Case Digest: Chamber of Real Estate &

Builders Associations v. The Secretary of

Agrarian Reform
G.R. No. 183409: June 18, 2010

CHAMBER OF REAL ESTATE AND BUILDERS ASSOCIATIONS, INC. (CREBA),

Petitioner, v. THE SECRETARY OF AGRARIAN REFORM, Respondent.

PEREZ, J.:

FACTS:

Oct 1997 Sec of DAR issued DAR A.O. entitled Omnibus Rules and Procedures
Governing Conversion of Agricultural Lands to Non Agricultural Uses. The said AO
embraced all private agricultural lands regardless of tenurial arrangement and
commodity produced and all untitled agricultural lands and agricultural lands
reclassified by LGU into non-agricultural uses after 15 June 1988. March 1999, Sec
DAR issued Revised Rules and Regulations on Conversion of Agricultural Lands to
Non AgriculturalUses, it covers the following: (1) those to be converted to residential,
commercial, industrial, institutional and other non-agricultural purposes; (2) those to
be devoted to another type of agricultural activity such as livestock, poultry, and
fishpond the effect of which is to exempt the land from the Comprehensive
Agrarian Reform Program (CARP) coverage; (3) those to be converted to non-
agricultural use other than that previously authorized; and (4) those reclassified to
residential, commercial, industrial, or other non-agricultural uses on or after the
effectivity of Republic Act No. 6657 on 15 June 1988 pursuant to Section 20 of
Republic Act No. 7160 and other pertinent laws and regulations, and are to be
converted to such uses. The 2 earlier AOs was further amended by an AO issued
Feb 2002 - 2002 Comprehensive Rules on Land Use Conversion; covers all
applications for conversion from agricultural to non-agricultural uses or to another
agricultural use.The AO was amended again in 2007 to include provisions
particularly addressing land conversion in time of exigencies and calamities. To
address the conversion to lands to non agricultural, Sec of DAR suspended
processing and approval of land conversion through DAR Memo 88. CREBA claims
that there is a slowdown of housing projects because of such stoppage

ISSUES: Whether or not DARs AO entitled Omnibus Rules and Procedures

Governing Conversion of Agricultural Lands to Non Agricultural Uses is
unconstitutional

HELD: Yes.
POLITICAL LAW: Constitutionality of DARs A.O. entitled Omnibus Rules and
Procedures Governing Conversion of Agricultural Lands to Non Agricultural
Uses.

RA 6657 and 8435 defines agricultural land as lands devoted to or suitable for the
cultivation of the soil, planting of crops, growing of fruit trees, raising of livestock,
poultry or fish, including the harvesting of such farm products, and other farm
activities and practices performed by a farmer in conjunction with such farming
operations done by a person whether natural or juridical, and not classified by the
law as mineral, forest, residential, commercial or industrial land. However, he issued
an AO included in this definition - lands not reclassified as residential, commercial,
industrial or other non-agricultural uses before 15 June 1988. In effect, lands
reclassified from agricultural to residential, commercial, industrial, or other non-
agricultural uses after 15 June 1988 are considered to be agricultural lands for
purposes of conversion, redistribution, or otherwise. This is violation of RA 6657
because there is nothing in Section 65 of Republic Act No. 6657 or in any other
provision of law that confers to the DAR the jurisdiction or authority to require that
non-awarded lands or reclassified lands be submitted to its conversion authority. It
also violates Section 20 of Republic Act No. 7160, because it was not provided
therein that reclassification by LGUs shall be subject to conversion procedures or
requirements, or that the DARs approval or clearance must be secured to effect
reclassification.The said Section 2.19 of DAR AO No. 01-02, as amended, also
contravenes the constitutional mandate on local autonomy under Section 25, Article
II and Section 2, Article X of the 1987 Philippine Constitution. There is deprivation of
liberty and property without due process of law because under DAR AO No. 01-02,
as amended, lands that are not within DARs jurisdiction are unjustly, arbitrarily and
oppressively prohibited or restricted from legitimate use on pain of administrative
and criminal penalties. More so, there is discrimination and violation of the equal
protection clause of the Constitution because the aforesaid administrative order is
patently biased in favor of the peasantry at the expense of all other sectors of
society.

DISMISSED.

Case Digest: Boracay Foundation v. Province

of Aklan
G.R. No. 196870 : June 26, 2012

BORACAY FOUNDATION, INC., Petitioner, v. THE PROVINCE OF AKLAN,

REPRESENTED BY GOV. CARLITO S. MARQUEZ, THE PHIL. RECLAMATION
AUTHORITY & THE DENR-EMB (REGION VI),Respondents.

LEONARDO-DE CASTRO, J.:

FACTS:

Boracay Island (Boracay), a tropical paradise located in the Western Visayas region
of the Philippines and one of the countrys most popular tourist destinations, was
declared a tourist zone and marine reserve in 1973 under Presidential Proclamation
No. 1801. The island comprises the barangays of Manoc-manoc, Balabag, and
Yapak, all within the municipality of Malay, in the province of Aklan.

More than a decade ago, respondent Province built the Caticlan Jetty Port and
Passenger Terminal at Barangay Caticlan to be the main gateway to Boracay.It also
built the corresponding Cagban Jetty Port and Passenger Terminal to be the
receiving end for tourists in Boracay. Respondent Province operates both ports to
provide structural facilities suited for locals, tourists and guests and to provide safety
and security measures.

Governor Marquez sent a letter to respondent PRA on March 12, 2009 expressing
the interest of respondent Province to reclaim about 2.64 hectares of land along the
foreshores of Barangay Caticlan, Municipality of Malay, Province of Aklan, pursuant
to Resolution No. 13, s. 2008 issued by the Sangguniang Barangay of Caticlan.

Sometime in April 2009, respondent Province entered into an agreement with the
Financial Advisor/Consultant that won in the bidding process held a month before, to
conduct the necessary feasibility study of the proposed project for the
Renovation/Rehabilitation of the Caticlan Passenger Terminal Building and Jetty
Port, Enhancement and Recovery of Old Caticlan Coastline, and Reclamation of a
Portion of Foreshore for Commercial Purposes (the Marina Project), in Malay, Aklan.

Subsequently, on May 7, 2009, the Sangguniang Panlalawigan of respondent

Province issued Resolution No. 2009110, which authorized Governor Marquez to file
an application to reclaim the 2.64 hectares of foreshore area in Caticlan, Malay,
Aklan with respondent PRA.

Meanwhile, the Sangguniang Bayan of the Municipality of Malay expressed its

strong opposition to the intended foreshore lease application, through Resolution
No. 044, approved on July 22, 2009, manifesting therein that respondent Provinces
foreshore lease application was for business enterprise purposes for its benefit, at
the expense of the local government of Malay, which by statutory provisions was the
rightful entity to develop, utilize and reap benefits from the natural resources found
within its jurisdiction.
In August 2009, a Preliminary Geohazard Assessmentfor the
enhancement/expansion of the existing Caticlan Jetty Port and Passenger Terminal
through beach zone restoration and Protective Marina Developments in Caticlan,
Malay, Aklan was completed.

Thereafter, Governor Marquez submitted an Environmental Performance Report and

Monitoring Program (EPRMP) to DENR-EMB RVI, which he had attached to his
letter dated September 19, 2009, as an initial step for securing an Environmental
Compliance Certificate (ECC). The letter reads in part:

With the project expected to start its construction implementation next month, the
province hereby assures your good office that it will give preferential attention to and
shall comply with whatever comments that you may have on this EPRMP.

Within the same month of October 2009, respondent Province deliberated on the
possible expansion from its original proposed reclamation area of 2.64 hectares to
forty (40) hectares.

Respondent PRA approved the reclamation project on April 20, 2010 in its
Resolution No. 4094and authorized its General Manager/Chief Executive Officer
(CEO) to enter into a MOA with respondent Province for the implementation of the
reclamation project.

On April 27, 2010, DENR-EMB RVI issued to respondent Province ECC-R6-1003-

096-7100 (the questioned ECC) for Phase 1 of the Reclamation Project to the extent
of 2.64 hectares to be done along the Caticlan side beside the existing jetty port.

On May 17, 2010, respondent Province entered into a MOA with respondent PRA.

In Resolution No. 046, Series of 2010, adopted on June 23, 2010, the Malay
Municipality reiterated its strong opposition to respondent Provinces project and
denied its request for afavorableendorsement of the Marina Project.

The Malay Municipality subsequently issued Resolution No. 016, Series of 2010,
adopted on August 3, 2010, to request respondent PRA not to grant reclamation
permit and notice to proceed to the Marina Project of the respondent Provincial
Government of Aklan located at Caticlan, Malay, Aklan.

In a letter dated October 12, 2010, petitioner informed respondent PRA of its
opposition to the reclamation project.

Petitioner likewise transmitted its Resolution No. 001, Series of 2010, registering its
opposition to the reclamation project to respondent Province, respondent PRA,
respondent DENR-EMB, the National Economic Development Authority Region VI,
the Malay Municipality, and other concerned entities.
Petitioner alleges that despite the Malay Municipalitys denial of respondent
Provinces request for afavorableendorsement, as well as the strong opposition
manifested both by Barangay Caticlan and petitioner as an NGO, respondent
Province still continued with the implementation of the Reclamation Project.

On June 1, 2011, petitioner filed the instant Petition for Environmental Protection
Order/Issuance of the Writ of Continuing Mandamus. On June 7, 2011, this Court
issued a Temporary Environmental Protection Order (TEPO) and ordered the
respondents to file their respective comments to the petition.

After receiving a copy of the TEPO on June 9, 2011, respondent Province

immediately issued an order to the Provincial Engineering Office and the concerned
contractor to cease and desist from conducting any construction activities until
further orders from this Court.

ISSUES:

[1] Whether or not the petition should be dismissed for having been rendered moot
and academic;
[2] Whether or not the petition is premature because petitioner failed to exhaust
administrative remedies before filing this case;
[3] Whether or not respondent Province failed to perform a full EIA as required by
laws and regulations based on the scope and classification of the project;
[4] Whether or not respondent Province complied with all the requirements under
the pertinent laws and regulations; and
[5] Whether or not there was proper, timely, and sufficient public consultation for the
project

HELD:

A close reading of the two LGUs respective resolutions would reveal that they
are not sufficient to render the petition moot and academic, as there are
explicit conditions imposed that must be complied with by respondent
Province. In Resolution No. 003, series of 2012, of the Sangguniang Barangay of
Caticlan it is stated that any vertical structures to be constructed shall be subject for
barangay endorsement. Clearly, what the barangay endorsed was the reclamation
only, and not the entire project that includes the construction of a commercial
building and wellness center, and other tourism-related facilities.Petitioners
objections, as may be recalled, pertain not only to the reclamation per se, but also to
the building to be constructed and the entire projects perceived ill effects to the
surrounding environment.
The Sangguniang Bayan of Malay obviously imposed explicit conditions for
respondent Province to comply with on pain of revocation of its endorsement of the
project, including the need to conduct a comprehensive study on the environmental
impact of the reclamation project, which is the heart of the petition before us.
Therefore, the contents of the two resolutions submitted by respondent Province do
not support its conclusion that the subsequent favorable endorsement of the LGUs
had already addressed all the issues raised and rendered the instant petition moot
and academic.

We do not agree with respondents appreciation of the applicability of the rule

on exhaustion of administrative remedies in this case. We are reminded of our
ruling in Pagara v. Court of Appeals, which summarized our earlier decisions on the
procedural requirement of exhaustion of administrative remedies, to wit:

REMEDIAL LAW: exhaustion of administrative remedies

The rule regarding exhaustion of administrative remedies is not a hard and fast rule.
It is not applicable: (1) where the question in dispute is purely a legal one, or (2)
where the controverted act is patently illegal or was performed without jurisdiction or
in excess of jurisdiction; or (3) where the respondent is a department secretary,
whose acts as an alter ego of the President bear the implied or assumed approval of
the latter, unless actually disapproved by him, or (4) where there are circumstances
indicating the urgency of judicial intervention.

Said principle may also be disregarded when it does not provide a plain, speedy and
adequate remedy, when there is no due process observed, or where the protestant
has no other recourse.

Although petitioner was not a party to the proceedings where the decision to issue
an ECC was rendered, it stands to be aggrieved by the decision, because it claims
that the reclamation of land on the Caticlan side would unavoidably adversely affect
the Boracay side, where petitioners members own establishments engaged in the
tourism trade. As noted earlier, petitioner contends that the declared objective of the
reclamation project is to exploit Boracays tourism trade because the project is
intended to enhance support services thereto; however, this objective would not be
achieved since the white-sand beaches for which Boracay is famous might be
negatively affected by the project. Petitioners conclusion is that respondent
Province, aided and abetted by respondents PRA and DENR-EMB RVI, ignored the
spirit and letter of our environmental laws, and should thus be compelled to perform
their duties under said laws.

REMEDIAL LAW: new rules of procedure for environmental cases; writ of

continuing mandamus

The new Rules of Procedure for Environmental Cases, A.M. No. 09-6-8-SC,
provides a relief for petitioner under the writ of continuing mandamus, which is a
special civil action that may be availed of to compel the performance of an act
specifically enjoined by law and which provides for the issuance of a TEPO as an
auxiliary remedy prior to the issuance of the writ itself. The Rationale of the said
Rules explains the writ in this wise:

Environmental law highlights the shift in the focal-point from the initiation of
regulation by Congress to the implementation of regulatory programs by the
appropriate government agencies.

Thus, a government agencys inaction, if any, has serious implications on the future
of environmental law enforcement. Private individuals, to the extent that they seek to
change the scope of the regulatory process, will have to rely on such agencies to
take the initial incentives, which may require a judicial component. Accordingly,
questions regarding the propriety of an agencys action or inaction will need to be
analyzed.

This point is emphasized in the availability of the remedy of the writ of mandamus,
which allows for the enforcement of the conduct of the tasks to which the writ
pertains: the performance of a legal duty.

The writ of continuing mandamus permits the court to retain jurisdiction after
judgment in order to ensure the successful implementation of the reliefs mandated
under the courts decision and, in order to do this, the court may compel the
submission of compliance reports from the respondent government agencies as well
as avail of other means to monitor compliance with its decision.

Petitioner had three options where to file this case under the rule: the Regional Trial
Court exercising jurisdiction over the territory where the actionable neglect or
omission occurred, the Court of Appeals, or this Court.

Petitioner had no other plain, speedy, or adequate remedy in the ordinary course of
law to determine the questions of unique national and local importance raised here
that pertain to laws and rules for environmental protection, thus it was justified in
coming to this Court.

3) Being the administrator of the EIS System, respondent DENR-EMB RVIs

submissions bear great weight in this case.However, the following are the issues
that put in question the wisdom of respondent DENR-EMB RVI in issuing the ECC:
[1] Its approval of respondent Provinces classification of the project as a mere
expansion of the existing jetty port in Caticlan, instead of classifying it as a new
project;
[2] Its classification of the reclamation project as a single instead of a co-located
project;
[3] The lack of prior public consultations and approval of local government agencies;
and
[4] The lack of comprehensive studies regarding the impact of the reclamation
project to the environment.
As may be gleaned from the breakdown of the 2.64 hectares as described by
respondent Province above, a significant portion of the reclaimed area would be
devoted to the construction of a commercial building, and the area to be utilized for
the expansion of the jetty port consists of a mere 3,000 square meters (sq. m). To be
true to its definition, the EIA report submitted by respondent Province should at the
very least predict the impact that the construction of the new buildings on the
reclaimed land would have on the surrounding environment. These new
constructions and their environmental effects were not covered by the old studies
that respondent Province previously submitted for the construction of the original
jetty port in 1999, and which it re-submitted in its application for ECC in this alleged
expansion, instead of conducting updated and more comprehensive studies.

Any impact on the Boracay side cannot be totally ignored, as Caticlan and Boracay
are separated only by a narrow strait. This becomes more imperative because of the
significant contributions of Boracays white-sand beach to the countrys tourism trade,
which requires respondent Province to proceed with utmost caution in implementing
projects within its vicinity.

POLITICAL LAW: public consultation

The Local Government Code establishes the duties of national government

agencies in the maintenance of ecological balance, and requires them to secure
prior public consultation and approval of local government units for the projects
described therein.

In the case before us, the national agency involved is respondent PRA. Even if the
project proponent is the local government of Aklan, it is respondent PRA which
authorized the reclamation, being the exclusive agency of the government to
undertake reclamation nationwide. Hence, it was necessary for respondent Province
to go through respondent PRA and to execute a MOA, wherein respondent PRAs
authority to reclaim was delegated to respondent Province. Respondent DENR-EMB
RVI, regional office of the DENR, is also a national government institution which is
tasked with the issuance of the ECC that is a prerequisite to projects covered by
environmental laws such as the one at bar.

This project can be classified as a national project that affects the environmental and
ecological balance of local communities, and is covered by the requirements found
in the Local Government Code provisions.

Under the Local Government Code, therefore, two requisites must be met before a
national project that affects the environmental and ecological balance of local
communities can be implemented: prior consultationwith the affected local
communities, and prior approval of the project by the appropriate sanggunian.
Absent either of these mandatory requirements, the projects implementation is
illegal.

Based on the above, therefore, prior consultations and prior approval are required
by law to have been conducted and secured by the respondent Province.
Accordingly, the information dissemination conducted months after the ECC had
already been issued was insufficient to comply with this requirement under the Local
Government Code. Had they been conducted properly, the prior public consultation
should have considered the ecological or environmental concerns of the
stakeholders and studied measures alternative to the project, to avoid or minimize
adverse environmental impact or damage. In fact, respondent Province once tried to
obtain the favorable endorsement of the Sangguniang Bayan of Malay, but this was
denied by the latter.

Moreover, DENR DAO 2003-30 provides:

5.3. ublic Hearing / Consultation Requirements

For projects under Category A-1, the conduct of public hearing as part of the EIS
review is mandatory unless otherwise determined by EMB. For all other
undertakings, a public hearing is not mandatory unless specifically required by EMB.

Proponents should initiate public consultations early in order to ensure that

environmentally relevant concerns of stakeholders are taken into consideration in
the EIA study and the formulation of the management plan. All public consultations
and public hearings conducted during the EIA process are to be documented. The
public hearing/consultation Process reportshall be validated by the EMB/EMB RD
and shall constitute part of the records of the EIA process.

In essence, the above-quoted rule shows that in cases requiring public

consultations, the same should be initiated early so that concerns of stakeholders
could be taken into consideration in the EIA study. In this case, respondent Province
had already filed its ECC application before it met with the local government units of
Malay and Caticlan.

The lack of prior public consultation and approval is not corrected by the subsequent
endorsement of the reclamation project by the Sangguniang Barangay of Caticlan
on February 13, 2012, and the Sangguniang Bayan of the Municipality of Malay
onFebruary 28, 2012, which were both undoubtedly achieved at the urging and
insistence of respondent Province. As we have established above, the respective
resolutions issued by the LGUs concerned did not render this petition moot and
academic.

It is clear that both petitioner and respondent Province are interested in the
promotion of tourism in Boracay and the protection of the environment, lest they kill
the proverbial hen that lays the golden egg. At the beginning of this decision, we
mentioned that there are common goals of national significance that are very
apparent from both the petitioners and the respondents respective pleadings and
memoranda.

As shown by the above provisions of our laws and rules, the speedy and smooth
resolution of these issues would benefit all the parties. Thus, respondent Provinces
cooperation with respondent DENR-EMB RVI in the Court-mandated review of the
proper classification and environmental impact of the reclamation project is of
utmost importance.

WHEREFORE, premises considered, the petition is hereby PARTIALLY GRANTED.

The TEPO issued by this Court is hereby converted into a writ of continuing
mandamus specifically as follows:

1. Respondent Department of Environment and Natural Resources-Environmental

Management Bureau Regional Office VI shall revisit and review the following
matters:
a. its classification of the reclamation project as a single instead of a co-located
project;
b. its approval of respondent Provinces classification of the project as a mere
expansion of the existing jetty port in Caticlan, instead of classifying it as a new
project; and
c. the impact of the reclamation project to the environment based on new, updated,
and comprehensive studies, which should forthwith be ordered by respondent
DENR-EMB RVI.
2. Respondent Province of Aklan shall perform the following:

a. fully cooperate with respondent DENR-EMB RVI in its review of the reclamation
project proposal and submit to the latter the appropriate report and study; and
b. secure approvals from local government units and hold proper consultations with
non-governmental organizations and other stakeholders and sectors concerned as
required by Section 27 in relation to Section 26 of the Local Government Code.

Respondent Philippine Reclamation Authority shall closely monitor the

submission by respondent Province of the requirements to be issued by
respondent DENR-EMB RVI in connection to the environmental concerns
raised by petitioner, and shall coordinate with respondent Province in
modifying the MOA, if necessary, based on the findings of respondent DENR-
EMB RVI.

The petitioner Boracay Foundation, Inc. and the respondents The Province of
Aklan, represented by Governor Carlito S. Marquez, The Philippine
Reclamation Authority, and The DENR-EMB (Region VI) are mandated to
submit their respective reports to this Court regarding their compliance with
the requirements set forth in this Decision no later than three (3) months from
the date of promulgation of this Decision.

In the meantime, the respondents, their concerned contractor/s, and/or their

agents, representatives or persons acting in their place or stead, shall
immediately cease and desist from continuing the implementation of the
project covered by ECC-R6-1003-096-7100 until further orders from this Court.
For this purpose, the respondents shall report within five (5) days to this Court
the status of the project as of their receipt of this Decision, copy furnished the
petitioner.

Article 1191 of the Civil Code of the Philippines

Article 1191. The power to rescind the obligation is implied in reciprocal ones,
in case one of the obligors should not comply with what is incumbent upon
him.

The injured party may choose between the fulfillment and rescission of the
obligation, with the payment of damages in either case. He may also seek
rescission, even after he has chosen fulfillment, if the latter should become
impossible.

The court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period.

This is understood to be without prejudice to the rights of third persons who have
acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage
Law.
Note: In the case of Vermen Realty Development Corporation, G.R. No. 101762,
July 6, 1993, the Supreme Court held, The general rule is that rescission of a
contract will not be permitted for a slight or causal breach, but only for such
substantial and fundamental breach as would defeat the very object of the
parties in executing the agreement. The question of whether a breach of
contract is substantial depends upon the attendant circumstances.
Note: In the case of Gotesco Properties, Inc. vs. Spouses Fajardo, it was held
that rescission does not merely terminate the contract and release the parties
from further obligations to each other, but abrogates the contract from its
inception and restores the parties to their original positions as if no contract
has been made.
The right to cancel or dissolve a contract or a reciprocal obligation in cases of
nonfulfillment on the part of one of the parties is also known as the power to
rescind. The rescission referred to in Article 1191 is different from that which is
referred to in Article 1380 and Article 1381. Articles 1380 and 1381 speak of
cancellation anchored on injurious effects to the economic interests on the part of
the plaintiff. Rather, Article 1191 makes reference to mere breach of contract or
breach of trust, such breach which violates the reciprocity of obligations between the
contracting parties.
Note: (Universal Food Corp. vs. Court of Appeals, G.R. No. L-29155, May 13,
1970) Justice J.B.L. Reyes, in his concurring opinion, made a distinction
between a rescission for breach of contract under Article 1191 of the Civil
Code and a rescission by reason of lesion or economic prejudice, under
Article 1381.
Incoming examples:

Juan and Maria entered into a contract where the latter would sell a parcel of
land to Maria and in turn, the former would pay in two gives, each payment a
month a part. This means that if the parcel of land was deliver on January 1,
the first payment would be February 1 and the second, March 1. The first part
of the payment was made. However, the last payment was not.

Juan rescinded the contract, invoking the special provision grating him the power to
rescind in cases of nonfulfillment. Was the rescission valid?

Yes, the rescission was valid. There is no doubt that Maria violated the reciprocity of
obligations between her and Juan. This same nonfulfillment gives rise to Juans right
to cancel or dissolve the contract. Justice Panganiban introduced the decision of the
Supreme Court, which he penned, with the following lines: A substantial breach of a
reciprocal obligation, like failure to pay the price in the manner prescribed by the
contract, entitled the injured party to rescind the obligation. Rescission abrogates the
contract from its inception and requires a mutual restitution of benefits received.
Note: Article 1385. Rescission creates the obligation to return the things which
were the object of the contract, together with their fruits, and the price with its
interest; consequently, it can be carried out only when he who demands
rescission can return whatever he may be obligated to restore.
Declaring a rescission of contract is declaring it void from the beginning. It puts the
contract in so a state that it is deemed to have never existed. Said the Supreme
Court in one case, It is not merely to terminate it and release parties from further
obligations to each other but to abrogate it from the beginning and restore parties to
relative positions which they would have occupied had no contract ever been made.
(See Pryce Corporation vs. PAGCOR, G.R. No. 157480, May 6, 2005)

Another question: What if Maria contends that, although there really is a

special provision in the contract giving Juan power to rescind in cases of
breach, the fact remains that judicial decree was not sought first? Would this
be a valid argument?

No, such argument is not meritorious. There is also nothing in the law that prohibits
the parties from entering into agreement that violation of the terms of the contract
would cause cancellation thereof, even without court intervention. In other words, it
is not always necessary for the injured party to resort to court for rescission of the
contract. Judicial action is needed where there, is absence of special provision in the
contract granting to a party the right of rescission. (See Froilan vs. POSC, G.R. No.
L-11897, October 31, 1964) Termination of a contract need not undergo judicial
intervention. (See Pryce Corporation vs. PAGCOR, G.R. No. 157480, May 6, 2005)

Article 1191 speaks of reciprocal obligations. This alludes to those obligations where
two parties are mutually obliged to do, not to do or give something. An example of
this is a contract of sale where Party A is obliged to deliver Object X and Party B is
obliged to pay for said object. In such cases, the reason of the obligations is the
same and such obligations arise simultaneously, except when there is an express
stipulation that the other obligation may be fulfilled later on.

Article 1231 of the Civil Code of the

Philippines
Article 1231. Obligations are extinguished:

(1) By payment or performance;

(2) By the loss of the thing due;
(3) By the condonation or remission of the debt;
(4) By the confusion or merger of the rights of creditor and debtor;
(5) By compensation;
(6) By novation.

Other causes of extinguishment of obligations, such as annulment, rescission,

fulfillment of a resolutory condition, and prescription, are governed elsewhere in this
Code. (1156a)

We remember that obligation is the juridical necessity to give, to do or not to do. It

may arise from law, contracts, quasi-contracts, delicts or quasi-delicts.

Obligations, nevertheless, are not forever. They can be extinguished. This Article
enumerates only six (6) of the many ways by which an obligation may be
extinguished: payment or performance; loss; condonation or remission; confusions;
compensation, and; novation.

As mentioned above, there are other ways of extinguishing an obligation aside from
the six (6) enumerated by Article 1231. They are: annulment; rescission; fulfillment
of the resolutory condition; prescription; death; arrival of the resolutory term; change
of civil status; compromises; mutual dissent; impossibility of fulfillment, and;
fortuitous event. Consignation may also be considered as a mode of extinguishing
obligation.

Payment of performance

A promised that he would paint a portrait of B in exchange of Php 100,000. A did and
delivered the portrait on time. A's obligation here was extinguished by performance.

B, in turn, has the obligation to pay the Php 100,000 fee. He issued a check in favor
of A. A encashed the same. B's obligation here was extiguished by payment.

Loss of the Thing Due

A promised to make and deliver a particular sculpture for B. Without his fault and
after actually finishing the art, a burglar entered A's house at night and stole the
sculpture. A here now does not have any obligation to deliver the sculpture anymore;
his obligation has been extinguished by the thing's loss.

However, this rule does not apply when it comes to the obligation to deliver an
indeterminate thing. Remember, genus never perishes. So, if A promised to deliver
one-kilo of high-grade sugar and what he prepared was lost by his fault or through a
fortuitous event, he is still obliged to deliver one-kilo of said sugar.

Condonation or Remission

A owed B $5000. B decided to let go of the $5000 debt since A has been a very
good friend to him through the years. A here now does not have any obligation to
pay the money anymore because it was condoned by B.

Confusion or Merger

A borrowed money from B so, in order to pay, the former issued a check in favor of
the latter. B, then, who was in turn indebted to C, handed it to C. Unknown to B, C
also owed the same amount of money from A. C returned the check to A. There is
now a merger of the rights of the debtor and the creditor.

Compensation

A and B are debtors and creditors of each other both in the amount of Php 100,000.
By operation of law, A and B are no more debtors and creditors of each other.

Novation
Article 1291 provides that Obligations may be modified by: (1) Changing their object
or principal conditions; (2) Substituting the person of the debtor; (3) Subrogating a
third person in the rights of the creditor.

Therefore, if A had the obligation to deliver a certain car to B and if they both agreed
that the thing to be delivered would be a certain unit of personal computer instead,
the obligation to deliver the car cannot be enforced anymore. Assigning C in place of
A or D in place of B would also extinguish the obligation to deliver the car between A
and B.

Annulment

A, 16 years of age, entered into a contract with B, 21. A's parents knew and went to
court. They argued that the contract is voidable and sought the annulment of the
same.

Rescission

Pending litigation over a parcel of land, B, the defendant in the case, sold the same
parcel of land to C, who knew very well of the nature of the parcel of land and of the
pending hearing over the same. A, the plaintiff, filed an action for the rescission of
the contract of sale between B and C.

Fulfillment of the Resolutory Condition

A told B, "This car is yours until you pass the BAR." B passed the BAR. A's
obligation to give the car, or more accurately put, to let B enjoy possession and use
of the car, is extinguished by the happening of the resolutory condition.

Prescription

Under Law XXX, a student may demand the school a rebate of 10% of all his total
tuition payments within one (1) month after his graduation. A graduated on January
1. He demanded on February 27. Here, the school's obligation to grant the rebate
had already prescribed.

Death

A met minds with B to have the former's house and lot sold to the latter. The contract
was perfected. However, A died the following day. Is B still bound to pay the house
and lot? Not anymore.

Arrival of the Resolutory Term

A told B, "This car is yours until the first day of 2016." The first day of 2016 came. A
is no more bound to let B maintain possession over the car.

Change of Civil Status

[xxx]

Compromises

A bound himself to give B a parcel of land. They, however, agreed and entered into a
compromise that A would instead give half of the promised land. A's obligation to
completely deliver the parcel of land had already been extinguished.

Mutual Dissent

A and B perfected a contract to sell. They, however, later on, both agreed to cancel
the contract.

Impossibility of Fulfillment

A bound himself to deliver 2 sacks of brown rice to B. The following day, all kinds of
brown rice were declared illegal by a statute. Here, there occurred what is called
legal impossibility.

Fortuitous Event

A and B agreed that the former would deliver a certain dog to the latter. The dog,
however, without the fault of A, died when a meteor hit it while it was sleeping one
night.

Consignation

A had the obligation to pay B $500,000. On the day the payment was agreed to be
made, B, apparently without any just cause or reason, refused to receive the
payment. A went to court, presented proof of tender of payment, deposited the
amount to court and served notice to B. The consignation by A extinguished the
obligation.