Obligations and Contracts Case Digests

CONSIGNATION
de Guzman v. Court of Appeals
G.R. No. 52733|J. Concepcion|July 23, 1985

Subjects: Pilar de Guzman, Rolando & Minerva Gestuvo (seller)

and Leonida Singh (buyer)
Prestation: Two Pasay City parcels of land
Juridical tie: Contract to Sell
Consideration: 133,640

FACTS: De Guzman, et a., as SELLER, and Singh, as BUYER, executed a Contract to Sell covering two
parcels of land owned by the petitioners located at Pasay City

Singh should pay the balance of the purchase price of 133K on or before February 17, 1975.

Two days before the said date, Singh asked the petitioners to furnish her with a statement of
account of the balance due; copies of the certificates of title covering the two parcels of land subject
of the sale; and a copy of the power of attorney executed by Gestuvo in favor of de Guzman.
Petitioners denied the request.

Singh filed a complaint for specific performance with damages against the petitioners before
the CFI of Rizal.

She said that petitioners committed a breach of contract, and had also acted unfairly and in
manifest bad faith for which they should be held liable for damages.

Petitioners claimed that the complaint failed to state a cause of action; that the balance due was
already pre-determined in the contract; that the petitioners have no obligation to furnish Singh with
copies of the documents requested; and that Singh's failure to pay the balance of the purchase price on
the date specified had caused the contract to expire and become ineffective without necessity of notice
or of any judicial declaration to that effect.

CFI: Approved the compromise agreement submitted by the parties wherein they agreed on the
following:

1. Not later than December 18, 1977, plaintiff will pay defendants the total amount of
240K and in case of failure to do so, she shall have only until January 27, 1978 within
which to pay the total amount of 250K which shall be treated as complete and final
payment of the consideration in the contract to sell;
2. Immediately upon receipt of either amount within the periods so contemplated,
defendants undertake to immediately execute the necessary legal instruments to
transfer to plaintiff the title to the parcels of land;
3. That defendants would temporarily desist from enforcing their right or possession
over the properties involved herein until January 27, 1978, but this shall not be
construed as an abandonment or waiver of its causes of action;
4. Should plaintiff fail to pay either of the amounts within the period herein stipulated,
the aforesaid Contract to Sell dated February 17, 1971 shall be deemed rescinded and

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plaintiff agrees to voluntarily surrender and vacate the same without further notice or
demand;
5. That payment of either amounts above-stated shall take place at CFI Rizal Branch 3 at
10:00 a.m. Friday, January 27, 1978 unless payment has been earlier made, in which case
plaintiff shall produce receipt of the same at the same time and place
6. Both parties waive and abandon, by reason hereof, their respective claims and
counterclaims as embodied in the Complaint and Answer.

On January 28, 1978, the petitioners filed a motion for the issuance of a writ of execution,
claiming that Singh had failed to abide by the terms of the compromise agreement and pay the
amount specified in their compromise agreement within the period stipulated.

Singh opposed the motion, saying that she had complied with the terms and conditions of the
compromise agreement and asked the court to direct the petitioners to comply with the court's
decision and execute the necessary documents to effect the transfer of ownership of the two parcels of
land to her.

CFI: Directed the petitioners to immediately execute the necessary documents, transferring to private
respondent the title to the properties.

CA: Affirmed.

ISSUE: W/N Singh had complied with the terms of the compromise agreement. YES.

HELD: Singh had substantially complied with the terms and conditions of the compromise
agreement. Her failure to deliver to the petitioners the full amount on January 27, 1978 was not her
fault. The blame lies with the petitioners. The record shows that Singh went to the sala of Judge
Bautista on the appointed day to make payment, as agreed upon in their compromise agreement. But,
the petitioners were not there to receive it. Only the petitioners' counsel appeared later, but, he
informed Singh that he had no authority to receive and accept payment. Instead, he invited Singh and
her companions to the house of the petitioners to effect payment. But, the petitioners were not there
either. They were informed that the petitioner Pilar de Guzman would arrive late in the afternoon.
Singh was assured, however, that she would be informed as soon as the petitioners arrived. Singh, in
her eagerness to settle her obligation, consented and waited for the call which did not come and
unwittingly let the period lapse.

The next day, January 28, 1978, Singh went to the office of the Clerk of the Court of First
Instance of Rizal, Pasay City Branch, to deposit the balance of the purchase price. But, it being a
Saturday, the cashier was not there to receive it. So, on the next working day, Monday, January 30,
1978, Singh deposited the amount of 30K with the cashier of the Office of the Clerk of the Court of
First Instance of Rizal, Pasay City Branch, to complete the payment of the purchase price of 250K.

Since the deposit of the balance of the purchase price was made in good faith and that the
failure of Singh to deposit the purchase price on the date specified was due to the petitioners who also
make no claim that they had sustained damages because of the two days delay, there was substantial
compliance with the terms and conditions of the compromise agreement

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CONSIGNATION
Meat Packing Corp. of the Phils. v. Sandiganbayan
G.R. No. 52733|J. Ynares-Santaigo|June 22, 2001

Subjects: Meat Packing Corp. of the Phils. (MPCP/Lessor-Vendor) and Philippine Integrated Meat Corp.
(PIMECO/Lessee-Vendee)
Prestation: Three (3) parcels of land situated in Barrio Ugong, Pasig City with meat processing and packing
plant
Juridical tie: Lease-Purchase Agreement
Consideration: 1,375,563.92 payable over 28 years
(total: 38,515,789.87)

FACTS: Meat Packing Corporation of the Philippines (MPCP) is a corporation wholly owned by the
GSIS the MPCP entered an Agreement with the Philippine Integrated Meat at the rate of P1,375,563.92
payable over 28 years with it totaling P38,515,789.87.

In 1986, PCGG sequestered all the assets, properties, and records of PIMECO which included
the meat packing plant and the lease-purchase agreement. MPCP wrote a letter of rescission of the
lease-purchase agreement on the ground of non-payment of non-payment of rentals of more than 2M
for the year 1986.

A case was filed in the Sandiganbayan for a Writ of Preliminary Injunction stating that the
transfer of PIMECO to MPCP will result in the dissipation of assets and that the PCGG committed a
grave abuse of authority in its termination of the lease-purchase agreement. The Sandiganbayan
issued the writ of preliminary injunction; it also continued to conduct its hearings regarding the
validity of the turn-over of the meat packing plant to GSIS. The Sandiganbayan ruled that the PCGG
gravely abused its discretion.

PIMECO asked for declaratory relief and remedies. It stated that it has paid rentals from 1981
1985 and prior to the sequestration it was able to pay MPCP 846K, however, since the PCGG
management took over the plant and presented the danger of making PIMECO in default in the
payment of the rentals to MPCP for three annual installments and causing the cancellation. PIMECO
prayed for a declaration that it was not bound by the said payment. PCGG paid MPCP two checks
amounting to P5 M. The Sandiganbayan set a hearing for the declaration and MPCP through a special
appearance filed its comment. The Sandiganbayan ruled that MPCP should accept the P5 M payment
made by the PCGG. MPCP filed for a Motion for Reconsideration that was denied. The Petition for
relief on the other hand was dismissed since the P5 M already covered part of the 7M previously
unpaid rentals thus making it moot and academic. This gave rise to this petition for certiorari,
mandamus, and prohibition.

ISSUE 1: W/N MPCPs refusal to accept the payment was unjustified. YES.
ISSUE 2: W/N Sandiganbayan has a jurisdiction to accept the consignation. YES.

HELD 1: YES, it is unjustified.

The Sandiganbayan already approved the consignation by the PCGG wherein consignation is
the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot
accept or refuses to accept payment, and it generally requires a a prior tender of payment. Tender on
the other hand is the antecedent of consignation, an act preparatory to the consignation, which is the
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principal, and from which are derived the immediate consequences which the debtor desires or seeks
to obtain.

Tender of payment maybe extrajudicial while consigning is necessarily judicial. The priority of
tendering payment is to attempt to make a private settlement before proceeding to the solemnities of
consignation.

Both tender and consignation validly made produces the effect of payment and extinguishes
the obligation. Refusal due to the said rescission of contract is untenable since MPCP accepted annual
amortizations or rentals, advances, insurance, and taxes from PIMECO. The acceptance negates the
said rescission.

Under the terms of the lease-purchase agreement, the amount of arrears in rentals or
amortizations must be equivalent to the cumulative sum of three annual installments, in order to
warrant the rescission of the contract. Therefore, it must be shown that PIMECO failed to pay the
aggregate amount of at least 10,038,809.10 before the lease-purchase agreement can be deemed
automatically cancelled.

Assuming in the extreme that, as alleged by MPCP, the arrears at the time of tender on
January 30, 1991 amounted to 12,578,171.00, the tender and consignation of the sum of
5,000,000.00, which had the effect of payment, reduced the back rentals to only 7,578,171.00, an
amount less than the equivalent of three annual installments.

Thus, with the Sandiganbayans approval of the consignation and directive for MPCP to
accept the tendered payment, the lease-purchase agreement could not be said to have been
rescinded.

HELD 2: YES
The voluntary appearance in court and its submission to its authority or by service of
summons gives the courts jurisdiction over the person. MPCPs appearance in the courts in the Civil
Case already created the said jurisdiction

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IMPOSSIBILITY
Naga Telephone Co. v. Court of Appeals
G.R. No. 107112|J. Nocon|February 24, 1994

Subjects: Naga Telephone Co. (NATELCO) and Camarines Sur II Electric Cooperative (CASURECO)
Prestation: Use of Electric Posts in Naga
Juridical tie: Contract
Consideration: Free Use of 10 Telephone Connections
Special Stipulation: Last as long as NATELCO has need for the electric posts CASURECO, it being understood
that this contract shall terminate when for any reason whatsoever, the CASURECO is forced to stop, abandoned
its operation as a public service and it becomes necessary to remove the electric post

FACTS: Petitioner, Naga Telephone Co., Inc. (NATELCO), is a telephone company rendering local as
well as long distance telephone service in Naga City. On November 1, 1977, it entered into a contract
with Camarines Sur II Electric Cooperative, Inc. (CASURECO II), a corporation established for the
purpose of operating an electric power service in the same city, for the use by the petitioner in the
operation of its telephone service the electric light posts of the respondent. In consideration of such
use, NATELCO agreed to provide the respondent with free use of ten telephone connections.

The contract between included, among others, a stipulation to the effect that the contract shall
be as long as the party of the first part (NATELCO) has need for the electric post of the second part
(CASURECO II) it being understood that this contract shall terminate when for any reason
whatsoever, the party of the second part is forced to stop, abandoned its operation as a public service
and it becomes necessary to remove the electric post.

After over ten years, the respondent filed on January 2, 1989 with the RTC of Naga City action
against the petitioner for reformation of the contract on the grounds that it is too one sided in favor of
the petitioner. The action also prayed that petitioner be ordered to pay for the use of electric posts
which are not covered by the agreement.
-And finally, that CASURECO be indemnified no less than 100K arising out of the poor servicing
of the ten telephone units which had caused it great inconvenience and damages.

CFI: Found in favor of the respondents and ordered the reformation of the contract in the interest of
justice and equity. As part of the ruling, the court ordered NATELCO to pay respondent a monthly
rental of 10 per electric post being used from the time of the filing of the case. On the other and,
CASURECO was ordered by the same trial court to pay NATELCO for the use and transfers of its
telephone units at the same rate that the public are paying. Appeal to the CA was made.

CA: Affirmed the ruling of the trial court but this time not based on the reformation but rather on the
operation of Article 1267 of the Civil Code and on the potestative condition with rendered the
condition void.

The CA held that as reformation only lie or may prosper when the contract failed to express
the true intentions of the parties due to error or mistake, accident, or fraud and there is no allegation
to this effect, the proper basis is the aforementioned Article.

The section on the continued use of the electric post for so long as these are needed by
NATELCO was considered as being purely potestative on the part of the petitioner as it leaves the
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continued effectivity of the contract to NATELCOs sole and exclusive will. As held in previous
jurisprudence, there must be mutuality and equality in any contract.

ISSUE: W/N the ruling of the CA is valid. YES.

HELD: The agreement between the parties has become too one sided in favor of the petitioner to the
great disadvantage of the respondent. Continuing with the agreement will result in the petitioners
unjust enrichment at the expense of the respondent.

The ruling in the Occea case is not applicable because the SC agrees with the CA that the
allegations in private respondent's complaint and the evidence it has presented sufficiently made out a
cause of action under Article 1267. The parties are released from their correlative obligations under the
contract.

Tolentino in his commentaries on the Civil Code citing foreign civilist Ruggiero, "equity
demands a certain economic equilibrium between the prestation and the counter-prestation, and does
not permit the unlimited impoverishment of one party for the benefit of the other by the excessive
rigidity of the principle of the obligatory force of contracts.

SC affirmed CA and CFI that: 1) petitioners to pay private respondent for the use of its posts in
Naga City and in the towns of Milaor, Canaman, Magarao and Pili, Camarines Sur and in other places
where petitioners use private respondent's posts, the sum of ten (10) pesos per post, per month,
beginning January, 1989; and 2) private respondent to pay petitioner the monthly dues of all its
telephones at the same rate being paid by the public beginning January, 1989.

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