eight years and notwithstanding that the seller-appellant had dulynotified the buyer of the rescission of the contract to sell# the *ourt upheld the lower courts judgmentdenying judicial confirmation of the rescission and instead granting the buyer an additional grace

period of si0ty days from notice of judgment to pay all the installment payments in arrears togetherwith the stipulated !


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2'3,6# .

romulgated:

uly ";# "

0------------------------------------------------------------------------------------0

3*)),''*GH .:

etitioner seeBs a review of the *ourt of ppeals @*A 3ecisionE! dated eptember "!# "

;. +hat repeated follow-up was made by the plaintiff for the immediate production of theordered bo0es# but every time# defendant Ewould only show samples of bo0es and maEBe repeatedpromises to deliver the said ordered bo0es.

7. +hat because of the failure of the defendant to deliver the ordered bo0es# plaintiff haEd to


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cancel the same and demand payment and/or refund from the defendant but the latter refused to payand/or refund the H\


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said amount to the unpaid balance.

)n its 2arch "# "


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)n determining when default occurs# rt. !!9! should be taBen in conjunction with rt. !!;9 of thesame law# which provides:

rt. !!;9. +hose obliged to deliver or to do something incur in delay from the time the obligeejudicially or e0trajudicially demands from them the fulfillment of their obligation.

Gowever# the demand by the creditor shall not be necessary in order that delay may e0ist:@!A >hen the obligation or the law e0pressly so declaresC or@"A >hen from the nature and the circumstances of the obligation it appears that thedesignation of the time when the thing is to be delivered or the service is to be rendered was acontrolling motive for the establishment of the contractC or@$A >hen demand would be useless# as when the obligor has rendered it beyond his power toperform.

)n reciprocal obligations# neither party incurs in delay if the other does not comply or is not readyto comply in a proper manner with what is incumbent upon him. From the moment one of the partiesfulfills his obligation# delay by the other begins.

)n reciprocal obligations# as in a contract of sale# the general rule is that the fulfillment of theparties[ respective obligations should be simultaneous. Gence# no demand is generally necessarybecause# once a party fulfills his obligation and the other party does not fulfill his# the latterautomatically incurs in delay. 4ut when different dates for performance of the obligations are fi0ed#the default for each obligation must be determined by the rules given in the first paragraph of thepresent article#E!9 that is# the other party would incur in delay only from the moment the other partydemands fulfillment of the former[s obligation. +hus# even in reciprocal obligations# if the period forthe fulfillment of the obligation is fi0ed# demand upon the obligee is still necessary before the obligorcan be considered in default and before a cause of action for rescission will accrue.

vident from the records and even from the allegations in the complaint was the lacB of demandby petitioner upon respondent to fulfill its obligation to manufacture and deliver the bo0es. +he*omplaint only alleged that petitioner made a ]follow-up^ upon respondent# which# however# wouldnot ualify as a demand for the fulfillment of the obligation. etitioner[s witness also testified that theymade a follow-up of the bo0es# but not a demand. 'ote is taBen of the fact that# with respect to theirclaim for reimbursement# the *omplaint alleged and the witness testified that a demand letter was sentto respondent. >ithout a previous demand for the fulfillment of the obligation# petitioner would nothave a cause of action for rescission against respondent as the latter would not yet be considered inbreach of its contractual obligation.

ven assuming that a demand had been previously made before filing the present case#petitioner[s claim for reimbursement would still fail# as the circumstances would show that respondentwas not guilty of breach of contract.

+he e0istence of a breach of contract is a factual matter not usually reviewed in a petition forreview under &ule 5.E"


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petition# we will not veer away from this doctrine and will thus sustain the factual findings of the *#which we find to be adeuately supported by the evidence on record.

s correctly observed by the *# aside from the pictures of the finished bo0es and theproduction report thereof# there is ample showing that the bo0es had already been manufactured byrespondent. +here is the testimony of stanislao who accompanied Wue to the factory# attesting that#

during their first visit to the company# they saw the pile of petitioner[s bo0es and Wue tooB samplesthereof. Wue# petitioner[s witness# himself confirmed this incident. Ge testified that +an pointed thebo0es to him and that he got a sample and saw that it was blanB. Wue[s absolute assertion that thebo0es were not manufactured is# therefore# implausible and suspicious.

)n fact# we note that respondent[s counsel manifested in court# during trial# that his client waswilling to shoulder e0penses for a representative of the court to visit the plant and see the bo0es.E""Gad it been true that the bo0es were not yet completed# respondent would not have been so bold as tochallenge the court to conduct an ocular inspection of their warehouse. ven in its *omment to thispetition# respondent prays that petitioner be ordered to remove the bo0es from its factory site#E"$which could only mean that the bo0es are# up to the present# still in respondent[s premises.

>e also believe that the agreement between the parties was for petitioner to picB up the bo0esfrom respondent[s warehouse# contrary to petitioner[s allegation. +hus# it was due to petitioner[s faultthat the bo0es were not delivered to +3*,.

etitioner had the burden to prove that the agreement was# in fact# for respondent to deliver thebo0es within $< days from payment# as alleged in the *omplaint. )ts sole witness# Wue# was not evencompetent to testify on the terms of the agreement and# therefore# we cannot give much credence to histestimony. )t appeared from the testimony of Wue that he did not personally place the order with +an#thus:W. 'o# my uestion is# you went to 3avao *ity and placed your order thereS. ) made a phone call.W. Kou made a phone call to 2r. +anS. +he first time# the first call to 2r. lfEred ,ng. lfred ,ng has a contact with 2r. +an.W. o# your first statement that you were the one who placed the order is not trueS. +hat[s true. +he olar Garvest made a contact with 2r. +an and ) deposited the money in thebanB.W. Kou said a while ago Ethat you were the one who called 2r. +an and placed the order for$;#5


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such obligation. Wue# insisting that the bo0es had not been manufactured# admitted that he did not giverespondent the authority to deliver the bo0es to +3*,:W. 3id you give authority to 2r. +an to deliver these bo0es to +3*,S. 'o# sir. s ) have said# before the delivery# we must have to checB the carton# the uantity anduality. 4ut ) have not seen a single carton.

W. re you trying to impress upon the Ecourt that it is only after the bo0es are completed# will yougive authority to 2r. +an to deliver the bo0es to +3*,ES. ir# because when ) checBed the plant# ) have not seen any carton. ) asBed 2r. +an to rush thecarton but not_E";W. 3id you give any authority for 2r. +an to deliver these bo0es to +3*,S. 4ecause ) have not seen any of my carton.W. Kou don[t have any authority yet given to 2r. +anS. 'one# your Gonor.E"7urely# without such authority# +3*, would not have allowed respondent to deposit the bo0eswithin its premises.

)n sum# the *ourt finds that petitioner failed to establish a cause of action for rescission# theevidence having shown that respondent did not commit any breach of its contractual obligation. spreviously stated# the subject bo0es are still within respondent[s premises. +o put a rest to this dispute#we therefore relieve respondent from the burden of having to Beep the bo0es within its premises and#conseuently# give it the right to dispose of them# after petitioner is given a period of time within whichto remove them from the premises.

>G&F, premises considered# the petition is 3')3. +he *ourt of ppeals 3ecisiondated eptember "!# "


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Hpon the other hand# respondent 4 2arthel )nternational# )nc. is a business entity engaged in trading#marBeting# and selling of various industrial commodities. )t is also an importer and distributor ofdifferent brands of engines and spare parts.

From !987 up to the institution of this case# respondent supplied petitioner with spare parts for thelatter[s marine engines. ometime in !989# petitioner asBed respondent for a uotation for various

machine parts. cceding to this reuest# respondent furnished petitioner with a formal uotation#E"thus:

2ay $!# !9892)'W-;


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*K1. 1)'& 2/ ! + 77#

,n "; anuary !99


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3ue to the failure of the parties to settle the matter# respondent filed an action for sum of money anddamages before the &egional +rial *ourt @&+*A of 2aBati *ity. )n its complaint#E!" respondent@plaintiff belowA alleged that despite its repeated oral and written demands# petitioner obstinatelyrefused to settle its obligations. &espondent prayed that petitioner be ordered to pay for the value ofthe cylinder liners plus accrued interest of !!!#$hereas in the firstamended complaint# only nine postdated checBs were involved# in its second amended complaint#respondent claimed that petitioner actually issued ten postdated checBs. 3espite the opposition bypetitioner# the trial court admitted respondent[s econd mended *omplaint with reliminaryttachment.E"G&F, the complaint is hereby dismissed# with costs against the plaintiff# which is ordered topay 5


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petitioner. &espondent[s counterclaims for moral# e0emplary# and compensatory damages weredismissed for insufficiency of evidence.

&espondent moved for the reconsideration of the trial court[s 3ecision but the motion was denied forlacB of merit.E"5

ggrieved by the findings of the trial court# respondent filed an appeal with the *ourt of ppealsE";which reversed and set aside the 3ecision of the court a uo. +he appellate court brushed asidepetitioner[s claim that time was of the essence in the contract of sale between the parties hereinconsidering the fact that a significant period of time had lapsed between respondent[s offer and theissuance by petitioner of its purchase orders. +he dispositive portion of the 3ecision of the appellatecourt states:

>G&F, the decision of the lower court is &(&3 and + )3. +he appellee ishereby ,&3&3 to pay the appellant the amount of 95#


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of the proposed terms of the contract of sale.E$! +hus# petitioner is of the view that these twodocuments ]cannot be taBen separately as if there were two distinct contracts.^E$" >e do not agree.

)t is a cardinal rule in interpretation of contracts that if the terms thereof are clear and leave no doubt asto the intention of the contracting parties# the literal meaning shall control.E$$ Gowever# in order toascertain the intention of the parties# their contemporaneous and subseuent acts should be considered.

E$ >hile this *ourt recogni?es the principle that contracts are respected as the law between thecontracting parties# this principle is tempered by the rule that the intention of the parties isprimordialE$5 and ]once the intention of the parties has been ascertained# that element is deemed as anintegral part of the contract as though it has been originally e0pressed in uneuivocal terms.^E$;

)n the present case# we cannot subscribe to the position of petitioner that the documents# by themselves#embody the terms of the sale of the cylinder liners. ,ne can easily glean the significant differences inthe terms as stated in the formal uotation and urchase ,rder 'o. !$8$9 with regard to the due date ofthe down payment for the first cylinder liner and the date of its delivery as well as urchase ,rder 'o.!hile the uotation provided byrespondent evidently stated that the cylinder liners were supposed to be delivered within two monthsfrom receipt of the firm order of petitioner and that the "5N down payment was due upon the cylinderliners[ delivery# the purchase orders prepared by petitioner clearly omitted these significant items. +hepetitioner[s urchase ,rder 'o. !$8$9 made no mention at all of the due dates of delivery of the firstcylinder liner and of the payment of "5N down payment. )ts urchase ,rder 'o. !

)n the case of 4ugatti v. *ourt of ppeals#E$7 we reiterated the principle that ]Ea contract undergoesthree distinct stages preparation or negotiation# its perfection# and finally# its consummation.'egotiation begins from the time the prospective contracting parties manifest their interest in thecontract and ends at the moment of agreement of the parties. +he perfection or birth of the contracttaBes place when the parties agree upon the essential elements of the contract. +he last stage is theconsummation of the contract wherein the parties fulfill or perform the terms agreed upon in thecontract# culminating in the e0tinguishment thereof.^

)n the instant case# the formal uotation provided by respondent represented the negotiation phase ofthe subject contract of sale between the parties. s of that time# the parties had not yet reached anagreement as regards the terms and conditions of the contract of sale of the cylinder liners. etitionercould very well have ignored the offer or tendered a counter-offer to respondent while the latter couldhave# under the pertinent provision of the *ivil *ode#E$8 withdrawn or modified the same. +he partieswere at liberty to discuss the provisions of the contract of sale prior to its perfection. )n this connection#we turn to the testimonies of ajarillo and Ianaan# r.# that the terms of the offer were# indeed#renegotiated prior to the issuance of urchase ,rder 'o. !$8$9.

3uring the hearing of the case on "8 anuary !99$# ajarillo testified as follows:

W: Kou testified 2r. >itness# that you submitted a uotation with defendant 1oren?o hipping*orporation dated rather marBed as 0hibit stating the terms of payment and delivery of the cylinderliner# did you notS

: Kes sir.

W: ) am showing to you the uotation which is marBed as 0hibit there appears in the uotation that


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the delivery of the cylinder liner will be made in two months[ time from the time you received theconfirmation of the order. )s that correctS

: Kes sir.

W: 'ow# after you made the formal uotation which is 0hibit how long a time did the defendant

maBe a confirmation of the orderS: fter si0 months.

W: nd this is contained in the purchase order given to you by 1oren?o hipping *orporationS

: Kes sir.

W: 'ow# in the purchase order dated 'ovember "# !989 there appears only the date the terms ofpayment which you reuired of them of "5N down payment# now# it is stated in the purchase order thedate of delivery# will you e0plain to the court why the date of delivery of the cylinder liner was notmentioned in the purchase order which is the contract between you and 1oren?o hipping *orporationS

: >hen 1oren?o hipping *orporation inuired from us for that cylinder liner# we have inuiredEwith our supplier in apan to give us the price and delivery of that item. >hen we received thatuotation from our supplier it is stated there that they can deliver within two months but we have to getour confirmed order within une.

W: 4ut were you able to confirm the order from your apanese supplier on une of that yearS

: 'o sir.

W: >hyS >ill you tell the court why you were not able to confirm your order with your apanesesupplierS

: 4ecause 1oren?o hipping *orporation did not give us the purchase order for that cylinder liner.

W: nd it was only on 'ovember "# !989 when they gave you the purchase orderS

: Kes sir.

W: o upon receipt of the purchase order from 1oren?o hipping 1ines in !989 did you confirm theorder with your apanese supplier after receiving the purchase order dated 'ovember "# !989S

: ,nly when 1oren?o hipping *orporation will give us the down payment of "5N.E$9

For his part# during the cross-e0amination conducted by counsel for petitioner# Ianaan# r.# testified inthe following manner:

>)+': +his term said "5N upon delivery. ubseuently# in the final contract# what was agreedupon by both parties was "5N down payment.

W: >henS


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: Hpon confirmation of the order.

. . .

W: nd when was the down payment supposed to be paidS

: )t was not stated when we were supposed to receive that. 'ormally# we e0pect to receive at theearliest possible time. gain# that would depend on the customers. ven after receipt of the purchaseorder which was what happened here# they re-negotiated the terms and sometimes we do accept that.

W: >as there a re-negotiation of this termS

: +his offer# yes. >e offered a final reuirement of "5N down payment upon delivery.

W: >hat was the re-negotiated termS

: "5N down payment

W: +o be paid whenS

: upposed to be paid upon order.E


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!989 to early anuary !99


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+he law e0plicitly gives either party the right to rescind the contract only upon the failure of the otherto perform the obligation assumed thereunder.E8 +he right# however# is not an unbridled one. +his*ourt in the case of Hniversity of the hilippines v. 3e los ngeles#E9 speaBing through the eminentcivilist ustice .4.1. &eyes# e0horts:

,f course# it must be understood that the act of a party in treating a contract as cancelled or resolved onaccount of infractions by the other contracting party must be made Bnown to the other and is alwaysprovisional# being ever subject to scrutiny and review by the proper court. )f the other party denied thatrescission is justified# it is free to resort to judicial action in its own behalf# and bring the matter tocourt. +hen# should the court# after due hearing# decide that the resolution of the contract was notwarranted# the responsible party will be sentenced to damagesC in the contrary case# the resolution willbe affirmed# and the conseuent indemnity awarded to the party prejudiced. @mphasis suppliedA

)n other words# the party who deems the contract violated may consider it resolved or rescinded# andact accordingly# without previous court action# but it proceeds at its own risB. For it is only the finaljudgment of the corresponding court that will conclusively and finally settle whether the action taBenwas or was not correct in law. 4ut the law definitely does not reuire that the contracting party whobelieves itself injured must first file suit and wait for a judgment before taBing e0trajudicial steps toprotect its interest. ,therwise# the party injured by the other[s breach will have to passively sit andwatch its damages accumulate during the pendency of the suit until the final judgment of rescission isrendered when the law itself reuires that he should e0ercise due diligence to minimi?e its owndamages.E5


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and . '% )'+[1. 1+3.# represented by their ttorney-in-fact# %,'61, *. K# respondents.& , 1 H + ) , '2'3,6# .:

For consideration are @!A petitioners ,mnibus 2otion in %.&. 'o. !!"99! seeBing reconsideration ofthe *ourts resolution dated ,ctober 9# !995# which denied the reconsideration of the decision in this

case promulgated on 2arch "


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allegedly acBnowledged receipt of petitioners record on appeal. +hese are the notice of appeal filed bypetitioner on ,ctober !# !99" @nne0 # ,mnibus 2otionA# 2otion to triBe ,ut the 'otice of ppealwith 2otion for )ssuance of >rit of 0ecution filed by the private respondents @nne0 %A and*omment filed by another claimant @olid 4anBA dated 2ay ";# !995 @nne0 GA.

)n addition# petitioner claims that the certifications by the clerBs of the &+* and the *ourt of ppeals

that no record on appeal was filed are unreliable# that his record on appeal was suppressed from therecords of the case# and that the certification of the *ourt of ppeals that no record on appeal was filedtherein was to be e0pected because the record on appeal was filed with the &+* and not with the *ourtof ppeals.

*ommenting# private respondents contend that the ,mnibus 2otion is actually a second motion forreconsideration which is not allowed by the rules since the issues raised therein had been fullyconsidered and passed upon by the *ourt and that there is no compelling reason to grant the motion.+hey maintain that petitioners appeal was not perfected because of the non-filing of a record on appeal.4ranch *lerB of court ntonio (alencia# on the other hand# maintains that =no record on appeal wasfiled and therefore none could be found in the e0pediente @records of the caseA.= Ge claims that therecord on appeal allegedly filed in the trial court could not have been unlawfully removed from therecords because all pleadings received by the court are immediately attached to the records. Ge deniesthat the signature appearing on the alleged record on appeal was his.

4ecause of

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