Gaite v. Fonacier Civil Code).

The subject matter of the sale is, therefore, a determinate object, the
Facts: 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
Gaite was appointed by Fonacier as attorney-in-fact to contract any party for the found in the mass, notwithstanding that the quantity delivered is less than the
exploration and development of mining claims. Gaite executed a deed of assignment amount estimated by them.
in favor of a single proprietorship owned by him. For some reasons, Fonacier revoked ___
the agency, which was acceded to by Gaite, subject to certain conditions, one of
which being the transfer of ores extracted from the mineral claims for P75,000, of
which P10,000 has already been paid upon signing of the agreement and the
balance to be paid from the first letter of credit for the first local sale of the iron
ores. To secure payment, Fonacier delivered a surety agreement with Larap Mines
and some of its stockholders, and another one with Far Eastern Insurance. When the
second surety agreement expired with no sale being made on the ores, Gaite
demanded the P65,000 balance. Defendants contended that the payment was
subject to the condition that the ores will be sold.

Issue:

(1) Whether the sale is conditional or one with a period

(2) Whether there were insufficient tons of ores
Held:
(1) The shipment or local sale of the iron ore is not a condition 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.

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.
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.
(2) 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
MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY vs. TUDTUD Case Digest
The former owner reacquires the property expropriated if the expropriation of the
same was subject to condition that when that purpose is ended or abandoned, it
shall be returned to the owner.

FACTS: The National Airports Corporation (NAC) filed a complaint for expropriation in
order to expand the Cebu Lahug Airport. It sought to acquire, by negotiated sale or
expropriation, several lots adjoining the then existing airport which included the
parcels of land owned by the predecessors-in-interest of respondents Benjamin
Tudtud et al. NAC assured the owners that they would reacquire the land if it is no
longer needed by the airport. The Court of First Instance of Cebu granted the
expropriation.

No structures related to the operation of the Cebu Lahug Airport were constructed
on the land expropriated. Respondent Lydia Adlawan (Lydia), acting as attorney-in-
fact of the original owners, sent a letter to the general manager of the petitioner
Mactan Cebu International Airport Authority (MCIAA), the new owner of the lot and
demanded to repurchase the lot at the same price paid at the time of the taking,
without interest.

Lydia filed a complaint before the Regional Trial Court (RTC) of Cebu City for
reconveyance and damages against the MCIAA. The RTC of Cebu rendered judgment
in favor of Tudtud et al. MCIAA appealed to the Court of Appeals but it affirmed the
RTC decision. MCIAA then filed a Motion for Reconsideration but was denied.

ISSUE: Whether or not Tudtud et al. are entitled for the reconveyance of the land
expropriated

HELD: Tudtud et al.s witness respondent Justiniano Borga declared that the original
owners did not oppose the expropriation of the lot upon the assurance of the NAC
that they would reacquire it if it is no longer needed by the airport. The rights and
duties between the MCIAA and Tudtud et al are governed by Article 1190 of the Civil
Code which provides: When the conditions have for their purpose the
extinguishment of an obligation to give, the parties, upon the fulfillment of said
conditions, shall return to each other what they have received. In case of the loss,
deterioration, or improvement of the thing, the provisions which, with respect to the
debtor, are laid down in the preceding article [Article 1189] shall be applied to the
party who is bound to return.

While the MCIAA is obliged to reconvey Lot No. 988 to Tudtud et al., they must return
to the MCIAA what they received as just compensation for the expropriation of Lot
No. 988, plus legal interest to be computed from default, which in this case runs
from the time the MCIAA complies with its obligation to the respondents. Tudtud et
al., must likewise pay the MCIAA the necessary expenses it may have incurred in
sustaining Lot No. 988 and the monetary value of its services in managing it to the
extent that Tudtud et al., were benefited thereby. Following Article 1187 of the Civil
Code, the MCIAA may keep whatever income or fruits it may have obtained from Lot
No. 988, and Tudtud et al., need not account for the interests that the amounts they
received as just compensation may have earned in the meantime.
Francisco Lim vs. CA/BENITO DY
G.R.No. 87047 31October1990
FRANCISCO LIM: BENITO DY entered into a contract of for a period of 3 years (1976-
79):
a) After 3 years, DY refused to vacate the premises.
b) LIM filed an ejectment suit, case was terminated by compromise agreement:
a. Term of the lease shall be renewed every 3 years (retroacting from October
1979-1982)
b. 20% raise every three years as long as DY needed the premises and can meet
and pay the said increases
c. 60 days before the expiration of the term for renewal
c) (1985) LIM advised DY he would no longer renew the contract effective October
1985.
a. (Aug 195) DY informed renewal the contract of lease for another term
b. Advised DY that he did not agree to a renewal of the lease contract upon its
expiration in October 1985.
c. Filed another ejectment suit, court dismissed the complaint:
i. Lease contract has not expired, being a continuous
one the period whereof depended upon the lessee's need for the premises and his
ability to pay the rents
ii. Compromise agreement constitutes res judicata to
the case before it.
i. Lessor should not be deprived of right.
ii. Should be for the benefit of both parties.
b) RES JUDICATA: matter that cannot be pursued further by same parties.
REQUISITES:
a. Must be a final judgment
b. Court which rendered it had jurisdiction over the subject matter and the parties
c. Must be a judgment on the merits
d. Must have identity between the two cases as to parties, subject matter and
cause of action.
CASE AT BAR: LACKING 4TH REQUISITE.
No IDENTITY ON SUBJECT MATTER: the subject matter in the first ejectment case is
the original lease contract while the subject matter in the case at bar is the lease
created under the terms provided in the subsequent compromise agreement. The
lease executed in 1978 is one thing; the lease constituted in 1982 by the
compromise agreement is another.
No IDENTITY ON CAUSES OF ACTION: Test is to consider the identity of facts
essential to their maintenance, or whether the same evidence would sustain both
causes of action. The wrong in the first case is different from that in the second, and
the evidence that will support and establish the cause of action in the former will not
suffice to support and establish that in the latter.
___________________

CA: NATELCO VS. CA

a) Held: G.R. No. 107112 February 24, 1994
a. Compromise agreement allowed DY to stay on the premises as long as he needs
it and can pay rents is valid (RESOLUTORY CONDITION). Therefore, compromise has FACTS:
effect of res judicata . NATELCO: telephone company rendering local and long distance services in Naga.
Entered into contract with Camarines Sur II Electric Cooperative (electrice power
ISSUES: service):
Is for as long as defendant needed the premises an independent stipulation? i. For the use in operation of its telephone service, electric light posts of
Is the matter subject to res judicata? CASURECO II.
ii. In return, free use of 10 telephone connections.
HELD: iii. Period: as long as NATELCO needs electric light posts, CASURECO understands
CA DECISION REVERSED and SET ASIDE. that contract will terminate when they are forced to stop, abandon operation and
a) FOR AS LONG AS DEFENDANT NEEDED THE PREMISES, CAN MEET AND PAY remove lightposts.
SAID INCREASES IS A POTESTATIVE CONDITION.
a. Not an independent stipulation but is controlled by said fixed term and the CASURECO after 10 years: filed for reformation of contract with damages, not
option for renewal upon agreement of both parties. conforming to guidelines of National Electrification Administration (NEA)- reasonable
b. ARTICLE 1182 (POTESTATIVE CONDITION): leaves the effectivity and enjoyment compensation for use of posts.
of leasehold rights to the sole and exclusive will of the lessee. i. Compensation is P10/posts but consumption of telephone cables costs
i. SUSPENSIVE CONDITION (ON PART OF DEBTOR) P2630.
due to renewal of lease. Renewal of lease gives rise to new lease. Thus, both ii. NATELCO used 319 posts without any contract at P10.00; refused to
condition and obligation are void. pay.
ii. It should be noted that a renewal constitutes a new iii. Poor servicing- damage not less than P100,000.
contract of lease although with the same terms and conditions as those in the NATELCO
expired lease. Compensation:
iii. It is not RESOLUTORY IN NATURE because it does i. No cause of action for reformation of contract.
not terminate the lease contract. ii. Barred by prescription (10 years execution of
iv. Definite period of contract is 3 years, lease contract)
automatically terminates. iii. Barred by estoppel.
iv. Utilization could not have cause deterioration because
c. MUTUALITY IS NEEDED: continuance, effectivity and fulfillment of a contract of already used for 11 years.
lease cannot be made to depend exclusively upon the free and uncontrolled choice v. Value of expenses been equal to use of telephone
of the lessee. lines.

TRIAL COURT
ORDERED REFORMATION OF AGREEMENT:
i. NATELCO to pay for electric polls sum of P10/pole
from January 1989.
1. Contract eventually became unfair due to increase in volume of subscribers
without increase of telephone connections which are free of charge to CASURECO.
2. REFORMATION OF CONTACT: cannot make another contract but abolish
inequities.
3. Contract does not mention use of posts outside Naga City. Contract should be
reformed including provision that for the use posts outside Naga.
CA: agreed to TRIAL COURT but for different reasons:
Article 1267 applicable
Contract POTESTATIVE CONDITION, THUS VOID.
ISSUE:
Is Article 1267 applicable? YES
Has the filing of reformation of contract prescribed? NO.
Is the period of contract, as long as the party of the first part has need for electrive
light posts potestative? YES.
HELD:
ARTICLE 1267, EVEN THOUGH NEVER RAISED BEFORE, IS APPLICABLE.
ARTICLE 1267: Art. 1267. When the service has become so difficult as to be
manifestly beyond the contemplation of the parties, the obligor may also be
released therefrom, in whole or in part.
PRESTATION: payment of money; a toll or duty; also, the rendering of a service.
Contract was one-sided unfair, and disadvantageous to plaintiff.
PRESCRIPTION HAS NOT YET LAPSED.
What is reformed is not the contract itself, but the instrument embodying the
contract. It follows that whether the contract is disadvantageous or not is irrelevant
to reformation and therefore, cannot be an element in the determination of the
period for prescription of the action to reform.
Article 1144: Action upon a written contract must be brought within 10 years from
the time the right of action accrues.
i. From the time the right of action accrues not
necessarily the date of execution of the contract.
ii. As correctly ruled by respondent court, private
respondent's right of action arose "sometime during the latter part of 1982 or in
1983 when according to Atty. Luis General, Jr. . . ., he was asked by (private
respondent's) Board of Directors to study said contract as it already appeared
disadvantageous to (private respondent) in 1989.
iii. 10 years had not yet elapsed.
3. PERIOD OF CONTRACT IS POTESTATIVE, THUS INVALID.
a. Leaves the continued effectivity of the aforesaid agreement to the latter's sole
and exclusive will as long as plaintiff is in operation
b. Leaves leaves the effectivity and enjoyment of leasehold rights to the sole and
exclusive will of the lessee
___
NATELCO
FACTS:
NATELCO is a telephone company rendering local and long distance
telephone service in Naga City. While CASURECO is a private corporation established
for purpose of operating and electric power service in the same city.
In 1977, the parties entered into a contract for the use of the electric light
post of CASURECO by NATELCO in operation of its telephone service. In
consideration, NATELCO agreed to install free of charge ten-telephone connection for
the use of CASURECO. The term of the contract shall be as long as NATELCO has
need for the electric light post of the CASURECO, it being understood that the same
contract shall be terminated by any reason whatsoever, if CASURECO is forced to
stop or abandon its operation as a public service.
After 10 years, CASURECO filed a case against NATELCO for the reformation
of contract with damages on the ground that it was too-one sided in favor of
NATELCO. That after 11 years, the cable strung by NATELCO was much heavier due
to the increase in volume of their subscribers, worsened by the fact that their
linemen bore holes through the post at which points those post were broken during
typhoons. NATELCO used posts in the towns outside Naga without any contract or
permission from CASURECO. After filing the complaints, NATELCO had refused to pay
despite the demands made. NATELCOs answered that CASURECO did not
sufficiently state the cause of action for the reformation of contract and that it was
barred by the prescription because it was filed after 10 years.
The trial court ruled in favor of CASURECO, ordering the reformation of
contract and ordering NATELCO to pay CASURECO the compensation for the use of
their post in Naga. Moreover, CASURECO was ordered to pay the monthly bills for
the use of the telephones. Disagreeing with the judgment, NATELCO appealed to the
Court of Appeals. The Court of Appeals affirmed the decision.
ISSUE:
1. Was reformation of the contract a proper remedy for NASURECO?
2. Was the contract subject to potestative condition?
RULING:
1. No. NASURECO cannot correctly invoke reformation of contract as a proper
remedy, because there had been no showing of mistake or error in said contract on
the part of any of the parties, so as to result in its failure to express their true intent.
2. No. A potestative condition is a condition wherein the fulfillment of which depends
upon the sole sill of the debtor, in which conditional obligation is void. Based on the
provision in the contract, the term shall be as long as NATELCO had need for the
electric post of the CASURECO, which was a potestative condition. But it should be
noted that the same provision also stated that the contract shall terminate when for
any reason whatsoever, CASURECO was to stop or abandon its operation as a public
service and it becomes necessary to remove the electric light post, which were
casual condition since they depend on chance, hazard, or the will of the third
person. The contract was subject to mixed conditions, depending partly in the will of
the debtor and partly on chance or will of a third person that would not invalidate
the provision.
Summary: A paper mill started operations and accepted offers to supply raw
materials from several suppliers. One supplier executed a contract with the paper
mill with a condition that the paper mill has the right to stop accepting deliveries
whenever the supply was sufficient. The paper mill exercised that right, but
continued accepting periodic deliveries from other suppliers.
Rule of Law: When the fulfillment of the condition depends on the sole will of the
debtor, the conditional obligation shall be void.
Article 1182, Civil Code.
Facts: When Rustan Pulp & Paper Mills (D) started operations Romeo Lluch (P)
offered to supply raw materials. Rustan Pulp (D) proposed a non-exclusive contract
to buy wood pulp from Lluch (P). However, a condition in the contract gave Rustan
Pulp (D) the right to stop accepting deliveries when the supply became sufficient
until such time the raw materials are needed.
During the test run of the pulp mill, major defects on the machinery were discovered
prompting the Japanese supplier of the machinery to recommend the stoppage of
the deliveries. The suppliers were informed to stop deliveries, but were not informed
as to the reasons for the stoppage.
Lluch (P) sought to clarify the tenor of the notice as to whether stoppage of delivery
or termination of the contract of sale was intended, but Rustan Pulp (D) failed to
reply. This alleged ambiguity notwithstanding, Lluch (P) and the other suppliers
resumed deliveries after a series of talks between Lluch (P) and Romeo Vergara, the
manager of Rustan Pulp (D).
Later, Lluch (P) filed a complaint for breach of contract. The case was dismissed, but
at the same time, the court enjoined Rustan Pulp (D) to honor the contract. On
appeal, the court ruled that Rustan Pulp's (D) suspension of deliveries was not in the
lawful exercise of its rights under the contract of sale.
Issues: Is the suspension of deliveries by Rustan (D) a proper exercise of its rights
under the contract of sale?
Ruling: No. There is basis for the apprehension on the illusory resumption of
deliveries at Rustan Pulp (D) because the prerogative suggests a condition solely
dependent upon its exclusive will. The literal import of contested condition is that
Rustan Pulp (D) can stop delivery of pulp wood from Lluch (P) if the supply at the
plant is sufficient as ascertained by Rustan Pulp (D), subject to re-delivery when the
need arises as determined likewise by Rustan Pulp (D).
A purely potestative imposition of this character must be obliterated from the face of
the contract without affecting the rest of the stipulations considering that the
condition relates to the fulfillment of an already existing obligation and not to its
inception (Civil Code Annotated, by Padilla, 1987 Edition, Volume 4, Page 160).
A condition which is both potestative (or facultative) and resolutory may be valid,
even though the saving clause is left to the will of the obligor as this Court ruled in
Taylor vs. Uy Tieng Piao (43 Phil. 873). But the Taylor case, which allowed a condition
for unilateral cancellation dependent on the arrival of factory machinery, cannot be
applied because the facts relate to the birth of the undertaking and not to the
fulfillment of an existing obligation.
___
\
\
\
SAN MIGUEL CORPORATION VS. COURT OF APPEALS, digested
Posted by Pius Morados on November 8, 2011
(GR # 57667, May 28, 1990) (Law on Natural Resources, Tax Declaration and
Receipts)
FACTS: This is a petition for review on certiorari where petitioner San Miguel
Corporation who purchased Lot 684 from Silverio Perez, seeks the reversal of the
decision of the Court of Appeals denying its application for registration of the said
land in view of its failure to show entitlement thereto.
The Solicitor General opposed and appealed the application contending that the land
in question is part of public domain and that petitioner being a private corporation is
disqualified from holding alienable lands of the public domain. In this case, petitioner
claims that its predecessor-in-interest had open, exclusive and undisputed
possession of the land in question based on documentary evidence of tax
declarations and receipts, and testimonial evidence of vendor Silverio Perez.
ISSUE: Whether or not the evidence presented by the petitioner is sufficient to
warrant a ruling that petitioner and/or its predecessor-in-interest has a registrable
right over Lot 684.
HELD: No, documentary evidence of tax declarations and receipts are not conclusive
evidence of ownership or right of possession over a piece of land but mere indicia of
a claim of ownership. They only become strong evidence of ownership of land
acquired by prescription when accompanied by proof of actual possession. Also, the
testimony of vendor Silverio Perez as proof of actual possession is weak and was not
corroborated by other witnesses.