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# 1 Pelayo Versus Lauron Issue: Whether or not the father-in-law or the husband is bound to pay medical assistance rendered to a wife. Facts: 1. Plaintiff-physician rendered medical assistance in the delivery of the wife to his child in the house of the defendant (father-in-law of the wife). 2. Defendant did not pay the plaintiff. Held: Article 1089 of the Civil Code, obligations are created by law, by contracts, by quasi-contracts, and by illicit acts and omissions or by those in which any kind of fault or negligence occurs. Obligations arising from law are not presumed. Those expressly determined in the code or in special laws, etc., are the only demandable ones. Obligations arising from contracts have legal force between the contracting parties and must be fulfilled in accordance with their stipulations. (Arts. 1090 and 1091.) The rendering of medical assistance in case of illness is comprised among the mutual obligations to which the spouses are bound by way of mutual support. (Arts. 142 and 143.) # 2 Dela Cruz v. NTE Issue: Whether or not an employer has the obligation to provide litigation fees to an employee sued for reason of the discharge of his duty. Facts: 1. Plantiff-security guard, shot a person after the latter attacked him with bolo, trying to gatecrash in the moviehouse, resulting in the latters death 2. Family of the deceased sued plaintiff, thus, he incurred expenses due to litigations. 3. Plaintiff seeks for reimbursement to his employer alleging that he was an agent of the defendants and that as such agent he was entitled to reimbursement of the expenses incurred by him in connection with the agency. Rulings: But we are not prepared to say and to hold that the giving of said legal assistance to its employees is a legal obligation. While it might yet and possibly be regarded as a normal obligation, it does not at present count with the sanction of man-made laws. Therefore, the employer cannot be obliged to render obligation not expressed in law. # 3 SVHF v. Santos Issues:

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1. Whether or not if a compromise agreement or compromise judgment does not provide for the payment of interest, the legal interest by way of penalty on account of fault or delay shall not be due and payable. 2. Whether or not if a compromise agreement did not provide for a period within which the obligation will become due and demandable, it is incumbent creditor to ask for judicial intervention for purposes of fixing the period, and when fixed period exists, thats the time legal interests can be computed. Facts: 1. Defendant- foundation indebted to the plaintiff: Oct. 26, 1990- execution of the compromise agreement (d-f agreed to pay debts); the terms provide that within a period of not more than two (2) years from the execution of this agreement, payment of debt should be made. Sept. 30, 1991- compromise agreement was approved by court. Oct. 28, 1992- plaintiff make a demand for the fulfilment of the obligation. February 8, 1995- defendant paid remaining debt. Debtor delayed payment of debt. Ruling: A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced. It is an agreement between two or more persons, who, for preventing or putting an end to a lawsuit, adjust their difficulties by mutual consent in the manner which they agree on, and which everyone of them prefers in the hope of gaining, balanced by the danger of losing. The general rule is that a compromise has upon the parties the effect and authority of res judicata, with respect to the matter definitely stated therein, or which by implication from its terms should be deemed to have been included therein. This holds true even if the agreement has not been judicially approved. When compromise agreement becomes binding? A compromise agreement as a consensual contract became binding between the parties upon its execution and not upon its court approval. From the time a compromise is validly entered into, it becomes the source of the rights and obligations of the parties thereto. The purpose of the compromise is precisely to replace and terminate controverted claims. The two-year period must be counted from October 26, 1990, the date of execution of the compromise agreement, and not on the judicial approval of the compromise agreement on September 30, 1991. When respondents wrote a demand letter to petitioner on October 28, 1992, the obligation was already due and demandable. When the petitioner failed to pay its due obligation after the demand was made, it incurred delay. Article 1169 of the New Civil Code provides: Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. Delay as used in this article is synonymous to default or mora which means delay in the fulfillment of [ obligations. It is the non-fulfillment of the obligation with respect to time.

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In order for the debtor to be in default, it is necessary that the following requisites be present: (1) that the obligation be demandable and already liquidated; (2) that the debtor delays performance; and (3) that the creditor requires the performance judicially or extrajudicially. In order for the debtor to be in default, it is necessary that the following requisites be present: (1) that the obligation be demandable and already liquidated; (2) that the debtor delays performance; and (3) that the creditor requires the performance judicially or extrajudicially. Defendant- foundation fully settled its outstanding balance only onFebruary 8, 1995, which is more than two years after the extra-judicial demand. Moreover, it filed several motions and elevated adverse resolutions to the appellate court to hinder the execution of a final and executory judgment, and further delay the fulfillment of its obligation. Third, the demand letter sent to the petitioner on October 28, 1992, was in accordance with an extrajudicial demand contemplated by law. Verily, the petitioner is liable for damages for the delay in the performance of its obligation. This is provided for in Article 1170 of the New Civil Code. When the debtor knows the amount and period when he is to pay, interest as damages is generally allowed as a matter of right. The complaining party has been deprived of funds to which he is entitled by virtue of their compromise agreement. The goal of compensation requires that the complainant be compensated for the loss of use of those funds. This compensation is in the form of interest. In the absence of agreement, the legal rate of interest shall prevail. The legal interest for loan as forbearance of money is 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. #4 SSS v. MDHC Issues: 1. Whether or not penalty is demandable even extinction of principal obligation. 2. Whether or not even if there is date for the fulfilment of the obligation, demand would still be necessary to put the creditor in delay. Facts: 1. Defendant loaned money from the plaintiff. 2. Defendant was not able to pay his obligation on time. There was Statement of Account issued by the plaintiff, but no demand letter sent. 3. Held: A penal clause has been defined as"an accessory obligation which the parties attach to a principal obligation for the purpose of insuring the performance thereof by imposing on the debtor a special presentation (generally consisting in the payment of a sum of money) in case the obligation is not fulfilled or is irregularly or inadequately fulfilled" (3 Castan 8th Ed. p. 118). Now an accessory obligation has been defined as that attached to a principal obligation in order to complete the same or take its place in the case of breach (4 Puig Pea Part 1 p. 76). Note therefore that an accessory obligation is dependent for its existence on the existence of a principal obligation. A principal obligation may exist without an accessory obligation but an accessory obligation cannot exist without a principal obligation. For example, the contract of mortgage is an accessory obligation to enforce

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the performance of the main obligation of indebtedness. An indebtedness can exist without the mortgage but a mortgage cannot exist without the indebtedness, which is the principal obligation. In the present case, the principal obligation is the loan between the parties. The accessory obligation of a penal clause is to enforce the main obligation of payment of the loan. If therefore the principal obligation does not exist the penalty being accessory cannot exist. Now then when is the penalty demandable? A penalty is demandable in case of non performance or late performance of the main obligation. In other words in order that the penalty may arise there must be a breach of the obligation either by total or partial non fulfillment or there is non- fulfillment in point of time which is called mora or delay. The debtor therefore violates the obligation in point of time if there is mora or delay. Now, there is no mora or delay unless there is a demand. It is noteworthy that in the present case during all the period when the principal obligation was still subsisting, although there were late amortizations there was no demand made by the creditor, plaintiff-appellant for the payment of the penalty. Therefore up to the time of theletter of plaintiff-appellant there was no demand for the payment of the penalty, hence the debtor was no in mora in the payment of the penalty. #5 Lorenzo Shipping Co. v. BJ Marthel International Issue: WON Vendor: BJ Marthel International Vendee: Lorenzo SC Contract of Sale of Cylinder Liner Facts: 1. Vendee ask for quotations of a cylinder liner. 2. Vendor sent a quotation stating price and date of delivery which is two (2) months after receipt of firm order. 3. Vendee issued purchase orders to be used for one of its ships, however the purchase order differs from the quotation with respect to terms of payment (instead of paying 25% downpayment it issued ten post dated checks representing full payment) and did not specify the date of delivery 4. Checks was dishonoured due to insufficiency of funds. 5. Vendor delivered the cylinder, vendor accepted it. 6. Vendor demanded payment of remaining balance to the payment for the cylinder. 7. Vendee now offer to pay only value lower than the original price indicated in the quotation claiming that vendor incurred delay in the delivery of the cylinder since accdg. to him deliver must be within two (2) months after the purchase order as indicated in the quotations. 8. Vendor filed an Action for Sum of Money plus damages. Vendee: Time is of the essence because it is indicated in the quotation that delivery must be made w/in two (2) months after a firm order. RTC- upheld vendees contention. CA- reversed; significant time elapsed between vendors offer and vendees purchase order. Held: Doctrine 1- there must be a sufficient manifestation, either in the contract itself or the surrounding circumstances of that intention, in determining whether time is of the essence in a contract.
Doctrine 2- when quotation offers the terms of the contract of sale, and the purchase order stated different terms as to its payment and date of delivery was of no mention, they cannot constitute as terms of sale.

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In such situation there created an obscurity in the terms, therefore, the date of delivery in the quotation cannot be the date to be relied on the performance of the obligation which is delivery.

Doctrine 4- When the time of delivery is not fixed or is stated in general and indefinite terms, time is not of the essence of the contract.
In such cases, the delivery must be made within a reasonable time. The law implies, however, that if no time is fixed, delivery shall be made within a reasonable time, in the absence of anything to show that an immediate delivery intended. Doctrine 5- When vendor is unaware of the immediate delivery needed by the vendee, he is not bound by the unspoken immediateness in the side of the vendee. In this case, the unaware vendor is allowed to fulfil the obligation within a reasonable time. Doctrine 6- Even where time is of the essence, a breach of the contract by one of the parties may be waived by the other party's. Thus, act of vendee in accepting the delivery of the cylinder waived the claimed delay.

TELEFAST COMMUNICATIONS/PHILIPPINE WIRELES INC. vs CASTRO, SR

Case #6 Filed under: Uncategorized Leave a comment March 24, 2011 GR NO. 73867. FEB. 29, 1988 FACTS: Sofia Crouch was in the Philippines for vacation when her mother died. Onthat same day, she adddressed a telegramannouncing her mothers death to Ignacio Castro, Sr at 685, Wanda, Scottsburg, Indiana, USA. The defendants, after receiving the required fees and charges, accepted the telegram for transmission. The husband and the children of the deceased who were all residing in the US never received the telegram. Sofia Crouch was the only one present during the internment. Sofia and the other plaintiffs then filed an action to recover damages arising from the breach of contract against the defendants. The only defense of the defendants was that, the failure was due to the technical and atmospheric factors beyond its control. However no evidence appeared on record that the defendant ever make any attempt to advise Sofia as to why they could not transmit the telegram. ISSUE: Whether or not the petitioner are liable for damages for their failure to transmit the telegram. Whether or not the petitioners should only liable for actual or quantified damages. RULING:

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YES. TELEFAST COMMUNICATIONS/PHIL. WIRELESS INC ARE LIABLE TO INDEMNIFY THE RESPONDENTS FOR DAMAGES THEY HAVE SUFFERED FROM THE FAILURE OF THE PLAINTIFFS ON TRANSMITTING THE TEEGRAM. The defendant Sofia Crouch and the plaintiffs entered into a contract whereby the plaintiffs shall send the respondents message overseas by telegram, after paying the required fees. The defendant has performed her part in the obligation. However, the plaintiffs failed to do their part. Petitoner therefore was guilty of contravening its obligation and is liable for damages pursuant to the provisions of Art 1170 and Art. 2176 of the Civil Code. NO. THE PETITIONERS LIABILITY ARE NOT LIMITED TO ACTUAL OR QUANTIFIED DAMAGES. Pursuant to Art. 2217 of the Civil Code, the petitioners are liable to indmenify the respondents for the moral damages they had suffered. The petitioners act or omissionwas the precise cause of the sufferings that the respondents have to undergo. Respondents Sofia Crouch shall be awarded with P16 000 as compensatory damages. Each of the respondents shall be awarded with P10 000 as moral damages and P1 000 as exemplary damages.

#7 RCBC v. Court of Appeals Facts: 1. Buyer purchased Toyota Corolla from Toyota Shaw, Inc. for which he made a down payment, and the

balance of the purchase price to be paid in 24 equal monthly installments. 2. To secure the balance, private respondent executed a promissory note and a contract of chattel mortgage over the vehicle in favor of Toyota Shaw, Inc. The contract of chattel mortgage, in paragraph 11 thereof, provided for an acceleration clause stating that should the mortgagor default in the payment of any instalment, the whole amount remaining unpaid shall become due. In addition, the mortgagor shall be liable for 25% of the principal due as liquidated damages. 3. Toyota Shaw, Inc. assigned all its rights and interests in the chattel mortgage to petitioner Rizal Commercial Banking Corporation (RCBC). 4. All the checks were encashed and debited by RCBC from private respondent's account, except for RCBC Check No. 279805 representing the payment for August 10, 1991, which was unsigned. 5. On the theory that respondent defaulted in his payments, the check representing the payment for August 10, 1991 being unsigned, petitioner, in a lette, demanded from private respondent the payment of the balance of the debt, including liquidated damages. The latter refused, prompting petitioner to file an action for replevin and damages before the Pasay City Regional Trial Court (RTC). Held: Article 1170 of the Civil Code states that those who in the performance of their obligations are guilty of delay are liable for damages. The delay in the performance of the obligation, however, must be either malicious or negligent. Thus, assuming that private respondent was guilty of delay in the payment of the value of the unsigned check, private respondent cannot be held liable for damages. There is no imputation, much less evidence, that private respondent acted with malice or negligence in failing to

Page |7 sign the check. Indeed, we agree with the Court of Appeals' finding that such omission was mere "inadvertence or oversight" on the part of private respondent.

As pointed out by the trial court, this whole controversy could have been avoided if only petitioner bothered to call up private respondent and ask him to sign the check. Good faith not only in compliance with its contractual obligations, but also in observance of the standard in human relations, for every person "to act with justice, give everyone his due, and observe honesty and good faith." Failing thus, petitioner is liable for damages caused to private respondent. These include moral damages for the mental anguish, serious anxiety, besmirched reputation, wounded feelings and social humiliation suffered by the latter.
#8 NPC v. CA

NPC v. CA
Facts: At the height of the typhoon Kading, a flash flood covered the towns near the Angat Dam, causing deaths and destructions to residents and their properties. Respondents blamed the tragedy to the reckless and imprudent opening of the 3 floodgates by petitioner, without prior warning to the residents within the vicinity of the dam. Petitioners denied the allegations and contended that they have kept the water at a safe level, that the opening of floodgates was done gradually, that it exercises diligence in the selection of its employees, and that written warnings were sent to the residents. It further contended that there was no direct causal relationship between the damage and the alleged negligence on their part, that the residents assumed the risk by living near the dam, and that what happened was a fortuitous event and are of the nature of damnum absque injuria. Issues: (1) Whether the petitioner can be held liable even though the coming of the typhoon is a fortuitous event (2) Whether a notice was sent to the residents (3) Whether the damage suffered by respondents is one of damnum absque injuria Held: (1) The obligor cannot escape liability, if upon the happening of a fortuitous event or an act of God, a corresponding fraud, negligence, delay or violation or contravention in any manner of the tenor of the obligation as provided in Article 1170 of the Civil Code which results in loss or damage. Even if there was no contractual relation between themselves and private respondents,

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they are still liable under the law on quasi-delict. Article 2176 of the Civil Code explicitly provides "whoever by act or omission causes damage to another there being fault or negligence is obliged to pay for the damage done." Act of God or force majeure, by definition, are extraordinary events not foreseeable or avoidable, events that could not be foreseen, or which, though foreseen, are inevitable. It is therefore not enough that the event should not have been foreseen or anticipated, as is commonly believed, but it must be one impossible to foresee or to avoid. The principle embodied in the act of God doctrine strictly requires that the act must be occasioned solely by the violence of nature. Human intervention is to be excluded from creating or entering into the cause of the mischief. When the effect is found to be in part the result of the participation of man, whether due to his active intervention or neglect or failure to act, the whole occurrence is then humanized and removed from the rules applicable to the acts of God. In the case at bar, although the typhoon "Kading" was an act of God, petitioners can not escape liability because their negligence was the proximate cause of the loss and damage. (2) The letter itself, addressed merely "TO ALL CONCERNED", would not strike one to be of serious importance, sufficient enough to set alarm and cause people to take precautions for their safety's sake. The notices were not delivered, or even addressed to responsible officials of the municipalities concerned who could have disseminated the warning properly. They were delivered to ordinary employees and policemen. As it happened, the said notices do not appear to have reached the people concerned, which are the residents beside the Angat River. The plaintiffs in this case definitely did not receive any such warning. Indeed, the methods by which the defendants allegedly sent the notice or warning was so ineffectual that they cannot claim, as they do in their second assignment of error, that the sending of said notice has absolved them from liability. (3) We cannot give credence to petitioners' third assignment of error that the damage caused by the opening of the dam was in the nature of damnum absque injuria, which presupposes that although there was physical damage, there was no legal injury in view of the fortuitous events. There is no question that petitioners have the right, duty and obligation to operate, maintain and preserve the facilities of Angat Dam, but their negligence cannot be countenanced, however noble their intention may be. The end does not justify the means, particularly because they could have done otherwise than simultaneously opening the spillways to such extent. Needless to say, petitioners are not entitled to counterclaim.
#9 Juntilla v. Funtanar

Juntilla v Funtanar FACTS: Plaintiff was seated in the front passenger seat of a public utility jeepney when the right tire blew up. He was thrown out of the jeep and suffered injuries. He also lost his omega watch. HELD: S C s a i d t h a t t h e r e a r e s p e c i f i c a c t s o f negligence on the part of the respondents. Jeep was running at a very fast speed and was overloaded. In this case, the cause of the unforeseen and unexpected occurrence was not independent of human

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will. It was caused either through the negligence of the driver or because of the mechanical defects in the tire. CHARACTERISTICS OF CASO FORTUITO: 1 . C a u s e o f t h e u n f o r e s e e n a n d u n e x p e c t e d occurrence, or of the failure of the debtor to comply with his obligation must be independent of human will. 2. It must be impossible to foresee the event which constitutes the caso fortuito, or if it can be foreseen, it is impossible to avoid. 3 . T h e o c c u r r e n c e m u s t b e s u c h a s t o r e n d e r i t impossible for the debtor to fulfill his obligation in a normal manner 4 . O b l i g o r m u s t b e f r e e f r o m p a r t i c i p a t i o n i n t h e aggravation of the injury resulting to the creditor.
#10 REFORMINA v TOMOL, JR

FACTS: A fire occurred burning the boat FB Pacita III and fishing gear of the Reforminas. Consequently, they filed an action for recovery of damages for injury to persons and loss of property. Judge Tomol, Jr awarded the Reforminas damages with legal interest from the filing of the complaint until paid. He further rendered that by legal interest meant 6% as provided for by Art 2209 CC. Reforminas contend that it should be 12% by virtue of Central Bank Circular No. 416. ISSUE: WON the legal interest is 6%. HELD: YES. RATIO: C.B. Circular 416 which took effect July 29, 1974 pursuant to PD 116 which amended Act 2655 (Usury Law) which raised the legal interest from 6% to 12% applies only to forbearances of money, goods or credit and court judgments. Such court judgment refers only to judgments in litigations involving loans or forbearance of any money, goods or credit. Any other kind of monetary judgment does not fa ll under the coverage of said law for it is not within the ambit of authority granted to the central Bank. Only the legislature can change the laws. In this case, the decision of the judge is one rendered in an action for damages arising from injury to persons and loss of property and does not involve a loan much less forbearance of any money, goods or credit. The law applicable is thus ART 2209 CC which states that: If the obligation consists in the payment of a sum of money and the debtor incurs in delay, the indemnity for damages there being no stipulation to the contrary shall be the payment of interest agreed upon, and in the absence of stipulation, the legal interest which is 6% per annum.
#21 Santos v. Court of Appeals, Caseda Issue: 1. Whether or not the contract is a contract of sale or contract to sell. Facts:

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1. Plaintiff borrowed money from a bank, having formers house and lot mortgaged as a bond maturing on June 16, 1987. 2. June 16, 1984, the bank sent plaintiff demand letter for payment of principal with interest. 3. Plaintiff, had no funds, thus they sold the house and lot to a third person (Caseda). 4. Caseda paid initially and took over the possession of the property; however, failed to pay the remaining balance of loan due to bankruptcy. 5. January 1989, plaintiff repossessed the property. 6. February 1989, Caseda offered to pay the balance, but they could not agree because plaintiff wants a higher price of the house and lot due to real estate boom that time. 7. Caseda filed a civil case against plaintiff praying for the execution of final deed of conveyance over the property, or in default, reimbursements plus damages. RTC- Caseda lost, because accdg. to the court, they were short of the purchase price, therefore, cannot demand specific performance. Further, Caseda is not entitled to reimbursement of payment made because they occupied the property for a period of time, and its failure of plaintiff to liquidate the mortgage on time. CA- reversed RTC ruling, and gave Casedas 90 days to pay the balance of the purchase price. Held: 1. Caseda took possession of the property, but there was no valid transfer of ownership made. Therefore, the contract is a contract of sale. Contract of sale: expressly obliges the vendor to transfer the ownership of the thing sold, because this is the essence of contract of sale. Contract to sell: ownership is reserved by the vendor, and is not passed until full payment of the purchase price. Since it is a contract to sell, judicial rescission of said agreement is NOT necessary, because there is no rescission to speak of. CONTRACT TO SELL: -payment of the purchase price is a positive suspensive condition (it will give rise to the acquisition of a right). Failure to pay the price is not a breach, but a situation that prevents the obligation of the vendor to convey title from acquiring an obligatory force. CONTRACT OF SALE: -payment of the purchase price is a negative suspensive condition (it will extinguish existing right). Vendor lost ownership of the thing sold and cannot recover it, unless the contract of sale is rescinded and set aside. *In contract to sell, if the vendor ejects the vendee for not complying for the condition (e.g. payment), he is not rescinding the contract, he is enforcing it.

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Plaintiff reoccupied the house, they did not rescind the contract, he enforced it. There being no right given to the vendee (transfer of title), judicial rescission, is not necessary. Case #22 Visayan Sawmill Company, Inc. v. CA, Hibionada (Positive Suspensive Condition) Issue: Whether or not the contract is a contract of sale or contract to sell. Facts: 1. Parties entered into a Purchase and Sale of Scrap Iron, with condition that vendee pays amount of money. 2. Defendant started to dig and gather iron at the premises of the plaintiff. 3. Vendee delayed 11 days in the fulfilment of the condition, thus, plaintiff rescinded the contract. 4. Defendant filed an action for damages. Defendant: There is delivery of the sale of the scrap iron. Thus, there is transfer of ownership, therefore, automatic rescission by the seller cannot take place because delivery has been made. And in cases where there has been delivery, intervention of court is necessary to annul the contract. Plaintiff: There was no delivery. Purchase document states that seller agreed to sell and the buyer agreed to buy scrap iron which the seller will identify and designate. There being no identification and designation made, there could be no delivery. Civil Code: The thing sold shall be understood as delivered when it is placed in the control and possession of the vendee. Held: 1. Contract is contract to sell or promise to sell and not contract of sale. Art 1593 of NCC: Sale of immovable property is rescinded upon expiration of period for delivery or failure of payment within the period. Art 1191 of NCC Power to rescind is implied in reciprocal obligations, in case one obligor should not comply with what is incumbent upon him. Choice of injured party: 1. Fulfilment with damages. 2. Rescission with damages. 3. Rescission with damages after fulfilment has become impossible. Court shall decree rescission, unless there is JUST CAUSE for authorizing fixing of a period. 2. Contract to sell is a positive suspensive condition. Meaning, payment (fulfilment of the condition) will convey title of ownership (give rise to the acquisition of rights).

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Agreement is to deliver the object upon payment of purchase price. Meaning, the contract is not sale where buyer acquired ownership over the property subject to the resolutory condition (happening extinguishes existing right acquired) that purchase price will be paid after delivery. Failure of vendee to comply with the positive suspensive condition is not a breach, but an event that prevent vendor from conveying title of ownership from acquiring binding force. Vendor is NOT rescinding the contract, ut merely enforcing it. Vendors obligation to sell did not arise, having the vendees failure to comply with condition. Therefore, Article 1191 of NCC will not apply (compel specific performance to comply with prestation). Instead Art 1597 of the NCC will apply. Art. 1597. Where the goods have not been delivered to the buyer, and the buyer has repudiated the contract of sale, or has manifested his inability to perform his obligations thereunder, or has committed a breach thereof, the seller may totally rescind the contract of sale by giving notice of his election so to do to the buyer. Case # 23 Gil v. CA Rescission in Reciprocal Obligations Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage Law. (1124) Facts: 1. Gil (vendor) sold lot to Pacetes (vendee) for consideration of amount of money. 2. Vendee paid downpayment. Accdg. to terms of the contract, obligation of vendee to pay balance shall ensue only upon issuance of certificate of title by the Register of Deeds over the property sold to and under the name of the vendee, and the delivery thereof by the vendor. 3. Vendor failed to secure the certificate of title, and died intestate. 4. Vendee, though not obliged to pay the remaining balance, paid SOME (not all) of it. 5. The heirs of vendor failed to deliver the title to the vendee. 6. Vendee filed action in court for the issuance of owners duplicate of title. Held:

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1. Vendee is not the injured party, entitled to rescission of deed of absolute sale, it is the heirs of the vendor. Consignation (the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to accept payment) effectively defeated the right of the heirs to demand for rescission of the contract of sale. Consignation and transfer of title is made, before the heirs of the vendor and the petitioner himself had demand for rescission of the deed of absolute sale- notarial or judicial demand. Although payee is consigned amount short of the purchase price, it cannot be said the Concepcion is an unpaid seller, because under the deed of sale, she was still obligated to transfer title to the vendee, which he failed to do so. Since there is a failure, it shall be executed at his cost. The vendee (Iluminada) had to obtain the owners duplicate of TCT No. 7450 and thereafter secure its transfer in her name. Pursuant to Article 1167, the expenses incurred by the vendee should be charged against the amount of P2,617.00 due to the heirs of Concepcion Gil as the vendors successors-ininterest. Vendor, failing to transfer title to vendee after paying the downpayment (as agreed), he must reimburse the expenses incurred due to transfer of title in vendees name. # 24 Ayson-Simon v Adamos Action for Rescission, Prescription Issues: 1. Whether or not the action to rescind the obligation has prescribed. 2. Whether or not complaint for specific performance may be deemed as waiver of her right to rescission since the fulfilment and rescission of an obligation are alternative and not cumulative remedies. Facts: 1. December 13, 1943, defendants-appellants purchased two lots from Porciuncula. Porciunculas successor- in- interest sought for the annulment and cancellation of the sale which the court favorably ruled. 2. During the pendency of the above mentioned case, defendants-appellants sold to Ayson- Simon the lots in question. 3. Due to the failure of defendants appellants to comply with their commitment to have the subdivision plan of the lots approved and to deliver to deliver the titles and possession to Ayson-Simon, the latter filed suit for specific performance. 4. As a result of the sale of the lot to said defendants appellants being null and void, there is impossibity that they can comply with their commitment to Ayson-Simon, the latter then seek the rescission of the contract plus damages.

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3. The defendants-appellants contend that Ayson-Simons action had prescribed, considering that she had only four years from May 29, 1946 to rescind the transaction. Further, they claims that action for specific performance may be deemed as a waiver of her right to rescission since the fulfilment and rescission of an obligation are alternative and not cumulative remedies. HELD: 1. The cause of action to claim rescission arises when the fulfilment of the obligation became impossible (upon finality of case rendering the saleof lots to defendants a complete nullity), and not from the date of sale of the lot. Prescription Period: 4 years. Defendants must reimburse the plaintiff for the purchase price paid, and other expenses related to the transfer of title with legal interest in both the purchase price and other expenses. 2. Injured party may also seek rescission, if the fulfilment should have become impossible.

# 25 Angeles v. Calasanz Rescission Casual Breach; judicial rescission not required if there is stipulation

FACTS: 1. December 19, 1957, defendants-appellants and plaintiffs-appellees entered into a contract to sell a piece of land for the amount plus 7% interest per annum. 2. Plaintiffs-appellees made a downpayment upon the execution of the contract and promised to pay the balance in monthly instalments, due and payable on the 19th day of each month. 3. December 7, 1966, the defendants-appellants wrote the plantiffs-appellees a letter requesting the remittance of past due accounts. 4. January 28, 1967, the defendants-appellants cancelled the said contract because the plaintiffs failed to meet subsequent payments. 5. Plaintiffs-appellees filed a case before the Court of First Instance to compel the defendant to execute in their favour 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. 6. 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

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monthly installments corresponding to the month of August, 1966 for more than 5 months, thereby constraining the defendants to cancel the said contract. Issue: 1. Has the Contract to Sell been automatically and validly cancelled by the defendantsappellants? RULING: No. While it is true that par.2 of the contract obligated the plaintiffs-appellees to pay the defendants the sum 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 plaintiffs- appellees 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 buyers. Thus, since the principal obligation under the contract is only P3,920.00 and the plaintiffsappellees 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 favour of the plaintiffs and execute the necessary transfer of documents, as provided in par.12 of the contract.
#26 Delta Motor Corporation v. Genuino Reciprocal Obligations Issue: WON vendor can rescind contract if vendee failed to perform obligation incumbent upon him. Vendor: Delta Vendee: Genuino (owner of ice plant and cold storage) Facts: 1. Vendor offered the sale of black iron pipes. 2. Vendee accepted the offer, and made initial payments. 3. Vendor did not deliver iron pipes, because vendee failed to comply with the condition of payment of substantial sum of money and execution of promissory notes. 4. Nevertheless, Vendor subsequently offer to deliver the black iron pipes, but vendee refuses because he is unready (construction of ice plant where pipes to be installed was not yet finished). 5. 3 years after, vendee ask delivery of the pipes.

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6. As a reply, vendor refuses, and ask vendee to pay higher prices, claiming that quoted price were good only within 30 days from the date of offer. 7. Vendee rejected new quoted price, and filed action for specific performance w/ damages. 8. Delta, in its answer prayed for rescission of the contracts pursuant to Art. 1191 of the New Civil

Code. Vendor: obligation to deliver good is subject to suspensive conditions required to vendee. If suspensive condition is complied by vendee (payment, promissory notes.), the obligation of vendor to deliver (pipes) will arise. Thus, when vendee failed to comply with its obligation, vendor is entitled to rescission. Held: Rescission is not absolute1. in needs to be communicated to the other party; and 2. it is provisional or subject to the review of the court.

1. Delta did not MANIFESTED that it opted to rescind the contract. Is only raised rescission as a defense for specific performance. Vendor possesses the iron pipes and the initial payment made by the vendee, but did not offered to return had it opted rescission. 2. Rescission is highly inequitable. Vendor claims that increase in price stipulation is misplaced. price offers will change after 30 days from receipt of offer, and thereafter subject to its review and confirmation, The offer by the vendor is accepted by the vendee within the period of 30 days, and therefore, that acceptance gives rise to a perfected contract between parties. Art 1319 of Civil Code Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause Contract of Sale is perfected at the moment there is meeting of minds upon the thing and the price. Thus, when vendee accepted the offer of vendor, it becomes a contract of sale between them, and neither party could change it, unless stipulations expressly provides for it. 3. While it is true that sale is subject to suspensive condition, is has nevertheless WAIVED PERFORMANCE OF THE CONDITION INCUMBENT UPON THE VENDEE when it opted to go with the contract although much in a higher price.

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Art. 1545 of the Civil Code: Where the obligation of either party to a contract of sale is subject to any condition which is not performed, such party may refuse to proceed with the contract or he may waived performance of the condition.
#27 Jison v. Court of Appeals Issue: WON where a contract provides for an AUTOMATIC RESCISSION CLAUSE, it can be rescind unilaterally if there is substantial breach in the contract. Vendor: Philips and Sons, Inc. (subdivision) Vendee: Jison (buyer) Facts: 1. Parties entered into a contract to sell a lot in a subdivision payable on monthly instalment basis. 2. Vendee made dowpayments and monthly instalments. 3. Vendee failed to build a house, they were penalized by the vendor, adding amount of money to monthly amortization, in accordance with stipulations. 4. Vendee failed to pay monthly installments three (3) consecutive months, although it latter paid them, and vendor accepted it. 5. Vendee failed to pay for four (4) consecutive months, vendor sent letter to vendee reminding the overdue. 6. Vendor sent another letter reminding automatic rescission clause of the contract. 7. Vendee eventually paid. 8. Vendee failed to pay three (3) consecutive months; vendor notified vendee that contract was cancelled, and forfeited all the installments already paid as liquidated damages. 9. Vendee tendered payment, but was refused acceptance, then, filed complaint for specific performance and consigning amount in court for monthly intalments. Held: Judicial rescission is NOT necessary where the contract provides that it may be cancelled for violation of its terms and conditions (automatic rescission). Written notice sent to the defaulter will suffice to rescind the contract (UP v. delos Angeles). But if there is defaulter impugn rescission; it shall be subject to judicial determination. Hence, the rescission by the vendor is valid. RA 6552 (Realty Installments and Buyers Protections Act): 1. requires written notice of rescission be notarized in order to be valid and biding. 2. allows 50% forfeiture of amounts paid in case of rescission of contract. Thus, this case happened before the effectivity of RA 6552. 1. Written notice of rescission will not apply. The unnotarized written notice of the rescission suffice to rescind the contract.

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2. Court reduced the amount of forfeiture by the vendor taking into consideration that he repossess the lot, and can resell it. Liquidated damages whether intended as indemnity of penalty shall be equitably reduced if theyre iniquitous or unconscionable. In obligation with penal clause, judge shall equitably reduce penalty when the principal obligation has been partly of irregularly complied with. #28 Dijamco v. Court of Appeals, Premiere Devt Bank Issues: 1. WON judicial rescission of contract is necessary when there is automatic rescission clause stipulated by the parties. 2. WON written notice is necessary to effect rescission when it is stipulated by parties that rescission will take place upon violation of terms without the need of formal demand. Mortgagor: Dijamco Mortgagee: Bank Real Estate Loan Facts: 1. Plaintiffs borrowed four loans to the bank. Fourth loan is a Real Estate Loan. To secure its payment, plaintiff mortgaged a parcel of land. th 2. Mortgagor failed to remit monthly amortizations regularly on the 4 loan, it was ten (10) months in arrears (legal term for the part of a debt that is overdue after missing one or more required payments). 3. Mortgage was foreclosed, it was auctioned, the Mortgagee as the highest bidder has bought it. Mortgagor failed to redeem the property within the allowable period. 4. Mortgagor nevertheless offered to repurchase the property. 5. Mortgagee agreed to sell it to mortgagor, and agreed to stipulations by the latter that in case of default, there will be automatic rescission and amounts paid will be forfeited as rentals. 6. Mortgagor again failed to pay. Forfeit (Something surrendered or subject to surrender as punishment for a crime, an offense, an

error, or a breach of contract)

Held: 1. No. Judicial rescission is not necessary when it is stipulated that it may revoked and cancelled for violation of its terms and conditions. 2. No. When parties expressly stipulated that in case of violation of terms and conditions, rescission will take place even without notice (motu propio), it will be honoured and valid in the eye of the law. Contract of sale is distinguished from contract to sell. Contract of Sale - Non- payment of the price is a negative resolutory condition.

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Vendor has lost ownership and cannot recover ownership unless the contract of sale is resolved and set aside.

Contract to Sell - Full payment is a positive suspensive condition. - Vendor retains ownership. It can be transferred upon fulfilment of the condition precedent of making payment at the time specified in the contract. - If vendee failed to fulfil the condition precedent, and he is ejected by the vendor, the vendor is not rescinding the contract, but enforcing it. #29 Pagtalunan v. dela cruz Vda. De Manzano Issues: 1. WON Maceda Law is not applicable when it is not raised in court proceedings in the first point in time. 2. WON a letter demanding vendee to vacate premises can already be considered as a notice of cancellation or demand for rescission by a notarial act required by RA 6552. Vendor: Patalunan (seller) Vendee: de Manzano (buyer) Contract to Sell a House and Lot Facts: 1. July 19, 1974, parties agreed to enter Contract to sell house and lot to be paid in instalment basis on or before last day of each month until fully paid. 2. As stipulated, vendee immediately occupy the house and lot, and in case of default in payment for 90 days after its due date, the contract would automatically be rescinded without the need for judicial declaration, and all payments/improvements made by the vendee will be considered as rentals for the use and occupation of the property or payment of damages suffered. 3. According to vendor, vendee stopped paying monthly installments without any justification or explanation. As such, her status as buyer was automatically transformed to be a lessee. According to vendee, she paid monthly instalments religiously, but vendor changed his mind, offer to refund all her payments provided she surrenders the house and lot. She refused, and vendor started to demolish it by part. She admitted default in payment, but paid it later on, and vendor even accepted it without suing him for ejectment. 4. Vendor sent a letter to vendee demanding that latter vacate the premises on the ground that her possession becomes unlawful. 5. Subsequently, vendor filed a Complaint of Unlawful Detainer against the vendee, praying that latter vacate immediately the property, forfeit the amount amounts paid (12,950php) in favour to vendor as rentals. MTC- vendees failure to pay means resolution or termination of the Contract to Sell. RTC- reversed; agreement should be judicially rescind because there is delivery to the buyer. CA- affirmed RTC; Contract was not validly rescind. Maceda Law (RA 6552)- enacted in 1972, therefore, it will apply to this case.

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Petitioner: 1. Maceda Law allows rescission without the need for judicial action. 2. Maceda law allows a grace period of one month per year, given if the vendee paid at least two (2) years of installments. Vendor paid for 12,950, and therefore, entitled to six months grace period, but nevertheless failed to pay within the allowance mentioned. 3. Maceda Law does not provide for the right of buyer to pay instalments, after the lapse of the grace period. 4. Maceda Law allows cancellation after 30 days of receipt of notice of cancellation or demand for rescission AND upon full payment of cash surrender value to vendee. 5. Layug v. IAC- requirement that notarized rescission is just an additional formality and is mere circuitous and superfluous. 6. Cash surrender value became the rentals after she stopped payment, and therefore, the vendee is not anymore entitled. 7. Maceda Law is NOT raised in the proceedings of the court, therefore, it cannot be applied in the ruling of the CA. Held: The court is NOT persuaded. CA correctly applied Maceda Law. 1. Court agrees that cancellation of Contract to Sell may be done outside the court when the vendee agrees to such cancellation. However, the cancellation is invalid. Cancellation must be in accordance with Sec 3 (b) of RA 6552: 1. Notarial act of rescission, AND 2. Refund of the cash surrender value of the payments of the property. Actual cancellation is after 30 days from receipt by the vendee of the two (2) mentioned requirements. Vendors letter demanding that vendee vacate the premises SHOULD NOT be considered as notice of cancellation or demand for rescission by notarial act. Demand letter is NOT the same as notice of cancellation or demand for rescission by a notarial act required. Layug v. IAC held that such notarial act of rescission in just a mere additional formality, circuitous and superfluous, because the seller filed annulment of contract, a kindred (relative) concept of rescission by notarial act, while his action of Unlawful detainer is not. (deductions: meaning, when the case filed is annulment of contract, notarial act becomes unnecessary, because the action in itself is an implied and suffice alternative for notarial rescission. When case filed is Unlawful Detainer, since it is not kindred (relative) to the concept of rescission by notarial act, it needs rescission by notarial act.) Since contract to sell is not cancelled, after 22 years of continuous possession of the property, and paid 12, 300 out of 17, 800 total purchase price, court deemed proper to just allow the vendee to pay the arrear (delayed dues) and settle the balance.

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(impt. Provisions of RA 6552)
The pertinent provision of R.A. No. 6552 reads: Sec. 3. In all transactions or contracts involving the sale or financing of real estate on installment payments, including residential condominium apartments but excluding industrial lots, commercial buildings and sales to tenants under Republic Act Numbered Thirty-eight hundred forty-four as amended by Republic Act Numbered Sixty-three hundred eighty-nine, where the buyer has paid at least two years of installments, the buyer is entitled to the following rights in case he defaults in the payment of succeeding installments: (a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him, which is hereby fixed at the rate of one month grace period for every one year of installment payments made: Provided, That this right shall be exercised by the buyer only once in every five years of the life of the contract and its extensions, if any. (b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty percent of the total payments made and, after five years of installments, an additional five percent every year but not to exceed ninety percent of the total payments made: Provided, That the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer.9

Case # 30 Fabrigas v. San Francisco del Monte, Inc. Issues: 1. WON stipulated automatic rescission clause is valid if vendee paid less than two (2) years of instalment? 2. WON there is rescission or novation (rescission v. novation) (Note: Under RA 6552, if vendee paid at least two (2) years, he is entitled to a grace period of one- month per year actually paid. Failure to pay within the grace period will warrant automatic rescission if there is an automatic rescission clause stipulated by parties.) RA 6552 took effect August 26, 1972, its day of approval; due to the effectivity clause: Section 9. This Act shall take effect upon its approval. Vendor: del Monte (seller) Vendee: Fabrigas (buyer) Contract to Sell Parcel of Residential Land Facts: 1. April 23, 1983- parties entered into the contract. Agreement stipulated is the payment of downpayment, balance to be paid in monthly successive instalments, and an automatic rescission clause in case of default in any payment with interest within thirty (30) days after the due date; annulment will take place without necessity of notice to the vendee, and all sums of money paid will be forfeited as rentals to the use of the property. 2. Vendee paid downpayment, took possession of the property but failed to pay any installments. 3. Vendor sent four (4) letters to vendee reminding their obligation; third letter gave fifteen days of grace period, and fourth letter another fifteen days of grace period plus warning that failure to satisfy their

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obligation would cause the rescission of the contract and the forfeiture of the money paid. After the lapse, vendor considered the contract annulled, and as stipulated, it did not notify the vendee of the annulment. nd 4. Vendor and vendee entered into a new contract (2 contract), with same subject (same piece of land), new purchase price and downpayments (higher). 5. Vendee again remitted irregular payments. 6. Vendor sent a letter demanding the payment of overdue account amounting to nine (9) instalments. 7. Vendee paid amounts to vendor, but failed to pay instalments. 8. Vendor sent a letter demanding payments, and giving a thirty (30) days of grace period. nd 9. Vendee failed to pay again, vendor sent letter to vendee informing of the rescission of the 2 contract, and demanded that vendee vacate the property. RTC- rescission is valid. CA- affirmed, stating that the rescission is valid pursuant to the automatic rescission clause. Petitioners: st 1 contract is valid, because its rescission is contrary to law (RA 6552). Held: Vendee paid only the equivalent of LESS THAN two (2) years of instalments, therefore, Sec. 3. Of RA 6552 will not apply, but Sec. 4. If vendee paid LESS THAN 2 years of installments, cancellation will take place if the two (2) requirements will be satisfy by the vendor: 1. Grace period of NOT less than sixty (60) days. 2. Notarial act of notice of cancellation at the end of the grace period, effective after thirty (30) days from the buyers receipt. In sum, if the instalment paid is LESS THAN two (2) years, grace period and notice is a condition sine qua non for the cancellation of the contract. 1 requirement- satisfied by the creditor, for giving more than sixty days of extension to pay. 2 requirement- NOT satisfied by the creditor, because he did not notify the vendee in the rescission of the contract considering that they have agreed an automatic rescission clause, and therefore, should govern their relationship. SC- AUTOMATICE RESCISSION CANNOT APPLY to INSTALMENTS PAID LESS THAN TWO (2) YEARS, because the law mandates it, and to do otherwise will contravene the law and public policy. Novation v. Rescission The 1 contract remains valid. Nevertheless, it is invalid, because rescission is NOT the only way to extinguish the obligation. NOVATION can be: 1. Extinctive- old obligation is terminated by old one. 2. Modificatory- old obligation subsists with the new one, because they are compatible.
st nd st

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The present case is NOT a modificatory novation because it will create an absurd situation when there is liability in two contracts having only one subject matter. The present case is a, extinctive novation. Extinctive Novation- results when there is change in object or principal conditions or substituting the person of the debtor or subrogating a third person in the rights of the creditor. Under this novation, the old obligation is extinguished and the new one is created because of incompatibility of the two. Essential requisites of Extinctive Novation: 1. Previous valid obligation. 2. Agreement of all parties concerned to the new contract. 3. Extinguishment of the old obligation. 4. Creation of the new valid obligation. Requisite 1 is satisfied- there is a valid obligation in the 1 contract. Requisite 2 is satisfied nd Vendee alleged that consent is invalid because only the wife signed the 2 contract, thus in order to make the conjugal property liable, both of them must consent. SC- Consent is mere voidable, and it is cured when husband paid monthly amortizations, meaning consent was impliedly given by the husband. Requisite 3 is satisfied, because 1 contract is extinguished by novation. Requisite 4 is satisfied, because there is a contracted 2
nd nd st st

contract.

Having 2 contract as valid, there is nothing to prevent the vendor in enforcing its contractual obligation against the vendee (ejectment and forfeiture of paid amounts of money).