SPOUSES BARREDO V.

SPOUSES LEAO
FACTS: Barredo Spouses bought a house and lot with the proceedsof a P50k loan from
the SSS which was payable in 25 years andan P88k loan from the Apex Mortgage and
Loans Corporationwhich was payable in 20 years. To secure the twin loans,
theyexecuted a first mortgage over the house and lot in favor of SSSand a second one
in favor of Apex.
Barredo Spouses later sold their house and lot torespondents Spouses Leao by way of
a Conditional Deed of Sale with Assumption of Mortgage. The Leao Spouses
would pay the Barredo Spouses P200k, P100k of which would be payable on July 15,
1987, while the balance of P100k would be paid in 10 equal monthly installments after
the signing of thecontract. The Leao Spouses would also assume the first andsecond
mortgages and pay the monthly amortizations to SSSand Apex beginning July 1987
until both obligations are fully paid.
In accordance with the agreement, the purchase price of P200k was paid to the Barredo
Spouses who turned over the possession of the house and lot in favor of the Leao
Spouses. 2years later, Barredo Spouses initiated a complaint before theRTC seeking
the rescission of the contract on the ground thatthe Leao Spouses despite repeated
demands failed to pay themortgage amortizations to the SSS and Apex, causing
theBarredo Spouses great and irreparable damage. The LeaoSpouses, however,
answered that they were up-to-date with their amortization payments to Apex but were
not able to pay the SSSamortizations because their payments were refused upon
theinstructions of the Barredo Spouses.
Meanwhile, allegedly in order to save their good name,credit standing and reputation,
the Barredo Spouses took it uponthemselves to settle the mortgage loans and paid the
SSS. Theyalso settled the mortgage loan with Apex. They also paid thereal estate
property taxes for the 1987 up to 1990.
Petitioners argue that the terms of the agreement called for the strict compliance of 2
equally essential and materialobligations on the part of the Leao Spouses, namely,
the payment of the P200,000.00 to them and the payment of themortgage amortizations
to the SSS and Apex. RespondentsLeao Spouses, however, contend that they were
only obliged toassume the amortization payments of the Barredo Spouses with the SSS
and Apex, which they did upon signing the agreement.The contract does not stipulate
as a condition the full paymentof the SSS and Apex mortgages.

ISSUE: WON THE BARREDO SPOUSES MAY RESCIND THECONTRACT, ON THE

GROUND OF NON-FULFILLMENT OFTHE PRESTATIONS?
HELD: NO. A careful reading of the pertinent provisions of theagreement readily shows
that the principal object of the contract wasthe sale of the Barredo house and lot, for
which the Leao Spousesgave a down payment of P100,000.00 as provided for in par.
1 of thecontract, and thereafter ten (10) equal monthly installmentsamounting to another
P100,000.00, as stipulated in par. 2 of thesame agreement. The assumption of the
mortgages by the LeaoSpouses over the mortgaged property and their payment
of amortizations are just collateral matters which are naturalconsequences of the sale
of the said mortgaged property.To include the full payment of the obligations with the
SSS andApex as a condition would be to unnecessarily stretch and put a newmeaning
to the provisions of the agreement. For, as a general rule,when the terms of an
agreement have been reduced to writing, suchwritten agreement is deemed to contain
all the terms agreed uponand there can be, between the parties and their successorsin-interest,no evidence of such terms other than the contents of the writtenagreement.
And, it is a familiar doctrine in obligations and contractsthat the parties are bound by the
stipulations, clauses, terms andconditions they have agreed to, which is the law
between them, theonly limitation being that these stipulations, clauses, terms
andconditions are not contrary to law, morals, public order or public policy. Not being
repugnant to any legal proscription, the agreemententered into by the parties must be
respected and each is bound tofulfill what has been expressly stipulated therein.But
even if we consider the payment of the mortgage amortizationsto the SSS and Apex
as a condition on which the sale is based on,still rescission would not be available since
non-compliance withsuch condition would just be a minor or casual breach thereof as
itdoes not defeat the very object of the parties in entering into thecontract. A cursory
reading of the agreement easily reveals that themain consideration of the sale is the
payment of P200K to thevendors within the period agreed upon. The assumption of
mortgage by the Leao Spouses is a natural consequence of their buying amortgaged
property. In fact, the Barredo Spouses do not stand to benefit from the payment of
the amortizations by the Leao Spousesdirectly to the SSS and Apex simply because
the Barredo Spouseshave already parted with their property, for which they were
alreadyfully compensated in the amount of P200K.If the Barredo Spouses were really
protective of their reputation andcredit standing, they should have sought the consent,
or at leastnotified the SSS and Apex of the assumption by the Leao Spousesof their
indebtedness. Besides, in ordering rescission, the trial courtshould have likewise
ordered the Barredo Spouses to return theP200K they received as purchase price plus
interests. Art. 1385 of the Civil Code provides that [r]escission creates the obligation
toreturn the things which were the object of the contract, together withtheir fruits, and
the price with its interest. The vendor is thereforeobliged to return the purchase price

paid to him by the buyer if thelatter rescinds the sale. Thus, where a contract is
rescinded, it is theduty of the court to require both parties to surrender that which
theyhave respectively received and place each other as far as practicablein his original
situation.
VALENZUELA VS COURT OF APPEALS
Facts: Arturo Valenzuela is a General Agent of Philippine American General Insurance
(Philamgen)since 1965. He was authorized to solicit and sell in behalf of Philamgen all
kinds of non-lifeinsurance, and in consideration of services rendered was entitled to
receive the full agent'scommission of 32.5% from Philamgen under the scheduled
commission rates. From 1973 to1975, Valenzuela solicited marine insurance from one
of his clients, the Delta Motors in thea m o u n t o f P 4 . 4 M i l l i o n f r o m w h i c h h e
w a s e n t i t l e d t o a c o m m i s s i o n o f 3 2 % . H o w e v e r , Valenzuela did not receive
his
full
commission
which
amounted
to
P1.6
Million from
the
P4.4M i l l i o n i n s u r a n c e c o v e r a g e o f t h e D e l t a M o t o r s . I n 1 9 7 7 , P h i l a m g
e n s t a r t e d t o b e c o m e interested in and expressed its intent to share in the
commission due Valenzuela on a fifty-fifty basis. Because of the refusal of Valenzuela,
Philamgen terminated the General AgencyAgreement of Valenzuela.
Issue: whether or not Philamgen could continue to hold Valenzuela jointly and severally
liable withthe insured for unpaid premiums
Held: NO.The principal cause of the termination of Valenzuela as General Agent of
Philamgen arosefrom his refusal to share his Delta commission. The apparent
bad faith o f t h e p r i v a t e r e s p o n d e n t s i n t e r m i n a t i n g t h e G e n e r a l
A g e n c y A g r e e m e n t o f p e t i t i o n e r s . T h e a g e n c y involving petitioner and
private respondent is one "coupled with an interest," and, therefore,should not be freely
revocable at the unilateral will of the latter. With the termination of theGeneral Agency
Agreement, Valenzuela
would
no longer be entitled
to commission on
therenewal of insurance policies of clients sourced from his agency.Despite the
termination of the agency, Philamgen continued to hold Valenzuela jointly andseverally
liable with the insured for unpaid premiums. Valenzuela had an interest in
thecontinuation of the agency when it was unceremoniously terminated not only
because of thecommissions he should continue to receive from the insurance business
he has solicited andprocured but also for the fact that by the very acts of the
respondents, he was made liableto Philamgen in the event the insured fail to pay the
premiums due. They are estopped bytheir own positive averments and claims for
damages. Therefore, the respondents cannotstate that the agency relationship
between Valenzuela and Philamgen is not coupled withinterest. There is an

exception to the principle that an agency is revocable at will and that iswhen the agency
has been given not only for the interest of the principal but for the interestof third
persons or for the mutual interest of the principal and the agent. In these cases, itis
evident that the agency ceases to be freely revocable by the sole will of the
principal.The factor rendering Philamgen and the private respondents liable in
damages is that thetermination by them of the General Agency Agreement
was tainted with bad faith. If aprincipal acts in bad faith and with abuse of right in
terminating the agency, then he is liablein damages.Valenzuela is not liable
to Philamgen for the unpaid and uncollected premiums. UnderSection 77 of the
Insurance Code, the remedy for the non-payment of premiums is to putan end to and
render the insurance policy not binding
LORENZO SHIPPING VS BJ MARTHEL
FACTS: Petitioner Lorenzo Shipping is engaged in coastwise shipping and owns the
cargo M/V Dadiangas Express. BJ Marthel is engaged in trading, marketing an dselling
various industrial commodities. Lorenzo Shipping ordered for the second time cylinder
lines from the respondent stating the term of payment to be 25% upon delivery, the
balance payable in 5 bi-monthly equal installments, no again stating the date of the
cylinders delivery. It was allegedly paid through post dated checks but the same was
dishonored due to insufficiency of funds. Despite due demands by the respondent,
petitioner falied contending that time was of the essence in the delivery of the cylinders
and that there was a delay since the respondent committed said items within two
months after receipt of fir order. RTC held respondents bound to the quotation with
respect to the term of payment, which was reversed by the Court of appeals ordering
appellee to pay appellant P954,000 plus interest. There was no delay since there was
no demand.
ISSUE: Whether or not respondent incurred delay in performing its obligation under the
contract of sale
HELD: By accepting the cylinders when they were delivered to the warehouse,
petitioner waived the claimed delay in the delivery of said items. Supreme Court geld
that time was not of the essence. There having been no failure on the part of the
respondent to perform its obligations, the power to rescind the contract is unavailing to
the petitioner. Petition is denied. Court of appeals decision is affirmed.
SANTOS HOCORMA FOUNDATION VS SANTOS

Facts: Ernesto V. Santos and Santos Ventura Hocorma Foundation, Inc. (SVHFI) were plaintiff and
defendant, respectively, in several civil cases. On October 26, 1990, the parties executed a
Compromise Agreement wherein Foundation shall pay Santos P14.5 Million in the following manner:
a. P1.5 Million immediately upon the execution of this agreement; and
b. The balance of P13 Million shall be paid, whether in lump sum or in installments, at the discretion of
the Foundation, within a period of not more than two (2) years from the execution of this agreement.
In compliance, Santos moved for the dismissal of the cases, while SVHFI paid the initial P1.5 million.
After several demands, SVHFI failed to pay the balance of P13 million, prompting Santos to apply for
the issuance of a writ of execution of the compromise judgment of the RTC dated September 30,
1991. Twice, SVHFIs properties were auctioned and sold to Riverland, Inc. On June 2, 1995, Santos
and Riverland Inc. filed a Complaint for Declaratory Relief and Damages alleging delay on the part of
SVHFI in paying the balance. They further alleged that under the Compromise Agreement, the
obligation became due on October26, 1992, but payment of the remaining balance was effected only
on November 22, 1994. Thus, respondents prayed that petitioner be ordered to pay legal interest on
the obligation, penalty, attorney's fees and costs of litigation. SVHFI alleged that the legal interest on
account of fault or delay was not due and payable, considering that the obligation had been
superseded by the compromise agreement. Moreover, SVHFI argued that absent in a stipulation,
Santos must ask for judicial intervention for purposes of fixing the period.
Issue: Whether or not SVHFI incurred in delay based on the compromise agreement and thereby
liable for legal interest
Held: SVHFI is liable for legal interest as penalty on account of delay. The Compromise Agreement
was entered into on October 26, 1990.
It was judicially approved on September30, 1991. Applying existing jurisprudence, the compromise
agreement as a consensual contract became binding between the parties upon its execution and not
upon its court approval. Hence, the two-year period should have begun on October 26, 1990.In this
case, there was non-fulfillment of the obligation with respect to time.
The requisites of mora were all met:
(1) that the obligation be demandable and already liquidated- the two-year period
already lapsed and the amount of payment was already determined;
(2) that the debtor delays performance, SVHFI paid the balance beyond the two-year period; and
finally,
(3) that the creditor requires the performance judicially or extra-judicially a demand letter was
sent in accordance with the extra-judicial demand as contemplated by law.
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 legal interest for loan as forbearance of money is 12% per annum to

be computed from the time the demand was made under the provisions of Article 1169 of the Civil
Code.
PHIL. COMMUNICATIONS SATELLITE CORP. V. GLOBETELECOM, INC.
Facts: Globe Telecom, Inc. (Globe), had been engaged in the coordination of the
provision of various communication facilities for the military bases of the US in Clark Air
Base and Subic Naval Base. Philcomsat and Globe entered into an Agreement whereby
Philcomsat obligated itself to establish, operate and provide an IBS Standard B earth
station (earth station) within Cubi Point for the exclusive use of the USDCA. The term of
the contract was for 60 months, or 5 years. In turn, Globe promised to pay Philcomsat
monthly rentals for each leased circuit involved.
At the time of the execution of the Agreement, both partiesknew that the RP-US Military
Bases Agreement, which was the basis for the occupancy of the Clark Air Base and
Subic Naval Base in Cubi Point was to expire in 1991.
Subsequently, Philcomsat installed and established the earth station at Cubi Point and
the USDCA made use of the same. On16 September 1991, the Senate passed and
adopted Senate Resolution No. 141, expressing its decision not to concur in the
ratification of the Treaty that was supposed to extend the term of the use by the US of
Subic Naval Base, among others.
Globe notified Philcomsat of its intention to discontinue the use of the earth station in
view of the withdrawal of US military personnel from Subic Naval Base after the
termination of the RP-US Military Bases Agreement. Globe invoked as basis for the
letter of termination Section 8 (Default) of the Agreement, which provides: Neither party
shall be held liable or deemed to be in default for any failure to perform its obligation
under this Agreement if such failure results directly or indirectly from force majeure or
fortuitous event. Either party is thus precluded from performing its obligation until such
force majeure or fortuitous event shall terminate. For the purpose of this paragraph,
force majeure shall mean circumstances beyond the control of the party involved
including, but not limited to, any law, order, regulation, direction or request of the
Government of the Philippines, strikes or other labor difficulties, insurrection riots,
national emergencies, war, acts of public enemies, fire, floods, typhoons or other
catastrophes or acts of God.
Philcomsat sent a reply letter, stating that "we expect[Globe] to know its commitment to
pay the stipulated rentals for the remaining terms of the Agreement even after [Globe]

shall have discontinue[d] the use of the earth station after November 08, 1992," citing
Section 7 of the Agreement.
After the US military forces left Subic Naval Base, Philcomsat demanded payment from
Globe of its outstanding obligations under the Agreement. However, Globe refused to
heed Philcomsats demand. Philcomsat filed a Complaint against Globe, praying that
the latter be ordered to pay liquidated damages under the Agreement, with legal
interest, exemplary damages, attorneys fees and costs of suit.
ISSUE: WON THE TERMINATION OF THE RP-US MILITARYBASES AGREEMENT
WAS A FORTUITOUS EVENT?
HELD:YES. There is no merit is Philcomsats argument that Section 8 of the Agreement
cannot be given effect because the enumeration of events constituting force majeure
therein unduly expands the concept of a fortuitous event under Article 1174 of the Civil
Code and is therefore invalid. In support of its position, Philcomsat contends that under
Article 1174 of the Civil Code, an event must be unforeseen in order to exempt a party
to a contract from complying with its obligations therein. It insists that since the
expiration of the RP-US Military Bases Agreement, the non-ratification of the Treaty of
Friendship, Cooperation and Security and the withdrawal of US military forces and
personnel from Cubi Point were not unforeseeable, but were possibilities known to it
and Globe at the time they entered into the Agreement, such events cannot exempt
Globe from performing its obligation of paying rentals for the entire five-year term
thereof. However, Article 1174, which exempts an obligor from liability on account of
fortuitous events or force majeure, refers not only to events that are unforeseeable, but
also to those which are foreseeable, but inevitable. A fortuitous event under Article
1174may either be an "act of God," or natural occurrences such as floods or typhoons,
or an "act of man," such as riots, strikes or wars. The enumeration under Section 8
of the Contract are either unforeseeable, or foreseeable but beyond the control of the
parties. There is nothing in the enumeration that runs contrary to, or expands, the
concept of a fortuitous event. Not being contrary to law, morals, good customs, public
order, or public policy, Section 8 of the Agreement which Philcomsat and Globe
freely agreed upon has the force of law between them. In order that Globe may be
exempt from non-compliance with its obligation to pay rentals under Section 8, the
concurrence of the following elements must be established: (1) the event must be
independent of the human will; (2) the occurrence must render it impossible for the
debtor to fulfill the obligation in a normal manner; and (3) the obligor must be free of
participation in, or aggravation of, the injury to the creditor. The Court agrees with the
Court of Appeals and the trial court that the abovementioned requisites are present in
the instant case. Philcomsat and Globe had no control over the non-renewal of the term

of the RP-US Military Bases Agreement when the same expired in 1991, because the
prerogative to ratify the treaty extending the life thereof belonged to the Senate. Neither
did the parties have control over the subsequent withdrawal of the US military forces
and personnel from Cubi Point in December 1992.Considering the foregoing, the Court
finds and so holds that the afore-narrated circumstances constitute "force majeure or
fortuitous event(s) as defined under paragraph 8 of the Agreement. From the foregoing,
the Court finds that the defendant is exempted from paying the rentals for the facility for
the remaining term of the contract. Moreover, it would be unjust to require Globe to
continue paying rentals even though Philcomsat cannot be compelled to perform its
corresponding obligation under the Agreement.
SICAM VS JORGE
Facts: Lulu Jorge pawned several pieces of jewelry with Agencia de R. C. Sicam to
secure a loan.
On October 19, 1987, two armed men entered the pawnshop and took away whatever
cash and jewelry were found inside the pawnshop vault.
Sicam sent respondent Lulu a letter informing her of the loss of her jewelry due to the
robbery incident in the pawnshop. Respondent Lulu expressed disbelief stating that
when the robbery happened, all jewelry pawned were deposited with Far East Bank
near the pawnshop since it had been the practice that before they could withdraw,
advance notice must be given to the pawnshop so it could withdraw the jewelry from the
bank. Respondent Lulu then requested petitioner Sicam to prepare the pawned jewelry
for withdrawal on but petitioner Sicam failed to return the jewelry.
Respondent Lulu is seeking indemnification for the loss of pawned jewelry and payment
of damages. Petitioner is interposing the defense of caso fortuito on the robber
committed against the pawnshop.
Issue: WON Sicam is liable for the loss of the pawned articles in their possession?
Held: YES. Fortuitous events by definition are extraordinary events not foreseeable or
avoidable. 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 mere difficulty to foresee the happening is not impossibility to foresee the
same.
Robbery per se, just like carnapping, is not a fortuitous event. It does not foreclose the
possibility of negligence on the part of herein petitioners.
A review of the records clearly shows that petitioners failed to exercise reasonable care
and caution that an ordinarily prudent person would have used in the same situation.
Petitioners were guilty of negligence in the operation of their pawnshop business. No

sufficient precaution and vigilance were adopted by petitioners to protect the pawnshop
from unlawful intrusion. There was no clear showing that there was any security guard
at all.
Sicams admission that the vault was open at the time of robbery is clearly a proof of
petitioners failure to observe the care, precaution and vigilance that the circumstances
justly demanded. Petitioner Sicam testified that once the pawnshop was open, the
combination was already off. Instead of taking the precaution to protect them, they let
open the vault, providing no difficulty for the robbers to cart away the pawned articles.
In contrast, the robbery in this case took place in 1987 when robbery was already
prevalent and petitioners in fact had already foreseen it as they wanted to deposit the
pawn with a nearby bank for safekeeping. Moreover, unlike in Austria, where no
negligence was committed, we found petitioners negligent in securing their pawnshop
as earlier discussed.
PNB vs Pike
Facts: The petitioner PNB allowed a representative of Defendant (his talent manager)
to withdraw from his dollar account with the use of a pre-signed withrdawal slip.
Issue: Whether or not the bank is liable
Held: Yes. PNB was held liable due to the negligence of its employees in allowing the
unauthorized withdrawal. This was shown by the lackadaisical attitude of its employees
in treating Pike's US dollar account, an act which resulted to the loss of $7,500. Such
warrants for the award of damages. The slips used were in breach of the standard
operating procedure of the bank in the ordinary and usual course of business.
Even if it is the employees who are negligent, the bank's liability as the obligor is not
merely vicarious but primary since banks are expected to exercise the degree of
diligence in the selection and supervision of their employees.
FIL-ESTATE PROPERTIES vs. GO
G.R. No. 165164 August 17, 2007

Facts:

On December 29, 1995, petitioner Fil-Estate Properties, Inc. entered into a contract to sell a condominium
unit to respondent spouses Gonzalo and Consuelo Go. The spouses paid a total ofP3.4M of the full
contract price set at P3.6M.

Petitioner failed to develop the condominium project. The spouses demanded the refund of the amount
they paid, plus interest. When petitioner did not refund the spouses, the latter filed a complaint against
petitioner for reimbursement of P3.6M plus interest, attorneys fees, and expenses of litigation.

Petitioner claimed that respondents had no cause of action since the delay in the construction of the
condominium was caused by the financial crisis that hit the Asian region, a fortuitous event over which
petitioner had no control.

Issue:

WON Fil-Estate can exculpate itself from liability in its claim of caso fortuito based on the 1997 Asian
Financial Crisis? NO

Held:

In Mondragon Leisure vs. Court of Appeals, the Asian financial crisis in 1997 is not among the fortuitous
events contemplated under Article 1174 of the Civil Code.

The Asian financial crisis in 1997 was not unforeseeable and beyond the control of a business
corporation. However, a real estate enterprise engaged in the pre-selling of condominium units is
concededly a master in projections on commodities and currency movements and business risks. The
fluctuating movement of the Philippine peso in the foreign exchange market is an everyday occurrence,
and fluctuations in currency exchange rates happen every day, thus, not an instance of caso fortuito.

The delay in the construction of the building was not attributable to the Asian financial crisis which
happened in 1997 because petitioner did not even start the project in 1995 when it should have done, so
that it could have finished it in 1997, as stipulated in the contract.

Under Section 23 of P.D. No. 957, the respondents are entitled to reimbursement but only to the P3.4M
that they have paid.

MANILA INTERNATIONAL AIRPORT AUTHORITY VS. ALA

INDUSTRIESCORPORATIONG.R. NO. 147349. FEBRUARY 13, 2004
FACTS:

The contract for the structural repair and waterproofing of the IPT and ICT building of the NAIA
airport was awarded, after a public bidding, to respondent ALA. Respondent made the necessary
repair and waterproofing.
After the submission of its progress billings to the petitioner, respondent received partial
payments. Progress billing remained unpaid despite repeated demands by the respondent.
Meanwhile petitioner unilaterally rescinded the contract on the ground that respondent failed to
complete the project within the agreed completion date. Respondent objected to the rescission
made by the petitioner and reiterated its claims. The trial court directed the parties to proceed to
arbitration. Both parties executed a compromise agreement and jointly filed in court a motion for
judgment based on the compromise agreement. The Court a quo rendered judgment approving
the compromise agreement.
For petitioners failure to pay within the period stipulated, respondent filed a motion for
execution to enforce its claim. Petitioner filed a comment and attributed the delay to its being a
government agency. The trial court denied the respondents motion. Reversing the trial court, the
CA ordered it to issue a writ of execution to enforce respondents claim. The appellate court
ratiocinated that a judgment rendered in accordance with a compromise agreement was
immediately executory, and that a delay was not substantial compliance therewith.
ISSUES:
1) Whether or not decision based on compromise agreement is final and executory.
2) Whether or not delay by one party on a compromise justifies execution.
HELD:
1. A compromise once approved by final orders of the court has the force of res judicata
between the parties and should not be disturbed except for vices of consent or forgery. Hence, a
decision on a compromise agreement is final and executory. Such agreement has the force of law
and is conclusive between the parties. It transcends its identity as a mere contract binding only
upon the parties thereto, as it becomes
a judgment that is subject to execution in accordance with the Rules. Judges therefore have the
ministerial and mandatory duty to implement and enforce it.
2. The failure to pay on the date stipulated was clearly a violation of the Agreement. Thus, nonfulfillment of the terms of the compromise justified execution. It is the height of absurdity for
petitioner to attribute to a fortuitous event its delayed payment. Petitioners explanation is clearly
a gratuitous assertion that borders callousness.
Vda. De Mistica vs. Naguiat
418 SCRA 73
Art. 1182. Potestative Condition

Issue/Scope
Potestative Condition under Art. 1182 in relation to Art. 1191 of Civil Code

Facts
Predecessor-in-interest of Petitioner and herein Defendants entered into a contract to sell in which
the latter prayed the initial payment and undertake to pay the remaining by installment within 10
years subject to 12% interest per annum
Petitioner filed a complaint for rescission alleging failure and refusal of Defendants to pay the
balance constitutes a violation of the contract which entitles her to rescind the same
Petitioner argues that period for performance of obligation cannot be extended to 10 years because to
do so would convert the obligation to purely potestative
Held
Under Art. 1191 of Civil Code, the right to rescind an obligation is predicated on
violation between parties brought about by breach of faith by one of them. Rescission,
however, is allowed only when the breach is substantial and fundamental to the
fulfillment of the obligation
In this case, no substantial breach in the Kasulatan, it was stipulated that payment could be made
even after 10 years from execution of contract, provided they will pay the 12% interest
Civil Code prohibits purely potestative, suspensive, conditional obligation that depend
on the whims of the debtor. Nowhere in the deed that payment of purchase price is dependent
whether respondents want to pay it or not, the fact that they already made partial payment shows
that parties intended to be bound by the Kasulatan