Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. L-22962 September 28, 1972

PILAR N. BORROMEO, MARIA B. PUTONG, FEDERICO V.
BORROMEO, JOSE BORROMEO, CONSUELO B. MORALES
and CANUTO V. BORROMEO, JR., petitioners,
vs.
COURT OF APPEALS and JOSE A. VILLAMOR,
(Deceased) Substituted by FELISA VILLAMOR,
ROSARIO V. LIAO LAMCO, MANUEL VILLAMOR, AMPARO
V. COTTON, MIGUEL VILLAMOR and CARMENCITA
VILLAMOR, respondents.
Filiberto Leonardo for petitioners.
Ramon Duterte for private respondents.

FERNANDO, J.:p
The point pressed on us by private respondents, 1 in this
petition for review of a decision of the Court of Appeals in the
interpretation of a stipulation which admittedly is not free
from ambiguity, there being a mention of a waiver of the
defense of prescription, is not calculated to elicit undue
judicial sympathy. For if accorded acceptance, a creditor, now
represented by his heirs, 2 who, following the warm and
generous impulse of friendship, came to the rescue of a
debtor from a serious predicament of his own making would
be barred from recovering the money loaned. Thus the

promptings of charity, unfortunately not often persuasive

enough, would be discredited. It is unfortunate then that
respondent Court of Appeals did not see it that way. For its
decision to be upheld would be to subject the law to such a
scathing indictment. A careful study of the relevant facts in
the light of applicable doctrines calls for the reversal of its
decision.
The facts as found by the Court of Appeals follow: "Before the
year 1933, defendant [Jose A. Villamor] was a distributor of
lumber belonging to Mr. Miller who was the agent of the
Insular Lumber Company in Cebu City. Defendant being a
friend and former classmate of plaintiff [Canuto O. Borromeo]
used to borrow from the latter certain amounts from time to
time. On one occasion with some pressing obligation to settle
with Mr. Miller, defendant borrowed from plaintiff a large sum
of money for which he mortgaged his land and house in Cebu
City. Mr. Miller filed civil action against the defendant and
attached his properties including those mortgaged to
plaintiff, inasmuch as the deed of mortgage in favor of
plaintiff could not be registered because not properly drawn
up. Plaintiff then pressed the defendant for settlement of his
obligation, but defendant instead offered to execute a
document promising to pay his indebtedness even after the
lapse of ten years. Liquidation was made and defendant was
found to be indebted to plaintiff in the sum of P7,220.00, for
which defendant signed a promissory note therefor on
November 29, 1933 with interest at the rate of 12% per
annum, agreeing to pay 'as soon as I have money'. The note
further stipulates that defendant 'hereby relinquish,
renounce, or otherwise waive my rights to the prescriptions
established by our Code of Civil Procedure for the collection
or recovery of the above sum of P7,220.00. ... at any time
even after the lapse of ten years from the date of this
instrument'. After the execution of the document, plaintiff
1

limited himself to verbally requesting defendant to settle his

indebtedness from time to time. Plaintiff did not file any
complaint against the defendant within ten years from the
execution of the document as there was no property
registered in defendant's name, who furthermore assured
him that he could collect even after the lapse of ten years.
After the last war, plaintiff made various oral demands, but
defendants failed to settle his account, hence the present
complaint for collection." 3 It was then noted in the decision
under review that the Court of First Instance of Cebu did
sentence the original defendant, the deceased Jose A.
Villamor, to pay Canuto O. Borromeo, now represented by
petitioners, the sum of P7,220.00 within ninety days from the
date of the receipt of such decision with interest at the rate
of 12% per annum from the expiration of such ninety-day
period. That was the judgment reversed by the Court of
Appeals in its decision of March 7, 1964, now the subject of
this petition for review. The legal basis was the lack of
validity of the stipulation amounting to a waiver in line with
the principle "that a person cannot renounce future
prescription." 4

ties of friendship was more than willing to give the debtor the
utmost latitude as to when his admittedly scanty resources
will allow him to pay. He was not renouncing any right; he
was just being considerate, perhaps excessively so. Under
the view of respondent Court, however, what had been
agreed upon was in effect voided. That was to run counter to
the well-settled maxim that between two possible
interpretations, that which saves rather than destroys is to be
preferred. What vitiates most the appealed decision,
however, is that it would amount not to just negating an
agreement duly entered into but would put a premium on
conduct that is hardly fair and could be characterized as
duplicitous. Certainly, it would reflect on a debtor apparently
bent all the while on repudiating his obligation. Thus he
would be permitted to repay an act of kindness with base
ingratitude. Since as will hereafter be shown, there is, on the
contrary, the appropriate construction of the wording that
found its way in the document, one which has all the
earmarks of validity and at the same time is in consonance
with the demands of justice and morality, the decision on
appeal, as was noted at the outset, must be reversed.

The rather summary and curt disposition of the crucial legal

question of respondent Court in its five-page decision,
regrettably rising not too-far-above the superficial level of
analysis hardly commends itself for approval. In the first
place, there appeared to be undue reliance on certain words
employed in the written instrument executed by the parties
to the total disregard of their intention. That was to pay
undue homage to verbalism. That was to ignore the warning
of Frankfurter against succumbing to the vice of literalism in
the interpretation of language whether found in a
constitution, a statute, or a contract. Then, too, in effect it
would nullify what ought to have been evident by a perusal
that is not-too-cursory, namely, that the creditor moved by

1. The facts rightly understood argue for the reversal of the

decision arrived at by respondent Court of Appeals. Even
before the event that gave rise to the loan in question, the
debtor, the late Jose A. Villamor, being a friend and a former
classmate, used to borrow from time to time various sums of
money from the creditor, the late Canuto O. Borromeo. Then
faced with the need to settle a pressing obligation with a
certain Miller, he did borrow from the latter sometime in 1933
what respondent Court called "a large sum of money for
which he mortgaged his land and house in Cebu City." 5 It was
noted that this Miller did file a suit against him, attaching his
properties including those he did mortgage to the late
Borromeo, there being no valid objection to such a step as
2

the aforesaid mortgage, not being properly drawn up, could

not be registered. Mention was then made of the late
Borromeo in his lifetime seeking the satisfaction of the sum
due with Villamor unable to pay, but executing a document
promising "to pay his indebtedness even after the lapse of
ten years." 6 It is with such a background that the words
employed in the instrument of November 29, 1933 should be
viewed. There is nothing implausible in the view that such
language renouncing the debtor's right to the prescription
established by the Code of Civil Procedure should be given
the meaning, as noted in the preceding sentence of the
decision of respondent Court, that the debtor could be
trusted to pay even after the termination of the ten-year
prescriptive period. For as was also made clear therein, there
had been since then verbal requests on the part of the
creditor made to the debtor for the settlement of such a loan.
Nor was the Court of Appeals unaware that such indeed was
within the contemplation of the parties as shown by this
sentence in its decision: "Plaintiff did not file any complaint
against the defendant within ten years from the execution of
the document as there was no property registered in
defendant's name who furthermore assured him that he
could collect even after the lapse of ten years." 7
2. There is much to be said then for the contention of
petitioners that the reference to the prescriptive period is
susceptible to the construction that only after the lapse
thereof could the demand be made for the payment of the
obligation. Whatever be the obscurity occasioned by the
words is illumined when the light arising from the relationship
of close friendship between the parties as well as the
unsuccessful effort to execute a mortgage, taken in
connection with the various oral demands made, is thrown on
them. Obviously, it did not suffice for the respondent Court of
Appeals. It preferred to reach a conclusion which for it was

necessitated by the strict letter of the law untinged by any

spirit of good morals and justice, which should not be alien to
legal norms. Even from the standpoint of what for some is
strict legalism, the decision arrived at by the Court of
Appeals calls for disapproval. It is a fundamental principle in
the interpretation of contracts that while ordinarily the literal
sense of the words employed is to be followed, such is not
the case where they "appear to be contrary to the evident
intention of the contracting parties," which "intention shall
prevail." 8 Such a codal provision has been given full force
and effect since the leading case of Reyes v. Limjap, 9 a 1910
decision. Justice Torres, who penned the above decision, had
occasion to reiterate such a principle when he spoke for the
Court in De la Vega v. Ballilos 10 thus: "The contract entered
into by the contracting parties which has produced between
them rights and obligations is in fact one of antichresis, for
article 1281 of the Civil Code prescribes among other things
that if the words should appear to conflict with the evident
intent of the contracting parties, the intent shall
prevail." 11 In Abella v. Gonzaga, 12 this Court through the
then Justice Villamor, gave force to such a codal provision
when he made clear that the inevitable conclusion arrived at
was "that although in the contract Exhibit A the usual words
'lease,' 'lessee,' and 'lessor' were employed, that is no
obstacle to holding, as we do hereby hold, that said contract
was a sale on installments, for such was the evident intention
of the parties in entering into said contract. 13 Only lately
inNielson and Company v. Lepanto Consolidated Mining
Company, 14 this Court, with Justice Zaldivar, as ponente,
after stressing the primordial rule that in the construction
and interpretation of a document, the intention of the parties
must be sought, went on to state: "This is the basic rule in
the interpretation of contracts because all other rules are but
ancillary to the ascertainment of the meaning intended by
the parties. And once this intention has been ascertained it
3

becomes an integral part of the contract as though it had

been originally expressed therein in unequivocal
terms ... ." 15 While not directly in point, what was said by
Justice Labrador in Tumaneng v. Abad 16 is relevant: "There is
no question that the terms of the contract are not clear on
the period of redemption. But the intent of the parties
thereto is the law between them, and it must be ascertained
and enforced." 17 Nor is it to be forgotten, following what was
first announced in Velasquez v. Teodoro 18 that "previous,
simultaneous and subsequent acts of the parties are properly
cognizable indicia of their true intention." 19
There is another fundamental rule in the interpretation of
contracts specifically referred to in Kasilag v. Rodriguez, 20as
"not less important" 21 than other principles which "is to the
effect that the terms, clauses and conditions contrary to law,
morals and public order should be separated from the valid
and legal contract when such separation can be made
because they are independent of the valid contract which
expresses the will of the contracting parties. Manresa,
commenting on article 1255 of the Civil Code and stating the
rule of separation just mentioned, gives his views as follows:
'On the supposition that the various pacts, clauses, or
conditions are valid, no difficulty is presented; but should
they be void, the question is as to what extent they may
produce the nullity of the principal obligation. Under the view
that such features of the obligation are added to it and do not
go to its essence, a criterion based upon the stability of
juridical relations should tend to consider the nullity as
confined to the clause or pact suffering therefrom, except in
cases where the latter, by an established connection or by
manifest intention of the parties, is inseparable from the
principal obligation, and is a condition, juridically speaking, of
that the nullity of which it would also occasion.' ... The same
view prevails in the Anglo-American law as condensed in the

following words: 'Where an agreement founded on a legal

consideration contains several promises, or a promise to do
several things, and a part only of the things to be done are
illegal, the promises which can be separated, or the promise,
so far as it can be separated, from the illegality, may be
valid. The rule is that a lawful promise made for a lawful
consideration is not invalid merely because an unlawful
promise was made at the same time and for the same
consideration, and this rule applies, although the invalidity is
due to violation of a statutory provision, unless the statute
expressly or by necessary implication declares the entire
contract void. ..." 22
Nor is it to be forgotten that as early as Compania Agricola
Ultramar v. Reyes, 23 decided in 1904, the then Chief Justice
Arellano in a concurring opinion explicitly declared: "It is true
that contracts are not what the parties may see fit to call
them, but what they really are as determined by the
principles of law." 24 Such a doctrine has been subsequently
adhered to since then. As was rephrased by Justice Recto
in Aquino v.
Deala: 25 "The validity of these agreements, however, is one
thing, while the juridical qualification of the contract resulting
therefrom is very distinctively another." 26 In a recent
decision, Shell Company of the Phils., Ltd. vs. Firemen's
Insurance Co. of Newark, 27 this court, through Justice Padilla,
reaffirmed the doctrine thus: "To determine the nature of a
contract courts do not have or are not bound to rely upon the
name or title given it by the contracting parties, should there
be a controversy as to what they really had intended to enter
into, but the way the contracting parties do or perform their
respective obligations, stipulated or agreed upon may be
shown and inquired into, and should such performance
conflict with the name or title given the contract by the
parties, the former must prevail over the latter." 28 Is it not
4

rather evident that since even the denomination of the entire

contract itself is not conclusively determined by what the
parties call it but by the law, a stipulation found therein
should likewise be impressed with the characterization the
law places upon it?

other than to delay." 32 There is no legal obstacle then to the

action for collection filed by the creditor. Moreover, the
judgment of the lower court, reversed by the respondent
Court of Appeals, ordering the payment of the amount due is
in accordance with law.

What emerges in the light of all the principles set forth above
is that the first ten years after November 29, 1933 should not
be counted in determining when the action of creditor, now
represented by petitioners, could be filed. From the joint
record on appeal, it is undoubted that the complaint was filed
on January 7, 1953. If the first ten-year period was to be
excluded, the creditor had until November 29, 1953 to start
judicial proceedings. After deducting the first ten-year period
which expired on November 29, 1943, there was the
additional period of still another ten years. 29 Nor could there
be any legal objection to the complaint by the creditor
Borromeo of January 7, 1953 embodying not merely the
fixing of the period within which the debtor Villamor was to
pay but likewise the collection of the amount that until then
was not paid. An action combining both features did receive
the imprimatur of the approval of this Court. As was clearly
set forth in Tiglao v. The Manila Railroad Company: 30 "There
is something to defendant's contention that in previous cases
this Court has held that the duration of the term should be
fixed in a separate action for that express purpose. But we
think the lower court has given good reasons for not adhering
to technicalities in its desire to do substantial justice." 31 The
justification became even more apparent in the latter portion
of the opinion of Justice Alex Reyes for this Court: "We may
add that defendant does not claim that if a separate action
were instituted to fix the duration of the term of its
obligation, it could present better proofs than those already
adduced in the present case. Such separate action would,
therefore, be a mere formality and would serve no purpose

3. There is something more to be said about the stress in the

Tiglao decision on the sound reasons for not adhering to
technicalities in this Court's desire to do substantial justice.
The then Justice, now Chief Justice, Concepcion expressed a
similar thought in emphasizing that in the determination of
the rights of the contracting parties "the interest of justice
and equity be not ignored." 33 This is a principle that dates
back to the earliest years of this Court. The then Chief Justice
Bengzon in Arrieta v. Bellos, 34 invoked equity. Mention has
been made of "practical and substantial justice," 35 "[no]
sacrifice of the substantial rights of a litigant in the altar of
sophisticated technicalities with impairment of the sacred
principles of justice," 36 "to afford substantial justice" 37 and
"what equity demands." 38 There has been disapproval when
the result reached is "neither fair, nor equitable." 39 What is
to be avoided is an interpretation that "may work injustice
rather than promote justice." 40 What appears to be most
obvious is that the decision of respondent Court of Appeals
under review offended most grievously against the above
fundamental postulate that underlies all systems of law.
WHEREFORE, the decision of respondent Court of Appeals of
March 7, 1964 is reversed, thus giving full force and effect to
the decision of the lower court of November 15, 1956. With
costs against private respondents.
Concepcion, C.J., Zaldivar, Castro, Teehankee, Barredo,
Makasiar, Antonio and Esguerra, JJ., concur.
Makalintal, J., is on leave.
5

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-11827

July 31, 1961

FERNANDO A. GAITE, plaintiff-appellee,

vs.
ISABELO FONACIER, GEORGE KRAKOWER, LARAP
MINES & SMELTING CO., INC., SEGUNDINA VIVAS,
FRNACISCO DANTE, PACIFICO ESCANDOR and
FERNANDO TY, defendants-appellants.
Alejo Mabanag for plaintiff-appellee.
Simplicio U. Tapia, Antonio Barredo and Pedro Guevarra for
defendants-appellants.
REYES, J.B.L., J.:
This appeal comes to us directly from the Court of First
Instance because the claims involved aggregate more than
P200,000.00.
Defendant-appellant Isabelo Fonacier was the owner and/or
holder, either by himself or in a representative capacity, of
6

11 iron lode mineral claims, known as the Dawahan Group,

situated in the municipality of Jose Panganiban, province of
Camarines Norte.
By a "Deed of Assignment" dated September 29,
1952(Exhibit "3"), Fonacier constituted and appointed
plaintiff-appellee Fernando A. Gaite as his true and lawful
attorney-in-fact to enter into a contract with any individual or
juridical person for the exploration and development of the
mining claims aforementioned on a royalty basis of not less
than P0.50 per ton of ore that might be extracted therefrom.
On March 19, 1954, Gaite in turn executed a general
assignment (Record on Appeal, pp. 17-19) conveying the
development and exploitation of said mining claims into the
Larap Iron Mines, a single proprietorship owned solely by and
belonging to him, on the same royalty basis provided for in
Exhibit "3". Thereafter, Gaite embarked upon the
development and exploitation of the mining claims in
question, opening and paving roads within and outside their
boundaries, making other improvements and installing
facilities therein for use in the development of the mines, and
in time extracted therefrom what he claim and estimated to
be approximately 24,000 metric tons of iron ore.
For some reason or another, Isabelo Fonacier decided to
revoke the authority granted by him to Gaite to exploit and
develop the mining claims in question, and Gaite assented
thereto subject to certain conditions. As a result, a document
entitled "Revocation of Power of Attorney and Contract" was
executed on December 8, 1954 (Exhibit "A"),wherein Gaite
transferred to Fonacier, for the consideration of P20,000.00,
plus 10% of the royalties that Fonacier would receive from
the mining claims, all his rights and interests on all the roads,
improvements, and facilities in or outside said claims, the
right to use the business name "Larap Iron Mines" and its

goodwill, and all the records and documents relative to the

mines. In the same document, Gaite transferred to Fonacier
all his rights and interests over the "24,000 tons of iron ore,
more or less" that the former had already extracted from the
mineral claims, in consideration of the sum of P75,000.00,
P10,000.00 of which was paid upon the signing of the
agreement, and
b. The balance of SIXTY-FIVE THOUSAND PESOS (P65,000.00)
will be paid from and out of the first letter of credit covering
the first shipment of iron ores and of the first amount derived
from the local sale of iron ore made by the Larap Mines &
Smelting Co. Inc., its assigns, administrators, or successors in
interests.
To secure the payment of the said balance of P65,000.00,
Fonacier promised to execute in favor of Gaite a surety bond,
and pursuant to the promise, Fonacier delivered to Gaite a
surety bond dated December 8, 1954 with himself (Fonacier)
as principal and the Larap Mines and Smelting Co. and its
stockholders George Krakower, Segundina Vivas, Pacifico
Escandor, Francisco Dante, and Fernando Ty as sureties
(Exhibit "A-1"). Gaite testified, however, that when this bond
was presented to him by Fonacier together with the
"Revocation of Power of Attorney and Contract", Exhibit "A",
on December 8, 1954, he refused to sign said Exhibit "A"
unless another bond under written by a bonding company
was put up by defendants to secure the payment of the
P65,000.00 balance of their price of the iron ore in the
stockpiles in the mining claims. Hence, a second bond, also
dated December 8, 1954 (Exhibit "B"),was executed by the
same parties to the first bond Exhibit "A-1", with the Far
Eastern Surety and Insurance Co. as additional surety, but it
provided that the liability of the surety company would attach
only when there had been an actual sale of iron ore by the
7

Larap Mines & Smelting Co. for an amount of not less then
P65,000.00, and that, furthermore, the liability of said surety
company would automatically expire on December 8, 1955.
Both bonds were attached to the "Revocation of Power of
Attorney and Contract", Exhibit "A", and made integral parts
thereof.
On the same day that Fonacier revoked the power of attorney
he gave to Gaite and the two executed and signed the
"Revocation of Power of Attorney and Contract", Exhibit "A",
Fonacier entered into a "Contract of Mining Operation",
ceding, transferring, and conveying unto the Larap Mines and
Smelting Co., Inc. the right to develop, exploit, and explore
the mining claims in question, together with the
improvements therein and the use of the name "Larap Iron
Mines" and its good will, in consideration of certain royalties.
Fonacier likewise transferred, in the same document, the
complete title to the approximately 24,000 tons of iron ore
which he acquired from Gaite, to the Larap & Smelting Co., in
consideration for the signing by the company and its
stockholders of the surety bonds delivered by Fonacier to
Gaite (Record on Appeal, pp. 82-94).
Up to December 8, 1955, when the bond Exhibit "B" expired
with respect to the Far Eastern Surety and Insurance
Company, no sale of the approximately 24,000 tons of iron
ore had been made by the Larap Mines & Smelting Co., Inc.,
nor had the P65,000.00 balance of the price of said ore been
paid to Gaite by Fonacier and his sureties payment of said
amount, on the theory that they had lost right to make use of
the period given them when their bond, Exhibit "B"
automatically expired (Exhibits "C" to "C-24"). And when
Fonacier and his sureties failed to pay as demanded by Gaite,
the latter filed the present complaint against them in the
Court of First Instance of Manila (Civil Case No. 29310) for the

payment of the P65,000.00 balance of the price of the ore,

consequential damages, and attorney's fees.
All the defendants except Francisco Dante set up the uniform
defense that the obligation sued upon by Gaite was subject
to a condition that the amount of P65,000.00 would be
payable out of the first letter of credit covering the first
shipment of iron ore and/or the first amount derived from the
local sale of the iron ore by the Larap Mines & Smelting Co.,
Inc.; that up to the time of the filing of the complaint, no sale
of the iron ore had been made, hence the condition had not
yet been fulfilled; and that consequently, the obligation was
not yet due and demandable. Defendant Fonacier also
contended that only 7,573 tons of the estimated 24,000 tons
of iron ore sold to him by Gaite was actually delivered, and
counterclaimed for more than P200,000.00 damages.
At the trial of the case, the parties agreed to limit the
presentation of evidence to two issues:
(1) Whether or not the obligation of Fonacier and his sureties
to pay Gaite P65,000.00 become due and demandable when
the defendants failed to renew the surety bond underwritten
by the Far Eastern Surety and Insurance Co., Inc. (Exhibit
"B"), which expired on December 8, 1955; and
(2) Whether the estimated 24,000 tons of iron ore sold by
plaintiff Gaite to defendant Fonacier were actually in
existence in the mining claims when these parties executed
the "Revocation of Power of Attorney and Contract", Exhibit
"A."
On the first question, the lower court held that the obligation
of the defendants to pay plaintiff the P65,000.00 balance of
the price of the approximately 24,000 tons of iron ore was
one with a term: i.e., that it would be paid upon the sale of
8

sufficient iron ore by defendants, such sale to be effected

within one year or before December 8, 1955; that the giving
of security was a condition precedent to Gait's giving of
credit to defendants; and that as the latter failed to put up a
good and sufficient security in lieu of the Far Eastern Surety
bond (Exhibit "B") which expired on December 8, 1955, the
obligation became due and demandable under Article 1198
of the New Civil Code.
As to the second question, the lower court found that plaintiff
Gaite did have approximately 24,000 tons of iron ore at the
mining claims in question at the time of the execution of the
contract Exhibit "A."
Judgment was, accordingly, rendered in favor of plaintiff
Gaite ordering defendants to pay him, jointly and severally,
P65,000.00 with interest at 6% per annum from December 9,
1955 until payment, plus costs. From this judgment,
defendants jointly appealed to this Court.
During the pendency of this appeal, several incidental
motions were presented for resolution: a motion to declare
the appellants Larap Mines & Smelting Co., Inc. and George
Krakower in contempt, filed by appellant Fonacier, and two
motions to dismiss the appeal as having become academic
and a motion for new trial and/or to take judicial notice of
certain documents, filed by appellee Gaite. The motion for
contempt is unmeritorious because the main allegation
therein that the appellants Larap Mines & Smelting Co., Inc.
and Krakower had sold the iron ore here in question, which
allegedly is "property in litigation", has not been
substantiated; and even if true, does not make these
appellants guilty of contempt, because what is under
litigation in this appeal is appellee Gaite's right to the
payment of the balance of the price of the ore, and not the
iron ore itself. As for the several motions presented by

appellee Gaite, it is unnecessary to resolve these motions in

view of the results that we have reached in this case, which
we shall hereafter discuss.
The main issues presented by appellants in this appeal are:
(1) that the lower court erred in holding that the obligation of
appellant Fonacier to pay appellee Gaite the P65,000.00
(balance of the price of the iron ore in question)is one with a
period or term and not one with a suspensive condition, and
that the term expired on December 8, 1955; and
(2) that the lower court erred in not holding that there were
only 10,954.5 tons in the stockpiles of iron ore sold by
appellee Gaite to appellant Fonacier.
The first issue involves an interpretation of the following
provision in the contract Exhibit "A":
7. That Fernando Gaite or Larap Iron Mines hereby transfers
to Isabelo F. Fonacier all his rights and interests over the
24,000 tons of iron ore, more or less, above-referred to
together with all his rights and interests to operate the mine
in consideration of the sum of SEVENTY-FIVE THOUSAND
PESOS (P75,000.00) which the latter binds to pay as follows:
a. TEN THOUSAND PESOS (P10,000.00) will be paid upon the
signing of this agreement.
b. The balance of SIXTY-FIVE THOUSAND PESOS
(P65,000.00)will be paid from and out of the first letter of
credit covering the first shipment of iron ore made by the
Larap Mines & Smelting Co., Inc., its assigns, administrators,
or successors in interest.
We find the court below to be legally correct in holding that
the shipment or local sale of the iron ore is not a condition
9

precedent (or suspensive) to the payment of the balance of

P65,000.00, but was only a suspensive period or term. What
characterizes a conditional obligation is the fact that its
efficacy or obligatory force (as distinguished from its
demandability) is subordinated to the happening of a future
and uncertain event; so that if the suspensive condition does
not take place, the parties would stand as if the conditional
obligation had never existed. That the parties to the contract
Exhibit "A" did not intend any such state of things to prevail
is supported by several circumstances:
1) The words of the contract express no contingency in the
buyer's obligation to pay: "The balance of Sixty-Five
Thousand Pesos (P65,000.00) will be paid out of the first
letter of credit covering the first shipment of iron ores . . ."
etc. There is no uncertainty that the payment will have to be
made sooner or later; what is undetermined is merely
the exact date at which it will be made. By the very terms of
the contract, therefore, the existence of the obligation to pay
is recognized; only its maturity or demandability is deferred.
2) A contract of sale is normally commutative and onerous:
not only does each one of the parties assume a correlative
obligation (the seller to deliver and transfer ownership of the
thing sold and the buyer to pay the price),but each party
anticipates performance by the other from the very start.
While in a sale the obligation of one party can be lawfully
subordinated to an uncertain event, so that the other
understands that he assumes the risk of receiving nothing for
what he gives (as in the case of a sale of hopes or
expectations, emptio spei), it is not in the usual course of
business to do so; hence, the contingent character of the
obligation must clearly appear. Nothing is found in the record
to evidence that Gaite desired or assumed to run the risk of
losing his right over the ore without getting paid for it, or that

Fonacier understood that Gaite assumed any such risk. This

is proved by the fact that Gaite insisted on a bond a to
guarantee payment of the P65,000.00, an not only upon a
bond by Fonacier, the Larap Mines & Smelting Co., and the
company's stockholders, but also on one by a surety
company; and the fact that appellants did put up such bonds
indicates that they admitted the definite existence of their
obligation to pay the balance of P65,000.00.
3) To subordinate the obligation to pay the remaining
P65,000.00 to the sale or shipment of the ore as a condition
precedent, would be tantamount to leaving the payment at
the discretion of the debtor, for the sale or shipment could
not be made unless the appellants took steps to sell the ore.
Appellants would thus be able to postpone payment
indefinitely. The desireability of avoiding such a construction
of the contract Exhibit "A" needs no stressing.
4) Assuming that there could be doubt whether by the
wording of the contract the parties indented a suspensive
condition or a suspensive period (dies ad quem) for the
payment of the P65,000.00, the rules of interpretation would
incline the scales in favor of "the greater reciprocity of
interests", since sale is essentially onerous. The Civil Code of
the Philippines, Article 1378, paragraph 1, in fine, provides:
If the contract is onerous, the doubt shall be settled in favor
of the greatest reciprocity of interests.
and there can be no question that greater reciprocity obtains
if the buyer' obligation is deemed to be actually existing, with
only its maturity (due date) postponed or deferred, that if
such obligation were viewed as non-existent or not binding
until the ore was sold.

10

The only rational view that can be taken is that the sale of
the ore to Fonacier was a sale on credit, and not an aleatory
contract where the transferor, Gaite, would assume the risk
of not being paid at all; and that the previous sale or
shipment of the ore was not a suspensive condition for the
payment of the balance of the agreed price, but was
intended merely to fix the future date of the payment.

(2) When he does not furnish to the creditor the guaranties or

securities which he has promised.

This issue settled, the next point of inquiry is whether

appellants, Fonacier and his sureties, still have the right to
insist that Gaite should wait for the sale or shipment of the
ore before receiving payment; or, in other words, whether or
not they are entitled to take full advantage of the period
granted them for making the payment.

Appellants' failure to renew or extend the surety company's

bond upon its expiration plainly impaired the securities given
to the creditor (appellee Gaite), unless immediately renewed
or replaced.

We agree with the court below that the appellant have

forfeited the right court below that the appellants have
forfeited the right to compel Gaite to wait for the sale of the
ore before receiving payment of the balance of P65,000.00,
because of their failure to renew the bond of the Far Eastern
Surety Company or else replace it with an equivalent
guarantee. The expiration of the bonding company's
undertaking on December 8, 1955 substantially reduced the
security of the vendor's rights as creditor for the unpaid
P65,000.00, a security that Gaite considered essential and
upon which he had insisted when he executed the deed of
sale of the ore to Fonacier (Exhibit "A"). The case squarely
comes under paragraphs 2 and 3 of Article 1198 of the Civil
Code of the Philippines:
"ART. 1198. The debtor shall lose every right to make use of
the period:
(1) . . .

(3) When by his own acts he has impaired said guaranties or

securities after their establishment, and when through
fortuitous event they disappear, unless he immediately gives
new ones equally satisfactory.

There is no merit in appellants' argument that Gaite's

acceptance of the surety company's bond with full knowledge
that on its face it would automatically expire within one year
was a waiver of its renewal after the expiration date. No such
waiver could have been intended, for Gaite stood to lose and
had nothing to gain barely; and if there was any, it could be
rationally explained only if the appellants had agreed to sell
the ore and pay Gaite before the surety company's bond
expired on December 8, 1955. But in the latter case the
defendants-appellants' obligation to pay became absolute
after one year from the transfer of the ore to Fonacier by
virtue of the deed Exhibit "A.".
All the alternatives, therefore, lead to the same result: that
Gaite acted within his rights in demanding payment and
instituting this action one year from and after the contract
(Exhibit "A") was executed, either because the appellant
debtors had impaired the securities originally given and
thereby forfeited any further time within which to pay; or
because the term of payment was originally of no more than
one year, and the balance of P65,000.00 became due and
payable thereafter.
11

Coming now to the second issue in this appeal, which is

whether there were really 24,000 tons of iron ore in the
stockpiles sold by appellee Gaite to appellant Fonacier, and
whether, if there had been a short-delivery as claimed by
appellants, they are entitled to the payment of damages, we
must, at the outset, stress two things: first, that this is a case
of a sale of a specific mass of fungible goods for a single
price or a lump sum, the quantity of "24,000 tons of iron ore,
more or less," stated in the contract Exhibit "A," being a mere
estimate by the parties of the total tonnage weight of the
mass; and second, that the evidence shows that neither of
the parties had actually measured of weighed the mass, so
that they both tried to arrive at the total quantity by making
an estimate of the volume thereof in cubic meters and then
multiplying it by the estimated weight per ton of each cubic
meter.

The sale between the parties is a sale of a specific mass or

iron ore because no provision was made in their contract for
the measuring or weighing of the ore sold in order to
complete or perfect the sale, nor was the price of P75,000,00
agreed upon by the parties based upon any such
measurement.(see Art. 1480, second par., New Civil Code).
The subject matter of the sale is, therefore, a determinate
object, the mass, and not the actual number of units or tons
contained therein, so that all that was required of the seller
Gaite was to deliver in good faith to his buyer all of the ore
found in the mass, notwithstanding that the quantity
delivered is less than the amount estimated by them (Mobile
Machinery & Supply Co., Inc. vs. York Oilfield Salvage Co., Inc.
171 So. 872, applying art. 2459 of the Louisiana Civil Code).
There is no charge in this case that Gaite did not deliver to
appellants all the ore found in the stockpiles in the mining
claims in questions; Gaite had, therefore, complied with his
promise to deliver, and appellants in turn are bound to pay
the lump price.
But assuming that plaintiff Gaite undertook to sell and
appellants undertook to buy, not a definite mass, but
approximately 24,000 tons of ore, so that any substantial
difference in this quantity delivered would entitle the buyers
to recover damages for the short-delivery, was there really a
short-delivery in this case?
We think not. As already stated, neither of the parties had
actually measured or weighed the whole mass of ore cubic
meter by cubic meter, or ton by ton. Both parties predicate
their respective claims only upon an estimated number of
cubic meters of ore multiplied by the average tonnage factor
per cubic meter.
Now, appellee Gaite asserts that there was a total of 7,375
cubic meters in the stockpiles of ore that he sold to Fonacier,
12

while appellants contend that by actual measurement, their

witness Cirpriano Manlagit found the total volume of ore in
the stockpiles to be only 6.609 cubic meters. As to the
average weight in tons per cubic meter, the parties are again
in disagreement, with appellants claiming the correct
tonnage factor to be 2.18 tons to a cubic meter, while
appellee Gaite claims that the correct tonnage factor is about
3.7.
In the face of the conflict of evidence, we take as the most
reliable estimate of the tonnage factor of iron ore in this case
to be that made by Leopoldo F. Abad, chief of the Mines and
Metallurgical Division of the Bureau of Mines, a government
pensionado to the States and a mining engineering graduate
of the Universities of Nevada and California, with almost 22
years of experience in the Bureau of Mines. This witness
placed the tonnage factor of every cubic meter of iron ore at
between 3 metric tons as minimum to 5 metric tons as
maximum. This estimate, in turn, closely corresponds to the
average tonnage factor of 3.3 adopted in his corrected report
(Exhibits "FF" and FF-1") by engineer Nemesio Gamatero,
who was sent by the Bureau of Mines to the mining claims
involved at the request of appellant Krakower, precisely to
make an official estimate of the amount of iron ore in Gaite's
stockpiles after the dispute arose.
Even granting, then, that the estimate of 6,609 cubic meters
of ore in the stockpiles made by appellant's witness Cipriano
Manlagit is correct, if we multiply it by the average tonnage
factor of 3.3 tons to a cubic meter, the product is 21,809.7
tons, which is not very far from the estimate of 24,000 tons
made by appellee Gaite, considering that actual weighing of
each unit of the mass was practically impossible, so that a
reasonable percentage of error should be allowed anyone
making an estimate of the exact quantity in tons found in the

mass. It must not be forgotten that the contract Exhibit "A"

expressly stated the amount to be 24,000 tons, more or less.
(ch. Pine River Logging & Improvement Co. vs U.S., 279, 46 L.
Ed. 1164).
There was, consequently, no short-delivery in this case as
would entitle appellants to the payment of damages, nor
could Gaite have been guilty of any fraud in making any
misrepresentation to appellants as to the total quantity of ore
in the stockpiles of the mining claims in question, as charged
by appellants, since Gaite's estimate appears to be
substantially correct.
WHEREFORE, finding no error in the decision appealed from,
we hereby affirm the same, with costs against appellants.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 112127 July 17, 1995

CENTRAL PHILIPPINE UNIVERSITY, petitioner,
vs.
COURT OF APPEALS, REMEDIOS FRANCO, FRANCISCO
13

N. LOPEZ, CECILIA P. VDA. DE LOPEZ, REDAN LOPEZ

AND REMARENE LOPEZ, respondents.

BELLOSILLO, J.:
CENTRAL PHILIPPINE UNIVERSITY filed this petition for review
on certiorari of the decision of the Court of Appeals which
reversed that of the Regional Trial Court of Iloilo City directing
petitioner to reconvey to private respondents the property
donated to it by their predecessor-in-interest.
Sometime in 1939, the late Don Ramon Lopez, Sr., who was
then a member of the Board of Trustees of the Central
Philippine College (now Central Philippine University [CPU]),
executed a deed of donation in favor of the latter of a parcel
of land identified as Lot No. 3174-B-1 of the subdivision plan
Psd-1144, then a portion of Lot No. 3174-B, for which Transfer
Certificate of Title No. T-3910-A was issued in the name of the
donee CPU with the following annotations copied from the
deed of donation
1. The land described shall be utilized by the CPU exclusively
for the establishment and use of a medical college with all its
buildings as part of the curriculum;

On 31 May 1989, private respondents, who are the heirs of

Don Ramon Lopez, Sr., filed an action for annulment of
donation, reconveyance and damages against CPU alleging
that since 1939 up to the time the action was filed the latter
had not complied with the conditions of the donation. Private
respondents also argued that petitioner had in fact
negotiated with the National Housing Authority (NHA) to
exchange the donated property with another land owned by
the latter.
In its answer petitioner alleged that the right of private
respondents to file the action had prescribed; that it did not
violate any of the conditions in the deed of donation because
it never used the donated property for any other purpose
than that for which it was intended; and, that it did not sell,
transfer or convey it to any third party.
On 31 May 1991, the trial court held that petitioner failed to
comply with the conditions of the donation and declared it
null and void. The court a quo further directed petitioner to
execute a deed of the reconveyance of the property in favor
of the heirs of the donor, namely, private respondents herein.

2. The said college shall not sell, transfer or convey to any

third party nor in any way encumber said land;

Petitioner appealed to the Court of Appeals which on 18 June

1993 ruled that the annotations at the back of petitioner's
certificate of title were resolutory conditions breach of which
should terminate the rights of the donee thus making the
donation revocable.

3. The said land shall be called "RAMON LOPEZ CAMPUS", and

the said college shall be under obligation to erect a
cornerstone bearing that name. Any net income from the
land or any of its parks shall be put in a fund to be known as
the "RAMON LOPEZ CAMPUS FUND" to be used for
improvements of said campus and erection of a building
thereon. 1

The appellate court also found that while the first condition
mandated petitioner to utilize the donated property for the
establishment of a medical school, the donor did not fix a
period within which the condition must be fulfilled, hence,
until a period was fixed for the fulfillment of the condition,
petitioner could not be considered as having failed to comply
with its part of the bargain. Thus, the appellate court
14

rendered its decision reversing the appealed decision and

remanding the case to the court of origin for the
determination of the time within which petitioner should
comply with the first condition annotated in the certificate of
title.
Petitioner now alleges that the Court of Appeals erred: (a) in
holding that the quoted annotations in the certificate of title
of petitioner are onerous obligations and resolutory
conditions of the donation which must be fulfilled noncompliance of which would render the donation revocable;
(b) in holding that the issue of prescription does not deserve
"disquisition;" and, (c) in remanding the case to the trial
court for the fixing of the period within which petitioner
would establish a medical college. 2
We find it difficult to sustain the petition. A clear perusal of
the conditions set forth in the deed of donation executed by
Don Ramon Lopez, Sr., gives us no alternative but to
conclude that his donation was onerous, one executed for a
valuable consideration which is considered the equivalent of
the donation itself, e.g., when a donation imposes a burden
equivalent to the value of the donation. A gift of land to the
City of Manila requiring the latter to erect schools, construct
a children's playground and open streets on the land was
considered an onerous donation. 3 Similarly, where Don
Ramon Lopez donated the subject parcel of land to petitioner
but imposed an obligation upon the latter to establish a
medical college thereon, the donation must be for an onerous
consideration.
Under Art. 1181 of the Civil Code, on conditional obligations,
the acquisition of rights, as well as the extinguishment or loss
of those already acquired, shall depend upon the happening
of the event which constitutes the condition. Thus, when a
person donates land to another on the condition that the

latter would build upon the land a school, the condition

imposed was not a condition precedent or a suspensive
condition but a resolutory one. 4 It is not correct to say that
the schoolhouse had to be constructed before the donation
became effective, that is, before the donee could become the
owner of the land, otherwise, it would be invading the
property rights of the donor. The donation had to be valid
before the fulfillment of the condition. 5 If there was no
fulfillment or compliance with the condition, such as what
obtains in the instant case, the donation may now be revoked
and all rights which the donee may have acquired under it
shall be deemed lost and extinguished.
The claim of petitioner that prescription bars the instant
action of private respondents is unavailing.
The condition imposed by the donor, i.e., the building of a
medical school upon the land donated, depended upon the
exclusive will of the donee as to when this condition shall be
fulfilled. When petitioner accepted the donation, it bound
itself to comply with the condition thereof. Since the time
within which the condition should be fulfilled depended upon
the exclusive will of the petitioner, it has been held that its
absolute acceptance and the acknowledgment of its
obligation provided in the deed of donation were sufficient to
prevent the statute of limitations from barring the action of
private respondents upon the original contract which was the
deed of donation. 6
Moreover, the time from which the cause of action accrued
for the revocation of the donation and recovery of the
property donated cannot be specifically determined in the
instant case. A cause of action arises when that which should
have been done is not done, or that which should not have
been done is done. 7 In cases where there is no special
provision for such computation, recourse must be had to the
15

rule that the period must be counted from the day on which
the corresponding action could have been instituted. It is the
legal possibility of bringing the action which determines the
starting point for the computation of the period. In this case,
the starting point begins with the expiration of a reasonable
period and opportunity for petitioner to fulfill what has been
charged upon it by the donor.
The period of time for the establishment of a medical college
and the necessary buildings and improvements on the
property cannot be quantified in a specific number of years
because of the presence of several factors and circumstances
involved in the erection of an educational institution, such as
government laws and regulations pertaining to education,
building requirements and property restrictions which are
beyond the control of the donee.
Thus, when the obligation does not fix a period but from its
nature and circumstances it can be inferred that a period was
intended, the general rule provided in Art. 1197 of the Civil
Code applies, which provides that the courts may fix the
duration thereof because the fulfillment of the obligation
itself cannot be demanded until after the court has fixed the
period for compliance therewith and such period has
arrived. 8
This general rule however cannot be applied considering the
different set of circumstances existing in the instant case.
More than a reasonable period of fifty (50) years has already
been allowed petitioner to avail of the opportunity to comply
with the condition even if it be burdensome, to make the
donation in its favor forever valid. But, unfortunately, it failed
to do so. Hence, there is no more need to fix the duration of a
term of the obligation when such procedure would be a mere
technicality and formality and would serve no purpose than
to delay or lead to an unnecessary and expensive

multiplication of suits. 9 Moreover, under Art. 1191 of the

Civil Code, when one of the obligors cannot comply with what
is incumbent upon him, the obligee may seek rescission and
the court shall decree the same unless there is just cause
authorizing the fixing of a period. In the absence of any just
cause for the court to determine the period of the
compliance, there is no more obstacle for the court to decree
the rescission claimed.
Finally, since the questioned deed of donation herein is
basically a gratuitous one, doubts referring to incidental
circumstances of a gratuitous contract should be resolved in
favor of the least transmission of rights and
interests.10 Records are clear and facts are undisputed that
since the execution of the deed of donation up to the time of
filing of the instant action, petitioner has failed to comply
with its obligation as donee. Petitioner has slept on its
obligation for an unreasonable length of time. Hence, it is
only just and equitable now to declare the subject donation
already ineffective and, for all purposes, revoked so that
petitioner as donee should now return the donated property
to the heirs of the donor, private respondents herein, by
means of reconveyance.
WHEREFORE, the decision of the Regional Trial Court of Iloilo,
Br. 34, of 31 May 1991 is REINSTATED and AFFIRMED, and the
decision of the Court of Appeals of 18 June 1993 is
accordingly MODIFIED. Consequently, petitioner is directed to
reconvey to private respondents Lot No. 3174-B-1 of the
subdivision plan Psd-1144 covered by Transfer Certificate of
Title No. T-3910-A within thirty (30) days from the finality of
this judgment.
Costs against petitioner.
SO ORDERED.
16

Quiason and Kapunan, JJ., concur.

Separate Opinions

DAVIDE, JR., J., dissenting:

I agree with the view in the majority opinion that the
donation in question is onerous considering the conditions
imposed by the donor on the donee which created reciprocal
obligations upon both parties. Beyond that, I beg to disagree.
First of all, may I point out an inconsistency in the majority
opinion's description of the donation in question. In one part,
it says that the donation in question is onerous. Thus, on
page 4 it states:
We find it difficult to sustain the petition. A clear perusal of
the conditions set forth in the deed of donation executed by
Don Ramon Lopez, Sr., give us no alternative but to conclude
that his donation was onerous, one executed for a valuable
consideration which is considered the equivalent of the
donation itself, e.g., when a donation imposes a burden
equivalent to the value of the donation . . . . (emphasis
supplied)
Yet, in the last paragraph of page 8 it states that the donation
is basically a gratuitous one. The pertinent portion thereof
reads:
Finally, since the questioned deed of donation herein is
basically a gratuitous one, doubts referring to incidental
circumstances of a gratuitous contract should be resolved in
favor of the least transmission of rights and interest . . .
(emphasis supplied)

Second, the discussion on conditional obligations is

unnecessary. There is no conditional obligation to speak of in
this case. It seems that the "conditions" imposed by the
donor and as the word is used in the law of donations is
confused with "conditions" as used in the law of obligations.
In his annotation of Article 764 of the Civil Code on
Donations, Arturo M. Tolentino, citing the well-known civilists
such as Castan, Perez Gonzalez and Alguer, and Colin &
Capitant, states clearly the context within which the term
"conditions" is used in the law of donations, to wit:
The word "conditions" in this article does not refer to
uncertain events on which the birth or extinguishment of a
juridical relation depends, but is used in the vulgar sense
of obligations or chargesimposed by the donor on the donee.
It is used, not in its technical or strict legal sense, but in its
broadest sense. 1 (emphasis supplied)
Clearly then, when the law and the deed of donation speaks
of "conditions" of a donation, what are referred to are
actually the obligations, charges or burdens imposed by the
donor upon the donee and which would characterize the
donation as onerous. In the present case, the donation is,
quite obviously, onerous, but it is more properly called a
"modal donation." A modal donation is one in which the
donor imposes a prestation upon the donee. The
establishment of the medical college as the condition of the
donation in the present case is one such prestation.
The conditions imposed by the donor Don Ramon Lopez
determines neither the existence nor the extinguishment of
the obligations of the donor and the donee with respect to
the donation. In fact, the conditions imposed by Don Ramon
Lopez upon the donee are the very obligations of the
donation to build the medical college and use the property
for the purposes specified in the deed of donation. It is very
17

clear that those obligations are unconditional, the fulfillment,

performance, existence or extinguishment of which is not
dependent on any future or uncertain event or past and
unknown event, as the Civil Code would define a conditional
obligation. 2
Reliance on the case of Parks vs. Province of Tarlac 3 as cited
on page 5 of the majority opinion is erroneous in so far as the
latter stated that the condition in Parks is a resolutory one
and applied this to the present case. A more careful reading
of this Court's decision would reveal that nowhere did we
say, whether explicitly or impliedly, that the donation in that
case, which also has a condition imposed to build a school
and a public park upon the property donated, is a resolutory
condition. 4It is incorrect to say that the "conditions" of the
donation there or in the present case are resolutory
conditions because, applying Article 1181 of the Civil Code,
that would mean that upon fulfillment of the conditions, the
rights already acquired will be extinguished. Obviously, that
could not have been the intention of the parties.
What the majority opinion probably had in mind was that the
conditions are resolutory because if they are notcomplied
with, the rights of the donee as such will be extinguished and
the donation will be revoked. To my mind, though, it is more
accurate to state that the conditions here are not resolutory
conditions but, for the reasons stated above,
are the obligations imposed by the donor.
Third, I cannot subscribe to the view that the provisions of
Article 1197 cannot be applied here. The
conditions/obligations imposed by the donor herein are
subject to a period. I draw this conclusion based on our
previous ruling which, although made almost 90 years ago,
still finds application in the present case. In Barretto vs. City
of Manila, 5 we said that when the contract of donation, as

the one involved therein, has no fixed period in which the

condition should be fulfilled, the provisions of what is now
Article 1197 (then Article 1128) are applicable and it is the
duty of the court to fix a suitable time for its fulfillment.
Indeed, from the nature and circumstances of the
conditions/obligations of the present donation, it can be
inferred that a period was contemplated by the donor. Don
Ramon Lopez could not have intended his property to remain
idle for a long period of time when in fact, he specifically
burdened the donee with the obligation to set up a medical
college therein and thus put his property to good use. There
is a need to fix the duration of the time within which the
conditions imposed are to be fulfilled.
It is also important to fix the duration or period for the
performance of the conditions/obligations in the donation in
resolving the petitioner's claim that prescription has already
barred the present action. I disagree once more with the
ruling of the majority that the action of the petitioners is not
barred by the statute of limitations. There is misplaced
reliance again on a previous decision of this Court in Osmea
vs. Rama. 6 That case does not speak of a deed of donation
as erroneously quoted and cited by the majority opinion. It
speaks of a contract for a sum of money where the debtor
herself imposed a condition which will determine when she
will fulfill her obligation to pay the creditor, thus, making the
fulfillment of her obligation dependent upon her will. What
we have here, however, is not a contract for a sum of money
but a donation where the donee has not imposed any
conditions on the fulfillment of its obligations. Although it is
admitted that the fulfillment of the conditions/obligations of
the present donation may be dependent on the will of the
donee as to when it will comply therewith, this did not arise
out of a condition which the donee itself imposed. It is
believed that the donee was not meant to and does not have
18

absolute control over the time within which it will perform its
obligations. It must still do so within a reasonable time. What
that reasonable time is, under the circumstances, for the
courts to determine. Thus, the mere fact that there is no time
fixed as to when the conditions of the donation are to be
fulfilled does not ipso facto mean that the statute of
limitations will not apply anymore and the action to revoke
the donation becomes imprescriptible.
Admittedly, the donation now in question is an onerous
donation and is governed by the law on contracts (Article
733) and the case of Osmea, being one involving a contract,
may apply. But we must not lose sight of the fact that it is
still a donation for which this Court itself applied the
pertinent law to resolve situations such as this. That the
action to revoke the donation can still prescribe has been the
pronouncement of this Court as early as 1926 in the case
of Parks which, on this point, finds relevance in this case.
There, this Court said,
[that] this action [for the revocation of the donation] is
prescriptible, there is no doubt. There is no legal provision
which excludes this class of action from the statute of
limitations. And not only this, the law itself recognizes the
prescriptibility of the action for the revocation of a donation,
providing a special period of [four] years for the revocation
by the subsequent birth of children [Art. 646, now Art. 763],
and . . . by reason of ingratitude. If no special period is
provided for the prescription of the action for revocation for
noncompliance of the conditions of the donation [Art. 647,
now Art. 764], it is because in this respect the donation is
considered onerous and is governed by the law of contracts
and the general rules of prescription. 7
More recently, in De Luna v. Abrigo, 8 this Court reiterated the
ruling in Parks and said that:

It is true that under Article 764 of the New Civil Code, actions
for the revocation of a donation must be brought within four
(4) years from the non-compliance of the conditions of the
donation. However, it is Our opinion that said article does not
apply to onerous donations in view of the specific provision of
Article 733 providing that onerous donations are governed by
the rules on contracts.
In the light of the above, the rules on contracts and the
general rules on prescription and not the rules on donations
are applicable in the case at bar.
The law applied in both cases is Article 1144(1). It refers to
the prescription of an action upon a written contract, which is
what the deed of an onerous donation is. The prescriptive
period is ten years from the time the cause of action accrues,
and that is, from the expiration of the time within which the
donee must comply with the conditions/obligations of the
donation. As to when this exactly is remains to be
determined, and that is for the courts to do as reposed upon
them by Article 1197.
For the reasons expressed above, I register my dissent.
Accordingly, the decision of the Court of Appeals must be
upheld, except its ruling that the conditions of the donation
are resolutory.
Padilla, J., dissents

Separate Opinions
DAVIDE, JR., J., dissenting:
I agree with the view in the majority opinion that the
donation in question is onerous considering the conditions
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imposed by the donor on the donee which created reciprocal

obligations upon both parties. Beyond that, I beg to disagree.
First of all, may I point out an inconsistency in the majority
opinion's description of the donation in question. In one part,
it says that the donation in question is onerous. Thus, on
page 4 it states:
We find it difficult to sustain the petition. A clear perusal of
the conditions set forth in the deed of donation executed by
Don Ramon Lopez, Sr., give us no alternative but to conclude
that his donation was onerous, one executed for a valuable
consideration which is considered the equivalent of the
donation itself, e.g., when a donation imposes a burden
equivalent to the value of the donation . . . . (emphasis
supplied)
Yet, in the last paragraph of page 8 it states that the donation
is basically a gratuitous one. The pertinent portion thereof
reads:
Finally, since the questioned deed of donation herein is
basically a gratuitous one, doubts referring to incidental
circumstances of a gratuitous contract should be resolved in
favor of the least transmission of rights and interest . . .
(emphasis supplied)

Second, the discussion on conditional obligations is

unnecessary. There is no conditional obligation to speak of in
this case. It seems that the "conditions" imposed by the
donor and as the word is used in the law of donations is
confused with "conditions" as used in the law of obligations.
In his annotation of Article 764 of the Civil Code on
Donations, Arturo M. Tolentino, citing the well-known civilists
such as Castan, Perez Gonzalez and Alguer, and Colin &
Capitant, states clearly the context within which the term
"conditions" is used in the law of donations, to wit:
The word "conditions" in this article does not refer to
uncertain events on which the birth or extinguishment of a
juridical relation depends, but is used in the vulgar sense
of obligations or chargesimposed by the donor on the donee.
It is used, not in its technical or strict legal sense, but in its
broadest sense. 1 (emphasis supplied)
Clearly then, when the law and the deed of donation speaks
of "conditions" of a donation, what are referred to are
actually the obligations, charges or burdens imposed by the
donor upon the donee and which would characterize the
donation as onerous. In the present case, the donation is,
quite obviously, onerous, but it is more properly called a
"modal donation." A modal donation is one in which the
donor imposes a prestation upon the donee. The
establishment of the medical college as the condition of the
donation in the present case is one such prestation.
The conditions imposed by the donor Don Ramon Lopez
determines neither the existence nor the extinguishment of
the obligations of the donor and the donee with respect to
the donation. In fact, the conditions imposed by Don Ramon
Lopez upon the donee are the very obligations of the
donation to build the medical college and use the property
for the purposes specified in the deed of donation. It is very
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clear that those obligations are unconditional, the fulfillment,

performance, existence or extinguishment of which is not
dependent on any future or uncertain event or past and
unknown event, as the Civil Code would define a conditional
obligation. 2
Reliance on the case of Parks vs. Province of Tarlac 3 as cited
on page 5 of the majority opinion is erroneous in so far as the
latter stated that the condition in Parks is a resolutory one
and applied this to the present case. A more careful reading
of this Court's decision would reveal that nowhere did we
say, whether explicitly or impliedly, that the donation in that
case, which also has a condition imposed to build a school
and a public park upon the property donated, is a resolutory
condition. 4It is incorrect to say that the "conditions" of the
donation there or in the present case are resolutory
conditions because, applying Article 1181 of the Civil Code,
that would mean that upon fulfillment of the conditions, the
rights already acquired will be extinguished. Obviously, that
could not have been the intention of the parties.
What the majority opinion probably had in mind was that the
conditions are resolutory because if they are notcomplied
with, the rights of the donee as such will be extinguished and
the donation will be revoked. To my mind, though, it is more
accurate to state that the conditions here are not resolutory
conditions but, for the reasons stated above,
are the obligations imposed by the donor.
Third, I cannot subscribe to the view that the provisions of
Article 1197 cannot be applied here. The
conditions/obligations imposed by the donor herein are
subject to a period. I draw this conclusion based on our
previous ruling which, although made almost 90 years ago,
still finds application in the present case. In Barretto vs. City
of Manila, 5 we said that when the contract of donation, as

the one involved therein, has no fixed period in which the

condition should be fulfilled, the provisions of what is now
Article 1197 (then Article 1128) are applicable and it is the
duty of the court to fix a suitable time for its fulfillment.
Indeed, from the nature and circumstances of the
conditions/obligations of the present donation, it can be
inferred that a period was contemplated by the donor. Don
Ramon Lopez could not have intended his property to remain
idle for a long period of time when in fact, he specifically
burdened the donee with the obligation to set up a medical
college therein and thus put his property to good use. There
is a need to fix the duration of the time within which the
conditions imposed are to be fulfilled.
It is also important to fix the duration or period for the
performance of the conditions/obligations in the donation in
resolving the petitioner's claim that prescription has already
barred the present action. I disagree once more with the
ruling of the majority that the action of the petitioners is not
barred by the statute of limitations. There is misplaced
reliance again on a previous decision of this Court in Osmea
vs. Rama. 6 That case does not speak of a deed of donation
as erroneously quoted and cited by the majority opinion. It
speaks of a contract for a sum of money where the debtor
herself imposed a condition which will determine when she
will fulfill her obligation to pay the creditor, thus, making the
fulfillment of her obligation dependent upon her will. What
we have here, however, is not a contract for a sum of money
but a donation where the donee has not imposed any
conditions on the fulfillment of its obligations. Although it is
admitted that the fulfillment of the conditions/obligations of
the present donation may be dependent on the will of the
donee as to when it will comply therewith, this did not arise
out of a condition which the donee itself imposed. It is
believed that the donee was not meant to and does not have
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absolute control over the time within which it will perform its
obligations. It must still do so within a reasonable time. What
that reasonable time is, under the circumstances, for the
courts to determine. Thus, the mere fact that there is no time
fixed as to when the conditions of the donation are to be
fulfilled does not ipso facto mean that the statute of
limitations will not apply anymore and the action to revoke
the donation becomes imprescriptible.
Admittedly, the donation now in question is an onerous
donation and is governed by the law on contracts (Article
733) and the case of Osmea, being one involving a contract,
may apply. But we must not lose sight of the fact that it is
still a donation for which this Court itself applied the
pertinent law to resolve situations such as this. That the
action to revoke the donation can still prescribe has been the
pronouncement of this Court as early as 1926 in the case
of Parks which, on this point, finds relevance in this case.
There, this Court said,
[that] this action [for the revocation of the donation] is
prescriptible, there is no doubt. There is no legal provision
which excludes this class of action from the statute of
limitations. And not only this, the law itself recognizes the
prescriptibility of the action for the revocation of a donation,
providing a special period of [four] years for the revocation
by the subsequent birth of children [Art. 646, now Art. 763],
and . . . by reason of ingratitude. If no special period is
provided for the prescription of the action for revocation for
noncompliance of the conditions of the donation [Art. 647,
now Art. 764], it is because in this respect the donation is
considered onerous and is governed by the law of contracts
and the general rules of prescription. 7

More recently, in De Luna v. Abrigo, 8 this Court reiterated the

ruling in Parks and said that:
It is true that under Article 764 of the New Civil Code, actions
for the revocation of a donation must be brought within four
(4) years from the non-compliance of the conditions of the
donation. However, it is Our opinion that said article does not
apply to onerous donations in view of the specific provision of
Article 733 providing that onerous donations are governed by
the rules on contracts.
In the light of the above, the rules on contracts and the
general rules on prescription and not the rules on donations
are applicable in the case at bar.
The law applied in both cases is Article 1144(1). It refers to
the prescription of an action upon a written contract, which is
what the deed of an onerous donation is. The prescriptive
period is ten years from the time the cause of action accrues,
and that is, from the expiration of the time within which the
donee must comply with the conditions/obligations of the
donation. As to when this exactly is remains to be
determined, and that is for the courts to do as reposed upon
them by Article 1197.
For the reasons expressed above, I register my dissent.
Accordingly, the decision of the Court of Appeals must be
upheld, except its ruling that the conditions of the donation
are resolutory.
Padilla, J., dissents

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