contended unconscionable. Medina further pleaded, by way of defense, that he was induced to pay P4,000.
00
EN BANC
[G.R. No. L-16477. May 31, 1961.]
MANILA TRADING & SUPPLY CO., plaintiff-appellee, vs. MARIANO MEDINA, defendant-
appellant.
Ross, Selph, & Carrascoso for plaintiff-appellee.
Campos, Mirasol & Mediodic for defendant-appellant.
SYLLABUS
1. OBLIGATIONS AND CONTRACTS; SALES ON INSTALLMENTS; PRESUMPTION OF PAYMENT OF
PRIOR INSTALLMENTS, PRIMA FACIE. The presumption that prior installments were paid upon the
presentation of a receipt of payment subsequent thereto, is only prima facie.
DECISION
REYES, J.B.L., J p:
This case was certified to us by the Court of Appeals because the claims involved totalled more than
P200,000.00 (Resolution, C.A., 14 Nov. 1959).
The facts appear to be that prior to May 7, 1956, the defendant- appellant Mariano Medina had certain
accounts with appellee Manila Trading & Supply Co. These accounts were on said date consolidated into a
total balance due of P60,000.00 for which Medina executed a promissory note (Exh. "A") for Sixty Thousand
Pesos (60,000.00), with interest at 12% per annum, payable in monthly installments of P4,000.00 plus interest.
The note provided that upon failure to pay any of the installments, "the whole sum remaining then unpaid will
immediately become due and payable, at the option of the holder of this note," fees and expenses of collection,
in addition to the costs of the suit.
On January 8, 1957, the payee Manila Trading & Supply Co., filed a complaint against appellant Medina in the
Court of First Instance of Manila, claiming that the said debtor had failed to meet the installments due on the
note for the months of September, 1956 up to and including January 7, 1957, and that due to such default, the
balance of the note amounting to P43,596.22, plus 12% interest and collection expenses, had become due and
demandable; and prayed for judgment in the amounts stated. On January 4, 1957, upon petition of plaintiff, a
writ of attachment was issued and levied upon eleven of defendant's buses.
On March 10, 1957, Medina filed an answer (Record on Appeal, p. 11), admitting the allegations of paragraphs
2, 3, and 4 of the complaint (i.e., the execution of the note; the failure to pay the monthly installments for
September, 1956 up to January, 1957; the maturity of the balance due of P43,596.22; and the lack of sufficient
security). He also admitted the allegations of the complaint concerning the 12% interest on the principal, but
additional on January 24, 1957, upon promise that he would not be sued, and that he would be allowed to pay
the balance "paulatinamente", and that instead, his trucks were attached. By way of counterclaim, Medina
asked for damages due to lost earnings of the trucks attached, at the rate of P900.00 per day. These defenses
and counterclaim were traversed by the plaintiff.
Trial was set for September 10, 1957, and because of non- appearance of defendant and his counsel, the court
commissioned the Clerk to receive plaintiff's evidence, which showed that from June 6, 1956 to January 21,
1957, defendant had made twenty-one payments totalling P24,311.34 of which P4,413.76 corresponded to
interest and the balance (P19,982.15) to the principal.
Upon seasonable motion of defendant Medina, the court reopened the case to give him opportunity to present
his evidence. Thereupon, he testified and asserted that in addition to the twenty-one payments acknowledged
by plaintiff company, he had made ten other payments that, added to the former, showed that he (Medina) had
paid more than P4,000.00 a month since the execution of the note up to the filing of the complaint, and was,
therefore, not in default. To bolster his claims, Medina exhibited ten additional receipts signed by the plaintiff's
cashier, but without numbers or year dates, because they were allegedly eaten by anay; however, defendant
wrote thereon the supposed numbers that the receipts originally bore, based on a memorandum book where
he purported to have noted his payment to plaintiff. Medina also testified that by reason of the attachment of his
buses, he had lost net earnings of P550.00 per day, and his business in building truck bodies had been
affected to the extent of P50,000.00; and that he had been forced to engage counsel at stipulated fees of
P7,000.00. Considering that the attachment was maintained for over two years, the damages claimed by
defendant would amount to over P300,000.00.
In rebuttal, the assistant accountant of the Manila Trading denied that the ten additional receipts exhibited by
the defendant corresponded to the period covered by the promissory note Exh. "A"; that the numbers attributed
to them by plaintiff were not in the proper sequence, because as of July 28, 1956, the company has adopted a
new numbering of its receipts; and that in the absence of the correct numbers and the years of issue, it was
impossible to locate the record of the payments claimed.
After considering the evidence, the trial court entertained doubts as to the veracity of the receipts produced by
the defendant, and refused to credit him with the amounts shown therein. It therefore, gave judgment for the
plaintiff for the balance due of P40,102.42 on the note, plus 12% interest from January 21, 1957 until payment;
but reduced the attorney's fees from 33-1/3% of the sum due to only P1,000.00. Defendant appealed from the
decision.
Our examination of the evidence satisfied us that the ten additional receipts produced by the defendant (Exhs.
3-D, 3-F, 3-H, 3-L, 3-S, 3-U, 3-W, 3-Z, 3-BB. and 3-CC), while issued by plaintiff, were not for payments made
on the dates claimed by defendant, nor are they chargeable to the balance of the promissory note Exh. "A". As
pointed out by the trial court, it is highly suspicious that these receipts should be mutilated precisely at the
places where the serial numbers and the year of issue must appear, while the receipts for the intervening
payments recognized by the plaintiff remained intact. Moreover, these contested receipts appear identical in
shape, size, and color to those issued by plaintiff company prior to July 28, 1956, before the form of its receipts
were changed, such as Exhs. 3 to 3-C, and Exhs. 7 to 7-D, but differ radically in color, size, and particulars
from those issued after July 28, 1956. In addition, the numbers that Medina attributed to them are not in
sequence as can be seen from the list Exh. 4. Thus, defendant claims that Exh. 3-D was issued in June (or
July) 29, 1956 and bore No. 2898; yet the acknowledged receipt for July 28, 1956 is numbered 0096, receipt
Exh. 3-F, allegedly for August 1, 1956, is numbered, according to defendant, 3438, while the admittedly
authentic receipt Exh. 3-G for August 3 has a lower number, 0813.
Moreover, receipt Exh. 3-H that defendant claims to be dated August 18, 1956, is numbered 1584, a number
lower than that of Exh. 3- F dated August 1st (No. 3438), when the latter was issued earlier. The same
inconsistency between dates and serial numbers is true with the other contested receipts. It is difficult to
believe that a trading company should issue receipts numbered at random, since it would make auditing control
impossible.
frustrated
The lower court also correctly noted that the genuine receipts from and after July 23 invariably specify the
amount charged to interest as well as that credited to the principal for each payment, while the disputed
receipts contain no such specification.

These differences between the defendant's disputed receipts and those admitted by plaintiff, when coupled
with the fact that appellant Medina's answer expressly admitted the balance due as well as his failure to meet
the monthly installments from September, 1956 to January, 1957, his lack of corroboration, and the further
circumstance that the admissions in his answer were never withdrawn nor was the answer containing them
ever amended, irresistibly show that the trial court's rejection of the genuineness and validity of the disputed
receipts constituted no error. The authenticity of the signatures appended to them does not prove that they
were issued in 1956 or 1957, as claimed by the appellant, nor that should be credited to the note Exh. "A". It is
not all improbable that these mutilated receipts were among those issued to the appellant prior to the
consolidation of his accounts and the execution of the promissory note.

Appellant avers that the genuine receipts dated January, 1957 raise the presumption that prior installments
were paid. This might be true if such receipts recited that they were issued for the installments corresponding
to the month of January, 1957; but nowhere does that fact appear. And even if such recital had been made, the
resulting presumption would only be prima facie, and the evidence before us is clear that the payments made
do not correspond to the installment falling due on the dates of the genuine receipts.

We find no error in the judgment appealed from, and therefore the same is hereby affirmed. Costs in both
instances against appellant Mariano Medina.

Padilla, Bautista Angelo, Labrador, Concepcion, Barrera, Paredes, Dizon, De Leon and Natividad, JJ., concur.

Bengzon, C.J., took no part.

||| (Manila Trading & Supply Co. v. Medina, G.R. No. L-16477, [May 31, 1961], 112 PHIL 449-454)

frustrated
 EN BANC P2,790.60

All the credit purchases were invoiced in the same printed form. The earliest, Exhibit "A", is, in words and
[G.R. No. L-18335. July 31, 1963.] figures, as follows:
"Tel. No. 21-38 No. 55968
SALUD LEDESMA, petitioner, vs. ALBERTO REALUBIN and COURTS OF Baguio CALTEX Service Station Corner Naguilian, Bower & Bokawkan Road Baguio
APPEALS, respondents. City.

Mr. & Mrs. A. REALUBIN Prop.

C. Q. Crucillo and F. C. Tumale for petitioner. Sold to Mrs. S. Ledesma
Paulino C. Order for respondent. Address

License No. 1541 Date 6-1-56

SYLLABUS
Qnty. Articles Unit Price Amount

87 GASOLINE 19.60
1. OBLIGATIONS AND CONTRACTS; PAYMENT, PRESUMPTION OF; CANNOT PREVAIL OVER PROVEN
FACT OF NON-PAYMENT. Where the creditor proved as a fact that prior purchases were for cash, the 2 ENGINE OIL C 1.80
presumption of payment of prior obligations under Article 1171 of the new Civil Code cannot prevail. Between a
proven fact and a presumption pro tanto, the former stands, and the latter falls. GEAR OIL

2. APPEALS; JUDGMENTS; ATTORNEYS FEES CAN BE INCREASED DESPITE WINNING PARTY'S HYDRAULIC FLUID
INTERPOSING NO APPEAL THEREON. The appellate court's decision to increase the attorney's fees
beyond those awarded by the trial court in spite of respondent interposing no appeal thereon is held to be TOTAL P21.40
correct, because the fees determined by the Court of First Instance could not have included the service of
counsel on appeal, none having been therefore interposed, and the Court of Appeals could fix counsel fees in Purchaser hereby agrees that a charge of 1% per month shall be added to all overdue
accordance with justice and equity. accounts; (accounts more than 30 days shall be counted overdue) an additional 25% of the
amount will also be charged for attorney's fees plus cost of collection; (in cases where such
3. ID.; ID.; INTEREST ON MAIN INDEBTEDNESS CANNOT BE INCREASED WHERE CREDITOR services are required.) It is agreed further that the courts of Baguio will have exclusive
INTERPOSED NO APPEAL THEREON. The Appeals Court erred in increasing the interest on the main jurisdiction over any litigation arising from this transaction.
indebtedness from the 6% awarded in the court of first instance to 12%, because plaintiff's failure to appeal
from the decision signified his assent to the rate fixed by the trial judge, despite the party's knowledge that the (Sgd.) Manuel Buenconsejo
documents called for 12% interest.
Salesman Purchaser or Agent"

The respondent follows this business practice: Each invoice is done in triplicate the original, in white paper;
the two others, in blue and pink paper, respectively. For purchases in cash, the original or white invoice is
DECISION issued to the customer, but for purchases on credit, the pink copy is issued, the station proprietor retaining the
original and blue copies; when payment is made on credit purchases, the white or original copy is then
released to the customer.

REYES, J.B.L., J p:
From the Baguio Caltex service station owned by the respondent, Alberto Realubin, the petitioner, Salud
Ledesma, purchased on credit, on different dates, through her drivers, gasoline and motor oil, from June to
September, 1956, for amounts summed up by the month, as follows:
At the time of the trial, the plaintiff (respondent herein) was in possession of the original or white copies of the
invoice for purchases made in the months hereinabove stated (June to September), all of which were signed by
the petitioner's truck drivers.
Due to repeated verbal demands upon to pay, the petitioner sent to Alberto Realubin the following handwritten
letter:

June P908.55 "Nov. 25, 1967

July 920.201 Mr. Realubin,

August 522.00 My son told me that you came to see me. To tell you the truth Mr. Realubin, I am just
waiting for the money of Miss Casisca from the National Power Corporation, after she can finish
September 439.85 the 24 houses she contracted after everything will be paid. I will be the one to go to you, and not

frustrated
 you to see me, because that is my obligation to you. I am really very ashamed for all that from the decision signified his assent to the rate fixed by the trial judge, despite the party's knowledge that the
happened to me that I cannot even pay my obligation. documents called for 12% interest.

I hope you understand what I mean. Just be patient Mr. Realubin. Very soon I will settle WHEREFORE, with the sole modification that the main award shall earn interest at the legal rate from July 18,
my account to you. 1959 until fully paid, the decision of the Court of Appeals is affirmed. No costs in this instance.

Sincerely, Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Barrera, Paredes, Dizon and Regala,
JJ., concur.
(Sgd.) Mrs. Ledesma"
Makalintal, J., took no part.
Salud Ledesma was, in the court below, first adjudged in default, but on petition for relief, the default was set
aside. In her subsequent answer to the complaint, she denied the purchases, and averred, as a special ||| (Ledesma v. Realubin, G.R. No. L-18335, [July 31, 1963], 118 PHIL 625-630)
defense, that her truck drivers did not have the authority to purchase gasoline in her behalf. The drivers'
authority to sign, however, was admitted during the trial, but Salud Ledesma testified that the amounts which
the plaintiff was collecting from her had been fully paid. She tried to prove payment by her sole testimony and
by presenting as exhibits the pink copies of the invoices she had in her possession. Salud Ledesma also
contended that the handwritten letter, previously transcribed, is a forgery. On this point, the Court of Appeals
made the following observation:

"The handwriting of the letter is that a convent bred and educated woman; the signature, Mrs.
Ledesma', is in the same handwriting, and the contents of the letter express the fine sentiments of
a woman apologizing for her failure to pay her obligation. Appellant's two samples of her signature
affixed during the trial on Exhibit 12, and her admitted signatures on Exhibits 13 and 14 seem to
be the same hand that wrote and signed the letter. As appellant's testimony denying having written
and signed the letter was on material matter, we deem it proper to order the holding of a
preliminary investigation to determine whether the crime of perjury or false testimony has probably
been committed."

The trial court found for the plaintiff, and the Court of Appeals sustained the decision with certain modifications.
The petitioner then took an ultimate appeal to this Court.

The petitioner argues here that it was error for the Court of Appeals to take against her the circumstance that
her answer had only one special defense, pointing out that evidence presented on her other defenses was not
objected to during the trial. We see no point in this assignment since the Court of Appeals merely stated the
truth, that in petitioner's answer she only alleged one special defense: "to wit, lack of authority of her truck
drivers to sign the purchase invoices on her behalf, . . ." The appellate court did not question
the admissibility of the evidence adduced in support of her other defense of payment, though it was not alleged
in her answer, but declined to give it weight, as it had sound discretion to do. To admit evidence and not to
believe it are not incompatible with each other, and this Court can not alter the conclusions of the Court of
Appeals on the credibility to be accorded to the evidence of the parties.

The second assignment of error refers to the failure of the Court of Appeals to apply the presumption of
payment. Invoking Article 1176 of the Civil Code (New), petitioner claims that inasmuch as she admittedly paid
her October, 1956 purchase, it is to be presumed that her prior purchases were likewise paid, because her
account with the respondent was a running account. We cannot agree. Realubin proved as a fact that the prior
purchases were not paid, and that the October purchases were for cash, and the Court of Appeals so found.
Therefore, the presumption of payment of prior obligations (assuming its applicability for argument's sake)
cannot prevail. Between a proven fact and a presumption pro tanto, the former stands, and the latter falls.

The petitioner assails the appellate court's decision to increase the attorney's fees beyond those awarded by
the trial court in spite of respondent's interposing no appeal thereon. This objection lacks merit, because the
fees determined by the Court of First Instance could not have included the service of counsel on appeal, none
having been theretofore interposed and the Court of Appeals could fix counsel fees in accordance with justice
and equity.

We agree with appellant, however, that the Appeals Court erred in increasing the interest on the main
indebtedness from the 6% awarded in the court of first instance to 12%, because plaintiff's failure to appeal

frustrated
 SECOND DIVISION
[G.R. No. 119466. November 25, 1999.]
SALVADOR ADORABLE and LIGAYA ADORABLE, petitioners, vs. COURT OF APPEALS,
HON. JOSE O. RAMOS, FRANCISCO BARENG and SATURNINO BARENG, respondents.
Lopez Law Office for petitioners.
Ariel C. Vallejo for Francisco and Saturnino Bareng.
Virgilio T. Velasco for Judge J.O. Ramos
SYNOPSIS
Petitioners were lessees of 200 sq. meters of land, owned by Saturnino Bareng. On April 29 1985 Saturnino
Bareng and his son Francisco Bareng obtained a loan from the petitioners in the amount of P26,000.00. Later,
Saturnino sold 18,500 sq. meters of the said lot to his son, Francisco. In turn, Francisco sold 3,000 square
meters of the said lot to Jose Ramos which included the portion being rented by the petitioners. When the
maturity date of the loan arrived, Francisco Bareng failed to pay. Petitioners, upon learning of the sale made by
Francisco Bareng to Jose Ramos filed a complaint with the Regional Trial Court, Branch 24 of Echague,
Isabela for the annulment or rescission of the sale anchoring their right as creditors of Francisco Bareng, as
well as their claim of preference as lessees to the sale of the contested lot. After trial, the court a quo rendered
judgment dismissing the complaint for lack of cause of action. On appeal, the Court of Appeals affirmed the
said decision.
In this petition, the Court ruled that as creditors, petitioners did not have such material interest as to allow them
to sue for rescission of the contract of sale. At the outset, petitioners' right against private respondents is only a
personal right to receive payment for the loan; it is not a real right over the lot subject of the deed of sale.
Nor did petitioners enjoy any preference to buy the questioned property. Petitioners attempted to establish
such legal injury through a claim of preference created under C.A. No. 539. This statute was passed to
implement Art. XIII, 4 of the 1935 Constitution which provided that "The Congress may authorize, upon
payment of just compensation, the expropriation of lands to be subdivided into small lots and conveyed at cost
to individuals." It was obvious that neither under this provision of the former Constitution nor that of C.A. No.
539 can petitioners claim any right since the grant of preference therein applies only to bona fide tenants, after
the expropriation or purchase by the government of the land they are occupying. Petitioners were not tenants
of the land in question in this case. Nor has the land been acquired by the government for their benefit.
SYLLABUS
1.REMEDIAL LAW; CIVIL PROCEDURE; PERSONAL RIGHT AND REAL RIGHT; DISTINGUISHED. A
personal right is the power of one person to demand of another, as a definite passive subject, the fulfillment of
a prestation to give, to do, or not to do. On the other hand, a real right is the power; belonging to a person over
a specific thing, without a passive subject individually determined, against whom, such right may be personally
exercised.
2.CIVIL LAW; OBLIGATIONS AND CONTRACTS; MEASURES TO BE TAKEN BY A CREDITOR BEFORE HE
CAN BRING AN ACTION FOR RESCISSION OF AN ALLEGEDLY FRAUDULENT SALE. Thus, the
following successive measures must be taken by a creditor before he may bring an action for rescission of an
allegedly fraudulent sale: (1) exhaust the properties of the debtor through levying by attachment and execution
upon all the property of the debtor, except such as are exempt by law from execution; (2) exercise all the rights
and actions of the debtor, save those personal to him (accion subrogatoria); and (3) seek rescission of the
contracts executed by the debtor in fraud of their rights (accion pauliana).
3.ID.; ID.; ID.; ACTION FOR RESCISSION IS A SUBSIDIARY REMEDY. Indeed, an action for rescission is
a subsidiary remedy; it cannot be instituted except when the party suffering damage has no other legal means
to obtain reparation for the same. Thus, Art. 1380 of the Civil Code provides: The following contracts are
rescissible: . . . (3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect
the claims due them.
4.ID.; ID.; ID.; ID.; NOT PROPER IN CASE AT BAR. Petitioners have not shown that they have no other
means of enforcing their credit. As the Court of Appeals pointed out in its decision: In this case, plaintiffs-
appellants had not even commenced an action against defendants-appellees Bareng for the collection of the
alleged indebtedness. Plaintiffs-appellants had not even tried to exhaust the property of defendants-appellees
Bareng. Plaintiffs-appellants, in seeking for the rescission of the contracts of sale entered into between
defendants-appellees, failed to show and prove that defendants-appellees Bareng had no other property, either
at the time of the sale or at the time this action was filed, out of which they could have collected this (sic) debts.
5.ID., ID.; ID.; ID.; MAY BE FILED BY PERSON NOT PRIVY TO CONTRACT WHO SHOWS THAT INJURY
WOULD POSITIVELY RESULT TO HIM. In Aldecoa v.Hongkong and Shanghai Banking Corporation, it was
held that in order that one who is not obligated in a contract either principally or subsidiarily may maintain an
action for nullifying the same, his complaint must show the injury that would positively result to him from the
contract in which he has not intervened, with regard at least to one of the contracting parties.
6.POLITICAL LAW; CONSTITUTIONAL LAW; EMINENT DOMAIN; COMMONWEALTH ACT NO. 539; GRANT
OF PREFERENCE APPLIES ONLY TO BONA FIDE TENANTS; NOT APPLICABLE IN CASE AT BAR.
Petitioners attempt to establish such legal injury through a claim of preference created under C.A. No. 539, the
pertinent provision of which provides: SEC. 1. The President of the Philippines is authorized to acquire private
lands or any interest therein, through purchase or expropriation, and to subdivide the same into horse lots or
small farms for resale at reasonable prices and under such conditions as he may fix to their bona fidetenants or
occupants or to private individuals who will work the lands themselves and who are qualified to acquire and
own lands in the Philippines. This statute was passed to implement Art. XIII, 4 of the 1935
Constitution which provided that "The Congress may authorize, upon payment of just compensation, the
expropriation of lands to be subdivided into small lots and conveyed at cost to individuals." It is obvious that
neither under this provision of the former Constitution nor that of C.A. No. 539 can petitioners claim any right
since the grant of preference therein applies only to bona fide tenants, after the expropriation or purchase by
the government of the land they are occupying. Petitioners are not tenants of the land in question in this case.
Nor has the land been acquired by the government for their benefit.
7.REMEDIAL LAW; SPECIAL CIVIL ACTION; CERTIORARI; GRAVE ABUSE OF DISCRETION; NOT
COMMITTED BY COURT THAT DECIDES TO PROCEED WITH TRIAL OF CASE RATHER THAN
POSTPONE THE HEARING TO ANOTHER DAY BECAUSE OF THE ABSENCE OF PARTY. We cannot
find grave abuse of discretion simply because a court decides to proceed with the trial of a case rather than
postpone the hearing to another day, because of the absence of a party. That the absence of a party during
trial constitutes waiver of his right to present evidence and cross-examine the opponent's witnesses is firmly
supported by jurisprudence. To constitute grave abuse of discretion amounting to lack or excess of jurisdiction,
the refusal of the court to postpone the hearing must be characterized by arbitrariness or capriciousness. Here,
as correctly noted by the Court of Appeals, petitioners' counsel was duly notified through registered mail of the
scheduled trials. His only excuse for his failure to appear at the scheduled hearing is that he "comes from
Makati" This excuse might hold water if counsel was simply late in arriving in the courtroom. But this was not
the case. He did not appear at all.
frustrated
 DECISION
MENDOZA, J p:
This is a petition for review under Rule 45 of the decision 1 of the Court of Appeals, dated January 6, 1995,
sustaining the dismissal by Branch 24 of the Regional Trial Court, Echague, Isabela, of the complaint filed by
petitioners, spouses Salvador and Ligaya Adorable, for lack of cause of action. cdphil
The facts are as follows:
Private respondent Saturnino Bareng was the registered owner of two parcels of land, one identified as Lot No.
661-D-5-A, with an area of 20,000 sq. m., covered by TCT No. T-162837, and the other known as Lot No. 661-
E, with an area of 4.0628 hectares, covered by TCT No. T-60814, both of which are in San Fabian, Echague,
Isabela. Petitioners were lessees of a 200 sq.m. portion of Lot No. 661-D-5-A.
On April 29, 1985, Saturnino Bareng and his son, private respondent Francisco Bareng, obtained a loan from
petitioners amounting to twenty six thousand pesos (P26,000), in consideration of which they promised to
transfer the possession and enjoyment of the fruits of Lot No. 661-E.
On August 3, 1986, Saturnino sold to his son Francisco 18,500 sq.m. of Lot No. 661-D-5-A. The conveyance
was annotated on the back of TCT No. T-162873. In turn, Francisco sold on August 27, 1986 to private
respondent Jose Ramos 3,000 sq.m. of the lot. The portion of land being rented to petitioners was included in
the portion sold to Jose Ramos. The deeds of sale evidencing the conveyances were not registered in the
office of the register of deeds. LexLib
As the Barengs failed to pay their loan, petitioners complained to Police Captain Rodolfo Saet of the Integrated
National Police (INP) of Echague through whose mediation a Compromise Agreement was executed between
Francisco Bareng and the Adorables whereby the former acknowledged his indebtedness of P56,385.00 which
he promised to pay on or before July 15, 1987. When the maturity date arrived, however, Francisco Bareng
failed to pay. A demand letter was sent to Francisco Bareng, but he refused to pay.
Petitioners, learning of the sale made by Francisco Bareng to Jose Ramos, then filed a complaint with the
Regional Trial Court, Branch 24, Echague, Isabela for the annulment or rescission of the sale on the ground
that the sale was fraudulently prepared and executed.
During trial, petitioners presented as witness Jose Ramos. After his testimony, the next hearing was set on
August 4 and 5, 1990. On said hearing dates, however, petitioners were absent. The trial court therefore
ordered the presentation of evidence for petitioners terminated and allowed private respondents to present
their evidence ex parte. On February 15, 1991, the trial court rendered judgment dismissing the complaint for
lack of cause of action, declaring the contract of sale between Francisco Bareng and Jose Ramos valid and
ordering Francisco Bareng to pay the amount he owed petitioners.
On appeal, the Court of Appeals affirmed the decision of the Regional Trial Court, with modification as to the
amount of Francisco Bareng's debt to petitioners.
Hence, this petition for review, raising the following issues: (1) whether the Court of Appeals erred in dismissing
the complaint for lack of cause of action; (2) whether petitioners enjoyed legal preference to purchase the lots
they lease; and (3) whether the Court of Appeals erred in sustaining the lower court's order terminating
petitioners' presentation of evidence and allowing private respondents to present their evidence ex parte.
In sustaining the decision of the trial court dismissing the complaint for lack of cause of action, the Court of
Appeals premised its decision on Rule 3, 2 of the former Rules of Court which provided: Cdpr
Parties in interest. Every action must be prosecuted and defended in the name of the real party
in interest. All persons having an interest in the subject of the action and in obtaining the relief
demanded shall be joined as plaintiffs. All persons who claim an interest in the controversy or who
are necessary to a complete determination or settlement of the questions involved therein shall be
joined as defendants.
A real party in interest is one who would be benefited or injured by the judgment, or who is entitled to the avails
of the suit. "Interest," within the meaning of this rule, should be material, directly in issue and to be affected by
the decree, as distinguished from a mere incidental interest or in the question involved. 2 Otherwise put, an
action shall be prosecuted in the name of the party who, by the substantive law, has the right sought to be
enforced. 3
Petitioners anchor their interest on their right as creditors of Francisco Bareng, as well as on their claim of
preference over the sale of the contested lot. 4 They contend that the sale between Francisco Bareng and Jose
Ramos prejudiced their interests over the property as creditors of Francisco Bareng. Moreover, they claim that,
under Commonwealth Act No. 539, they have a preferential right, as tenants or lessees, to purchase the land in
question.
The petition has no merit.
First. We hold that, as creditors, petitioners do not have such material interest as to allow them to sue for
rescission of the contract of sale. At the outset, petitioners' right against private respondents is only a personal
right to receive payment for the loan; it is not a real right over the lot subject of the deed of sale.
A personal right is the power of one person to demand of another, as a definite passive subject, the fulfillment
of a prestation to give, to do, or not to do. On the other hand, a real right is the power belonging to a person
over a specific thing, without a passive subject individually determined, against whom such right may be
personally exercised. 5 In this case, while petitioners have an interest in securing payment of the loan they
extended, their right to seek payment does not in any manner attach to a particular portion of the patrimony of
their debtor, Francisco Bareng. prLL
Nor can we sustain petitioners' claim that the sale was made in fraud of creditors. Art. 1177 of the Civil Code
provides:
The creditors, after having pursued the property in possession of the debtor to satisfy their claims,
may exercise all the rights and bring all the actions of the latter for the same purpose, save those
which are inherent in his person; they may also impugn the actions which the debtor may have
done to defraud them. (Emphasis added)
Thus, the following successive measures must be taken by a creditor before he may bring an action for
rescission of an allegedly fraudulent sale: (1) exhaust the properties of the debtor through levying by
attachment and execution upon all the property of the debtor, except such as are exempt by law from
execution; (2) exercise all the rights and actions of the debtor, save those personal to him (accion
subrogatoria); and (3) seek rescission of the contracts executed by the debtor in fraud of their rights (accion
pauliana). Without availing of the first and second remedies, i.e., exhausting the properties of the debtor or
subrogating themselves in Francisco Bareng's transmissible rights and actions, petitioners simply undertook
the third measure and filed an action for annulment of the sale. This cannot be done.
Indeed, an action for rescission is a subsidiary remedy; it cannot be instituted except when the party suffering
damage has no other legal means to obtain reparation for the same. 6 Thus, Art. 1380 of the Civil Code
provides:
The following contracts are rescissible:
xxx xxx xxx
(3)Those undertaken in fraud of creditors when the latter cannot in any other manner collect the
claims due them;
frustrated
Petitioners have not shown that they have no other means of enforcing their credit. As the Court of Appeals
pointed out in its decision:
In this case, plaintiffs-appellants had not even commenced an action against defendants-
appellees Bareng for the collection of the alleged indebtedness. Plaintiffs-appellants had not even
tried to exhaust the property of defendants-appellees Bareng. Plaintiffs-appellants, in seeking for
the rescission of the contracts of sale entered into between defendants-appellees, failed to show
and prove that defendants-appellees Bareng had no other property, either at the time of the sale
or at the time this action was filed, out of which they could have collected this (sic) debts. cdtai
Second. Nor do petitioners enjoy any preference to buy the questioned property. In Aldecoa v. Hongkong and
Shanghai Banking Corporation, 7 it was held that in order that one who is not obligated in a contract either
principally or subsidiarily may maintain an action for nullifying the same, his complaint must show the injury that
would positively result to him from the contract in which he has not intervened, with regard at least to one of the
contracting parties.
Petitioners attempt to establish such legal injury through a claim of preference created under C.A. No. 539, the
pertinent provision of which provides:
SEC. 1.The President of the Philippines is authorized to acquire private lands or any interest
therein, through purchase or expropriation, and to subdivide the same into home lots or small
farms for resale at reasonable prices and under such conditions as he may fix to their bona
fide tenants or occupants or to private individuals who will work the lands themselves and who are
qualified to acquire and own lands in the Philippines.
This statute was passed to implement Art. XIII, 4 of the 1935 Constitution which provided that "The
Congress may authorize, upon payment of just compensation, the expropriation of lands to be subdivided into
small lots and conveyed at cost to individuals." It is obvious that neither under this provision of the former
Constitution nor that of C.A. No. 539 can petitioners claim any right since the grant of preference therein
applies only to bona fide tenants, after the expropriation or purchase by the government of the land they are
occupying. 8 Petitioners are not tenants of the land in question in this case. Nor has the land been acquired by
the government for their benefit.
Third. Finally, we hold that no error was committed by the Court of Appeals in affirming the order of the trial
court terminating the presentation of petitioners' evidence and allowing private respondents to proceed with
theirs because of petitioners' failure to present further evidence at the scheduled dates of trial. Cdpr
Petitioners contend that since their counsel holds office in Makati, the latter's failure to appear at the trial in
Isabela at the scheduled date of hearing should have been treated by the court with a "sense of fairness." 9
This is more a plea for compassion rather than explanation based on reason. We cannot find grave abuse of
discretion simply because a court decides to proceed with the trial of a case rather than postpone the hearing
to another day, because of the absence of a party. That the absence of a party during trial constitutes waiver of
his right to present evidence and cross-examine the opponent's witnesses is firmly supported by
jurisprudence. 10 To constitute grave abuse of discretion amounting to lack or excess of jurisdiction, the refusal
of the court to postpone the hearing must be characterized by arbitrariness or capriciousness. Here, as
correctly noted by the Court of Appeals, petitioners' counsel was duly notified through registered mail of the
scheduled trials. 11 His only excuse for his failure to appear at the scheduled hearings is that he "comes from
Makati." This excuse might hold water if counsel was simply late in arriving in the courtroom. But this was not
the case. He did not appear at all.
WHEREFORE, the petition for review is DENIED, and the decision of the Court of Appeals is AFFIRMED.
SO ORDERED. prcd
Bellosillo, Quisumbing, Buena and De Leon, Jr., JJ., concur.
||| (Spouses Adorable v. Court of Appeals, G.R. No. 119466, [November 25, 1999], 377 PHIL 210-221)
[G.R. No. 137884. March 28, 2008.]
THE INSULAR LIFE ASSURANCE COMPANY, LTD., petitioner, vs. TOYOTA BEL-AIR,
INC., respondent.
DECISION
AUSTRIA-MARTINEZ, J p:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
assailing the Decision 1 dated September 30, 1998 of the Regional Trial Court (RTC), Branch 148, Makati
City in Civil Case No. 98-2075 which nullified the Writ of Execution dated August 12, 1998 issued by the
Metropolitan Trial Court (MeTC), Branch 63, Makati City in Civil Case No. 59089, and the RTC
Order 2 dated March 5, 1999 denying the Motion for Reconsideration.
The principal issue raised in the present petition pertains to the propriety of the decision of the
RTC in declaring as void the writ of execution issued by the MeTC and in ordering the consignation of
rentals. Being pure questions of law, direct resort to this Court is proper under Section 2 (c), Rule 41 of the
Rules of Court.
The factual antecedents of the case are as follows:
Toyota Bel-Air, Inc. (Toyota) entered into a Contract of Lease 3 over a 3,700-square meter lot and
building owned by Insular Life Assurance Company, Ltd. (Insular Life) in Pasong Tamo Street, Makati City,
for a five-year period, from April 16, 1992 to April 15, 1997. Upon expiration of the lease, Toyota remained in
possession of the property. Despite repeated demands, Toyota refused to vacate the property. Thus, on
January 28, 1998, Insular Life filed a Complaint 4 for unlawful detainer against Toyota in the MeTC.
On July 3, 1998, MeTC rendered a Decision, 5 the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of [Insular Life] and against
[Toyota]. The Court hereby orders [Toyota]:
1. and all persons claiming possession of the premises through [Toyota], to vacate the
leased properties and return possession thereof to [Insular Life];
2. to pay reasonable compensation at the rate of P585,640.00 a month until
possession of the subject premises is surrendered to the [Insular Life].
3. to pay attorney's fees in the sum of P50,000.00;
4. to pay expenses of litigation in the amount of P20,000.00;
5. to pay the costs of the suit.
SO ORDERED. 6 (Emphasis supplied).
On July 23, 1998, Insular Life filed a Motion for Execution 7 of the decision. Toyota, on the other
hand, filed a Notice of Appeals 8 of the decision. Subsequently, Insular Life filed a Notice of Partial
frustrated
Appeal 9 of the decision insofar as the issue of monthly compensation was concerned. Both parties,
however, later filed separate motions to withdraw their respective appeals. 10
On August 12, 1998, the MeTC issued an Order approving the withdrawal of notice of appeal of
both parties. It also issued a Writ of Execution, 11 on the following premise:
WHEREAS, in a certain action for "EJECTMENT" of the following described premises,
to wit: a parcel of Land and Building located at Pasong Tamo, Makati City under TCT No. 64737 of
the Registry of Deeds of Rizal, . . . judgment was rendered on the 3rd day of July, 1998 that
[Insular Life] and all persons claiming under him/her/them have restitution of the premises and
also that he/she/they recover the sum of P585,640.00 a month from April 15, 1997 until
possession of the subject premises is surrendered to plaintiff; to recover the sum of P50,000.00 as
and for attorney's fees; P20,000.00 as expenses of litigation and costs of suit.12 . . . (Emphasis
supplied)
Subsequently, the Deputy Sheriff of the MeTC executed the writ by levying on Toyota's personal
and real properties, and garnishing its bank accounts. He scheduled the auction of the levied properties on
August 28, 1998.
On August 24, 1998, Toyota filed a Petition for Certiorari 13 with prayer for injunctive relief in the
RTC. It charged the MeTC with grave abuse of discretion in issuing the Writ of Execution since the writ
amended the dispositive portion of the decision it sought to execute by giving retroactive effect to the
payment of reasonable compensation of P585,640.00 by the inclusion of the phrase "from April 15, 1997."
On August 27, 1998, the RTC issued a temporary restraining order (TRO) enjoining the auction
sale of Toyota's levied properties. 14
On August 28, 1998, Insular Life filed with the MeTC a Motion to Clarify Decision Dated July 3,
1998 15 praying that the court issue an order clarifying the dispositive portion of the Decision dated July 3,
1998.
On September 14, 1998, the MeTC issued an Order, 16 clarifying paragraph 2 of the dispositive
portion of the Decision dated July 3, 1998 to read as: "2. to pay reasonable compensation in the amount
of P585,640.00 as of April 15, 1997 until possession of the subject premises is surrendered to plaintiff." 17
On September 25, 1998, Toyota filed with the RTC a Motion to Consignate P1,171,280.00 in favor
of Insular Life and to submit the case for decision. 18 The amount of P1,171,280.00 represented the
reasonable compensation for the months of July and August 1998.
Five days later, or on September 30, 1998, the RTC rendered the herein assailed
Decision, 19 holding that the MeTC acted with grave abuse of discretion in issuing the Writ of Execution
dated August 12, 1998 by giving retroactive effect to the reasonable compensation judgment of P585,640.00
by inserting the date "April 15, 1997" which was not provided for in the dispositive portion of the MeTC
Decision; that the clarificatory order issued by the MeTC did not cure the ambiguity in the decision since it
omitted the phrase "a month" as originally stated in the Decision; that considering the Writ of Execution is
void, the levy effected by the Sheriff is also void; and that consignation of rentals is proper since Toyota has
been in possession of the property since July 3, 1998.
On October 13, 1998, Insular Life filed a Motion for Reconsideration 20 of the RTC Decision. On
the same day, it filed with the MeTC a Second Motion to Clarify Decision Dated July 3, 1998. 21
On October 28, 1998, the MeTC issued its second clarificatory order to correct paragraph 2 of the
dispositive portion of the Decision dated July 3, 1998 to read as: "2. [t]o pay reasonable compensation at
the rate of P585,640.00 a month as of April 15, 1997 until possession of the subject premises is
surrendered to the plaintiff." 22
On March 5, 1999, the RTC issued an Order 23 denying Insular Life's motion for reconsideration.
On April 19, 1999, Insular Life then filed herein Petition for Review on Certiorari 24 with this Court
anchored on the following grounds:
I
THE RTC COMMITTED A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK
OR IN EXCESS OF ITS JURISDICTION IN VOIDING THE WRIT OF EXECUTION ISSUED BY
THE MTC.
i. THE WRIT OF EXECUTION IS IN HARMONY WITH THE INTENT, SPIRIT AND
TERMS OF THE MTC'S DECISION DATED JULY 3, 1998.
ii. THE WRIT OF EXECUTION IS VALID AND ENFORCEABLE.
iii. THE RTC SANCTIONED TBA'S CRAFTY CIRCUMVENTION OF THE RULES.
II
ASSUMING ARGUENDO THAT THE MTC EXCEEDED ITS JURISDICTION IN
ORDERING IN THE WRIT OF EXECUTION THAT THE REASONABLE COMPENSATION BE
COMPUTED FROM APRIL 15, 1997, STILL, THE RTC COMMITTED A GRAVE ABUSE OF
DISCRETION TANTAMOUNT TO LACK OR IN EXCESS OF ITS JURISDICTION IN VOIDING
THE ENTIRE WRIT OF EXECUTION.
III
THE RTC COMMITTED A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK
OR IN EXCESS OF ITS JURISDICTION IN ORDERING IN THE CERTIORARI PROCEEDING A
QUO THE CONSIGNATION OF RENTALS.
IV
THE RTC COMMITTED A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK
OR IN EXCESS OF ITS JURISDICTION IN NOT DISMISSING THE CERTIORARI PETITION A
QUO FOR TBA (PETITIONER BELOW) HAD A PLAIN, SPEEDY AND ADEQUATE REMEDY IN
THE COURSE OF LAW AND DID NOT AVAIL OF THE SAME. 25
Insular Life contends that the case falls within the recognized exceptions to the rule that only the
dispositive portion of the decision controls the execution of judgment; that the pleadings, findings of fact and
conclusion of law expressed in the text of the MeTC's Decision dated July 13, 1998 should be resorted to, to
clarify the ambiguity in the dispositive portion of the decision; that the intent to order payment of rent as
reasonable compensation from April 15, 1997, when possession became unlawful, can be inferred from the
text of the decision; that the RTC should not have nullified the entire Writ of Execution since only the matter
of reasonable compensation from April 15, 1997 was at issue; that consignation of rentals was improper
since the office of a writ of certiorari is to correct defects in jurisdiction solely and the legal requisites for a
valid consignation were not present; and that Toyota failed to resort to available remedies before availing
itself of the extraordinary remedy of certiorari. On the matter of the compromise agreement, Insular Life
reiterated that the agreement was a conditional compromise agreement which was voided for Toyota's
failure to comply with the conditions. 26
Toyota claims that the parties had entered into a Compromise Agreement dated May 7, 1999
whereby Toyota was obligated to pay Insular Life P8 million under the following terms and conditions: (a) the
delivery of 3 Toyota vehicles worth P1.5 million; (b) the issuance of 12 postdated corporate checks to
answer for the balance of P6.5 million in 12 monthly installments; and (c) the posting of a surety bond which
shall guarantee payment of installments. 27 Toyota insists that the Compromise Agreement dated May 7,
1999 should be given effect considering that the preconditions contained in the Compromise Agreement
were complied with, or at the very least substantially complied with; 28 and prayed that the case should be
remanded to the lower court for the purpose of approving the Compromise Agreement dated May 7,
1999. 29
frustrated
 In a Resolution dated August 8, 2001, the Court remanded the case to the RTC for further
proceedings to determine whether Toyota had complied with the conditions contained in the Compromise
Agreement dated May 7, 1999 and thereafter elevate its findings and records thereof to the Court. 30
In its Compliance 31 dated March 24, 2003, the RTC found that Toyota failed to comply with
conditions in the Compromise Agreement dated May 7, 1999 relating to the issuance of the 12 postdated
corporate checks and the posting of a surety bond; that the postdated checks were not accepted since they
were drawn from Toyota's garnished Metrobank account; that the checks could have been encashed had
Insular Life lifted the garnishment; that the surety bond was rejected for not having been issued by a surety
company that is among Insular Life's list of acceptable surety companies; that as substitute collateral, Toyota
offered a Bukidnon real property but Insular Life turned it down since the owner's duplicate of title could not
be found and the property was not owned by Toyota but by three corporations; that a subsequent
reconstitution of the title and the authorization by the three co-owner corporations to mortgage the Bukidnon
real property and to use it to stand as security for the postdated checks failed to entice Insular Life to accept
the proposal; and that Toyota acted in good faith in dealing with Insular Life when it tried to comply with the
conditions in the Compromise Agreement.
By Resolution 32 dated August 27, 2003, the Court required both parties to submit supplemental
memoranda, taking into account the Compliance dated March 24, 2003 of the RTC.
In its Supplemental Memorandum, 33 Insular Life maintains that Toyota failed to comply with the
conditions relating to the postdated checks and the surety bond; that the garnishment of Toyota's bank
accounts was a known fact; that it would have been absolutely foolhardy for Insular Life to cause the
immediate lifting of the garnishment upon Toyota's mere delivery to it of the postdated checks; that the lifting
of the garnishment is one of the consequences once all the conditions of the compromise are met; that
Toyota admitted in a Letter dated May 21, 1999 to Insular Life its inability to comply with the surety bond
requirement; that Toyota's good faith is immaterial; that Toyota cannot claim substantial compliance since it
failed to comply with the conditions of the Compromise Agreement.
On the other hand, in its Supplemental Memorandum, 34 Toyota submits that it substantially
complied with the terms of the Compromise Agreement since the compromised amount was reduced from
P8 million to P6.5 million upon delivery of the three Toyota vehicles worth P1.5 million; that it could have
complied with the requirement of the delivery of 12 postdated checks had Insular Life lifted the garnishment
on Toyota's bank accounts effected by virtue of the Writ of Execution dated August 12, 1998; that since the
Writ of Execution was voided by the RTC, the garnishment was also nullified; and that Insular Life's
unjustified refusal to give due course to the postdated checks, by not lifting the garnishment, prevented said
checks from being encashed.
It is necessary to resolve the matter involving the efficacy of the Compromise Agreement between
the parties before the merits of the petition can be discussed.
Jurisprudence teaches us that when a contract is subject to a suspensive condition, its birth or
effectivity can take place only if and when the event which constitutes the condition happens or is
fulfilled, 35 and if the suspensive condition does not take place, the parties would stand as if the conditional
obligation has never existed. 36
In this case, the Compromise Agreement clearly stipulates that it shall become valid and binding
only upon the occurrence of all the conditions in the agreement, to wit:
2. This Agreement when signed by the parties shall take effect and shall become valid and
binding only upon the occurrence of all of the following based on a certification or
acknowledgment certified and issued by INSULAR LIFE:
2.1. transfer of ownership and delivery of the aforementioned three (3) motor vehicles in
favor of INSULAR LIFE in accordance with the provisions of Section 1.1.
hereof;
2.2. TBA's execution, issuance and delivery of twelve (12) post-dated TBA corporate
checks signed by ROBERT L. YUPANGCO in favor of INSULAR LIFE in
accordance with the provisions of this Agreement;
2.3. the issuance of the Surety Company and delivery of the Bond in the amount of
PESOS: SIX MILLION FIVE HUNDRED THOUSAND (P6,500,000.00) to and
in favor of INSULAR LIFE under this Agreement. 37 . . . (Emphasis supplied)
Thus, the issuance of 12 postdated checks and the posting of a surety bond are positive
suspensive conditions of the Compromise Agreement, the non-compliance with which was not a breach,
casual or serious, but a situation that prevented the obligation under the Compromise Agreement from
acquiring obligatory force. For its non-fulfillment, there was no contract or agreement to speak of, Toyota
having failed to comply or perform the suspensive conditions which enforce a juridical relation. 38 Since
Toyota was unable to comply with the last two conditions of the agreement, which were suspensive
conditions, Insular Life cannot be compelled to comply with its obligation to end the present litigation. No
right in favor of Toyota arose and no obligation on the part of Insular Life was created. 39
Toyota faults Insular Life for its failure to comply with the requirements of the Compromise
Agreement because Insular Life refused to accept checks from Toyota's garnished account. However,
Insular Life should not be blamed for this. It would be imprudent and foolhardy on Insular Life's part to lift the
garnishment on Toyota's bank accounts. The garnishment was one of the effects of the issuance of the Writ
of Execution, and while the RTC nullified the Writ of Execution, its decision on the matter is not yet final as it
is, in fact, subject of the present petition.
Besides, even if Insular Life accepted the postdated checks, Toyota still failed to comply with the
requirement of posting of a surety bond from Insular Life's list of acceptable sureties which would guarantee
the payment of installments. Even the substitute collateral proposed by Toyota was not accepted by Insular
Life. Since the conditions of the Compromise Agreement were not met or fulfilled by Toyota, the parties
stand as if no agreement to end the litigation was reached.
And now on the merits of the petition.
The Court finds the petition impressed with merit for the following reasons:
First, the RTC erred in giving due course to Toyota's petition for certiorari. The filing of the petition
for certiorari was premature and unwarranted. The cardinal rule is that before a petition for certiorari can be
brought against an order of the lower court, all remedies available in that court must first be exhausted.
Thus, for the special civil action for certiorari to prosper, there must be "no appeal nor any plain, speedy and
adequate remedy in the ordinary course of law." 40 The court must be given sufficient opportunity to correct
the error it may have committed. The reason for this rule is that issues, which courts of first instance are
bound to decide, should not be taken summarily from them and submitted to an appellate court, without first
giving the lower courts an opportunity to dispose of the same with due deliberation. 41
While there are exceptions to the rule, such as where the order complained of is void for being
violative of due process; or there are special circumstances which warrant immediate and more direct action;
or the lower court has taken an unreasonably long time to resolve the motions before it and a further delay
would prejudice the party concerned; or the motion will raise the same point which has already been
squarely stated before the court; or the proceeding in which the order occurred is a patent nullity, as the
court acted without jurisdiction, Toyota failed to show that any of the exceptions apply. Toyota may not
arrogate to itself the determination of whether recourse to an available remedy is necessary or not. 42 In the
instant case, it appears that Toyota had adequate remedies under the law. It could have filed with the MeTC
a motion to quash the writ of execution or a motion to clarify the dispositive portion of the decision. There is
no showing that either motion would not be a prompt and adequate remedy, or that there was such urgent
necessity for relief that only recourse tocertiorari was proper.
Second, while the general rule is that the portion of a decision that becomes the subject of
execution is that ordained or decreed in the dispositive part thereof, there are recognized exceptions to this
rule: (a) where there is ambiguity or uncertainty, the body of the opinion may be referred to for purposes of
construing the judgment, because the dispositive part of a decision must find support from the
frustrated
decision's ratio decidendi; 43 and (b) where extensive and explicit discussion and settlement of the issue is
found in the body of the decision. 44
Considering the circumstances of the instant case, the Court finds that the exception to the
general rule applies to the instant case. The RTC should have referred to the body of the decision for
purposes of construing the reasonable compensation judgment, because the dispositive part of a decision
must find support from the decision's ratio decidendi. Findings of the court are to be considered in the
interpretation of the dispositive portion of the judgment. 45
Indeed, to grasp and delve into the true intent and meaning of a decision, no specific portion
thereof should be resorted to the decision must be considered in its entirety. 46 The Court may resort to
the pleadings of the parties, its findings of fact and conclusions of law as expressed in the body of the
decision to clarify any ambiguities caused by any inadvertent omission or mistake in the dispositive portion
thereof. 47
In Reinsurance Company of the Orient, Inc. v. Court of Appeals, 48 the Court held:
In Republic Surety and Insurance Company, Inc. v. Intermediate Appellate Court, the
Court applying the above doctrine said:
. . . We clarify, in other words, what we did affirm. What is involved here is not what is
ordinarily regarded as a clerical error in the dispositive part of the decision of the Court
of First Instance, which type of error is perhaps best typified by an error in arithmetical
computation. At the same time, what is involved here is not a correction of an erroneous
judgment or dispositive portion of a judgment. What we believe is involved here is in the
nature of aninadvertent omission on the part of the Court of First Instance (which
should have been noticed by private respondent's counsel who had prepared the
complaint), of what might be described as a logical follow-through of something
set forth both in the body of the decision and in the dispositive portion
thereof: the inevitable follow-through, or translation into, operational or behavioral
terms, of the annulment of the Deed of Sale with Assumption of Mortgage, from which
petitioners' title or claim of title embodied in TCT 133153 flow. 49 (Emphasis supplied)
In the present case, the omission of the award of payment of rental from April 15, 1997 was
obviously through mere inadvertence. The pleadings, findings of fact and conclusions of law of the MeTC
bear out that upon the termination of the lease on April 15, 1997, Toyota's possession of the property
became unlawful; thus, from that date, payment of rents must be reckoned. The importance of April 15, 1997
as termination date of the lease was emphasized by the MeTC in the body of its Decision, thus:
The claim of [Toyota] that notice to vacate was made on them only on December 9,
1997 is belied by Exhibits C, D, E and F which are attached to the affidavit of Januario Flores, the
Asst. Vice-President of [Insular Life]. These exhibits are letters written by Asst. Vice-President
Flores to Mr. Isidro Laforteza Vice-President of [Toyota] dated March 1, 1994, March 4, 1996,
March 3, 1997 and April 14, 1997, respectively. These letters show that as early as 1994,
[Insular Life] had already informed [Toyota] if its intention to take back possession of the
leased premises by not renewing the lease contract upon its expiration on April 15, 1997.
Hence the continued possession of [Toyota] after the expiration of the lease contract did
not bear the acquiescence of [Insular Life]. In fact, [Toyota] was informed by [Insular Life] to
vacate the leased premises on or before April 30, 1997 (Exh. "F" to the affidavit of Mr. Flores).
The existence of Exh. "F" negates that an implied lease was established between
[Insular Life] and [Toyota]. It is now apparent that [Toyota] is unlawfully withholding possession of
the leased premises.
xxx xxx xxx
[Toyota], having enjoyed the use and possession of the leased property over the objection of
[Insular Life] . . . [Insular Life] is entitled to reasonable compensation of Five Hundred Eighty Five
Thousand Six Hundred Forty Pesos (P585,640.00) a month until possession thereof is returned to
[Insular Life] which amount is double the amount of the last monthly rental paid by [Toyota] to
[Insular Life]. 50 . . . (Emphasis supplied).
Third, the RTC erred in granting Toyota's motion for consignation. It was precipitate and
unauthorized. It is basic that certiorari under Rule 65 is a remedy narrow in scope and inflexible in character.
It is not a general utility tool in the legal workshop. 51 It offers only a limited form of review. Its principal
function is to keep an inferior tribunal within its jurisdiction. 52 It can be invoked only for an error of
jurisdiction, that is, one in which the act complained of was issued by the court, officer or a quasi-judicial
body without or in excess of jurisdiction, or with grave abuse of discretion which was tantamount to lack or
excess of jurisdiction;53 it is not to be used for any other purpose, 54 such as to cure errors in proceedings
or to correct erroneous conclusions of law or fact. 55
The only issue involved in the RTC was whether the writ of execution issued by the MeTC was
issued in excess of jurisdiction.
The determination of the propriety of consignation as ordered by the RTC is a factual matter which
by the weight of judicial precedents cannot be inquired into by the RTC in a petition for certiorari. The sole
office of the writ of certiorari is the correction of errors of jurisdiction including the commission of grave
abuse of discretion amounting to lack or excess of jurisdiction.
Nevertheless, in the interest of prompt disposition of the present case, the Court opts to resolve
the question whether consignation is proper under the undisputed circumstances.
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 prior tender of
payment. 56 In order that consignation may be effective, the debtor must show that: (1) there was a debt
due; (2) the consignation of the obligation was made because the creditor to whom tender of payment had
been made refused to accept it or was absent or incapacitated, or because several persons claimed to be
entitled to receive the amount due, or because the title to the obligation was lost; (3) previous notice of the
consignation was given to the person interested in the performance of the obligation; (4) the amount due
was placed at the disposal of the court; and (5) after the consignation had been made, the person interested
was notified thereof. 57 Failure in any of these requirements is enough ground to render a consignation
ineffective.
In the present case, Toyota failed to allege (2) and (3) above, much less prove that any of the
requirements was present. The mere fact that Toyota had been in possession of the property since July 3,
1998, when the MeTC Decision was promulgated, is not a sufficient justification to grant the motion to
consign the rents due.
Finally, the Court cannot help but call the RTC's attention to the prejudice it has wittingly or
unwittingly caused Insular Life by voiding the entire writ of execution when what was assailed was simply the
inclusion of the phrase "from April 15, 1997" in the reasonable compensation judgment of the MeTC. The
order for Toyota to vacate the lease properties and return possession thereof to Insular Life, and pay
attorney's fees and litigation expenses was not assailed and should have been enforced.
The factual milieu of the present case demonstrates eloquently that Toyota misused all known
technicalities and remedies to prolong the proceedings in a simple ejectment case. The equitable remedy
provided by the summary nature of ejectment proceedings has been frustrated by Toyota to the great
prejudice of Insular Life and the time of this Court.
Ironically, the precipitate action of the RTC in giving due course to Toyota's petition
for certiorari prolonged the litigation and unnecessarily delayed the case, in the process causing the very evil
it apparently sought to avoid. Instead of unclogging dockets, it has actually increased the work load of the
justice system as a whole. Such action does not inspire public confidence in the administration of justice.
WHEREFORE, the petition is hereby GRANTED. The Decision dated September 30, 1998 and
Order dated March 5, 1999 of the Regional Trial Court, Branch 148, Makati City are REVERSED and SET
ASIDE. The Writ of Execution dated August 12, 1998 as clarified in the Order dated October 28, 1998 of the
Metropolitan Trial Court, Branch 63, Makati, is declared VALID
frustrated
 =THIRD DIVISION
[G.R. No. 103577. October 7, 1996.]
ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL, ANNABELLE C.
GONZALES (for herself and on behalf of Floraida C. Tupper, as attorney-in-fact), CIELITO A.
CORONEL, FLORAIDA A. ALMONTE, and CATALINA BALAIS MABANAG, petitioners, vs.
THE COURT OF APPEALS, CONCEPCION D. ALCARAZ and RAMONA PATRICIA ALCARAZ,
assisted by GLORIA F. NOEL as attorney-in-fact, respondents.
Leven S. Puno for petitioners.
Perpetuo G. Paner for private respondents.
SYLLABUS
1. CIVIL LAW; SALES; ESSENTIAL ELEMENTS THEREOF. Sale, by its very nature, is a consensual
contract because it is perfected by mere consent. The essential elements of a contract of sale are the following:
a) consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price; b)
determinate subject matter; and c) price certain in money or its equivalent. DCScaT
2. ID.; ID.; CONTRACT TO SELL DISTINGUISHED FROM CONDITIONAL CONTRACT OF SALE. Under
this definition, a Contract to Sell may not be considered as a Contract of Sale because the first essential
element is lacking. In a contract to sell, the prospective seller explicitly reserves the transfer of title to the
prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of
the property subject of the contract to sell until the happening of an event, which for present purposes we shall
take as the full payment of the purchase price. What the seller agrees or obliges himself to do is to fulfill his
promise to sell the subject property when the entire amount of the purchase price is delivered to him. . . . In a
contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase price,
ownership will not automatically transfer to the buyer although the property may have been previously delivered
to him. The prospective seller still has to convey title to the prospective buyer by entering into a contract of
absolute sale. A contract to sell as defined hereinabove, may not even be considered as a conditional contract
of sale where the seller may likewise reserve title to the property subject of the sale until the fulfillment of a
suspensive condition, because in a conditional contract of sale, the first element of consent is present, although
it is conditioned upon the happening of a contingent event which may or may not occur. If the suspensive
condition is not fulfilled, the perfection of the contract of sale is completely abated (cf. Homesite and Housing
Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the suspensive condition is fulfilled, the
contract of sale is thereby perfected, such that if there had already been previous delivery of the property
subject of the sale to the buyer, ownership thereto automatically transfers to the buyer by operation of law
without any further act having to be performed by the seller.
3. ID.; ID.; ID.; SALE OF SUBJECT PROPERTY TO A THIRD PERSON; EFFECTS THEREOF. It is
essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where
the subject property is sold by the owner not to the party the seller contracted with, but to a third person, as in
the case at bench. In a contract to sell, there being no previous sale of the property, a third person buying such
property despite the fulfillment of the suspensive condition such as the full payment of the purchase price, for
instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of
reconveyance of the property. There is no double sale in such case. Title to the property will transfer to the
buyer after registration because there is no defect in the owner-seller's title per se, but the latter, of course,
may be sued for damages by the intending buyer. In a conditional contract of sale, however, upon the
fulfillment of the suspensive condition, the sale becomes absolute and this will definitely affect the seller's title
thereto. In fact, if there had been previous delivery of the subject property, the seller's ownership or title to the
property is automatically transferred to the buyer such that, the seller will no longer have any title to transfer to
any third person. Applying Article 1544 of the Civil Code, such second buyer of the property who may have had
actual or constructive knowledge of such defect, cannot be a registrant in good faith. Such second buyer
cannot defeat the first buyer's title. In case a title is issued to the second buyer, the first buyer may seek
reconveyance of the property subject of the sale.
4. ID.; ID.; CONTRACT OF SALE; INTERPRETATION OF WORDS USED THEREIN SHOULD BE GIVEN
ORDINARY MEANING; CASE AT BENCH. It is a canon in the interpretation of contracts that the words
used therein should be given their natural and ordinary meaning unless a technical meaning was intended (Tan
vs. Court of Appeals, 212 SCRA 586 [1992]). Thus, . . . When the "Receipt of Down Payment" is considered in
its entirety, it becomes more manifest that there was a clear intent on the part of petitioners to transfer title to
the buyer, but since the transfer certificate of title was still in the name of petitioner's father, they could not fully
effect such transfer although the buyer was then willing and able to immediately pay the purchase price.
Therefore, petitioners-sellers undertook upon receipt of the down payment from private respondent Ramona P.
Alcaraz, to cause the issuance of a new certificate of title in their names from that of their father, after which,
they promised to present said title, now in their names, to the latter and to execute the deed of absolute sale
whereupon, the latter shall, in turn, pay the entire balance of the purchase price. The agreement could not have
been a contract to sell because the sellers herein made no express reservation of ownership or title to the
subject parcel of land. Furthermore, the circumstance which prevented the parties from entering into an
absolute contract of sale pertained to the sellers themselves (the certificate of title was not in their names) and
not the full payment of the purchase price. Under the established facts and circumstances of the case, the
Court may safely presume that, had the certificate of title been in the names of petitioners-sellers at that time,
there would have been no reason why an absolute contract of sale could not have been executed and
consummated right there and then.
5. ID.; ID.; ID.; WHEN RECIPROCAL OBLIGATIONS OF SELLER AND BUYER AROSE IN CASE AT BENCH.
On January 19, 1985, as evidenced by the document denominated as "Receipt of Down Payment" (Exh.
"A", Exh. "1"), the parties entered into a contract of sale subject only to the suspensive condition that the sellers
shall effect the issuance of new certificate of title from that of their father's name to their names. . . . On
February 6, 1985, this condition was fulfilled (Exh. "D"; Exh. "4"). We therefore, hold that, in accordance with
Article 1187 . . . the rights and obligations of the parties with respect to the perfected contract of sale became
mutually due and demandable as of the time of fulfillment or occurrence of the suspensive condition on
February 6, 1985. As of that point in time, reciprocal obligations of both seller and buyer arose, that is, . . .
petitioners, as sellers, were obliged to present the transfer certificate of title already in their names to private
respondent Ramona P. Alcaraz, the buyer, and to immediately execute the deed of absolute sale, while the
buyer on her part, was obliged to forthwith pay the balance of the purchase price amounting to P1,190,000.00.
6. ID.; WILLS AND SUCCESSION; RIGHTS THERETO TRANSMITTED FROM MOMENT OF DECEDENT'S
DEATH; CASE AT BENCH. Petitioners also argue there could be no perfected contract on January 19, 1985
because they were then not yet the absolute owners of the inherited property. We cannot sustain this
argument. Article 774 of the Civil Code defines succession as a mode of transferring ownership as follows: Art.
774. Succession is a mode of acquisition by virtue of which the property, rights and obligations to the extent
and value of the inheritance of a person are transmitted through his death to another or others by his will or by
operation of law. Petitioners-sellers in the case at bar being the sons and daughters of the decedent
Constancio P. Coronel are compulsory heirs who were called to succession by operation of law. Thus, at the
point their father drew his last breath, petitioners stepped into his shoes insofar as the subject property is
concerned, such that any rights or obligations pertaining thereto became binding and enforceable upon them. It
is expressly provided that rights to the succession are transmitted from the moment of death of the decedent
(Article 777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]).
7. ID.; SALES; CONTRACT OF SALE; ESTOPPEL; PETITIONERS PRECLUDED FROM DENYING
OWNERSHIP OF SUBJECT PROPERTY AT TIME OF SALE; CASE AT BENCH. Aside from this,
petitioners are precluded from raising their supposed lack of capacity to enter into an agreement at that time
and they cannot be allowed to now take a posture contrary to that which they took when they entered into the
agreement with private respondent Ramona P. Alcaraz. . . . Having represented themselves as the true owners
frustrated
of the subject property at the time of sale, petitioners cannot claim now that they were not yet the absolute
owners thereof at that time.
8. ID.; ID.; ID.; RESCISSION; PHYSICAL ABSENCE OF BUYER NOT A GROUND THEREFOR IN CASE AT
BENCH. Petitioners also contend that although there was in fact a perfected contract of sale between them
and Ramona P. Alcaraz, the latter breached her reciprocal obligation when she rendered impossible the
consummation thereof by going to the United States of America, without leaving her address, telephone
number, and Special Power of Attorney (Paragraphs 14 and 15, Answer with Compulsory Counterclaim to the
Amended Complaint, p. 2; Rollo, p. 43), for which reason, so petitioners conclude, they were correct in
unilaterally rescinding the contract of sale. We do not agree with petitioners that there was a valid rescission of
the contract of sale in the instant case. We note that these supposed grounds for petitioners' rescission, are
mere allegations found only in their responsive pleadings, which by express provision of the rules, are deemed
controverted even if no reply is filed by the plaintiffs (Sec. 11, Rule 6, Revised Rules of Court). The records are
absolutely bereft of any supporting evidence to substantiate petitioners' allegations. We had stressed time and
again that allegations must be proven by sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882
[1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]). Mere allegation is not an evidence (Lagasca vs. De Vera, 79
Phil. 376 [1947]). Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on
February 6, 1985, we cannot justify petitioners-sellers' act of unilaterally and extrajudicially rescinding the
contract of sale, there being no express stipulation authorizing the sellers to extrajudicially rescind the contract
of sale. (cf Dignos vs. CA, 158 SCRA 375 [1988];Taguba vs. Vda. de Leon, 132 SCRA 722 [1984]). Moreover,
petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz because although the
evidence on record shows that the sale was in the name of Ramona P. Alcaraz as the buyer, the sellers had
been dealing with Concepcion D. Alcaraz, Ramona's mother, who had acted for and in behalf of her daughter,
if not also in her own behalf. Indeed, the down payment was made by Concepcion D. Alcaraz with her own
personal check (Exh. "B"; Exh. "2") for and in behalf of Ramona P. Alcaraz. There is no evidence showing that
petitioners ever questioned Concepcion's authority to represent Ramona P. Alcaraz when they accepted her
personal check. Neither did they raise any objection as regards payment being effected by a third person.
Accordingly, as far as petitioners are concerned, the physical absence of Ramona P. Alcaraz is not a ground to
rescind the contract of sale.
9. ID.; ID.; ID.; ID.; ID.; BUYER NOT CONSIDERED IN DEFAULT IN CASE AT BENCH. Corollarily,
Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her obligation to pay the full purchase
price is concerned. Petitioners who are precluded from setting up the defense of the physical absence of
Ramona P. Alcaraz as above-explained offered no proof whatsoever to show that they actually presented the
new transfer certificate of title in their names and signified their willingness and readiness to execute the deed
of absolute sale in accordance with their agreement. Ramona's corresponding obligation to pay the balance of
the purchase price in the amount of P1,190,000.00 (as buyer) never became due and demandable and,
therefore, she cannot be deemed to have been in default. Article 1169 of the Civil Code defines when a party in
a contract involving reciprocal obligations may be considered in default, . . . There is thus neither factual nor
legal basis to rescind the contract of sale between petitioners and respondents.
10. ID.; ID.; DOUBLE SALE; WHEN SECOND BUYER IS ENTITLED TO TITLE OR OWNERSHIP OF
PROPERTY. With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave
rise to a case of double sale where Article 1544 of the Civil Code will apply. . . . The record of the case shows
that the Deed of Absolute Sale dated April 25, 1985 as proof of the second contract of sale was registered with
the Registry of Deeds of Quezon City giving rise to the issuance of a new certificate of title in the name of
Catalina B. Mabanag on June 5, 1985. Thus, the second paragraph of Article 1544 shall apply. The above-
cited provision on double sale presumes title or ownership to pass to the first buyer, the exceptions being: (a)
when the second buyer, in good faith, registers the sale ahead of the first buyer, and (b) should there be no
inscription by either of the two buyers, when the second buyer, in good faith, acquires possession of the
property ahead of the first buyer. Unless, the second buyer satisfies these requirements, title or ownership will
not transfer to him to the prejudice of the first buyer.
11. ID.; ID.; ID.; ID.; CASE AT BENCH. Petitioners point out that the notice of lis pendens in the case at bar
was annotated on the title of the subject property only on February 22, 1985, whereas, the second sale
between petitioners Coronels and petitioner. Mabanag was supposedly perfected prior thereto or on February
18, 1985. The idea conveyed is that at the time petitioner Mabanag, the second buyer, bought the property
under a clean title, she was unaware of any adverse claim or previous sale, for which reason she is a buyer in
good faith. We are not persuaded by such argument. In a case of double sale, what finds relevance and
materiality is not whether or not the second buyer was a buyer in good faith but whether or not said second
buyer registers such second sale in good faith, that is, without knowledge of any defect in the title of the
property sold. As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good
faith, registered the sale entered into on February 18, 1985 because as early as February 22, 1985, a notice
of lis pendens had been annotated on the transfer certificate of title in the names of petitioners, whereas
petitioner Mabanag registered the said sale sometime in April, 1985. At the time of registration, therefore,
petitioner Mabanag knew that the same property had already been previously sold to private respondents, or,
at least, she was charged with knowledge that a previous buyer is claiming title to the same property. Petitioner
Mabanag cannot close her eyes to the defect in petitioners' title to the property at the time of the registration of
the property. CAScIH
DECISION
MELO, J p:
The petition before us has its roots in a complaint for specific performance to compel herein petitioners (except
the last named, Catalina Balais Mabanag) to consummate the sale of a parcel of land with its improvements
located along Roosevelt Avenue in Quezon City entered into by the parties sometime in January 1985 for the
price of P1,240,000.00
The undisputed facts of the case were summarized by respondent court in this wise:
On January 19, 1985, defendants-appellants Romulo Coronel, et al. (hereinafter referred to as
Coronels) executed a document entitled "Receipt of Down Payment" (Exh. "A") in favor of plaintiff
Ramona Patricia Alcaraz (hereinafter referred to as Ramona) which is reproduced hereunder:
RECEIPT OF DOWN PAYMENT
P1,240,000.00 Total amount
50,000.00 Down payment
P1,190,000.00 Balance
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty
Thousand Pesos purchase price of our inherited house and lot, covered by TCT No. 119627 of the
Registry of Deeds of Quezon City, in the total amount of P1,240,000.00.
We bind ourselves to effect the transfer in our names from our deceased father, Constancio
P. Coronel, the transfer certificate of title immediately upon receipt of the down payment above-
stated.
On our presentation of the TCT already in our name, We will immediately execute the deed of
absolute sale of said property and Miss Ramona Patricia Alcaraz shall immediately pay the
balance of the P1,190,000.00.
Clearly, the conditions appurtenant to the sale are the following:
frustrated
 1. Ramona will make a down payment of Fifty Thousand (P50,000.00) Pesos upon execution of
the document aforestated;
2. The Coronels will cause the transfer in their names of the title of the property registered in the
name of their deceased father upon receipt of the Fifty Thousand (P50,000.00) Pesos down
payment;
3. Upon the transfer in their names of the subject property, the Coronels will execute the deed of
absolute sale in favor of Ramona and the latter will pay the former the whole balance of One
Million One Hundred Ninety Thousand (P1,190,000.00) Pesos.
On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz (hereinafter
referred to as Concepcion), mother of Ramona, paid the down payment of Fifty Thousand
(P50,000.00) Pesos (Exh. "B", Exh. "2").
On February 6, 1985, the property originally registered in the name of the Coronels' father was
transferred in their names under TCT No. 327043 (Exh. "D"; Exh. "4")
On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to intervenor-
appellant Catalina B. Mabanag (hereinafter referred to as Catalina) for One Million Five Hundred
Eighty Thousand (P1,580,000.00) Pesos after the latter has paid Three Hundred Thousand
(P300,000.00) Pesos (Exhs. "F-3"; Exh. "6-C")
For this reason, Coronels canceled and rescinded the contract (Exh. "A") with Ramona by
depositing the down payment paid by Concepcion in the bank in trust for Ramona Patricia Alcaraz.
On February 22, 1985, Concepcion, et al., filed a complaint for specific performance against the
Coronels and caused the annotation of a notice of lis pendens at the back of TCT No. 327403
(Exh. "E"; Exh. "5").
On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering the same
property with the Registry of Deeds of Quezon City (Exh. "F"; Exh. "6").
On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject property in
favor of Catalina (Exh. "G"; Exh. "7").
On June 5, 1985, a new title over the subject property was issued in the name of Catalina under
TCT No. 351582 (Exh. "H"; Exh. "8").
(Rollo, pp. 134-136)
In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City) the parties agreed to
submit the case for decision solely on the basis of documentary exhibits. Thus, plaintiffs therein (now private
respondents) proffered their documentary evidence accordingly marked as Exhibits "A" through "J", inclusive of
their corresponding submarkings. Adopting these same exhibits as their own, then defendants (now petitioners)
accordingly offered and marked them as Exhibits "1" through "10", likewise inclusive of their corresponding
submarkings. Upon motion of the parties, the trial court gave them thirty (30) days within which to
simultaneously submit their respective memoranda, and an additional 15 days within which to submit their
corresponding comment or reply thereto, after which, the case would be deemed submitted for resolution.
On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura, who was then
temporarily detailed to preside over Branch 82 of the RTC of Quezon City. On March 1, 1989, judgment was
handed down by Judge Roura from his regular bench at Macabebe, Pampanga for the Quezon City branch,
disposing as follows:
WHEREFORE, judgment for specific performance is hereby rendered ordering defendant to
execute in favor of plaintiffs a deed of absolute sale covering that parcel of land embraced in and
covered by Transfer Certificate of Title No. 327403 (now TCT No. 331582) of the Registry of
Deeds for Quezon City, together with all the improvements existing thereon free from all liens and
encumbrances, and once accomplished, to immediately deliver the said document of sale to
plaintiffs and upon receipt thereof, the plaintiffs are ordered to pay defendants the whole balance
of the purchase price amounting to P1,190,000.00 in cash. Transfer Certificate of Title No. 331582
of the Registry of Deeds for Quezon City in the name of intervenor is hereby canceled and
declared to be without force and effect. Defendants and intervenor and all other persons claiming
under them are hereby ordered to vacate the subject property and deliver possession thereof to
plaintiffs. Plaintiffs' claim for damages and attorney's fees, as well as the counterclaims of
defendants and intervenors are hereby dismissed.
No pronouncement as to costs.
So Ordered.
Macabebe, Pampanga for Quezon City, March 1, 1989.
(Rollo, p. 106)
A motion for reconsideration was filed by petitioners before the new presiding judge of the Quezon City RTC
but the same was denied by Judge Estrella T. Estrada, thusly:
The prayer contained in the instant motion, i.e., to annul the decision and to render anew decision
by the undersigned Presiding Judge should be denied for the following reasons: (1) The instant
case became submitted for decision as of April 14, 1988 when the parties terminated the
presentation of their respective documentary evidence and when the Presiding Judge at that time
was Judge Reynaldo Roura. The fact that they were allowed to file memoranda at some future
date did not change the fact that the hearing of the case was terminated before Judge Roura and
therefore the same should be submitted to him for decision; (2) When the defendants and
intervenor did not object to the authority of Judge Reynaldo Roura to decide the case prior to the
rendition of the decision, when they met for the first time before the undersigned Presiding Judge
at the hearing of a pending incident in Civil Case No. Q-46145 on November 11, 1988, they were
deemed to have acquiesced thereto and they are now estopped from questioning said authority of
Judge Roura after they received the decision in question which happens to be adverse to them;
(3) While it is true that Judge Reynaldo Roura was merely a Judge-on-detail at this Branch of the
Court, he was in all respects the Presiding Judge with full authority to act on any pending incident
submitted before this Court during his incumbency. When he returned to his Official Station at
Macabebe, Pampanga, he did not lose his authority to decide or resolve such cases submitted to
him for decision or resolution because he continued as Judge of the Regional Trial Court and is of
co-equal rank with the undersigned Presiding Judge. The standing rule and supported by
jurisprudence is that a Judge to whom a case is submitted for decision has the authority to decide
the case notwithstanding his transfer to another branch or region of the same court (Sec. 9, Rule
135, Rule of Court).
Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989 rendered
in the instant case, resolution of which now pertains to the undersigned Presiding Judge, after a
meticulous examination of the documentary evidence presented by the parties, she is convinced
that the Decision of March 1, 1989 is supported by evidence and, therefore, should not be
disturbed.
IN VIEW OF THE FOREGOING, the "Motion for Reconsideration and/or to Annul Decision and
Render Anew Decision by the Incumbent Presiding Judge" dated March 20, 1989 is hereby
DENIED.
SO ORDERED.
Quezon City, Philippines, July 12, 1989.
frustrated
 (Rollo, pp. 108-109)
Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court of Appeals (Buena,
Gonzaga-Reyes, Abad Santos (P), JJ.) rendered its decision fully agreeing with the trial court.
Hence, the instant petition which was filed on March 5, 1992. The last pleading, private respondents' Reply
Memorandum, was filed on September 15, 1993. The case was, however, re-raffled to
undersigned ponente only on August 28, 1996, due to the voluntary inhibition of the Justice to whom the case
was last assigned.
While we deem it necessary to introduce certain refinements in the disquisition of respondent court in the
affirmance of the trial court's decision, we definitely find the instant petition bereft of merit.
The heart of the controversy which is the ultimate key in the resolution of the other issues in the case at bar is
the precise determination of the legal significance of the document entitled "Receipt of Down Payment" which
was offered in evidence by both parties. There is no dispute as to the fact that said document embodied the
binding contract between Ramona Patricia Alcaraz on the one hand, and the heirs of Constancio P. Coronel on
the other, pertaining to a particular house and lot covered by TCT No. 119627, as defined in Article 1305 of the
Civil Code of the Philippines which reads as follows:
Art. 1305. A contract is a meeting of minds between two persons whereby one binds himself, with
respect to the other, to give something or to render some service.
While, it is the position of private respondents that the "Receipt of Down Payment" embodied a perfected
contract of sale, which perforce, they seek to enforce by means of an action for specific performance,
petitioners on their part insist that what the document signified was a mere executory contract to sell, subject to
certain suspensive conditions, and because of the absence of Ramona P. Alcaraz, who left for the United
States of America, said contract could not possibly ripen into a contract of absolute sale.
Plainly, such variance in the contending parties' contentions is brought about by the way each interprets the
terms and/or conditions set forth in said private instrument. Withal, based on whatever relevant and admissible
evidence may be available on record, this Court, as were the courts below, is now called upon to adjudge what
the real intent of the parties was at the time the said document was executed.
The Civil Code defines a contract of sale, thus:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in
money or its equivalent.
Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential
elements of a contract of sale are the following:
a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the
price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first essential
element is lacking. In a contract to sell, the prospective seller explicitly reserves the transfer of title to the
prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of
the property subject of the contract to sell until the happening of an event, which for present purposes we shall
take as the full payment of the purchase price. What the seller agrees or obliges himself to do is to fulfill his
promise to sell the subject property when the entire amount of the purchase price is delivered to him. In other
words the full payment of the purchase price partakes of a suspensive condition, the non-fulfillment of which
prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller without
further remedies by the prospective buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion
to rule:
Hence, We hold that the contract between the petitioner and the respondent was a contract to sell
where the ownership or title is retained by the seller and is not to pass until the full payment of the
price, such payment being a positive suspensive condition and failure of which is not a breach,
casual or serious, but simply an event that prevented the obligation of the vendor to convey title
from acquiring binding force.
Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the purchase
price, the prospective seller's obligation to sell the subject property by entering into a contract of sale with the
prospective buyer becomes demandable as provided in Article 1479 of the Civil Code which states:
Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally
demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding
upon the promissor if the promise is supported by a consideration distinct from the price.
A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while expressly
reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself
to sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that
is, full payment of the purchase price.
A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where
the seller may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive
condition, because in a conditional contract of sale, the first element of consent is present, although it is
conditioned upon the happening of a contingent event which may or may not occur. If the suspensive condition
is not fulfilled, the perfection of the contract of sale is completely abated (cf. Homesite and Housing
Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the suspensive condition is fulfilled, the
contract of sale is thereby perfected, such that if there had already been previous delivery of the property
subject of the sale to the buyer, ownership thereto automatically transfers to the buyer by operation of law
without any further act having to be performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase
price, ownership will not automatically transfer to the buyer although the property may have been previously
delivered to him. The prospective seller still has to convey title to the prospective buyer by entering into a
contract of absolute sale.
It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases
where the subject property is sold by the owner not to the party the seller contracted with, but to a third person,
as in the case at bench. In a contract to sell, there being no previous sale of the property, a third person buying
such property despite the fulfillment of the suspensive condition such as the full payment of the purchase price,
for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of
reconveyance of the property. There is no double sale in such case. Title to the property will transfer to the
buyer after registration because there is no defect in the owner-seller's title per se, but the latter, of course,
may be sued for damages by the intending buyer.
In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes
absolute and this will definitely affect the seller's title thereto. In fact, if there had been previous delivery of the
subject property, the seller's ownership or title to the property is automatically transferred to the buyer such
that, the seller will no longer have any title to transfer to any third person. Applying Article 1544 of the Civil
Code, such second buyer of the property who may have had actual or constructive knowledge of such defect in
the seller's title, or at least was charged with the obligation to discover such defect, cannot be a registrant in
good faith. Such second buyer cannot defeat the first buyer's title. In case a title is issued to the second buyer,
the first buyer may seek reconveyance of the property subject of the sale.
frustrated
With the above postulates as guidelines, we now proceed to the task of deciphering the real nature of the
contract entered into by petitioners and private respondents.
It is a canon in the interpretation of contracts that the words used therein should be given their natural and
ordinary meaning unless a technical meaning was intended (Tan vs. Court of Appeals, 212 SCRA 586 [1992]).
Thus, when petitioners declared in the said "Receipt of Down Payment" that they
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty
Thousand Pesos purchase price of our inherited house and lot, covered by TCT No. 1199627 of
the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00.
without any reservation of title until full payment of the entire purchase price, the natural and ordinary idea
conveyed is that they sold their property.
When the "Receipt of Down Payment" is considered in its entirety, it becomes more manifest that there was a
clear intent on the part of petitioners to transfer title to the buyer, but since the transfer certificate of title was
still in the name of petitioner's father, they could not fully effect such transfer although the buyer was then
willing and able to immediately pay the purchase price. Therefore, petitioners-sellers undertook upon receipt of
the down payment from private respondent Ramona P. Alcaraz, to cause the issuance of a new certificate of
title in their names from that of their father, after which, they promised to present said title, now in their names,
to the latter and to execute the deed of absolute sale whereupon, the latter shall, in turn, pay the entire balance
of the purchase price.
The agreement could not have been a contract to sell because the sellers herein made no express reservation
of ownership or title to the subject parcel of land. Furthermore, the circumstance which prevented the parties
from entering into an absolute contract of sale pertained to the sellers themselves (the certificate of title was
not in their names) and not the full payment of the purchase price. Under the established facts and
circumstances of the case, the Court may safely presume that, had the certificate of title been in the names of
petitioners-sellers at that time, there would have been no reason why an absolute contract of sale could not
have been executed and consummated right there and then.
Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely promise to sell the property to
private respondent upon the fulfillment of the suspensive condition. On the contrary, having already agreed to
sell the subject property, they undertook to have the certificate of title changed to their names and immediately
thereafter, to execute the written deed of absolute sale.
Thus, the parties did not merely enter into a contract to sell where the sellers, after compliance by the buyer
with certain terms and conditions, promised to sell the property to the latter. What may be perceived from the
respective undertakings of the parties to the contract is that petitioners had already agreed to sell the house
and lot they inherited from their father, completely willing to transfer full ownership of the subject house and lot
to the buyer if the documents were then in order. It just so happened, however, that the transfer certificate of
title was then still in the name of their father. It was more expedient to first effect the change in the certificate of
title so as to bear their names. That is why they undertook to cause the issuance of a new transfer of the
certificate of title in their names upon receipt of the down payment in the amount of P50,000.00. As soon as the
new certificate of title is issued in their names, petitioners were committed to immediately execute the deed of
absolute sale. Only then will the obligation of the buyer to pay the remainder of the purchase price arise.
There is no doubt that unlike in a contract to sell which is most commonly entered into so as to protect the
seller against a buyer who intends to buy the property in installment by withholding ownership over the property
until the buyer effects full payment therefor, in the contract entered into in the case at bar, the sellers were the
ones who were unable to enter into a contract of absolute sale by reason of the fact that the certificate of title to
the property was still in the name of their father. It was the sellers in this case who, as it were, had the
impediment which prevented, so to speak, the execution of a contract of absolute sale.
What is clearly established by the plain language of the subject document is that when the said "Receipt of
Down Payment" was prepared and signed by petitioners Romulo A. Coronel, et al., the parties had agreed to a
conditional contract of sale, consummation of which is subject only to the successful transfer of the certificate
of title from the name of petitioners' father, Constancio P. Coronel to their names.
The Court significantly notes that this suspensive condition was, in fact, fulfilled on February 6, 1985 (Exh. "D";
Exh. "4"). Thus, on said date, the conditional contract of sale between petitioners and private respondent
Ramona P. Alcaraz became obligatory, the only act required for the consummation thereof being the delivery of
the property by means of the execution of the deed of absolute sale in a public instrument, which petitioners
unequivocally committed themselves to do as evidenced by the "Receipt of Down Payment."
Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to the case at bench. Thus,
Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the
thing which is the object of the contract and upon the price.
From that moment, the parties may reciprocally demand performance, subject to the provisions of
the law governing the form of contracts.
Art. 1181. In 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.
Since the condition contemplated by the parties which is the issuance of a certificate of title in petitioners'
names was fulfilled on February 6, 1985, the respective obligations of the parties under the contract of sale
became mutually demandable, that is, petitioners, as sellers, were obliged to present the transfer certificate of
title already in their names to private respondent Ramona P. Alcaraz, the buyer, and to immediately execute
the deed of absolute sale, while the buyer on her part, was obliged to forthwith pay the balance of the purchase
price amounting to P1,190,000.00.
It is also significant to note that in the first paragraph in page 9 of their petition, petitioners conclusively
admitted that:
3. The petitioners-sellers Coronel bound themselves "to effect the transfer in our names from our
deceased father Constancio P. Coronel, the transfer certificate of title immediately upon receipt of
the downpayment above-stated." The sale was still subject to this suspensive condition.
(Emphasis supplied.)
(Rollo, p. 16)
Petitioners themselves recognized that they entered into a contract of sale subject to a suspensive
condition. Only, they contend, continuing in the same paragraph, that:
. . . Had petitioners-sellers not complied with this condition of first transferring the title to the
property under their names, there could be no perfected contract of sale. (Emphasis supplied.)
(Ibid.)
not aware that they have set their own trap for themselves, for Article 1186 of the Civil Code expressly provides
that:
Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its
fulfillment.
Besides, it should be stressed and emphasized that what is more controlling these mere hypothetical
arguments is the fact that the condition herein referred to was actually and indisputably fulfilled on February 6,
1985, when a new title was issued in the names of petitioners as evidenced by TCT No. 327403 (Exh. "D";
Exh. "4").
The inevitable conclusion is that on January 19, 1985, as evidenced by the document denominated as "Receipt
of Down Payment" (Exh. "A"; Exh. "1"), the parties entered into a contract of sale subject only to the
suspensive condition that the sellers shall effect the issuance of new certificate of title from that of their father's
name to their names and that, on February 6, 1985, this condition was fulfilled (Exh. "D"; Exh "4").
We, therefore, hold that, in accordance with Article 1187 which pertinently provides
frustrated
 Art. 1187. The effects of conditional obligation to give, once the condition has been fulfilled, shall
retroact to the day of the constitution of the obligation . . .
In obligations to do or not to do, the courts shall determine, in each case, the retroactive effect of
the condition that has been complied with.
the rights and obligations of the parties with respect to the perfected contract of sale became mutually due
and demandable as of the time of fulfillment or occurrence of the suspensive condition on February 6, 1985.
As of that point in time, reciprocal obligations of both seller and buyer arose.
Petitioners also argue there could be no perfected contract on January 19, 1985 because they were then not
yet the absolute owners of the inherited property.
We cannot sustain this argument.
Article 774 of the Civil Code defines Succession as a mode of transferring ownership as follows:
Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and obligations
to the extent and value of the inheritance of a person are transmitted through his death to another
or others by his will or by operation of law.
Petitioners-sellers in the case at bar being the sons and daughters of the decedent Constancio P. Coronel are
compulsory heirs who were called to succession by operation of law. Thus, at the point their father drew his last
breath, petitioners stepped into his shoes insofar as the subject property is concerned, such that any rights or
obligations pertaining thereto became binding and enforceable upon them. It is expressly provided that rights to
the succession are transmitted from the moment of death of the decedent (Article 777, Civil Code; Cuison vs.
Villanueva, 90 Phil. 850 [1952]).
Be it also noted that petitioners' claim that succession may not be declared unless the creditors have been paid
is rendered moot by the fact that they were able to effect the transfer of the title to the property from the
decedent's name to their names on February 6, 1985.
Aside from this, petitioners are precluded from raising their supposed lack of capacity to enter into an
agreement at that time and they cannot be allowed to now take a posture contrary to that which they took when
they entered into the agreement with private respondent Ramona P. Alcaraz. The Civil Code expressly states
that:
Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the
person making it, and cannot be denied or disproved as against the person relying thereon.
Having represented themselves as the true owners of the subject property at the time of sale, petitioners
cannot claim now that they were not yet the absolute owners thereof at that time.
Petitioners also contend that although there was in fact a perfected contract of sale between them and Ramona
P. Alcaraz, the latter breached her reciprocal obligation when she rendered impossible the consummation
thereof by going to the United States of America, without leaving her address, telephone number, and Special
Power of Attorney (Paragraphs 14 and 15, Answer with Compulsory Counterclaim to the Amended Complaint,
p. 2; Rollo, p. 43), for which reason, so petitioners conclude, they were correct in unilaterally rescinding the
contract of sale.
We do not agree with petitioners that there was a valid rescission of the contract of sale in the instant case. We
note that these supposed grounds for petitioners' rescission, are mere allegations found only in their
responsive pleadings, which by express provision of the rules, are deemed controverted even if no reply is filed
by the plaintiffs (Sec. 11, Rule 6, Revised Rules of Court). The records are absolutely bereft of any supporting
evidence to substantiate petitioners' allegations. We have stressed time and again that allegations must be
proven by sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA
598 [1961]). Mere allegation is not an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]).
Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on February 6, 1985,
we cannot justify petitioners-sellers' act of unilaterally and extrajudicially rescinding the contract of sale, there
being no express stipulation authorizing the sellers to extrajudicially rescind the contract of sale. (cf Dignos vs.
CA, 158 SCRA 375 [1988]; Taguba vs. Vda. de Leon, 132 SCRA 722 [1984]).
Moreover, petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz because although
the evidence on record shows that the sale was in the name of Ramona P. Alcaraz as the buyer, the sellers
had been dealing with Concepcion D. Alcaraz, Ramona's mother, who had acted for and in behalf of her
daughter, if not also in her own behalf. Indeed, the down payment was made by Concepcion D. Alcaraz with
her own personal check (Exh. "B"; Exh. "2") for and in behalf of Ramona P. Alcaraz. There is no evidence
showing that petitioners ever questioned Concepcion's authority to represent Ramona P. Alcaraz when they
accepted her personal check. Neither did they raise any objection as regards payment being effected by a third
person. Accordingly, as far as petitioners are concerned, the physical absence of Ramona P. Alcaraz is not a
ground to rescind the contract of sale.
Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her obligation to pay the full
purchase price is concerned. Petitioners who are precluded from setting up the defense of the physical
absence of Ramona P. Alcaraz as above-explained offered no proof whatsoever to show that they actually
presented the new transfer certificate of title in their names and signified their willingness and readiness to
execute the deed of absolute sale in accordance with their agreement. Ramona's corresponding obligation to
pay the balance of the purchase price in the amount of P1,190,000.00 (as buyer) never became due and
demandable and, therefore, she cannot be deemed to have been in default.
Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations may be
considered in default, to wit:
Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the obligee
judicially or extrajudicially demands from them the fulfillment of their obligation.
xxx xxx xxx
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready
to comply in a proper manner with what is incumbent upon him. From the moment one of the
parties fulfill his obligation, delay by the other begins. (Emphasis supplied.)
There is thus neither factual nor legal basis to rescind the contract of sale between petitioners and
respondents.
With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to a case of
double sale where Article 1544 of the Civil Code will apply, to wit:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should be
movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in
good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was
first in the possession; and, in the absence thereof to the person who presents the oldest title,
provided there is good faith.
The record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as proof of the second
contract of sale was registered with the Registry of Deeds of Quezon City giving rise to the issuance of a new
certificate of title in the name of Catalina B. Mabanag on June 5, 1985. Thus, the second paragraph of Article
1544 shall apply.
frustrated
The above-cited provision on double sale presumes title or ownership to pass to the first buyer, the exceptions
being: (a) when the second buyer, in good faith, registers the sale ahead of the first buyer, and (b) should there
be no inscription by either of the two buyers, when the second buyer, in good faith, acquires possession of the
property ahead of the first buyer. Unless, the second buyer satisfies these requirements, title or ownership will
not transfer to him to the prejudice of the first buyer.
In his commentaries on the Civil Code, an accepted authority on the subject, now a distinguished member of
the Court, Justice Jose C. Vitug, explains:
not Concepcion was also acting in her own behalf as a co-buyer is not squarely raised in the instant petition,
nor in such assumption disputed between mother and daughter. Thus, We will not touch this issue and no
longer disturb the lower courts' ruling on this point.
WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the appealed judgment
AFFIRMED.
SO ORDERED.

The governing principle is prius tempore, potior jure (first in time, stronger in right). Knowledge by Narvasa, C .J ., Davide, Jr. and Francisco, JJ ., concur.
the first buyer of the second sale cannot defeat the first buyer's rights except when the second
buyer first registers in good faith the second sale (Olivares vs. Gonzales, 159 SCRA 33). Panganiban, J ., took no part.
Conversely, knowledge gained by the second buyer of the first sale defeats his rights even if he is
first to register, since knowledge taints his registration with bad faith (see also Astorga vs. Court of
Appeals,G.R. No. 58530, 26 December 1984). In Cruz vs. Cabana (G.R. No. 56232, 22 June ||| (Coronel v. Court of Appeals, G.R. No. 103577, [October 7, 1996], 331 PHIL 294-323)
1984, 129 SCRA 656), it was held that it is essential, to merit the protection of Art. 1544, second
paragraph, that the second realty buyer must act in good faith in registering his deed of sale
(citing Carbonell vs. Court of Appeals, 69 SCRA 99,Crisostomo vs. CA, G.R. No. 95843, 02
September 1992).

(J. Vitug, Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604).

Petitioners point out that the notice of lis pendens in the case at bar was annotated on the title of the subject
property only on February 22, 1985, whereas, the second sale between petitioners Coronels and petitioner
Mabanag was supposedly perfected prior thereto or on February 18, 1985. The idea conveyed is that at the
time petitioner Mabanag, the second buyer, bought the property under a clean title, she was unaware of any
adverse claim or previous sale, for which reason she is a buyer in good faith.

We are not persuaded by such argument.

In a case of double sale, what finds relevance and materiality is not whether or not the second buyer was a
buyer in good faith but whether or not said second buyer registers such second sale in good faith, that is,
without knowledge of any defect in the title of the property sold.

As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith, registered
the sale entered into on February 18, 1985 because as early as February 22, 1985, a notice of lis pendens had
been annotated on the transfer certificate of title in the names of petitioners, whereas petitioner Mabanag
registered the said sale sometime in April, 1985. At the time of registration, therefore, petitioner Mabanag knew
that the same property had already been previously sold to private respondents, or, at least, she was charged
with knowledge that a previous buyer is claiming title to the same property. Petitioner Mabanag cannot close
her eyes to the defect in petitioners' title to the property at the time of the registration of the property.

This Court had occasions to rule that:

If a vendee in a double sale registers the sale after he has acquired knowledge that there was a
previous sale of the same property to a third party or that another person claims said property in a
previous sale, the registration will constitute a registration in bad faith and will not confer upon him
any right. (Salvoro vs. Tanega,87 SCRA 349 [1978]; citing Palarca vs. Director of Land, 43
Phil. 146; Cagaoan vs. Cagaoan, 43 Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.)

Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz, perfected on February
6, 1985, prior to that between petitioners and Catalina B. Mabanag on February 18, 1985, was correctly upheld
by both the courts below.

Although there may be ample indications that there was in fact an agency between Ramona as principal and
Concepcion, her mother, as agent insofar as the subject contract of sale is concerned, the issue of whether or

frustrated
 FIRST DIVISION
[G.R. No. 112127. July 17, 1995.]
CENTRAL PHILIPPINE UNIVERSITY, petitioner, vs. COURT OF APPEALS, REMEDIOS
FRANCO, FRANCISCO N. LOPEZ, CECILIA P. VDA. DE LOPEZ, REDAN LOPEZ AND
REMARENE LOPEZ, respondents.
Juanito M. Acanto for petitioner.
Santos B. Aguadera for private respondents.
SYLLABUS
1. CIVIL LAW; PROPERTY; MODES OF ACQUIRING OWNERSHIP; DONATION; CONSIDERED ONEROUS
WHEN EXECUTED FOR A VALUABLE CONSIDERATION WHICH IS CONSIDERED THE EQUIVALENT OF
THE DONATION. A clear perusal of the condition 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. 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.
2. ID.; ID.; ID.; ID.; MAY BE REVOKED FOR NON-FULFILLMENT OR NON-COMPLIANCE OF THE
CONDITIONS SET FORTH THEREIN; CASE AT BAR. 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. 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. 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.
3. ID.; ID.; ID.; ID.; DONEE'S ACCEPTANCE AND ACKNOWLEDGMENT OF ITS OBLIGATION PROVIDED
IN THE DEED, SUFFICIENT TO PREVENT THE STATUTE OF LIMITATION FROM BARRING THE ACTION
OF DONOR UPON THE ORIGINAL CONTRACT. 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.
4. ID.; ID.; ID.; ID.; IN CASE OF REVOCATION, 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. 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. In cases where
there is no special provision for such computation, recourse must be had to the 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.
5. ID.; ID.; ID.; ID.; GENERALLY, WHEN THE OBLIGATION DOES NOT FIX A PERIOD BUT FROM ITS
NATURE AND CIRCUMSTANCES IT CAN BE INFERRED THAT A PERIOD WAS INTENDED, COURT MAY
FIX THE PERIOD FOR COMPLIANCE. 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.
6. ID.; ID.; ID.; ID.; WHEN OBLIGOR CANNOT COMPLY WITH WHAT IS INCUMBENT UPON HIM, THE
OBLIGEE MAY SEEK RESCISSION; EXCEPTION. 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. 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.
7. ID.; ID.; ID.; ID.; IN CASE OF GRATUITOUS DONATION DOUBTS SHOULD BE RESOLVED IN FAVOR
OF THE LEAST TRANSMISSION OF RIGHTS AND INTERESTS. 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. 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.
DAVIDE, JR., J, dissenting opinion:
1. CIVIL LAW; PROPERTY, MODES OF ACQUIRING OWNERSHIP; DONATION; IN LAW OF DONATION,
"CONDITIONS" REFERS TO OBLIGATION OR CHARGES IMPOSED BY THE DONOR ON THE DONEE.
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 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 it is used in the vulgar
sense of obligations or charges imposed by the donor on the donee. It is used, not in its technical or strict legal
sense, but in its broadest sense. (Italics 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
frustrated
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.
2. ID.; ID.; ID.; ID.; WHEN NO FIXED PERIOD IN WHICH THE CONDITION SHOULD BE FULFILLED, IT IS
THE DUTY OF THE COURT TO FIX A SUITABLE TIME FOR ITS FULFILLMENT. J. Davide, Jr., 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 Barreto vs. City of Manila, 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.
3. ID.; ID.; ID.; ID.; MERE FACT THAT THERE IS NO TIME FIXED AS TO WHEN THE CONDITION
THEREOF ARE TO BE FULFILLED DOES NOT IPSO FACTO MEAN THAT THE STATUTE OF LIMITATION
WILL NOT APPLY. There is misplaced reliance again on a previous decision of this Court
in Osmea vs. Rama. 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 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.
4. ID.; ID.; ID.; ID.; ACTION TO REVOKE THEREOF PRESCRIBES IN FOUR (4) YEARS. More recently,
in De Luna vs. Abrigo, this Court reiterated the ruling in Parksand 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.
DECISION
BELLOSILLO, J p:
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:
2. The said college shall not sell, transfer or convey to any third party nor in any way encumber
said land;
3. The said land shall be called "RAMON LOPEZ CAMPUS", and the said college shall be under
obligation to erect a cornerstones 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
On 31 May 1989, privates 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 prescribe; that it did
not violate any of the conditions in the deed of donation because it never used the donated properly 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 11991, 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 reconveyance of the
property in favor of the heirs of the donor, namely, private respondents herein.
Petitioner appealed to the Court of Appeals which on 18 June 1993 ruled that the 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.
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 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 alleged 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 non-compliance 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 this 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
frustrated
 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 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 acknowledgement 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 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 government laws and regulations pertaining to education, building requirements and
property restrictions which are beyond the control of the donee. LibLex
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 that 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 interest. 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.
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 in 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 isonerous. Thus, on page 4 it states: LLpr
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 . . . (Italics 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 . . . (Italics 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 world 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 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
charges imposed by the donor on the donee. It is used, not in its technical or strict legal sense, but
in its broadest sense. 1 (Italics 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
frustrated
more properly called a "modal donation." A modal donation is one in which the donor imposes a prestation Admittedly, the donation now in question is an onerous donation and is governed by the law on
upon the donee. The establishment of the medical college as the condition of the donation in the present case contracts (Article 733) and the case of Osmea, being one involving a contract, may apply. But we must not
is one such prestation. 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
The conditions imposed by the donor Don Ramon Lopez determines neither the existence nor the pronouncement of this Court as early as 1962 in the case of Parkswhich, on this point, finds relevance in this
extinguishment of the obligations of the donor and the donee with respect to the donation. In fact, the case. There, this Court said,
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 clear that [that] this action [for the revocation of the donation] is prescriptible, there is no doubt. There is no
those obligations are unconditional, the fulfillment, performance, existence or extinguishment of which is not legal provision which excludes this class of action from the statute of limitations. And not only this,
dependent on any future or uncertain event or past and unknown event, as the Civil Code would define a the law itself recognizes the prescriptibility of the action for the revocation of a donation, providing
conditional obligation. 2 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
Reliance on the case of Parks vs. Province of Tarlac 3 as cited on page 5 of the majority opinion is erroneous the action for revocation for noncompliance of the conditions of the donation [Art. 647, now Art.
in so far as the latter stated that the condition in Parksis a resolutory one and applied this on the present case. 764], it is because in this respect the donation is considered onerous and is governed by the law
A more careful reading of this Court's decision would reveal that nowhere did we say, whether explicitly or of contracts and the general rules of prescription. 7
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. 4 It is incorrect to say that the "conditions" of the donation More recently, in De Lune v. Abrigo, 8 this Court reiterated the ruling in Parks and said that:
there or in the present case are resolutory conditions because, applying Article 1181 of the Civil Code, that It is true that under Article 764 of the New Civil Code, actions for the revocation of a donation must
would mean that upon fulfillment of the conditions, the rights already acquired will be extinguished. Obviously, be brought within four (4) years from the noncompliance of the conditions of the donation.
that could not have been the intention of the parties. However, it is Our opinion that said article does not apply to onerous donations in view of the
specific provisions of Article 733 providing that onerous donations are governed by the rules on
What the majority opinion probably had in mind was that the conditions are resolutory because if they
contracts.
are not complied 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 In the light of the above, the rules on contracts and the general rules on prescription and not the
reasons stated above, are the obligations imposed by the donor. rules on donations are applicable in the case at bar.
Third, I cannot subscribe to the view that the provisions of Article 1197 cannot be applied here. The The law applied in both cases Article 1144(1). It refers to the prescription of an action upon a written contract,
conditions/obligations imposed by the donor herein are subject to a period. I draw this conclusion based on our which is what the deed of an onerous donation is. The prescriptive period is ten years from the time the cause
previous ruling which, although made almost 90 years ago, still finds application in the present case. In Barretto of action accrues, and that is, from the expiration of the time within which the donee must comply with the
vs. City of Manila, 5 we said that when the contract of donation, as the one involved therein, has no fixed period conditions/obligations of the donation. As to when this exactly is remains to be determined, and that is for the
in which the condition should be fulfilled, the provisions of what is now Article 1197 (then Articles 1128) are courts to do as reposed upon them by Article 1197.
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 For the reasons expressed above, I register my dissent. According, the decision of the Court of Appeals must
contemplated by the donor. Don Ramon Lopez could not have intended his property to remain idle for a long be upheld, except its ruling that the conditions of the donation are resolutory.
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 Padilla, J ., concurs.
conditions imposed are to be fulfilled.
||| (Central Philippine University v. Court of Appeals, G.R. No. 112127, [July 17, 1995], 316 PHIL 616-634)
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 on 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 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.

frustrated

THIRD DIVISION
[G.R. No. 81158. May 22, 1992.]
OSCAR A. JACINTO and LIBRADA FRANCO-JACINTO, petitioners, vs. ROGELIO KAPARAZ,
RAUL KAPARAZ and ROSE MARIET KAPARAZ,respondents.
Garcia, Iigo & Ledesma Law Office for petitioners.
SYLLABUS
1. CIVIL LAW; SPECIAL CONTRACTS; SALE; CONTRACT OF SALE DISTINGUISHED FROM CONTRACT
TO SELL; REMEDY OF UNPAID SELLER; RULE. Vital to the resolution of the controversy is the
determination of the true nature of the questioned agreement. Is it a contract of sale or a contract to sell? The
two are not, of course, the same. In the latter case, ownership is retained by the seller and is not to pass until
full payment of the price. Such payment is a positive suspensive condition the failure of which is not a breach,
casual or serious, but simply an event that prevents the obligation of the vendor to convey title from acquiring
binding force. In such a situation, to argue that there was only a casual breach is to proceed from the
assumption that the contract is one of absolute sale, where non-payment is a resolutory question. Otherwise
stated, as capsulized in Luzon Brokerage Co., vs. Maritime Building Co., Inc., 46 SCRA 381 [1972] there can
be no rescission or resolution of an obligation as yet non-existent, because the suspensive condition did not
happen. On the other hand, since in a contract of sale, the non-payment of the price is a resolutory
condition, the remedy of the seller under Article 1191 of the Civil Code is to exact fulfillment or to rescind the
contract. In respect, however, to the sale of immovable property, this Article must be read together with Article
1592 of the same Code: This Article applies to instances where no stipulation for automatic rescission is made
because it says "even though".
2. ID.; ID.; ID.; EARMARKS OF CONTRACT OF SALE; PRESENT IN CASE AT BAR. The agreement in the
instant case has all the earmarks of a contract of sale. The possession of the portion sold was immediately
delivered to the petitioners. They were granted the right to enjoy all the improvements therein effective from the
date of the execution of the agreement. Private respondents unqualifiedly bound themselves to execute the
final deed of sale "as soon as the settlement or partition of the estate of the deceased Narcisa R. Kaparaz shall
have been consummated and effected, but not later than March 31, 1967" and only upon full payment of the
unpaid portion of the purchase price. The private respondents did not reserve unto themselves the ownership
of the property until full payment of the unpaid balance of P1,000.00. Finally, there is no stipulation giving the
private respondents the right to unilaterally rescind the contract the moment the vendee fails to pay within a
fixed period. (Taguba v. Vda. de Leon, 132 SCRA 722; Luzon Brokerage Co., Inc. v. Maritime Building Co.,
Inc., 86 SCRA 305)."
3. ID.; ID.; ID.; OBLIGATIONS OF VENDEE; REMEDY OF VENDOR IN CASE OF NON-PERFORMANCE
THEREOF; EFFECT OF NON-COMPLIANCE. As stated earlier, in a contract of sale, the remedy of an
unpaid seller is either specific performance or rescission. The latter, with respect to the sale of immovables, is
specifically governed by Article 1592 of the Civil Code. In the case at bar, there was non-compliance with the
requirements prescribed in these provisions. It is not controverted that private respondents had neither filed an
action for specific performance nor demanded the rescission of the agreement either judicially or by a notarial
act before the filing of the complaint in Civil Case No. 586. It is only in their Answer that they belatedly raised
the defense of resolution of the contract pursuant to Article 1191 by reason of petitioners' breach of their
obligation. Even if the general law on resolution, Article 1191 of the Civil Code, is to be applied, Our decision
would still be for the petitioners. The third paragraph of this Article reads: . . . "The Court shall decree the
rescission claimed, unless there be just cause authorizing the fixing of a period."
4. ID.; CONTRACTS; RESCISSION; INTENT TO RESCIND MUST BE COMMUNICATED TO THE OTHER
PARTY; CASE AT BAR. Then too, at no time before the filing of their Answer did private respondents
declare their intention to rescind the agreement, or if they did, communicate such intention to the petitioners. It
was necessary for private respondents to have done so. As this Court held in University of the Philippines vs.
De los Angeles: "Of course, it must be understood that the act of a party in treating a contract as canceled or
resolved on account of infractions by the other contracting party must be made known to the other and is
always provisional, being ever subject to scrutiny and review by the proper court. If the other party denies that
rescission is justified, it is free to resort to judicial action in its own behalf, and bring the matter to court. Them
should the court, after due hearing, decide that the resolution of the contract was not warranted, the
responsible party will be sentenced to damages; in the contrary case, the resolution will be affirmed, and the
consequent indemnity awarded to the party prejudiced. In other words, the party who deems the contract
violated may consider it resolved or rescinded, and act accordingly, without previous court action, but
it proceeds at its own risk. For it is only the final judgment of the corresponding court that will conclusively and
finally settle whether the action taken was or was not correct in law. But the law definitely does not require that
the contracting party who believes itself injured must first file suit and wait for a judgment before taking
extrajudicial steps to protect its interest. Otherwise, the party injured by the others' breach will have to
passively sit and watch its damages accumulate during the pendency of the suit until the final judgment of
frustrated
rescission is rendered when the law itself requires that he should exercise due diligence to minimize its own
damages (Civil Code, Article 2203)."
5. ID.; ID.; ID.; NOT JUSTIFIED BY A CASUAL OR LIGHT BREACH OF THE AGREEMENT; CASE AT BAR.
the delay incurred by petitioners was but a casual or slight breach of the agreement, which did not defeat
the object of the parties in entering into the agreement. A mere casual breach does not justify rescission. The
prompt payment of the monthly amortizations of the unpaid balance of P1,000.00 was not a condition
precedent to the execution of the final deed of sale. Besides, petitioners had already paid P1,000.00 of the total
consideration of P1,800.00, or exactly 77.77% of the purchase price within the period stipulated. Moreover,
they had in fact overpaid the private respondents by P100.00.
DECISION
DAVIDE JR., J p:
Petitioners urge this Court to review and set aside the decision of the respondent Court of Appeals of 30 July
1987 in C.A.-G.R. CV No. 69357, 1 the dispositive portion of which reads:
"WHEREFORE, the appealed decision is hereby REVERSED and SET ASIDE and judgment is
hereby rendered as follows:
1. The Complaint/Amended Complaint is hereby dismissed.
2. The agreement between the parties dated March 11, 1966 (Exhibit "A"; also
marked as Exhibit "1") is hereby declared extinguished.
3. To prevent unjust enrichment at the expense of another, the defendants-
appellants are hereby ordered to reimburse to the plaintiffs-appellees the sum of
P500.00 paid by the latter to the Development Bank of the Philippines for the
defendants-appellants' P2,600.00 loan account.
No pronouncement as to costs. LLpr
SO ORDERED." 2
The undisputed antecedent facts are as follows:
On 11 March 1966, herein petitioners and private respondents entered into an agreement (hereinafter referred
to as Agreement) under which the private respondents agreed to sell and convey to petitioners a portion
consisting of six hundred (600) square meters of a lot located in Matiao, Mati, Davao Oriental and covered by
Transfer Certificate of Title No. T-3694 for a total consideration of P1,800.00. A downpayment of P800.00 was
paid upon execution of the Agreement. The balance of P1,000.00 was to be paid by petitioners on installment
at the rate of P100.00 a month to the Development Bank of the Philippines (DBP) to be applied to private
respondents' loan accounts. Paragraphs 5, 6, 7 and 8 of the Agreement read as follows:
"That the PARTY OF THE FIRST PART is very much in need of cash to pay the loan to the
DEVELOPMENT BANK OF THE PHILIPPINES herein abovementioned which is very much in
arrears and the PARTY OF THE SECOND PART is agreeable to advance the sum of EIGHT
HUNDRED (P800.00) PESOS as partial payment of the said loan to the Development Bank of the
Philippines provided that the PARTY OF THE FIRST PARTY (sic) shall sell, transfer, cede and
convey absolutely to the party of the SECOND PART an area of SIX HUNDRED (600) SQUARE
METERS with a frontage of twenty (20) METERS along the present national highway, at the
corner of the aforementioned land bordering a proposed five-meter subdivision road adjacent to
the property of the PARTY OF THE SECOND PART;
That for and in consideration of the foregoing premises and of the sum of EIGHT HUNDRED
(800.00) PESOS which the PARTY OF THE FIRST PARTY (sic) hereby acknowledges to have
received from the PARTY OF THE SECOND PART, THE PARTY OF THE FIRST PART hereby
agrees, promises and binds himself to sell, cede, transfer, and convey absolutely to the PARTY
OF THE SECOND PART SIX HUNDRED (600) SQUARE METERS portion of the property
covered by TRANSFER CERTIFICATE OF TITLE NO. T-3694 together with all the improvements
thereon, which portion is situated along the national highway and shown as the shaded area in the
sketch at the back hereof; the total consideration of the sale of the said SIX HUNDRED (600)
SQUARE METERS shall be ONE THOUSAND EIGHT HUNDRED PESOS (P1,800.00), including
the amount of EIGHT HUNDRED PESOS (P800.00) advanced by the PARTY OF THE SECOND
PART upon the execution of this document;
That the unpaid balance of the total consideration of the sale amounting to ONE THOUSAND
(P1,000.00) PESOS shall be paid by the PARTY OF THE SECOND PART directly to the
DEVELOPMENT BANK OF THE PHILIPPINES, DAVAO BRANCH, in ten (10) equal monthly
installments of ONE HUNDRED (P100.00) PESOS each not later than the 15th day following the
end of each month beginning May 10, 1966;
That the PARTY OF THE SECOND PART has the right and privilege by virtue of this (sic)
presents to take possession of the area of SIX HUNDRED (P600.00) SQUARE METERS subject
of this agreement and to appropriate for himself all the improvements existing thereon effective
from the date of execution of this agreement;" 3
Paragraph 9 thereof reads:
"That the PARTY OF THE FIRST PART agrees and binds himself to acknowledge receipt of every
and all monthly payments remitted to the DEVELOPMENT BANK OF THE PHILIPPINES by the
PARTY OF THE SECOND PART and further agrees and binds himself to execute the final deed
of absolute sale of the SIX HUNDRED (600) SQUARE METERS herein above referred to in favor
of the PARTY OF THE SECOND PART as soon as the settlement or partition of the estate of the
deceased NARCISA R. KAPARAZ hall have been consummated and effected, but not later than
March 31, 1967;" 4
Upon the execution of the agreement, petitioners paid the downpayment of P800.00 and were placed in
possession of the portion described therein. As to the P1,000.00 which was to be paid directly to the DBP,
petitioners claim that they had even made an excess payment of P100.00. cdphil
In view of the refusal of private respondents to execute the deed of sale, petitioners filed against them a
complaint for specific performance with the then Court of First Instance (now Regional Trial Court) of Davao
Oriental. The complaint was docketed as Civil Case No. 586 and was amended on 23 January 1979. In their
Answer filed on 28 June 1977, later amended on 19 December 1979 as a consequence of the filing of the
amended complaint, private respondents alleged that the sale did not materialize because of the failure of
petitioners to fulfill their promise to make timely payments on the stipulated price to the DBP; as a result of
such failure, they (private respondents) failed to secure the release of the mortgage on the property. They then
prayed for the dismissal of the case and a declaration that the agreement is null and void.
After due trial, the court below rendered on 19 November 1981 a decision in favor of the petitioners, the
dispositive portion of which reads as follows:
"FOR ALL THE FOREGOING, judgment is hereby rendered in favor of the plaintiffs and against
the defendants
frustrated
 (1) Declaring the plaintiffs to be the owners of the property consisting of six
hundred (600) square meters, more or less, denominated as Lot H-12, Psd-11-000576,
which was formerly a portion of the property covered by Transfer Certificate of Title No.
T-3694, and now covered by Transfer Certificate of Title No. T-5824 in the name of
defendant Rogelio Kaparaz;
(2) Ordering defendant Rogelio Kaparaz to reconvey this property to the
plaintiffs herein;
(3) Ordering defendants to pay plaintiffs reasonable attorney's fees in the
amount of P3,000.00 and to pay the costs.
SO ORDERED." 5
The facts as found by the trial court are as follows:
xxx xxx xxx
"The adduced evidence will show that the parties herein above executed a certain agreement
(Exh. "A" for the plaintiffs; Exhibit "1" for the defendants) dated March 11, 1966, the pertinent
portions of which are hereunder quoted, to wit:
xxx xxx xxx
From the foregoing provisions of the said agreement, the defendants herein have bound
themselves to sell and convey a portion of the property covered by Transfer Certificate of Title No.
T-3694, consisting of SIX HUNDRED (600) SQUARE METERS, to the plaintiffs for a consideration
of P1,800.00, P800.00 of which had been received by the defendants upon the execution of the
document and the remaining balance of P1,000.00 shall be paid by the plaintiffs directly to the
Development Bank of the Philippines in `ten (10) equal monthly installments of ONE HUNDRED
(P100.00) PESOS EACH not later than the 15th day following the end of each month beginning
May 10, 1966'. The defendants, on the other hand, have also bound themselves to execute the
final deed of absolute sale of the portion above-mentioned in favor of the plaintiffs `as soon as the
settlement or partition of the estate of the deceased NARCISA R. KAPARAZ shall have been
consummated and effected, but not later than March 31, 1967.'
It appears that plaintiffs had paid defendant Domingo Kaparaz the amount of P400.00 (Exh. "B"),
the P200.00 which was paid by plaintiffs to the Development Bank of the Philippines for the
account of the late Domingo Kaparaz and the P200.00 was given to said defendant. Plaintiff Oscar
Jacinto made another payment to the Development Bank of the Philippines for the account of
Domingo and Narcisa Kaparaz covered by Official Receipt No. 1113990, dated November 29,
1966, in the amount of P200.00 (Exh. "F"). Another payment was again made to the Development
Bank of the Philippines for the same account by plaintiff Oscar Jacinto covered by Official Receipt
No. 1334193, dated December 5, 1968, in the amount of P300.00 (Exh. "C") and another payment
also was made on December 9, 1968 in the amount of P200.00 covered by Official Receipt No.
1334196 (Exh. "H"). all of these payments are certified by the Development Bank of the
Philippines (Exh. "E") to have been made by plaintiff Oscar Jacinto and applied to the accounts of
Domingo and Narcisa Kaparaz,. For the subdivision survey of the lot of six hundred (600) square
meters involved in this case, plaintiffs contributed the amount of P80.00 (Exh. "J") and another
amount of P350.00 was paid also to Engr. Ladera (Exh. "I"). Plaintiffs, all in all, aside from the
payments that they made to the Surveyor, have paid the Development Bank of the Philippines for
the account of the late Domingo Kaparaz in the total amount of P700.00 which is already in
excess of the price consideration of P1,800.00 after defendants had received the amount of
P1,200.00. Plaintiff Oscar Jacinto explained that the payment was in excess of P100.00 because
the balance of P600.00 which was originally intended to be paid for the surveyor was instead to be
paid by him to the bank plus P100.00 to cover the accumulated interests. Thus (sic), making the
total payments to the Development Bank of the Philippines in the amount of P700.00. llcd
On the other (hand), defendant Rogelio Kaparaz testified that plaintiffs did not comply with the
terms of the agreement (Exh. "A") by having failed to pay the ten (10) equal monthly installments.
For failure of plaintiffs to pay the monthly installments, as agreed (sic) in the agreement (Exh. "A"),
he decided to pay the Development Bank of the Philippines of (sic) their accounts. The partial
payment was made on July 3, 1967 in the amount of P3,000.00 covered by Official Receipt No.
1160314 (Exh. "2") and another payment for the balance was made on August 15, 1967 in the
amount of P3,124.11 covered by Official Receipt No. 1160831 (Exh. "4").
It is likewise admitted that the estate of the late Narcisa R. Kaparaz had already been settled and
that six hundred (600) square meters portion of the lot covered by Transfer Certificate of Title No.
T-3694, or Lot No. H-12, Psd-11-000576, has already been adjudicated to defendant Rogelio
Kaparaz and is now registered in his name under Transfer Certificate of Title No. T-5824." 6
Private respondents appealed from said decision to the Court of Appeals which docketed the case as C.A.-
G.R. CV No. 69357. In their Brief, they contended that the trial court erred in: (a) finding that petitioners had
fully paid the consideration for the property subject of the agreement, (b) ruling that the delay in the payments
to the DBP is only a slight breach of the agreement, (c) holding private respondents' failure to protest
petitioners' delay of payment amounted to implied waiver to rescind the agreement, (d) declaring that laches
did not operate against petitioners considering that the prescriptive period had not even expired, (e) not holding
that the parties are in pari delicto, and (f) ordering Rogelio Kaparaz to reconvey the property in question to
petitioners.
As earlier adverted to, in its decision of 30 July 1987, the respondent Court of Appeals reversed the decision of
the trial court. The respondent Court was of the opinion: (a) The petitioners had not fully discharged their
obligation under the agreement considering that their last payments to DBP of P300.00 7 and P200.00 8were
"several months delayed beyond the date/s agreed upon by the parties," and that the agricultural loan to which
the amortizations of the unpaid balance of P1,000.00 of the purchase price were to be applied had in fact been
fully settled by the private respondents. The application of these payments by the DBP to another account of
the private respondents was of no moment because the agreement of the parties specifically referred to the
agricultural loan. (b) No evidence supports the conclusion of the trial court that private respondents failed to
protest the delay in the payments. On the contrary, the evidence discloses that private respondents demanded
from the petitioners the balance of the obligation after the latter had defaulted; having received no response,
private respondents themselves paid the agricultural loan. (c) The delay in the payments was not a slight
breach. The dates of the payments were so essential that they were specifically stipulated upon by the parties.
The primary importance of timely payments sprang from the nature of the subject bank account consisting of a
loan secured by a real estate mortgage which demanded up-to-date amortization to prevent foreclosure. (d)
While the trial court was correct in holding that both parties defaulted in the performance of their respective
obligations, petitioners were the first to incur in delay. There is, therefore, greater justification to decree
rescission. Moreover, even granting that there was no evidence as to who violated the agreement first, then the
contract is deemed extinguished pursuant to the second sentence ofArticle 1192 of the Civil Code. This Article
provides that:
"In case both parties have committed a breach of the obligation, the liability of the first infractor
shall be equitably tempered by the courts. If it cannot be determined which of the parties first
violated the contract, the same shall be deemed extinguished, and each shall bear his own
damage."
Unable to accept the above verdict, petitioner commenced this petition wherein they allege that respondent
Court erred in not finding that: (a) petitioners had fully paid the consideration for the 600 square meters of Lot
H; (b) private respondents' failure to protest the delay of payments can be considered as estoppel on their part
and an implied waiver of their right to rescind the sale; (c) assuming that the last two payments to the DBP
were not valid as they were applied to another account, there was at least substantial performance by the
petitioners of their obligation; (d) the breach on the part of petitioners was only slight or casual and would not
warrant rescission of the sale; (e) under the circumstances, it was necessary for the respondents to make a
frustrated
notarial demand or obtain prior judicial approval to effect rescission of the sale, and finally, (f) the agreement
was extinguished. prcd
After the filing of the Comments by private respondents, the reply thereto by petitioners and the rejoinder to the
latter by private respondents, the Court gave due course to the petition and required the parties to submit
simultaneously their respective Memoranda, 9 which they subsequently complied with. 10
The petition is impressed with merit.
Vital to the resolution of the controversy is the determination of the true nature of the questioned agreement. Is
it a contract of sale or a contract to sell? The two are not, of course, the same. In the latter case, ownership is
retained by the seller and is not to pass until full payment of the price. Such payment is a positive suspensive
condition the failure of which is not a breach, casual or serious, but simply an event that prevents the obligation
of the vendor to convey title from acquiring binding force. In such a situation, to argue that there was only a
casual breach is to proceed from the assumption that the contract is one of absolute sale, where non-payment
is a resolutory question. 11 Otherwise stated, as capsulized in Luzon Brokerage Co., vs. Maritime Building Co.,
Inc.,12 there can be no rescission or resolution of an obligation as yet non-existent, because the suspensive
condition did not happen." Expanding on this point, this Court, in said case, made the following disquisitions:
". . . The upshot of all these stipulation is that in seeking the ouster of Maritime for failure to pay
the price as agreed upon, Myers was not rescinding (or more properly, resolving) the contract, but
precisely enforcing it according to its express terms. In its suit Myers was not seeking restitution to
it of the ownership of the thing sold (since it was never disposed of), such restoration being the
logical consequence of the fulfillment of a resolutory condition, express or implied (article 1190);
neither was it seeking a declaration that its obligation to sell was extinguished. What it sought was
a judicial declaration that because the suspensivecondition (full and punctual payment)
had not been fulfilled, its obligation to sell to Maritime never arose or never became effective and,
therefore, it (Myers) was entitled to repossess the property object of the contract, possession
being a mere incident to its right of ownership. It is elementary that, as stated by Castan,
'b) Si la condicion suspensiva llega a faltar, la obligacion se tiene por no
existente, y el acreedor pierde todo derecho, incluso el de utilizar las medidas
conservativas. (3 Castan, Derecho Civil, 7a Ed., p. 107). (Also Puig Pea, Der. Civ., T.
IV (1), p. 113).'"
On the other hand, since in a contract of sale, the non-payment of the price is a resolutory condition, 13 the
remedy of the seller under Article 1191 of the Civil Code is to exact fulfillment or to rescind the contract. In
respect, however, to the sale of immovable property, this Article must be read together with Article 1592 of the
same Code:
"ARTICLE 1592. In the sale of immovable property, even though it may have been stipulated that
upon failure to pay the price at the time agreed upon the rescission of the contract shall of right
take place, the vendee may pay, even after the expiration of the period, as long as no demand for
rescission of the contract has been made upon him either judicially or by a notarial act. After the
demand, the court may not grant him a new term."
This Article applies to instances where no stipulation for automatic rescission is made because it says "even
though". 14
The agreement in the instant case has all the earmarks of a contract of sale. The possession of the portion sold
was immediately delivered to the petitioners. They were granted the right to enjoy all the improvements therein
effective from the date of the execution of the agreement. Private respondents unqualifiedly bound themselves
to execute the final deed of sale "as soon as the settlement or partition of the estate of the deceased Narcisa
R. Kaparaz shall have been consummated and effected, but not later than March 31, 1967" and only upon full
payment of the unpaid portion of the purchase price. The private respondents did not reserve unto themselves
the ownership of the property until full payment of the unpaid balance of P1,000.00. Finally, there is no
stipulation giving the private respondents the right to unilaterally rescind the contract the moment the vendee
fails to pay within a fixed period. In reality, the agreement was an absolute sale which allowed the petitioners to
pay the remaining balance of the purchase price in installment. We agree with the submission of
petitioners 15 that Dignos vs. Court of Appeals 16applies in this case. In said case, this Court stated: LLpr
"Thus, it has been held that a deed of sale is absolute in nature although denominated as a `Deed
of Conditional Sale' where nowhere in the contract in question is a proviso or stipulation to the
effect that title to the property sold is reserved in the vendor until full payment of the purchase
price, nor is there a stipulation giving the vendor the right to unilaterally rescind the contact the
moment the vendee fails to pay within a fixed period (Taguba v. Vda. de Leon, 132 SCRA 722;
Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 86 SCRA 305)."
As stated earlier, in a contract of sale, the remedy of an unpaid seller is either specific performance or
rescission. The latter, with respect to the sale of immovables, is specifically governed by Article 1592 of the
Civil Code. 17 In the case at bar, there was non-compliance with the requirements prescribed in these
provisions. It is not controverted that private respondents had neither filed an action for specific performance
nor demanded the rescission of the agreement either judicially or by a notarial act before the filing of the
complaint in Civil Case No. 586. It is only in their Answer that they belatedly raised the defense of resolution of
the contract pursuant to Article 1191 by reason of petitioners' breach of their obligation.
Even if the general law on resolution, Article 1191 of the Civil Code, is to be applied, Our decision would still be
for the petitioners. The third paragraph of this Article reads:
xxx xxx xxx
"The Court shall decree the rescission claimed, unless there be just cause authorizing the fixing of
a period."
It is not denied that petitioners made two (2) payments in the sums of P200.00 and P300.00 at a time when
what remained unsettled under the agreement was only P400.00. There was then an excess payment of
P100.00. These payments were made to the DBP which applied them to an outstanding account of the private
respondents. Private respondents neither complained of the delay in these payments nor rejected their
application to their account. They were, undoubtedly, benefited by the application because it either satisfied
their account or correspondingly reduced it. The claim that the account to which it was applied was not the
account stipulated in the agreement is without merit. In the first place, the agreement fails to disclose an
express agreement that the monthly amortizations on the P1,000.00 unpaid balance of the purchase price to
be made to the DBP should be applied exclusively to the agricultural loan indicated in the exordium of the
agreement. The loan was mentioned only to lay the basis for private respondents' need for the downpayment.
In the second place, to allow private respondents to reject the payment of P400.00, plus the excess of P100.00
after they benefited therefrom, would be unjust.
Then too, at no time before the filing of their Answer did private respondents declare their intention to rescind
the agreement, or if they did, communicate such intention to the petitioners. It was necessary for private
respondents to have done so. As this Court held in University of the Philippines vs. De los Angeles: 18
"Of course, it must be understood that the act of a party in treating a contract as canceled or
resolved on account of infractions by the other contracting party must be made known to the other
and is always provisional, being ever subject to scrutiny and review by the proper court. If the
other party denies that rescission is justified, it is free to resort to judicial action in its own behalf,
and bring the matter to court. Them should the court, after due hearing, decide that the resolution
of the contract was not warranted, the responsible party will be sentenced to damages; in the
contrary case, the resolution will be affirmed, and the consequent indemnity awarded to the party
prejudiced.
In other words, the party who deems the contract violated may consider it resolved or rescinded,
and act accordingly, without previous court action, but itproceeds at its own risk. For it is only the
final judgment of the corresponding court that will conclusively and finally settle whether the action
taken was or was not correct in law. But the law definitely does not require that the contracting
party who believes itself injured must first file suit and wait for a judgment before taking
extrajudicial steps to protect its interest. Otherwise, the party injured by the others' breach will
frustrated
 have to passively sit and watch its damages accumulate during the pendency of the suit until the
final judgment of rescission is rendered when the law itself requires that he should exercise due
diligence to minimize its own damages (Civil Code, Article 2203)."
Finally, the delay incurred by petitioners was but a casual or slight breach of the agreement, which did not
defeat the object of the parties in entering into the agreement. A mere casual breach does not justify
rescission. 19 The prompt payment of the monthly amortizations of the unpaid balance of P1,000.00 was not a
condition precedent to the execution of the final deed of sale. Besides, petitioners had already paid P1,000.00
of the total consideration of P1,800.00, or exactly 77.77% of the purchase price within the period stipulated.
Moreover, they had in fact overpaid the private respondents by P100.00.
Accordingly, We rule that rescission of the agreement was not available to private respondents. Cdpr
We further rule that the respondent court erred in declaring the agreement extinguished pursuant to the second
sentence of article 1192 of the Civil Code. Having concluded, although erroneously, that petitioners were the
first to breach the agreement, it should have applied the first sentence thereof by equitably tempering
petitioners' liability. The second sentence applies only to cases where it cannot be determined which of the
parties first violated the contract.
The foregoing disquisitions render unnecessary any discussion on the other issues raised by petitioners.
WHEREFORE, the petition is GRANTED. The challenged decision of the Court of Appeals is REVERSED and
the judgment of the lower court is hereby REINSTATED and AFFIRMED. Costs against private respondent.
SO ORDERED.
Gutierrez, Jr., Bidin, Davide, Jr. and Romero, JJ., concur.
||| (Jacinto v. Kaparaz, G.R. No. 81158, [May 22, 1992], 284-A PHIL 712-727)
SECOND DIVISION
[G.R. No. L-58286. May 16, 1983.]
AGAPITO B. DUCUSIN and AGAPITO T. DUCUSIN, JR., petitioners, vs. HON. COURT OF
APPEALS, VIRGILIO S. BALIOLA and LILIA S. BALIOLA,respondents.
Agapito Ducusin in his own behalf.
Roberto Brodette for respondents.
SYLLABUS
1. REMEDIAL LAW; EVIDENCE ADDUCED BEFORE THE TRIAL COURTS; EXCLUSION THEREOF ON
APPEAL TO THE APPELLATE COURT, A CASE OF GRAVE ERROR. As pointed out by the petitioners,
the testimony of petitioner Agapito Ducusin, Sr. should have been given weight by the appellate court because
he testified that his son Agapito Jr. got married to Adela Villacorta on November 25, 1978 in Edmonton,
Alberta, Canada at the St. Anthony Church and that he knows this fact of marriage since he was present during
the wedding ceremony and pictures marked Exhibits "H," "I," "J," and "J-1" were taken of the wedding party
after the ceremony and wherein he identified himself in the picture (Exh. "J") as "the gentleman in dark jacket
on the right side" (t.s.n., June 5, 1979, pp. 19-21; pp. 177-179, Records). And with the testimony of Arturo
Ducusin, a brother of Agapito Jr., which may be considered under Rule 130, Sec. 33 as an act or declaration
about pedigree, the word "pedigree" including relationship, family genealogy, birth, marriage, death, the dates
when and the places where these facts occurred, and the names of the relatives, as well as the presentation of
the marriage certificate of Agapito Ducusin, Jr. and Adela Villacorta (all of which evidence were noted, admitted
and considered in the decision of the case before the CFI of Manila, Branch XVI (p. 87, Records) and in the
decision of the City Court of Manila, Branch XVI (p. 62, Records) both holding that the marriage has been
sufficiently proved, the Supreme Court ruled that the Court of Appeals gravely erred in excluding the evidence
described above and presented to prove the marriage of Agapito Ducusin, Jr.
2. ID.; ID.; INTENT TO USE LEASED PREMISES AS RESIDENCE OF THE IMMEDIATE MEMBER OF
LESSORS' FAMILY, SUFFICIENTLY AND SATISFACTORILY PROVED. The Supreme Court likewise
conclude that the intention to use the leased premises as the residence of Ducusin, Jr. has been satisfactorily
and sufficiently proved by clear, strong, and substantial evidence found in the records of the case. The
testimony of the petitioner, Ducusin Sr., that his son needs the leased premises as he was getting married and
did in fact got married for which reason petitioner sent the "Notice to Terminate His Contract"; the testimony of
Arturo Ducusin that he had an overseas telephone talk with his brother Agapito Jr. informing that the latter was
coming home and that he and his wife were preparing their documents and arriving within the month and the
documentary evidence which is the letter of Agapito Ducusin, Jr. where it stated that he intended to settle in the
Philippines instead of Canada where he was presently residing with his wife-all these evidence clearly and
competently prove the intention of petitioner Agapito Ducusin, Jr. to reside in the Philippines and use the
leased premises for his residence and his wife.
3. CIVIL LAW; LEASE CONTRACT; P.D. NO. 20; JUDICIAL EJECTMENT WHERE LEASE IS FOR A
DEFINITE PERIOD OR WHEN THE AGREED DEFINITE PERIOD HAS EXPIRED, EXPRESSLY ALLOWED;
DOCTRINE IN RANTAEL VS. COURT OF APPEALS, APPLIED. The contention of the petitioner that the
contract of lease in question is for a definite period, being on a month-to-month basis beginning February 19,
frustrated
1975 and is, therefore, not covered by P.D. No. 20, is correct. The rule laid down by the Supreme Court in
Rantael vs. Court of Appeals and Teresa Llave, L-47519, April 30, 1980, 97 SCRA 453, is squarely on all fours
with the case at bar and is controlling. To quote; . . . "However, by express exception of P.D. No. 20, judicial
ejectment lies 'when the lease is for a definite period' or when the fixed or definite period agreed upon has
expired. The lease in the case at bar having a definite period, it indubitably follows that the exception, rather
than the general rule, applies and therefore, respondent Llave's right to judicially eject petitioner Rantael from
the premises may be duly enforced. This has been the consistent administrative interpretation of the Office of
the President. Therefore, no error was committed by respondent appellate court . . . ."
4. REMEDIAL LAW; APPEAL; FINDINGS OF FACTS BY THE COURT OF APPEALS GENERALLY
ACCEPTED AS BASIS FOR REVIEW OF ITS DECISION; EXCEPTIONS. Generally, the findings of fact by
the Court of Appeals are deemed accepted as the basis for review of the appellate court's decision. But this
rule is not without exception such as shown in the case before the Supreme Court where the Court of Appeals
reversed the findings of fact made by the trial court (City Court of Manila) and also the Court of First Instance,
by excluding evidence supposedly hearsay when they are not pursuant to the rules of evidence, by ignoring
evidence on record that are competent, clear and substantial and by misapprehending the facts, thereby
making manifest the commission of grave abuse of discretion on the part of the respondent appellate court and
so warrants and justifies a review not only of the law but also the facts. In Tolentino vs. De Jesus, 56 SCRA
167, it was ruled that the findings of facts of the Court of Appeals are not conclusive where there is grave
abuse of discretion; the judgment is based on misapprehension of facts; the findings of facts of the Court of
Appeals are contrary to those of the trial court or premised on the absence of evidence and is contradicted by
evidence on record; the conclusion is a finding grounded entirely on speculation, surmise and conjectures; and
the inference made is manifestly mistaken. These are the exceptions to the general rule. The instant petition is
such an exception.
DECISION
GUERRERO, J p:
Petition for certiorari praying that the judgment in CA-G.R No. SP-11473-PR entitled "Virgilio S. Baliola and
Lilia S. Baliola vs. Hon. Alfredo L. Benipayo, Judge, CFI of Manila, Branch XVI, Agapito Ducusin and Agapito
Ducusin, Jr." be set aside and reversed, the dispositive portion of which reads:
"WHEREFORE, premises considered, the judgment appealed from is hereby MODIFIED. The
complaint for ejectment is hereby DISMISSED. Petitioners are hereby ordered to pay private
respondent Agapito Ducusin Sr. the sum of P263.29 as their proportionate share for the use of the
booster pump. Petitioners are likewise ordered to share in the expenses incurred for the use of the
booster pump in the future until the termination of the contract of lease. No costs."
It appears from the records that on February 20, 1975, petitioner Agapito Ducusin leased to private respondent,
Virgilio S. Baliola, married to Lilia Baliola, a one-door apartment unit located in 3319-A, Magistrado Araullo St.,
Bacood, Sta. Mesa, Manila under the contract of lease, Exhibit "A", pertinent stipulations of which state: cdll
"xxx xxx xxx
"Now, therefore, for and in consideration of the foregoing premises and covenants and stipulations
herein contained in a monthly rental of Two Hundred and Twenty (P220.00) Pesos, the Lessor
hereby lease the one-door residential apartment located at No. 3319-A Maj. Araullo St., Bacood,
Manila under the following terms, stipulations and conditions:
"1. The lessees agrees to pay to the Lessor on or before the 30th day of each
and every month the sum of Two Hundred and Twenty (P220.00) Pesos as rental fee
for the subject premises, without need of demand;
"2. The term of this contract shall be in a month to month basis commencing
on February 19, 1975 until terminated by the lessor on the ground that his children need
the premises for their own use or residence or upon any ground provided for in
accordance with law;
"3. The Lessees, hereby warrants that the leased premises will be used by
him exclusively as residence only and that Lessees shall not directly or indirectly
sublease, assign, transfer, convey or in any manner encumber the right of lease or in
any part of the leased premises under any circumstances whatsoever;
"4. The Lessees hereby agrees to keep and maintain the premises clean or
same in such good and tenantable conditions, and shall comply with all government
sanitary regulations and safety, as well as electrical regulations which may be imposed
by the government or the lessor himself;
"5. All utilities such as light, water, telephone, gas service, etc. in the leased
premises shall be paid for by the Lessees;
"6. The Lessor hereby undertake to maintain the Lessees in a peaceful
enjoyment and possession of the lease premises and warrants that the premises lease
by him to the lessees, are in good habitable condition;
"7. That all repairs necessary for the preservation of the wire screens, electric
switches and other parts, plumbing fixtures, articles or toilet parts and tubes, paints and
payment for labor for repairs shall be for the account of the Lessees, except big major
repairs;
"8. That the Lessees agrees to deposit the amount of four hundred and forty
(P440.00) pesos rental deposit to the Lessor. The said rental deposit which is equivalent
to payment of two months rental fee could be used or be paid for the Lessees last two
months stay in the leased premises. . . . (Exhibit "A")." (Emphasis supplied)
The Baliola spouses occupied the apartment for almost two (2) years, paying its rentals when on January 18,
1977, petitioner Ducusin sent a "Notice to Terminate Lease Contract" to private respondents Baliolas
terminating the lease and giving them until March 15, 1977 within which to vacate the premises for the reason
that his two children were getting married and will need the apartment for their own use and residence Exhibit
"B"). A second letter dated February 14, 1977 was thereafter sent by Ducusin to respondents Baliolas making
an inquiry on any action the latter had taken on the previous notice to terminate the lease contract. LLjur
Respondents made no reply to the "Notice to Terminate Lease Contract". Indeed, they wrote a letter to the
Secretary of National Defense dated February 12, 1977, reporting that Ducusin was intent on evicting them
from the leased premises (Exhibit "6").
So on April 14, 1977, petitioners filed an action for ejectment against the Baliola spouses in the City Court of
Manila, Branch XVI, alleging that having constructed the apartment complex for the use and residence of his
children (each to a unit) if and when they decide to marry and live independently and that the apartment unit
located at 3319-A Magistrado Araullo St., Bacood, Manila having been allotted to his son, Agapito Ducusin, Jr.,
the said unit is now needed by Agapito, Jr. who is getting married in the month of May, 1977 and that said
Agapito, Jr. has decided to live independently.
The complaint for eviction further alleged that the lessees have violated the terms of the contract by subleasing
the premises; that the lessees have not used the premises solely for residential purposes but have used the
frustrated
same as factory and/or manufacturing premises for their commercial goods; and that they have neglected to
undertake repairs of the apartment and the premises according to their agreement.
The lessees denied the allegations of the lessor and claimed in their Answer that the ejectment suit "is a well-
planned scheme to rid the defendants and family out of their apartment, and to circumvent the law prohibiting
raising the rental of apartments and houses."
The City Court of Manila, Branch XVI, decided in favor of the lessor Ducusin on the ground that the
"defendants' contract with the plaintiff has already terminated with the notice of termination sent by the plaintiff
to the defendants on the ground that he needs the premises for his own children." The trial court's decision
states the following dispositive portion:
"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants,
ordering the defendant and all persons claiming possession under them to vacate the premises
known as 3319-A Magistrado Araulio St., Bacood, Sta. Mesa, Manila, and surrender possession
thereof to the plaintiffs herein; ordering the defendants to pay the plaintiffs the amount of P220.00
monthly as reasonable compensation for the use of the premises starting December 1978 until the
premises is finally vacated and possession thereof surrendered to the plaintiffs; ordering the
defendants to pay to the plaintiffs the amount of P263.29 as reimbursement for the expenses
incurred for the use of the booster pump; ordering the defendants to pay the plaintiff the amount of
P700.00 as reasonable attorney's fees, plus the costs of suit."
The lessees appealed to the Court of First Instance of Manila, Branch XVI, assigning the following errors: (a)
That the lower court erred in not finding that the written contract of lease falls within the range of P.D. No. 20;
(b) That the lower court erred in finding that the need of the leased premises by the plaintiffs-appellees to be
lawful and valid and satisfactorily proved by them; (c) That the lower court erred in awarding damages in the
form of reimbursement of the expenses for the use of the booster pump and attorney's fees; and (d) That the
lower court erred in not allowing defendants-appellants' counter-claim. Cdpr
The Court of First Instance of Manila, Branch XVI, affirmed the decision of the City Court of Manila, Branch
XVI, based on its findings that : (1) mere allegation of the landlord in his need of the premises for the use of the
immediate members of his family "constitutes a cause to eject the tenants . . ."; (2) the marriage of private
respondent Agapito Ducusin, Jr. was proved by the testimony of private respondent Agapito Ducusin, Sr., the
latter's son Arturo, photographs depicting married couple and a marriage certificate (Exhibits "F", "G", "H" and
"I"; and (3) that petitioners admitted the existence of the verbal agreement to share the expenses incurred for
the use of the booster pump.
The lessees, still not satisfied with the CFI decision, went to the Court of Appeals on a petition for review
submitting that: "(1) that the respondent CFI of Manila erred in holding that the need of the premises in
question by the private respondents is lawful and valid; (2) that the respondent CFI of Manila erred in finding
that the need of the premises a quo by the private respondents has been sufficiently proven by them and
legally entitle them to judicially eject the petitioners from the premises; (3) that the respondent CFI of Manila
erred in ruling that the award by the trial court to private respondents of damages in the form of reimbursement
of expenses for the use of the booster pump is proper and legal."
In resolving the appeal, the respondent appellate court proceeded to "examine (the) determination of the
questions (1) whether or not an owner of a leased premises can unilaterally terminate the contract of lease
under the terms and conditions stated therein; and (2) whether or not the happening of the resolutory condition
re: the need of the immediate members of the family of the lessor of the leased premises has been
established by a preponderance of evidence."
Sustaining the validity of the clause in the contract of lease in question, the Court of Appeals held:
"The clause in the contract of lease dated February 20, 1975 at issue in the instant case reads:
'xxx xxx xxx
'2. The term of this contract shall be in a month-to-month basis commencing on February 19, 1975
until terminated by mutual agreement or terminated by the lessor on the ground that his children
need the premises for their own use or residence or upon any ground provided for in accordance
with law;
'xxx xxx xxx
(Emphasis supplied.)
"The parties to the contract of lease agreed that the obligations arising from the said contract shall
be extinguished due to the following causes: (1) termination of the contract by mutual consent of
to parties; (2) when the lessor elects to terminate the contract on the ground that his children need
the premises for their own use or residence; and (3) for any cause as provided in accordance with
law.
"In the complaint for ejectment, private respondents rely on three causes of action to support their
claim that the contract of lease entered into with the petitioners was terminated: (1) violation of the
clause in the contract against sublease; (2) use of the leased premises for commercial purposes
and (3) happening of the resolutory condition need of the leased premises by the lessor's
children. The trial court rejected the first two grounds as not being supported by evidence
presented but sustained the private respondents' third cause of action.
"The validity of the terms and conditions in a contract is governed by the following Civil
Code provisions:
'Art. 1308. The contract must bind both contracting parties; its validity or
compliance cannot be left to the will of one of them.'
'Art. 1182. When the fulfillment of the condition depends upon the sole will of
the debtor, the conditional obligation shall be void. If it depends upon chance or upon
the will of a third person, the obligation shall take effect in conformity with the provisions
of this Code.'
xxx xxx xxx
"The resolutory condition in the contract of lease re: the need of the lessor's children of the leased
premises is not a condition the happening of which is dependent solely upon the will of the lessor.
The happening of the condition depends upon the will of a third person - the lessor's children.
Whenever the latter require the use of the leased premises for their own needs, then the contract
of lease shall be deemed terminated. The validity of the said condition as agreed upon by the
parties stands."
We agree with the above ruling of the respondent Court and, therefore, affirm the same.
As to the second issue: whether the need of the immediate members of the family of the lessor of the leased
premises has been established by a preponderance of evidence, the respondent court ruled against the lessor
Ducusin and We quote: LLphil
"Upon a careful review of the records of the instant case, We are of the opinion that the private
respondents have not proved by a preponderance of evidence the alleged need of the immediate
members of his family of the use of the leased premises in dispute.
"Private respondent Agapito Ducusin Sr. alleged in his complaint that he needed the leased
premises because his son Agapito Ducusin, Jr. was getting married. In the proceedings at the trial
Court, be testified that Agapito Ducusin Jr. was getting married on May 1977, hence the latter
needed the leased premises (T.S.N., March 7, 1978, pp. 11-12).
"No proof of the marriage of private respondent Agapito Ducusin, Jr. was presented from the time
of the institution of the case against the petitioners on April 13, 1977 until June 5, 1979 when
frustrated
 Arturo Ducusin testified for his father, Agapito Ducusin, Sr. In fact, evidence on the alleged
marriage of private respondent Agapito Ducusin, Jr. was only presented after private respondents
filed a `Motion To Reopen The Case For Reception of Rebuttal Evidence For Plaintiffs.' The
evidence consists of photographs of a wedding (Exhibits "J" and "J-1") and a marriage certificate
(Exhibit "H"). An alleged letter of the private respondent Agapito Ducusin, Jr. where it stated that
the latter intended to settle in the Philippines instead of Canada where he was presently residing
with his wife (Exhibits "F" & "G") was also presented.
"To give weight and credence to the evidence presented by the private respondents on the need
of the landlord's children to occupy and use the leased premises runs counter to the time-honored
rule against hearsay evidence.
`Private respondent Agapito Ducusin, Jr. though named a plaintiff in the case at bar never
appeared during the proceedings in the trial Court. Even his presence in the Philippines in 1977
when the case was instituted remains subject to conjecture. His father, private respondent Agapito
Ducusin Sr., merely intimated during the trial Court proceedings that the younger Ducusin applied
as an immigrant to Canada (T.S.N, March 7, 1978, pp. 11-12).
"The letters of private respondent Agapito Ducusin, Jr. to his brother Arturo Ducusin, photographs
of the alleged wedding of the former and the certificate of marriage of Agapito Ducusin, Jr. are all
self-serving. Petitioners are entitled to cross-examine the person who allegedly made the
statements in the letter following the rulings in Pastor v. Gaspar, 2 Phil. 529; U.S. v. Caligagan, 2
Phil. 433; U.S. v. Manalo, 6 Phil 364. The evidence presented to prove the alleged marriage of
Agapito Ducusin, Jr. should be excluded in accordance with the provisions of Rule 130, Sec, 30 of
the Rules of Court which states:
`Sec. 30. Testimony generally confined to personal knowledge; hearsay
excluded: A witness can testify only to those facts which he knows of his own
knowledge; that is, which is derived from his own perception, except as otherwise
provided in these rules.'
"Moreover, even if We are satisfactorily convinced of the marriage of private
respondent Agapito Ducusin, Jr., it does not establish the alleged need of the latter to
use the leased premises presently occupied by the petitioners. Private respondent
Agapito Ducusin, Sr. did not show that the one-door apartment leased to the petitioners
was the only place available for the use of his son, Agapito Ducusin, Jr. On the contrary,
petitioner Virgilio Baliola testified that private respondent Agapito Ducusin, Sr. informed
him before the action was instituted against him that another apartment unit, No. 3319-D
similarly owned by the latter would soon be vacated (T.S.N., July 27, 1978, pp. 17-18)."
According to the petitioners, the above ruling of the Court of Appeals is erroneous and should be reversed
because "I. The contract expired by the termination of the period of the lease and upon notice to vacate,
irrespective of the truth or not of petitioners' need of the subject premises; II. The evidence of petitioners on the
third cause of action was sufficient to show their need of the premises for their personal use and occupation;
and III. There being a provision in the contract on the third cause of action, the house rental laws have not
been violated." (Petition, p. 11, Records).
We find for the petitioners. We do not agree with the holding of the respondent court that the petitioners have
not proved by a preponderance of evidence the alleged need of the immediate members of his family for the
use of the leased premises, which holding is grounded on the assumption that "to give weight and credence to
the evidence presented by the private respondents on the need of the landlord's children to occupy and use the
leased premises runs counter to the time-honored rule against hearsay evidence." (CA Decision, p. 108,
Records). LLpr
The Court of Appeals rejected the letters of petitioner Agapito Ducusin, Jr. to his brother, Arturo Ducusin, the
photographs of the wedding of Ducusin, Jr. and the certificate of marriage of Ducusin, Jr. and Adela Villacorta
as self-serving, citing Sec. 30, Rule 130 of the Rules of Court which provides that the witness can testify only to
those facts which he knows of his own knowledge. And since the marriage was not proved, the appellate court
reasoned out that the need for the use of the leased premises by Ducusin, Jr. was not established.
We reject this holding of the respondent court. In the first place, as pointed out by the petitioners, the testimony
of petitioner Agapito Ducusin, Sr. should have been given weight by the appellate court because he testified
that his son Agapito Jr. got married to Adela Villacorta on November 25, 1978 in Edmonton, Alberta, Canada at
the St. Anthony Church and that he knows this fact of marriage since he was present during the wedding
ceremony and pictures marked Exhibits "H", "I", "J" and "J-1" were taken of the wedding party after the
ceremony and wherein he identified himself in the picture (Exh. "J") as "the gentleman in dark jacket on the
right side" (t.s.n., June 5, 1979, pp. 19-21; pp. 177-179, Records). And with the testimony of Arturo Ducusin, a
brother of Agapito Jr., which may be considered under Rule 130, Sec. 33 as an act or declaration about
pedigree, the word "pedigree" including relationship, family genealogy, birth, marriage, death, the dates when
and the places where these facts occurred, and the names of the relatives, as well as the presentation of the
marriage certificate of Agapito Ducusin, Jr. and Adela Villacorta (all of which evidence were noted, admitted
and considered in the decision of the case before the CFI of Manila, Branch XVI (p. 87, Records) and in the
decision of the City Court of Manila, Branch XVI (p. 62, Records) both holding that the marriage has been
sufficiently proved, We rule that the Court of Appeals gravely erred in excluding the evidence described above
and presented to prove the marriage of Agapito Ducusin, Jr.
We likewise conclude that the intention to use the leased premises as the residence of Ducusin Jr. has been
satisfactorily and sufficiently proved by clear, strong, and substantial evidence found in the records of the case.
The testimony of the petitioner, Ducusin Sr., that his son needs the leased premises as he was getting married
and did in fact got married, for which reason petitioner sent the "Notice to Terminate His Contract" (Exh. "B");
the testimony of Arturo Ducusin that he had an overseas telephone talk with his brother Agapito Jr. informing
that the latter was coming home and that he and his wife were preparing their documents and arriving within
the month (t.s.n., pp. 13, 17, June 5, 1979; p. 15, Records) and the documentary evidence (Exh. "F" and "G")
which is the letter of the private respondent Agapito Ducusin, Jr. where it stated that he intended to settle in the
Philippines instead of Canada where he was presently residing with his wife (CA decision, p, 108, Records)
all these evidence clearly and competently prove the intention of petitioner Agapito Ducusin, Jr. to reside in the
Philippines and use the leased premises for his residence and his wife.
The contention of the petitioner that the contract of lease in question is for a definite period, being on a month-
to-month basis beginning February 19, 1975 and is, therefore, not covered by P.D. No. 20, is correct. The rule
We laid down in Rantael vs. Court of Appeals and Teresa Llave, L-47519, April 30, 97 SCRA 453, is squarely
on all fours with the case at bar and is controlling. The Supreme Court said, and We quote:
"1. The source of disagreement between petitioner Rantael and respondent Llave relates to the
following quoted provisions of the Agreement on Occupancy of Apartment dated August 1, 1974:
`The undersigned TENANT hereby agrees with Mrs. Teresa F. Llave as
owner, to use, occupy and live in the latter's apartment at Stand ford, Quezon City,
known as Door 51-A on a month to month basis, beginning today, under the following
terms and condition until the premises, (are) completely vacated . . .'
The aforequoted provisions of the Agreement on Occupancy of Apartment cannot but be read as
providing for a definite period for the lease. Period relates to `length of existence; duration' or even
a `series of years, months or days in which something is completed.' Definite means' having
distinct or certain limits; determinate in extent or character; limited; fixed.' A definite period,
therefore, refers to a portion of time certain or ascertainable as to its beginning, duration and
termination. As already stated above, the parties further expressly agreed that - (upon thirty (30)
days notice, either party may terminate this agreement, each fulfilling their respective obligations
herein agreed.
In the case at bar, the lease entered into between petitioner Rantael and respondent Llave
commenced, in accordance with the provisions of the Agreement on Occupancy of Apartment, on
August 1, 1974, the date of execution of the said Agreement, considering that the parties
frustrated
 employed the phrase `beginning today' with reference to the starting point of the period during WHEREFORE, IN VIEW OF THE FOREGOING, the decision of the respondent Court of Appeals subject of
which petitioner Rantael would have use and occupancy of the premises of unit 51-A. As to the this review is hereby REVERSED and SET ASIDE. The decision of the City Court of Manila, Branch XVI and
duration and termination of the aforementioned contractual relations, the parties used the phrase' affirmed on appeal to the Court of First Instance of Manila, Branch XVI is hereby reinstated and restored, with
on a month to month basis' in the Agreement with reference to the length of true during which costs in favor of petitioners.
petitioner Rantael would have use and occupancy of the leased premises. And month here should
be construed, in like manner as in the interpretation of laws pursuant to the provisions of Article 12 SO ORDERED.
of the Civil Code of the Philippines, there being no reason to deviate therefrom, as a period
composed of thirty days. The contractual relations between petitioner Rantael and respondent Makasiar, Aquino, Concepcion, Jr., De Castro and Escolin, JJ., concur.
Llave ceased after the expiration of the first thirty days reckoned from August 1, 1974 but
Abad Santos, J., took no part.
continued for the next thirty-day period and expired after the last day thereof, repeating same
cycle for the succeeding thirty-day periods, until the said respondent Llave exercised her express
prerogative under the agreement to terminate the same.

xxx xxx xxx

||| (Ducusin v. Court of Appeals, G.R. No. L-58286, [May 16, 1983], 207 PHIL 248-262)
"However, by express exception of P.D. No. 20, judicial ejectment lies `when the lease is for a
definite period' or when the fixed or definite period agreed upon has expired. The lease in the case
at bar having a definite period, it indubitably follows that the exception, rather than the general
rule, applies and, therefore, respondent Llave's right to judicially eject petitioner Rantael from the
premises may be duly enforced. This has been the consistent administrative interpretation of the
Office of the President, supra. Therefore, no error was committed by respondent appellate court . .
.

As to the holding of the respondent court that petitioner Ducusin, Sr. "did not show that the one-door apartment
leased to the petitioners was the only place available for the use of his son, Agapito Ducusin, Jr.," on the
contrary, We find in the records evidence that out of the eight doors apartment building belonging to the
petitioner Ducusin Sr., three doors, now 31 years old, became untenantable due to wear and tear and the
remaining five doors were all occupied by tenants; first door, 3319, is occupied by Mr. Coluso, 3319-A by the
Baliola spouses, 3319-B by Mr. & Mrs. Magsano, 3319-C by Mr. & Mrs. de los Santos, and 3319-D by Videz.
(pp. 13-14, t.s.n,, July 27, 1978; see p. 14, Records). From this evidence may be deduced that there is no other
place available for the use and residence of petitioner's son, Agapito Ducusin, Jr. Assuming that Agapito
Ducusin, Sr. informed his tenant Virgilio Baliola that another apartment unit No. 3319, would soon be vacated,
the alleged vacancy is nearly speculative and there is no showing that it actually became vacant and available.
THIRD DIVISION

There is, therefore, no factual and legal basis for the respondent court's decision dismissing the complaint for
[G.R. No. 70789. October 19, 1992.]
ejectment and reversing the findings of facts of both the City Court of Manila, Branch XVI, and the Court of First
Instance of Manila, Branch XVI.

And that brings Us to the last point in the review of the case at bar. Generally, the findings of fact by the Court RUSTAN PULP & PAPER MILLS, INC., BIENVENIDO R. TANTOCO, SR., and ROMEO S.
of Appeals are deemed accepted as the basis for review of the appellate court's decision. But this rule is not VERGARA, petitioners, vs. THE INTERMEDIATE APPELLATE COURT AND ILIGAN
without exception such as shown in the case before Us where the Court of Appeals reversed the findings of DIVERSIFIED PROJECTS, INC., ROMEO A. LLUCH and ROBERTO G.
fact made by the trial court the City Court of Manila) and also the Court of First Instance, by excluding evidence BORROMEO, respondents.
supposedly hearsay when they are not pursuant to the rules of evidence, by ignoring evidence on record that
are competent, clear and substantial and by misapprehending the facts, thereby making manifest the
commission of grave abuse of discretion on the part of the respondent appellate court and so warrants and Napoleon J. Poblador for petitioner.
justifies a review not only of the law but also the facts.
Pinito W. Mercado and Pablo S. Badong for respondents.
We reiterate Our doctrine in Tolentino vs. De Jesus, 56 SCRA 167, where it was ruled that the findings of facts
of the Court of Appeals are not conclusive where there is grave abuse of discretion; the judgment is based on
misapprehension of facts; the findings of facts of the Court of Appeals are contrary to those of the trial court or
premised on the absence of evidence and is contradicted by evidence on record; the conclusion is a finding SYLLABUS
grounded entirely on speculation, surmise and conjectures; and the inference made is manifestly mistaken.
These are the exceptions to the general rule. The instant petition is such an exception.
1. CIVIL LAW; OBLIGATIONS AND CONTRACT; POTESTATIVE CONDITION; MAY BE OBLITERATED
WITHOUT AFFECTING THE REST OF THE STIPULATIONS. The matter of Tantoco's and Vergara's joint
and several liability as a result of the alleged breach of the contract is dependent, first of all, on whether Rustan
frustrated
Pulp and Paper Mills may legally exercise the right of stoppage should there be a glut of raw materials at its
plant.
And insofar as the express discretion on the part of petitioners is concerned regarding the right of stoppage,
We feel that there is cogent basis for private respondents' apprehension on the illusory resumption of deliveries
inasmuch as the prerogative suggests a condition solely dependent upon the will of petitioners. Petitioners can
stop delivery of pulp wood from private respondents if the supply at the plant is sufficient as ascertained by
petitioners, subject to re-delivery when the need arises as determined likewise by petitioners. This is Our
simple understanding of the literal import of paragraph 7 of the obligation in question. 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. It is, a truism in legal jurisprudence that 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.
2. ID.; ID.; ID.; RIGHT OF STOPPAGE GUARANTEED IN THE CONTRACT, HELD INOPERATIVE; REASON.
Petitioners are of the impression that the letter dated September 30, 1968 sent to private respondents is well
within the right of stoppage guaranteed to them by paragraph 7 of the contract of sale which was construed by
petitioners to be a temporary suspension of deliveries. There is no doubt that the contract speaks loudly about
petitioners' prerogative but what diminishes the legal efficacy of such right is the condition attached to it which,
as aforesaid, is dependent exclusively on their will for which reason, We have no alternative but to treat the
controversial stipulation as inoperative (Article 1306, New Civil Code). It is for this same reason that We are not
inclined to follow the interpretation of petitioners that the suspension of delivery was merely temporary since
the nature of the suspension itself is again conditioned upon petitioners' determination of the sufficiency of
supplies at the plant.
3. ID.; ID.; FRUSTRATION OF COMMERCIAL OBJECT AS GROUND FOR TERMINATION OF THE
CONTRACT, NOT ACCEPTABLE; REASONS. Neither are We prepared to accept petitioners' exculpation
grounded on frustration of the commercial object under Article 1267 of the New Civil Code, because petitioners
continued accepting deliveries from the suppliers. This conduct will estop petitioners from claiming that the
breakdown of the machinery line was an extraordinary obstacle to their compliance to the prestation. It was
indeed incongruous for petitioners to have sent the letters calling for suspension and yet, they in effect
disregarded their own advice by accepting the deliveries from the suppliers. Knowing fully well that they will
encounter difficulty in producing output because of the defective machinery line, petitioners opted to open the
plant to greater loss, thus compounding the costs by accepting additional supply to the stockpile. Verily, the
Appellate Court emphasized the absurdity of petitioners' action when they acknowledged that "if the plant could
not be operated on a commercial scale, it would then be illogical for defendant Rustan to continue accepting
deliveries of raw materials."
4. ID.; AGENCY; OFFICERS OF CORPORATIONS NOT LIABLE INDIVIDUALLY UNDER THE CONTRACT
SIGNED BY THEM IN THEIR OFFICIAL CAPACITY; EXCEPTION. We have to agree with petitioners'
citation of authority to the effect that the President and Manager of a corporation who entered into and signed a
contract in his official capacity, cannot be made liable thereunder in his individual capacity in the absence of
stipulation to that effect due to the personality of the corporation being separate and distinct from the persons
composing it (Bangue Generale Belge vs. Walter Bull and Co., Inc., 84 Phil. 164). And because of this precept,
Vergara's supposed non-participation in the contract of sale although he signed the letter dated September 30,
1968 is completely immaterial. The two exceptions contemplated by Article 1897 of the New Civil Code where
agents are directly responsible are absent and wanting.
DECISION
MELO, J p:
When petitioners informed herein private respondents to stop the delivery of pulp wood supplied by the latter
pursuant to a contract of sale between them, private respondents sued for breach of their covenant. The court
of origin dismissed the complaint but at the same time enjoined petitioners to respect the contract of sale if
circumstances warrant the full operation in a commercial scale of petitioners' Baloi plant and to continue
accepting and paying for deliveries of pulp wood products from Romeo Lluch (page 14, Petition; page 20,
Rollo). On appeal to the then Intermediate Appellate Court, Presiding Justice Ramon G. Gaviola, Jr., who
spoke for the First Civil Cases Division, with Justices Caguioa, Quetulio-Losa, and Luciano, concurring,
modified the judgment by directing herein petitioners to pay private respondents, jointly and severally, the sum
of P30,000.00 as moral damages and P15,000.00 as attorney's fees (pages 48-58, Rollo).
In the petition at bar, it is argued that the Appellate Court erred:
"A. . . . IN HOLDING PERSONALLY LIABLE UNDER THE CONTRACT OF SALE PETITIONER
TANTOCO WHO SIGNED MERELY AS REPRESENTATIVE OF PETITIONER RUSTAN, AND
PETITIONER VERGARA WHO DID NOT SIGN AT ALL;
B. . . . IN HOLDING THAT PETITIONER RUSTAN'S DECISION TO SUSPEND TAKING
DELIVERY OF PULP WOOD FROM RESPONDENT LLUCH, WHICH WAS PROMPTED BY
SERIOUS AND UNFORESEEN DEFECTS IN THE MILL, WAS NOT IN THE LAWFUL EXERCISE
OF ITS RIGHT UNDER THE CONTRACT OF SALE; and
C. . . . IN AWARDING MORAL DAMAGES AND ATTORNEY'S FEES IN THE ABSENCE OF
FRAUD OR BAD FAITH."(page 18, Petition; page 24, Rollo)
The generative facts of the controversy, as gathered from the pleadings, are fairly simple.
Sometime in 1966, petitioner Rustan established a pulp and paper mill in Baloi, Lanao del Norte. On March 20,
1967, respondent Lluch, who is a holder of a forest products license, transmitted a letter to petitioner Rustan for
the supply of raw materials by the former to the latter. In response thereto, petitioner Rustan proposed, among
other things, in the letter-reply:
"2. That the contract to supply is not exclusive because Rustan shall have the option to buy from
other suppliers who are qualified and holder of appropriate government authority or license to sell
and dispose pulp wood."
These prefatory business proposals culminated in the execution, during the month of April, 1968, of a contract
of sale whereby Romeo A. Lluch agreed to sell, and Rustan Pulp and Paper Mill, Inc. undertook to pay the
price of P30.00 per cubic meter of pulp wood raw materials to be delivered at the buyer's plant in Baloi, Lanao
del Norte. Of pertinent significance to the issue at hand are the following stipulations in the bilateral
undertaking:
"3. That BUYER shall have the option to buy from other SELLERS who are equally qualified and
holders of appropriate government authority or license to sell or dispose, that BUYER shall not
buy from any other seller whose pulp woods being sold shall have been established to have
emanated from the SELLER'S lumber and/or firewood concession. . . ."
And that SELLER has the priority to supply the pulp wood materials requirement of the BUYER;
xxx xxx xxx
7. That the BUYER shall have the right to stop delivery of the said raw materials by the seller
covered by this contract when supply of the same shall become sufficient until such time when
need for said raw materials shall have become necessary provided, however, that the SELLER is
given sufficient notice."(pages 8-9, Petition; pages 14-15, Rollo)
In the installation of the plant facilities, the technical staff of Rustan Pulp and Paper Mills, Inc. recommended
the acceptance of deliveries from other suppliers of the pulp wood materials for which the corresponding
deliveries were made. But during the test run of the pulp mill, the machinery line thereat had major defects
frustrated
while deliveries of the raw materials piled up, which prompted the Japanese supplier of the machinery to
recommend the stoppage of the deliveries. The suppliers were informed to stop deliveries and the letter of
similar advice sent by petitioners to private respondents reads:
"September 30, 1968
Iligan Diversified Projects, Inc.
Iligan City
Attention: Mr. Romeo A. Lluch.
Dear Mr. Lluch:
This is to inform you that the supply of raw materials to us has become sufficient and we will not
be needing further delivery from you. As per the terms of our contract, please stop delivery thirty
(30) days from today.
Very truly yours,
RUSTAN PULP AND PAPER
MILLS, INC.
By:
DR. ROMEO S. VERGARA
Resident Manager"
Private respondent Romeo Lluch sought to clarify the tenor of the letter as to whether stoppage of delivery or
termination of the contract of sale was intended, but the query was not answered by petitioners. This alleged
ambiguity notwithstanding, Lluch and the other suppliers resumed deliveries after the series of talks between
Romeo S. Vergara and Romeo Lluch.
On January 23, 1969, the complaint for contractual breach was filed which, as earlier noted, was dismissed. In
the process of discussing the merits of the appeal interposed therefrom, respondent Court clarified the eleven
errors assigned below by herein petitioners and it seems that petitioners were quite satisfied with the Appellate
Court's in seriatim response since petitioners trimmed down their discourse before this Court to three basic
matters, relative to the nature of liability, the propriety of the stoppage, and the feasibility of awarding moral
damages including attorney's fees.
Respondent Court found it ironic that petitioners had to exercise the prerogative regarding the stoppage of
deliveries via the letter addressed to Iligan Diversified Projects, Inc. on September 30, 1968 because
petitioners never really stopped accepting deliveries from private respondents until December 23, 1968.
Petitioner's paradoxical stance was portrayed in this manner:
". . . We cannot accept the reasons given by appellees as to why they were stopping deliveries of
pulp wood materials. First, We find it preposterous for a business company like the appellee to
accumulate stockpiles of cut wood even after its letter to appellants dated September 30, 1968
stopping the deliveries because the supply of raw materials has become sufficient. The fact that
appellees were buying and accepting pulp wood materials from other sources other than the
appellants even after September 30, 1968 belies that they have more than sufficient supply of pulp
wood materials, or that they are unable to go into full commercial operation or that their
machineries are defective or even that the pulp wood materials coming from appellants are sub-
standard. Second, We likewise find the court a quo's finding that "even with one predicament in
which defendant Rustan found itself wherein commercial operation was delayed, it accommodated
all its suppliers of raw materials, including plaintiff, Romeo Lluch, by allowing them to deliver all its
stockpiles of cut wood" (Decision, page 202, Record on Appeal) to be both illogical and
inconsistent. Illogical, because as appellee Rustan itself claimed "if the plant could not be
operated on a commercial scale, it would then be illogical for defendant Rustan to continue
accepting deliveries of raw materials." Inconsistent because this kind of "concern" or
"accommodation" is not usual or consistent with ordinary business practice considering that this
would mean adequate losses to the company. More so, if We consider that appellee is a new
company and could not therefore afford to absorb more losses than it already allegedly incurred
by the consequent defects in the machineries. cdrep
Clearly therefore, this is a breach of the contract entered into by and between appellees and
appellants which warrants the intervention of this Court."
xxx xxx xxx
. . . The letter of September 30, 1968, Exh. "D" shows that defendants were terminating the
contract of sale (Exh. "A"), and refusing any future or further delivery whether on the ground
that they had sufficient supply of pulp wood materials or that appellants cannot meet the standard
of quality of pulp wood materials that Rustan needs or that there were defects in appellees'
machineries resulting in an inability to continue full commercial operations.
Furthermore, there is evidence on record that appellees have been accepting deliveries of pulp
wood materials from other sources, i.e. Salem Usman, Fermin Villanueva and Pacasum even after
September 30, 1968.
Lastly, it would be unjust for the court a quo to rule that the contract of sale be temporarily
suspended until Rustan, et al., are ready to accept deliveries from appellants. This would make
the resumption of the contract purely dependent on the will of one party the appellees, and they
could always claim, as they did in the instant case, that they have more than sufficient supply of
pulp wood when in fact they have been accepting the same from other sources. Added to this, the
court a quo was imposing a new condition in the contract, one that was not agreed upon by the
parties."(Pages 8-10, Decision; Pages 55-57, Rollo)
The matter of Tantoco's and Vergara's joint and several liability as a result of the alleged breach of the contract
is dependent, first of all, on whether Rustan Pulp and Paper Mills may legally exercise the right of stoppage
should there be a glut of raw materials at its plant.
And insofar as the express discretion on the part of petitioners is concerned regarding the right of stoppage,
We feel that there is cogent basis for private respondents' apprehension on the illusory resumption of deliveries
inasmuch as the prerogative suggests a condition solely dependent upon the will of petitioners. Petitioners can
stop delivery of pulp wood from private respondents if the supply at the plant is sufficient as ascertained by
petitioners, subject to re-delivery when the need arises as determined likewise by petitioners. This is Our
simple understanding of the literal import of paragraph 7 of the obligation in question. 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). It is, of course, a truism in
legal jurisprudence that 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 like what this Court, through Justice Street, said
in Taylor vs. Uy Tieng Piao and Tan Liuan (43 Phil. 873; 879; cited in Commentaries and Jurisprudence on the
Civil Code, by Tolentino, Volume 4, 1991 edition, page 152). But the conclusion drawn from the Taylor case,
which allowed a condition for unilateral cancellation of the contract when the machinery to be installed on the
factory did not arrive in Manila, is certainly inappropriate for application to the case at hand because the factual
milieu in the legal tussle dissected by Justice Street conveys that the proviso relates to the birth of the
undertaking and not the fulfillment of an existing obligation. LLjur
In support of the second ground for allowance of the petition, petitioners are of the impression that the letter
dated September 30, 1968 sent to private respondents is well within the right of stoppage guaranteed to them
by paragraph 7 of the contract of sale which was construed by petitioners to be a temporary suspension of
deliveries. There is no doubt that the contract speaks loudly about petitioners' prerogative but what diminishes
the legal efficacy of such right is the condition attached to it which, as aforesaid, is dependent exclusively on
their will for which reason, We have no alternative but to treat the controversial stipulation as inoperative
(Article 1306, New Civil Code). It is for this same reason that We are not inclined to follow the interpretation of
frustrated
petitioners that the suspension of delivery was merely temporary since the nature of the suspension itself is
again conditioned upon petitioners' determination of the sufficiency of supplies at the plant.
Neither are We prepared to accept petitioners' exculpation grounded on frustration of the commercial object
under Article 1267 of the New Civil Code, because petitioners continued accepting deliveries from the
suppliers. This conduct will estop petitioners from claiming that the breakdown of the machinery line was an
extraordinary obstacle to their compliance to the prestation. It was indeed incongruous for petitioners to have
sent the letters calling for suspension and yet, they in effect disregarded their own advice by accepting the
deliveries from the suppliers. The demeanor of petitioners along this line was sought to be justified as an act of
generous accommodation, which entailed greater loss to them and "was not motivated by the usual
businessman's obsession with profit" (Page 34, Petition; Page 40, Rollo). Altruism may be a noble gesture but
petitioners' stance in this respect hardly inspires belief for such an excuse is inconsistent with a normal
business enterprise which takes ordinary care of its concern in cutting down on expenses (Section 3, (d), Rule
131, Revised Rules of Court). Knowing fully well that they will encounter difficulty in producing output because
of the defective machinery line, petitioners opted to open the plant to greater loss, thus compounding the costs
by accepting additional supply to the stockpile. Verily, the Appellate Court emphasized the absurdity of
petitioners' action when they acknowledged that "if the plant could not be operated on a commercial scale, it
would then be illogical for defendant Rustan to continue accepting deliveries of raw materials." (Page 202,
Record on Appeal; Page 8, Decision; Page 55, Rollo).
Petitioners argue next that Tantoco and Vergara should not have been adjudged to pay moral damages and
attorney's fees because Tantoco merely represented the interest of Rustan Pulp and Paper Mills, Inc. while
Romeo S. Vergara was not privy to the contract of sale. On this score, We have to agree with petitioners'
citation of authority to the effect that the President and Manager of a corporation who entered into and signed a
contract in his official capacity, cannot be made liable thereunder in his individual capacity in the absence of
stipulation to that effect due to the personality of the corporation being separate and distinct from the persons
composing it (Bangue Generale Belge vs. Walter Bull and Co., Inc., 84 Phil. 164). And because of this precept,
Vergara's supposed non-participation in the contract of sale although he signed the letter dated September 30,
1968 is completely immaterial. The two exceptions contemplated by Article 1897 of the New Civil Code where
agents are directly responsible are absent and wanting. LLjur
WHEREFORE, the decision appealed from is hereby MODIFIED in the sense that only petitioner Rustan Pulp
and Paper Mills is ordered to pay moral damages and attorney's fees as awarded by respondent Court.
SO ORDERED.
||| (Rustan Pulp & Paper Mills, Inc. v. Intermediate Appellate Court, G.R. No. 70789, [October 19, 1992])
FIRST DIVISION
[G.R. No. 4437. September 9, 1909.]
TOMAS OSMEA, plaintiff-appellee, vs. CENONA RAMA, defendant-appellant.
Filemon Sotto for appellant.
J.H. Junquera for appellee.
SYLLABUS
1. CONTRACT; CONDITIONAL PROMISE TO PAY. A condition imposed upon a contract by
the promisor, the performance of which depends upon his exclusive will, is void, in accordance with the
provisions of article 1115 of the Civil Code.
DECISION
JOHNSON, J p:
It appears from the record that upon the 15th day of November, 1890, the defendant herein
executed and delivered to Victoriano Osmea the following contract:
"EXHIBIT A.
P200.00.
"CEBU, November 15, 1890.
"I, Doa Cenona Rama, a resident of this city, and of legal age, have received from Don
Victoriano Osmea the sum of two hundred pesos in cash which I will pay in sugar in the month of
January or February of the coming year, at the price ruling on the day of delivering the sugar into
his warehouses, and I will pay him interest at the rate of half a cuartillo per month on each peso,
beginning on this date until the day of the settlement; and if I can not pay in full, a balance shall be
struck, showing the amount outstanding at the end of each June, including interest, and such
balance as may be outstanding against me shall be considered as capital which I will always pay
in sugar, together with the interest mentioned above. I further promise that I will sell to the said
Seor Osmea all the sugar that I may harvest, and as a guarantee, pledge as security all of my
present and future property, and as special security the house with tile roof and ground floor of
stone in which I live in Pagina; in proof whereof, I sign this document, and he shall be entitled to
make claim against me at the expiration of the term stated in this document.
(Signed) "CENONA RAMA.
"Witnesses:
"FAUSTO PEALOSA.
"FRANCISCO MEDALLE."
On the 27th day of October, 1891, the defendant executed and delivered to the said Victoriano
Osmea the following contract:
"EXHIBIT B.
"CEBU, October 27, 1891.
"On this date I have asked for a further loan and have received from Don Victoriano
Osmea the sum of seventy pesos in cash, fifty pesos of which I have loaned to Don Evaristo
Peares, which we will pay in sugar in the month of January of the coming year according to the
former conditions.
(Signed) "CENONA RAMA.
"FROM Don Evaristo Peares P50
"Doa Cenona Rama 20
____
frustrated
 P70

"Received Evaristo Peares."

Some time after the execution and delivery of the above contracts, the said Victoriano Osmea
died. In the settlement and division of the property of his estate the above contracts became the property of
one of his heirs, Agustina Rafols. Later, the date does not appear, the said Agustina Rafols ceded to the
present plaintiff all of her right and interest in said contracts.
On the 15th day of March, 1902, the plaintiff presented the contracts to the defendant for payment
and she acknowledged her responsibility upon said contracts by an indorsement upon them in the following
language:
"EXHIBIT C.
"CEBU, March 15, 1902.
"On this date I hereby promise, in the presence of two witnesses, that, if the house of
strong materials in which I live in Pagina is sold, I will pay my indebtedness to Don Tomas
Osmea as set forth in this document.
(Signed) "CENONA RAMA."
The defendant not having paid the amount due on said contracts; the plaintiff, upon the 26th day
of June, 1906, commenced the present action in the Court of First Instance of the Province of Cebu. The
complaint filed in said cause alleged the execution and delivery of the above contracts, the demand for
payment, and the failure to pay on the part of the defendant, and the prayer for a judgment for the amount
due on the said contracts. The defendant answered by filing a general denial and setting up the special
defense of prescription.
The case was finally brought on to trial in the Court of First Instance, and the only witness
produced during the trial was the plaintiff himself. The defendant did not offer any proof whatever in the
lower court.
After hearing the evidence adduced during the trial, the lower court rendered a judgment in favor
of the plaintiff and against the defendant for the sum of P200 with interest at the rate of 18 3/4 per cent per
annum, from the 15th day of November, 1890, and for the sum of P20, with interest at the rate of 18 3/4 per
cent per annum, from the 27th day of October, 1891, until the said sums were paid. From this judgment the
defendant appealed.
The lower court found that P50 of the P70 mentioned in Exhibit B had not been borrowed by the
defendant, but by one Evaristo Peares; therefore the defendant had no responsibility for the payment of the
said P50.
The only questions raised by the appellant were questions of fact. The appellant alleges that the
proof adduced during the trial of the cause was not sufficient to support the findings of the lower court. It was
suggested during the discussion of the case in this court that, in the acknowledgment above quoted of the
indebtedness made by the defendant, she imposed the condition that she would pay the obligation if she
sold her house. If that statement found in her acknowledgment of the indebtedness should be regarded as a
condition, it was a condition which depended upon her exclusive will, and is, therefore, void. (Art. 1115, Civil
Code.) The acknowledgment, therefore, was an absolute acknowledgment of the obligation and was
sufficient to prevent the statute of limitation from barring the action upon the original contract.
We are satisfied, from all of the evidence adduced during the trial, that the judgment of the lower
court should be affirmed. So ordered.
Arellano, C.J., Torres, Carson and Moreland, JJ., concur.

||| (Osmea v. Rama, G.R. No. 4437, [September 9, 1909], 14 PHIL 99-102)

frustrated
 this case. Besides, said article was never raised by the parties in their pleadings and was never the subject of
trial and evidence. Article 1267 speaks of "service" which has become so difficult. Taking into consideration the
rationale behind this provision, the term "service" should be understood as referring to the "performance" of the
obligation. In the present case, the obligation of private respondent consists in allowing petitioners to use its
posts in Naga City, which is the service contemplated in said article. Furthermore, a bare reading of this article
reveals that it is not a requirement thereunder that the contract be for future service with future unusual
change. According to Senator Arturo M. Tolentino, Article 1267 states in our law the doctrine of unforeseen
events. This is said to be based on the discredited theory of rebus sic stantibus in public international law;
under this theory, the parties stipulate in the light of certain prevailing conditions, and once these conditions
cease to exist the contract also ceases to exist. Considering practical needs and the demands of equity and
good faith, the disappearance of the basis of a contract gives rise to a right to relief in favor of the party
prejudiced.

3. ID.; ID.; POTESTATIVE CONDITION; MEANING THEREOF; APPLICATION IN CASE AT BAR. A

potestative condition is a condition, the fulfillment of which depends upon the sole will of the debtor, in which
case, the conditional obligation is void. Based on this definition, respondent court's finding that the provision in
the contract, to wit: "(a) That the term or period of this contract shall be as long as the party of the first part
(petitioner) has need for the electric light posts of the party of the second part (private respondent) . . ." is a
potestative condition, is correct. However, it must have overlooked the other conditions in the same provision,
to wit: ". . . it being understood that this contract shall terminate when for any reason whatsoever, the party of
the second part (private respondent) is forced to stop, abandoned (sic) its operation as a public service and it
SECOND DIVISION becomes necessary to remove the electric light post (sic);" which are casual conditions since they depend on
chance, hazard, or the will of a third person. In sum, the contract is subject to mixed conditions, that is, they
depend partly on the will of the debtor and partly on chance, hazard or the will of a third person, which do not
[G.R. No. 107112. February 24, 1994.] invalidate the aforementioned provision.

4. ID.; PRESCRIPTION OF ACTIONS; RULE ON WRITTEN CONTRACT. Article 1144 of the New Civil
NAGA TELEPHONE CO., INC. (NATELCO) AND LUCIANO M. MAGGAY, petitioners, vs. THE Code provides, inter alia, that an action upon a written contract must be brought within ten (10) years from the
COURT OF APPEALS AND CAMARINES SUR II ELECTRIC COOPERATIVE, INC. time the right of the action accrues. Clearly, the ten (10) year period is to be reckoned from the time the right of
(CASURECO II), respondents. action accrues which is not necessarily the date of execution of the contract. 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). (Private respondent's) cause of
SYLLABUS action to ask for reformation of said contract should thus be considered to have arisen only in 1982 or 1983,
and from 1982 to January 2, 1989 when the complaint in this case was filed, ten (10) years had not yet
elapsed."
1. CIVIL LAW; OBLIGATION AND CONTRACTS; RULE WHERE A PERSON BY HIS CONTRACT CHARGES
HIMSELF WITH AN OBLIGATION POSSIBLE TO BE PERFORMED. The case of Reyes v. Caltex
(Philippines), Inc. enunciated the doctrine that where a person by his contract charges himself with an
obligation possible to be performed, he must perform it, unless its performance is rendered impossible by the
act of God, by the law, or by the other party, it being the rule that in case the party desires to be excused from DECISION
performance in the event of contingencies arising thereto, it is his duty to provide the basis therefor in his
contract. With the enactment of the New Civil Code, a new provision was included therein namely, Article 1267
which provides: "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." In the report of the Code Commission, NOCON, J p:
the rationale behind this innovation was explained, thus: "The general rule is that impossibility of performance
releases the obligor. However, it is submitted that when the service has become so difficult as to be manifestly
The case of Reyes v. Caltex (Philippines), Inc. 1 enunciated the doctrine that where a person by his contract
beyond the contemplation of the parties, the court should be authorized to release the obligor in whole or in
charges himself with an obligation possible to be performed, he must perform it, unless its performance is
part. The intention of the parties should govern and if it appears that the service turns out to be so difficult as to
rendered impossible by the act of God, by the law, or by the other party, it being the rule that in case the party
have been beyond their contemplation, it would be doing violence to that intention to hold the obligor still
desires to be excused from performance in the event of contingencies arising thereto, it is his duty to provide
responsible." In other words, fair and square consideration underscores the legal precept therein.
the basis therefor in his contract. LibLex
2. ID.; ID.; "SERVICE" UNDER ART. 1267 REFERS TO THE PERFORMANCE OF AN OBLIGATION; CASE
With the enactment of the New Civil Code, a new provision was included therein namely, Article 1267 which
AT BAR. Petitioners assert earnestly that Article 1267 of the New Civil Code is not applicable primarily
provides:
because the contract does not involve the rendition of service or a personal prestation and it is not for future
service with future unusual change. Instead, the ruling in the case Occea, et al. v. Jabson, etc, et al., (G.R.
No. L-44349, October 29, 1976, 73 SCRA 637) which interpreted the article, should be followed in resolving
frustrated
 "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."
In the report of the Code Commission, the rationale behind this innovation was explained, thus:
"The general rule is that impossibility of performance releases the obligor. However, it is submitted
that when the service has become so difficult as to be manifestly beyond the contemplation of the
parties, the court should be authorized to release the obligor in whole or in part. The intention of
the parties should govern and if it appears that the service turns out to be so difficult as to have
been beyond their contemplation, it would be doing violence to that intention to hold the obligor
still responsible." 2
In other words, fair and square consideration underscores the legal precept therein.
Naga Telephone Co., Inc. remonstrates mainly against the application by the Court of Appeals of Article 1267
in favor of Camarines Sur II Electric Cooperative, Inc. in the case before us. Stated differently, the former
insists that the complaint should have been dismissed for failure to state a cause of action. prLL
The antecedent facts, as narrated by respondent Court of Appeals are, as follows:
Petitioner Naga Telephone Co., Inc. (NATELCO) is a telephone company rendering local as well as long
distance service in Naga City while private respondent Camarines Sur II Electric Cooperative, Inc.
(CASURECO II) is a private corporation established for the purpose of operating an electric power service in
the same city.
On November 1, 1977, the parties entered into a contract (Exh. "A") for the use by petitioners in the operation
of its telephone service the electric light posts of private respondent in Naga City. In consideration therefor,
petitioners agreed to install, free of charge, ten (10) telephone connections for the use by private respondent in
the following places:
"(a) 3 units The Main Office of (private respondent);
(b) 2 Units The Warehouse of (private respondent);
(c) 1 Unit The Sub-Station of (private respondent) at Concepcion Pequea;
(d) 1 Unit The Residence of (private respondent's) President;
(e) 1 Unit The Residence of (private respondent's) Acting General Manager; &
(f) 2 Units To be determined by the General Manager. 3
Said contract also provided:
"(a) That the term or period of this contract shall be as long as the party of the first part has need
for the electric light posts of the party of the second part it being understood that this contract shall
terminate when for any reason whatsoever, the party of the second part is forced to stop,
abandoned [sic] its operation as a public service and it becomes necessary to remove the electric
lightpost;" (sic) 4
It was prepared by or with the assistance of the other petitioner, Atty. Luciano M. Maggay, then a member of
the Board of Directors of private respondent and at the same time the legal counsel of petitioner.
After the contract had been enforced for over ten (10) years, private respondent filed on January 2, 1989 with
the Regional Trial Court of Naga City (Br. 28) C.C. No. 89-1642 against petitioners for reformation of the
contract with damages, on the ground that it is too one-sided in favor of petitioners; that it is not in conformity
with the guidelines of the National Electrification Administration (NEA) which direct that the reasonable
compensation for the use of the posts is P10.00 per post, per month; that after eleven (11) years of petitioners'
use of the posts, the telephone cables strung by them thereon have become much heavier with the increase in
the volume of their subscribers, worsened by the fact that their linemen bore holes through the posts at which
points those posts were broken during typhoons; that a post now costs as much as P2,630.00; so that justice
and equity demand that the contract be reformed to abolish the inequities thereon. prLL
As second cause of action, private respondent alleged that starting with the year 1981, petitioners have used
319 posts in the towns of Pili, Canaman, Magarao and Milaor, Camarines Sur, all outside Naga City, without
any contract with it; that at the rate of P10.00 per post, petitioners should pay private respondent for the use
thereof the total amount of P267,960.00 from 1981 up to the filing of its complaint; and that petitioners had
refused to pay private respondent said amount despite demands.
And as third cause of action, private respondent complained about the poor servicing by petitioners of the ten
(10) telephone units which had caused it great inconvenience and damages to the tune of not less than
P100,000.00
In petitioners' answer to the first cause of action, they averred that it should be dismissed because (1) it does
not sufficiently state a cause of action for reformation of contract; (2) it is barred by prescription, the same
having been filed more than ten (10) years after the execution of the contract; and (3) it is barred by estoppel,
since private respondent seeks to enforce the contract in the same action. Petitioners further alleged that their
utilization of private respondent's post could not have caused their deterioration because they have already
been in use for eleven (11) years; and that the value of their expenses for the ten (10) telephone lines long
enjoyed by private respondent free of charge are far in excess of the amounts claimed by the latter for the use
of the posts, so that if there was any inequity, it was suffered by them.
Regarding the second cause of action, petitioners claimed that private respondent had asked for telephone
lines in areas outside Naga City for which its posts were used by them; and that if petitioners had refused to
comply with private respondent's demands for payment for the use of the posts outside Naga City, it was
probably because what is due to them from private respondent is more than its claim against them.
And with respect to the third cause of action, petitioners claimed, inter alia, that their telephone service had
been categorized by the National Telecommunication Corporation (NTC) as "very high" and of "superior
quality."
During the trial, private respondent presented the following witnesses:
(1) Dioscoro Ragragio, one of the two officials who signed the contract in its behalf, declared that it was
petitioner Maggay who prepared the contract; that the understanding between private respondent and
petitioners was that the latter would only use the posts in Naga City because at that time, petitioners' capability
was very limited and they had no expectation of expansion because of legal squabbles within the company;
that private respondent agreed to allow petitioners to use its posts in Naga City because there were many
subscribers therein who could not be served by them because of lack of facilities; and that while the telephone
lines strung to the posts were very light in 1977, said posts have become heavily loaded in 1989. LLphil
(2) Engr. Antonio Borja, Chief of private respondent's Line Operation and Maintenance Department, declared
that the posts being used by petitioners totalled 1,403 as of April 17, 1989, 192 of which were in the towns of
Pili, Canaman, and Magarao, all outside Naga City (Exhs. "B" and "B-1"); that petitioners' cables strung to the
posts in 1989 are much bigger than those in November, 1977; that in 1987, almost 100 posts were destroyed
by typhoon Sisang: around 20 posts were located between Naga City and the town of Pili while the posts in
barangay Concepcion, Naga City were broken at the middle which had been bored by petitioner's linemen to
enable them to string bigger telephone lines; that while the cost per post in 1977 was only from P700.00 to
P1,000.00, their costs in 1989 went up from P1,500.00 to P2,000.00, depending on the size; that some lines
that were strung to the posts did not follow the minimum vertical clearance required by the National Building
Code, so that there were cases in 1988 where, because of the low clearance of the cables, passing trucks
would accidentally touch said cables causing the posts to fall and resulting in brown-outs until the electric lines
were repaired.
(3) Dario Bernardez, Project Supervisor and Acting General Manager of private respondent and Manager of
Region V of NEA, declared that according to NEA guidelines in 1985 (Exh. "C"), for the use by private
frustrated
telephone systems of electric cooperatives' posts, they should pay a minimum monthly rental of P4.00 per post,
and considering the escalation of prices since 1985, electric cooperatives have been charging from P10.00 to
P15.00 per post, which is what petitioners should pay for the use of the posts.
(4) Engineer Antonio Macandog, Department Head of the Office of Services of private respondent, testified on
the poor service rendered by petitioners' telephone lines, like the telephone in their Complaints Section which
was usually out of order such that they could not respond to the calls of their customers. In case of disruption of
their telephone lines, it would take two to three hours for petitioners to reactivate them notwithstanding their
calls on the emergency line.
(5) Finally, Atty. Luis General, Jr., private respondent's counsel, testified that the Board of Directors asked him
to study the contract sometime during the latter part of 1982 or in 1983, as it had appeared very
disadvantageous to private respondent. Notwithstanding his recommendation for the filing of a court action to
reform the contract, the former general managers of private respondent wanted to adopt a soft approach with
petitioners about the matter until the term of General Manager Henry Pascual who, after failing to settle the
matter amicably with petitioners, finally agreed for him to file the present action for reformation of contract.
On the other hand, petitioner Maggay testified to the following effect:
(1) It is true that he was a member of the Board of Directors of private respondent and at the same time the
lawyer of petitioner when the contract was executed, but Atty. Gaudioso Tena, who was also a member of the
Board of Directors of private respondent, was the one who saw to it that the contract was fair to both parties.
(2) With regard to the first cause of action:
(a) Private respondent has the right under the contract to use ten (10) telephone units of petitioners for as long
as it wishes without paying anything therefor except for long distance calls through PLDT out of which the latter
get only 10% of the charges. LLpr
(b) In most cases, only drop wires and not telephone cables have been strung to the posts, which posts have
remained erect up to present;
(c) Petitioners' linemen have strung only small messenger wires to many of the posts and they need only small
holes to pass through; and
(d) Documents existing in the NTC show that the stringing of petitioners' cables in Naga City are according to
standard and comparable to those of PLDT. The accidents mentioned by private respondent involved trucks
that were either overloaded or had loads that protruded upwards, causing them to hit the cables.
(3) Concerning the second cause of action, the intention of the parties when they entered into the contract was
that the coverage thereof would include the whole area serviced by petitioners because at that time, they
already had subscribers outside Naga City. Private respondent, in fact, had asked for telephone connections
outside Naga City for its officers and employees residing there in addition to the ten (10) telephone units
mentioned in the contract. Petitioners have not been charging private respondent for the installation, transfers
and re-connections of said telephones so that naturally, they use the posts for those telephone lines.
(4) With respect to the third cause of action, the NTC has found petitioners cable installations to be in
accordance with engineering standards and practice and comparable to the best in the country.
On the basis of the foregoing countervailing evidence of the parties, the trial court found, as regards private
respondents first cause of action, that while the contract appeared to be fair to both parties when it was
entered into by them during the first year of private respondents operation and when its Board of Directors did
not yet have any experience in that business, it had become disadvantageous and unfair to private respondent
because of subsequent events and conditions, particularly the increase in the volume of the subscribers of
petitioners for more than ten (10) years without the corresponding increase in the number of telephone
connections to private respondent free of charge. The trial court concluded that while in an action for
reformation of contract, it cannot make another contract for the parties, it can, however, for reasons of justice
and equity, order that the contract be reformed to abolish the inequities therein. Thus, said court ruled that the
contract should be reformed by ordering petitioners to pay private respondent compensation for the use of their
posts in Naga City, while private respondent should also be ordered to pay the monthly bills for the use of the
telephones also in Naga City. And taking into consideration the guidelines of the NEA on the rental of posts by
telephone companies and the increase in the costs of such posts, the trial court opined that a monthly rental of
P10.00 for each post of private respondent used by petitioners is reasonable, which rental it should pay from
the filing of the complaint in this case on January 2, 1989. And in like manner, private respondent should pay
petitioners from the same date its monthly bills for the use and transfers of its telephones in Naga City at the
same rate that the public are paying. cdll
On private respondent's second cause of action, the trial court found that the contract does not mention
anything about the use by petitioners of private respondent's posts outside Naga City. Therefore, the trial court
held that for reason of equity, the contract should be reformed by including therein the provision that for the use
of private respondent's posts outside Naga City, petitioners should pay a monthly rental of P10.00 per post, the
payment to start on the date this case was filed, or on January 2, 1989, and private respondent should also pay
petitioners the monthly dues on its telephone connections located outside Naga City beginning January, 1989.
And with respect to private respondent's third cause of action, the trial court found the claim not sufficiently
proved.
Thus, the following decretal portion of the trial court's decision dated July 20, 1990:
"WHEREFORE, in view of all the foregoing, decision is hereby rendered ordering the reformation
of the agreement (Exh. A); ordering the defendants to pay plaintiff's electric poles in Naga City and
in the towns of Milaor, Canaman, Maragao and Pili, Camarines Sur and in other places where
defendant NATELCO uses plaintiff's electric poles, the sum of TEN (P10.00) PESOS per plaintiff's
pole, per month beginning January, 1989 and ordering also the plaintiff to pay defendant
NATELCO the monthly dues of all its telephones including those installed at the residence of its
officers, namely; Engr. Joventino Cruz, Engr. Antonio Borja, Engr. Antonio Macandog, Mr. Jesus
Opiana and Atty. Luis General, Jr. beginning January, 1989. Plaintiff's claim for attorney's fees and
expenses of litigation and defendants' counterclaim are both hereby ordered dismissed. Without
pronouncement as to costs." llcd
Disagreeing with the foregoing judgment, petitioners appealed to respondent Court of Appeals. In the
decision dated May 28, 1992, respondent court affirmed the decision of the trial court, 5 but based on
different grounds to wit: (1) that Article 1267 of the New Civil Code is applicable and (2) that the contract was
subject to a potestative condition which rendered said condition void. The motion for reconsideration was
denied in the resolution dated September 10, 1992. 6Hence, the present petition.
Petitioners assign the following pertinent errors committed by respondent court:
1) in making a contract for the parties by invoking Article 1267 of the New Civil Code;
2) in ruling that prescription of the action for reformation of the contract in this case commenced
from the time it became disadvantageous to private respondent; and
3) in ruling that the contract was subject to a potestative condition in favor of petitioners.
Petitioners assert earnestly that Article 1267 of the New Civil Code is not applicable primarily because the
contract does not involve the rendition of service or a personal prestation and it is not for future service with
future unusual change. Instead, the ruling in the case Occea, et al. v. Jabson, etc, et al., 7 which interpreted
the article, should be followed in resolving this case. Besides, said article was never raised by the parties in
their pleadings and was never the subject of trial and evidence.
In applying Article 1267, respondent court rationalized:
"We agree with appellant that in order that an action for reformation of contract would lie and may
prosper, there must be sufficient allegations as well as proof that the contract in question failed to
frustrated
express the true intention of the parties due to error or mistake, accident, or fraud. Indeed, in
embodying the equitable remedy of reformation of instruments in the New Civil Code, the Code
Commission gave its reasons as follows:
'Equity dictates the reformation of an instrument in order that the true intention of the
contracting parties may be expressed. The courts by the reformation do not attempt to
make a new contract for the parties, but to make the instrument express their real
agreement. The rationale of the doctrine is that it would be unjust and inequitable to
allow the enforcement of a written instrument which does not reflect or disclose the real
meeting of the minds of the parties. The rigor of the legalistic rule that a written
instrument should be the final and inflexible criterion and measure of the rights and
obligations of the contracting parties is thus tempered to forestall the effects of mistake,
fraud, inequitable conduct, or accident.' (pp. 55-56, Report of Code Commission)
Thus, Articles 1359, 1361, 1362, 1363 and 1364 of the New Civil Code provide in essence that
where through mistake or accident on the part of either or both of the parties or mistake or fraud
on the part of the clerk or typist who prepared the instrument, the true intention of the parties is not
expressed therein, then the instrument may be reformed at the instance of either party if there was
mutual mistake on their part, or by the injured party if only he was mistaken. cdphil
Here, plaintiff-appellee did not allege in its complaint, nor does its evidence prove, that there was
a mistake on its part or mutual mistake on the part of both parties when they entered into the
agreement Exh. "A", and that because of this mistake, said agreement failed to express their true
intention. Rather, plaintiff's evidence shows that said agreement was prepared by Atty. Luciano
Maggay, then a member of plaintiff's Board of Directors and its legal counsel at that time, who was
also the legal counsel for defendant-appellant, so that as legal counsel for both companies and
presumably with the interests of both companies in mind when he prepared the aforesaid
agreement, Atty. Maggay must have considered the same fair and equitable to both sides, and
this was affirmed by the lower court when it found said contract to have been fair to both parties at
the time of its execution. In fact, there were no complaints on the part of both sides at the time of
and after the execution of said contract, and according to 73-year old Justino de Jesus, Vice
President and General manager of appellant at the time who signed the agreement Exh. "A" in its
behalf and who was one of the witnesses for the plaintiff (sic), both parties complied with said
contract 'from the very beginning' (p. 5, tsn, April 17, 1989).
That the aforesaid contract has become iniquitous or unfavorable or disadvantageous to the
plaintiff with the expansion of the business of appellant and the increase in the volume of its
subscribers in Naga City and environs through the years, necessitating the stringing of more and
bigger telephone cable wires by appellant to plaintiff's electric posts without a corresponding
increase in the ten (10) telephone connections given by appellant to plaintiff free of charge in the
agreement Exh. "A" as consideration for its use of the latter's electric posts in Naga City, appear,
however, undisputed from the totality of the evidence on record and the lower court so found. And
it was for this reason that in the later (sic) part of 1982 or 1983 (or five or six years after the
subject agreement was entered into by the parties), plaintiff's Board of Directors already asked
Atty. Luis General who had become their legal counsel in 1982, to study said agreement which
they believed had become disadvantageous to their company and to make the proper
recommendation, which study Atty. General did, and thereafter, he already recommended to the
Board the filing of a court action to reform said contract, but no action was taken on Atty. General's
recommendation because the former general managers of plaintiff wanted to adopt a soft
approach in discussing the matter with appellant, until, during the term of General Manager Henry
Pascual, the latter, after failing to settle the problem with Atty. Luciano Maggay who had become
the president and general manager of appellant, already agreed for Atty. General's filing of the
present action. The fact that said contract has become iniquitous or disadvantageous to plaintiff as
the years went by did not, however, give plaintiff a cause of action for reformation of said contract,
for the reasons already pointed out earlier. But this does not mean that plaintiff is completely
without a remedy, for we believe that the allegations of its complaint herein and the evidence it
has presented sufficiently make out a cause of action under Art. 1267 of the New Civil Code for its
release from the agreement in question. LibLex
xxx xxx xxx
The understanding of the parties when they entered into the Agreement Exh. "A" on November 1,
1977 and the prevailing circumstances and conditions at the time, were described by Dioscoro
Ragragio, the President of plaintiff in 1977 and one of its two officials who signed said agreement
in its behalf, as follows:
'Our understanding at that time is that we will allow NATELCO to utilize the posts of
CASURECO II only in the City of Naga because at that time the capability of NATELCO
was very limited, as a matter of fact we do [sic] not expect to be able to expand because
of the legal squabbles going on in the NATELCO. So, even at that time there were so
many subscribers in Naga City that cannot be served by the NATELCO, so as a matter
of public service we allowed them to sue (sic) our posts within the Naga City.' (p. 8, tsn
April 3, 1989)
Ragragio also declared that while the telephone wires strung to the electric posts of plaintiff were
very light and that very few telephone lines were attached to the posts of CASURECO II in 1977,
said posts have become 'heavily loaded' in 1989 (tsn, id.).
In truth, as also correctly found by the lower court, despite the increase in the volume of
appellant's subscribers and the corresponding increase in the telephone cables and wires strung
by it to plaintiff's electric posts in Naga City for the more 10 years that the agreement Exh. "A" of
the parties has been in effect, there has been no corresponding increase in the ten (10) telephone
units connected by appellant free of charge to plaintiff's offices and other places chosen by
plaintiff's general manager which was the only consideration provided for in said agreement for
appellant's use of plaintiff's electric posts. Not only that, appellant even started using plaintiff's
electric posts outside Naga City although this was not provided for in the agreement Exh. "A" as it
extended and expanded its telephone services to towns outside said city. Hence, while very few of
plaintiff's electric posts were being used by appellant in 1977 and they were all in the City of Naga,
the number of plaintiff's electric posts that appellant was using in 1989 had jumped to 1,403,192 of
which are outside Naga City (Exh. "B"). Add to this the destruction of some of plaintiff's poles
during typhoons like the strong typhoon Sisang in 1987 because of the heavy telephone cables
attached thereto, and the escalation of the costs of electric poles from 1977 to 1989, and the
conclusion is indeed ineluctable that the agreement Exh. "A" has already become too one-sided in
favor of appellant to the great disadvantage of plaintiff, in short, the continued enforcement of said
contract has manifestly gone far beyond the contemplation of plaintiff, so much so that it should
now be released therefrom under Art. 1267 of the New Civil Code to avoid appellant's unjust
enrichment at its (plaintiff's) expense. As stated by 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 (IV Tolentino, Civil Code of the Philippines, 1986 ed., pp. 247-248). LexLib
We therefore, find nothing wrong with the ruling of the trial court, although based on a different
and wrong premise (i.e., reformation of contract), that from the date of the filing of this case,
appellant must pay for the use of plaintiff's electric posts in Naga City at the reasonable monthly
rental of P10.00 per post, while plaintiff should pay appellant for the telephones in the same City
that it was formerly using free of charge under the terms of the agreement Exh. "A" at the same
rate being paid by the general public. In affirming said ruling, we are not making a new contract for
the parties herein, but we find it necessary to do so in order not to disrupt the basic and essential
services being rendered by both parties herein to the public and to avoid unjust enrichment by
appellant at the expense of plaintiff, said arrangement to continue only until such time as said
frustrated
 parties can re-negotiate another agreement over the same subject-matter covered by the
agreement Exh. "A". Once said agreement is reached and executed by the parties, the aforesaid
ruling of the lower court and affirmed by us shall cease to exist and shall be substituted and
superseded by their new agreement. . . ." 8
Article 1267 speaks of "service" which has become so difficult. Taking into consideration the rationale behind
this provision, 9 the term "service" should be understood as referring to the "performance" of the obligation. In
the present case, the obligation of private respondent consists in allowing petitioners to use its posts in Naga
City, which is the service contemplated in said article. Furthermore, a bare reading of this article reveals that it
is not a requirement thereunder that the contract be for future service with future unusual change. According to
Senator Arturo M. Tolentino, 10 Article 1267 states in our law the doctrine of unforeseen events. This is said to
be based on the discredited theory of rebus sic stantibus in public international law; under this theory, the
parties stipulate in the light of certain prevailing conditions, and once these conditions cease to exist the
contract also ceases to exist. Considering practical needs and the demands of equity and good faith, the
disappearance of the basis of a contract gives rise to a right to relief in favor of the party prejudiced.
In a nutshell, private respondent in the Occea case filed a complaint against petitioner before the trial court
praying for modification of the terms and conditions of the contract that they entered into by fixing the proper
shares that should pertain to them out of the gross proceeds from the sales of subdivided lots. We ordered the
dismissal of the complaint therein for failure to state a sufficient cause of action. We rationalized that the Court
of Appeals misapplied Article 1267 because:
". . . respondent's complaint seeks not release from the subdivision contract but that the court
'render judgment modifying the terms and conditions of the contract . . . by fixing the proper
shares that should pertain to the herein parties out of the gross proceeds from the sales of
subdivided lots of subject subdivision'. The cited article (Article 1267) does not grant the courts
(the) authority to remake, modify or revise the contract or to fix the division of shares between the
parties as contractually stipulated with the force of law between the parties, so as to substitute its
own terms for those covenanted by the parties themselves. Respondent's complaint for
modification of contract manifestly has no basis in law and therefore states no cause of action.
Under the particular allegations of respondent's complaint and the circumstances therein averred,
the courts cannot even in equity the relief sought." 11
The ruling in the Occea case is not applicable because we agree with respondent court that the allegations
in private respondent's complaint and the evidence it has presented sufficiently made out a cause of action
under Article 1267. We, therefore, release the parties from their correlative obligations under the contract.
However, our disposition of the present controversy does not end here. We have to take into account the
possible consequences of merely releasing the parties therefrom: petitioners will remove the telephone
wires/cables in the posts of private respondent, resulting in disruption of their essential service to the public;
while private respondent, in consonance with the contract 12 will return all the telephone units to petitioners,
causing prejudice to its business. We shall not allow such eventuality. Rather, we require, as ordered by the
trial court: 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 (P10.00) 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. The peculiar circumstances of the present case, as distinguished further
from the Occea case, necessitates exercise of our equity jurisdiction. 13 By way of emphasis, we reiterate
the rationalization of respondent court that: cdll
". . . In affirming said ruling, we are not making a new contract for the parties herein, but we find it
necessary to do so in order not to disrupt the basic and essential services being rendered by both
parties herein to the public and to avoid unjust enrichment by appellant at the expense of plaintiff .
. . ." 1 4
Petitioners' assertion that Article 1267 was never raised by the parties in their pleadings and was never the
subject of trial and evidence has been passed upon by respondent court in its well reasoned resolution, which
we hereunder quote as our own:
"First, we do not agree with defendant-appellant that in applying Art. 1267 of the New Civil Code to
this case, we have changed its theory and decided the same on an issue not invoked by plaintiff in
the lower court. For basically, the main and pivotal issue in this case is whether the continued
enforcement of the contract Exh. "A" between the parties has, through the years (since 1977),
become too iniquitous or disadvantageous to the plaintiff and too one-sided in favor of defendant-
appellant, so that a solution must be found to relieve plaintiff from the continued operation of said
agreement and to prevent defendant-appellant from further unjustly enriching itself at plaintiff's
expense. It is indeed unfortunate that defendant had turned deaf ears to plaintiff's requests for
renegotiation, constraining the latter to go to court. But although plaintiff cannot, as we have held,
correctly invoke reformation of contract as a proper remedy (there having been no showing of a
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), this does not mean that plaintiff is absolutely without a remedy in order
to relieve itself from a contract that has gone far beyond its contemplation and has become highly
iniquitous and disadvantageous to it through the years because of the expansion of defendant-
appellant's business and the increase in the volume of its subscribers. And as it is the duty of the
Court to administer justice, it must do so in this case in the best way and manner it can in the light
of the proven facts and the law or laws applicable thereto. cdphil
It is settled that when the trial court decides a case in favor of a party on a certain ground, the
appellate court may uphold the decision below upon some other point which was ignored or
erroneously decided by the trial court (Garcia Valdez v. Tuazon, 40 Phil. 943; Relativo v. Castro,
76 Phil. 563; Carillo v. Salak de Paz, 18 SCRA 467). Furthermore, the appellate court has the
discretion to consider an unassigned error that is closely related to an error properly assigned
(Paterno v. Jao Yan, 1 SCRA 631; Hernandez v. Andal, 78 Phil. 196). It has also been held that
the Supreme Court (and this Court as well) has the authority to review matters, even if they are
not assigned as errors in the appeal, if it is found that their consideration is necessary in arriving at
a just decision of the case (Saura Import & Export Co., Inc. v. Phil. International Surety Co. and
PNB, 8 SCRA 143). For it is the material allegations of fact in the complaint, not the legal
conclusion made therein or the prayer, that determines the relief to which the plaintiff is entitled,
and the plaintiff is entitled to as much relief as the facts warrant although that relief is not
specifically prayed for in the complaint (Rosales v. Reyes and Ordoveza, 25 Phil. 495; Cabigao v.
Lim, 50 Phil. 844; Baguioro v. Barrios, 77 Phil. 120). To quote an old but very illuminating decision
of our Supreme Court through the pen of American jurist Adam C. Carson:
'Under our system of pleading it is the duty of the courts to grant the relief to which the
parties are shown to be entitled by the allegations in their pleadings and the facts
proven at the trial, and the mere fact that they themselves misconstrue the legal effects
of the facts thus alleged and proven will not prevent the court from placing the just
construction thereon and adjudicating the issues accordingly.' (Alzua v. Johnson, 21
Phil. 308)
And in the fairly recent case of Caltex Phil. Inc. v. IAC, 176 SCRA 741, the Honorable Supreme
Court also held:
'We rule that the respondent court did not commit any error in taking cognizance of the
aforesaid issues, although not raised before the trial court. The presence of strong
consideration of substantial justice has led this Court to relax the well-entrenched rule
that, except questions on jurisdiction, no question will be entertained on appeal unless it
has been raised in the court below and it is within the issues made by the parties in their
pleadings (Cordero v. Cabral, L-36789, July 25, 1983, 123 SCRA 532). . . .'
We believe that the above authorities suffice to show that this Court did not err in applying Art.
1267 of the New Civil Code to this case. Defendant-appellant stresses that the applicability of said
provision is a question of fact, and that it should have been given the opportunity to present
evidence on said question. But defendant-appellant cannot honestly and truthfully claim that it
frustrated
 (did) not (have) the opportunity to present evidence on the issue of whether the continued
operation of the contract Exh. "A" has now become too one-sided in its favor and too iniquitous,
unfair, and disadvantageous to plaintiff. As held in our decision, the abundant and copious
evidence presented by both parties in this case and summarized in said decision established the
following essential and vital facts which led us to apply Art. 1267 of the New Civil Code to this
case: Cdpr
xxx xxx xxx." 15
On the issue of prescription of private respondent's action for reformation of contract, petitioners allege that
respondent court's ruling that the right of action "arose only after said contract had already become
disadvantageous and unfair to it due to subsequent events and conditions, which must be sometime during the
latter part of 1982 or in 1983 . . ." 16 is erroneous. In reformation of contracts, what is reformed is not the
contract itself, but the instrument embodying the contract. It follows that whether the contract is
disadvantageous or not irrelevant to reformation and therefore, cannot be an element in the determination of
the period for prescription of the action to reform.
Article 1144 of the New Civil Code provides, inter alia, that an action upon a written contract must be brought
within ten (10) years from the time the right of the action accrues. Clearly, the ten (10) year period is to be
reckoned from the time the right of action accrues which is not necessarily the date of execution of the contract.
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) (p.
31, tsn, May 8, 1989). (Private respondent's) cause of action to ask for reformation of said contract should thus
be considered to have arisen only in 1982 or 1983, and from 1982 to January 2, 1989 when the complaint in
this case was filed, ten (10) years had not yet elapsed." 17
Regarding the last issue, petitioners allege that there is nothing purely potestative about the prestations of
either party because petitioner's permission for free use of telephones is not made to depend purely on their
will, neither is private respondent's permission for free use of its posts dependent purely on its will. llcd
Apart from applying Article 1267, respondent court cited another legal remedy available to private respondent
under the allegations of its complaint and the preponderant evidence presented by it:
". . . we believe that the provision in said agreement
'(a) That the term or period of this contract shall be as long as the party of the first part [herein
appellant] has need for the electric light posts of the party of the second part [herein plaintiff] it
being understood that this contract shall terminate when for any reason whatsoever, the party of
the second part is forced to stop, abandoned [sic] its operation as a public service and it becomes
necessary to remove the electric light post [sic]'; (Emphasis supplied)
The above can also be said of the agreement Exh. "A" between the parties in this case. There is
no mutuality and equality between them under the afore-quoted provision thereof since the life and
continuity of said agreement is made to depend as long as appellant needs plaintiff's electric
posts. And this is precisely why, since 1977 when said agreement was executed and up to 1989
when this case was finally filed by plaintiff, it could do nothing to be released from or terminate
said agreement notwithstanding that its continued effectivity has become very disadvantageous
and iniquitous to it due to the expansion and increase of appellant's telephone services within
Naga City and even outside the same, without a corresponding increase in the ten (10) telephone
units being used by plaintiff free of charge, as well as the bad and inefficient service of said
telephones to the prejudice and inconvenience of plaintiff and its customers. . . ." 18
Petitioners' allegations must be upheld in this regard. A potestative condition is a condition, the fulfillment of
which depends upon the sole will of the debtor, in which case, the conditional obligation is void. 19 Based on
this definition, respondent court's finding that the provision in the contract, to wit:
"(a) That the term or period of this contract shall be as long as the party of the first part (petitioner)
has need for the electric light posts of the party of the second part (private respondent) . . ." LLjur
is a potestative condition, is correct. However, it must have overlooked the other conditions in the same
provision, to wit:
". . . it being understood that this contract shall terminate when for any reason whatsoever, the
party of the second part (private respondent) is forced to stop, abandoned (sic) its operation as a
public service and it becomes necessary to remove the electric light post (sic);"
which are casual conditions since they depend on chance, hazard, or the will of a third person. 20 In sum,
the contract is subject to mixed conditions, that is, they depend partly on the will of the debtor and partly on
chance, hazard or the will of a third person, which do not invalidate the aforementioned provision. 21
Nevertheless, in view of our discussions under the first and second issues raised by petitioners, there is no
reason to set aside the questioned decision and resolution of respondent court.
WHEREFORE, the petition is hereby DENIED. The decision of the Court of Appeals dated May 28, 1992 and
its resolution dated September 10, 1992 are AFFIRMED.
SO ORDERED.
Narvasa, C .J ., Padilla, Regalado and Puno, JJ ., concur.
||| (Naga Telephone Co., Inc. v. Court of Appeals, G.R. No. 107112, [February 24, 1994], 300 PHIL 367-389)

is invalid for being purely potestative on the part of appellant as it leaves the continued effectivity
of the aforesaid agreement to the latter's sole and exclusive will as long as plaintiffs is in
operation. A similar provision in a contract of lease wherein the parties agreed that the lessee
could stay on the leased premises 'for as long as the defendant needed the premises and can
meet and pay said increases' was recently held by the Supreme Court in Lim v. C.A., 191 SCRA
150, citing the much earlier case of Encarnacion v. Baldomar, 77 Phil. 470, as invalid for being 'a
purely potestative condition because it leaves the effectivity and enjoyment of leasehold rights to
the sole and exclusive will of the lessee.' Further held the High Court in the Lim case: llcd

'The continuance, effectivity and fulfillment of a contract of lease cannot be made to

depend exclusively upon the free and uncontrolled choice of the lessee between
continuing the payment of the rentals or not, completely depriving the owner of any say
in the matter. Mutuality does not obtain in such a contract of lease of no equality exists THIRD DIVISION
between the lessor and the lessee since the life of the contract is dictated solely by the
lessee.'
[G.R. No. 96053. March 3, 1993.]
frustrated
 JOSEFINA TAYAG, RICARDO GALICIA, TERESITA GALICIA, EVELYN GALICIA, JUAN
GALICIA, JR. and RODRIGO GALICIA, petitioners, vs. COURT OF APPEALS and ALBRIGIDO
LEYVA, respondents.
Facundo T. Bautista for petitioners.
Jesus T. Garcia for private respondent.
SYLLABUS
1. CIVIL LAW; CONTRACTS; RESCISSION; WAIVER OF RIGHT THERETO. The suggestion of petitioners
that the covenant must be cancelled in the light of private respondent's so-called breach seems to overlook
petitioners' demeanor who, instead of immediately filing the case precisely to rescind the instrument because
of non-compliance, allowed private respondent to effect numerous payments posterior to the grace periods
provided in the contract. This apathy of petitioners who even permitted private respondent to take the initiative
in filing the suit for specific performance against them, is akin to waiver or abandonment of the right to rescind
normally conferred by Article 1191 of the Civil Code. As aptly observed by Justice Gutierrez, Jr. in Angeles vs.
Calasanz (135 SCRA 323 [1985]; 4 Paras, Civil Code of the Philippines Annotated, Twelfth Ed. [1989], p. 203):
". . . We agree with the plaintiffs-appellees that when the defendants-appellants, instead of availing of their
alleged right to rescind, have accepted and received delayed payments of installments, though the plaintiffs-
appellees have been in arrears beyond the grace period mentioned in paragraph 6 of the contract, the
defendants-appellants have waived, and are now estopped from exercising their alleged right of rescission . . ."
In Development Bank of the Philippines vs. Sarandi (5 CAR (25) 811; 817-818; cited in 4 Padilla, Civil Code
Annotated, Seventh Ed. [1987], pp. 212-213) a similar opinion was expressed to the effect that: "In a perfected
contract of sale of land under an agreed schedule of payments, while the parties may mutually oblige each
other to compel the specific performance of the monthly amortization plan, and upon failure of the buyer to
make the payment, the seller has the right to ask for a rescission of the contract under Art. 1191 of the Civil
Code, this shall be deemed waived by acceptance of posterior payments." Both the trial and appellate courts
were, therefore, correct in sustaining the claim of private respondent anchored on estoppel or waiver by
acceptance of delayed payments under Article 1235 of the Civil Code in that: "When the obligee accepts the
performance, knowing its incompleteness or irregularity, and without expressing any protest or objection, the
obligation is deemed fully complied with."
2. ID.; ID.; IN RECIPROCAL CONTRACTS BOTH PARTIES ARE CONSIDERED MUTUALLY OBLIGORS
AND OBLIGEES OF EACH OTHER. Respondent court applied Article 1186 of the Civil Code on
constructive fulfillment which petitioners claim should not have been appreciated because they are the obligees
while the provisoin point speaks of the obligor. But, petitioners must concede that in a reciprocal obligation like
a contract of purchase (Ang vs. Court of Appeals, 170 SCRA 286 [1989]; 4 Paras, supra, at p. 201), both
parties are mutually obligors and also obligees (4 Padilla, supra, at p. 197), and any of the contracting parties
may, upon non-fulfillment by the other privy of his part of the prestation, rescind the contract or seek fulfillment
(Article 1191, Civil Code). In short, it is puerile for petitioners to say that they are the only obligees under the
contract since they are also bound as obligors to respect the stipulation in permitting private respondent to
assume the loan with the Philippine Veterans Bank which petitioners impeded when they paid the balance of
said loan. As vendors, they are supposed to execute the final deed of sale upon full payment of the balance as
determined hereafter.
DECISION
MELO, J p:
The deed of conveyance executed on May 28, 1975 by Juan Galicia, Sr., prior to his demise in 1979, and
Celerina Labuguin, in favor of Albrigido Leyva involving the undivided one-half portion of a piece of land
situated at Poblacion, Guimba, Nueva Ecija for the sum of P50,000.00 under the following terms:
"1. The sum of PESOS: THREE THOUSAND (P3,000.00) is HEREBY acknowledged to have
been paid upon the execution of this agreement;
2. The sum of PESOS: TEN THOUSAND (P10,000.00) shall be paid within ten (10) days from and
after the execution of this agreement;
3. The sum of PESOS: TEN THOUSAND (P10,000.00) represents the VENDORS' indebtedness
with the Philippine Veterans Bank which is hereby assumed by the VENDEE; and
4. The balance of PESOS: TWENTY SEVEN THOUSAND (P27,000.00) shall be paid within one
(1) year from and after the execution of this instrument." (p. 53, Rollo). cdll0
is the subject matter of the present litigation between the heirs of Juan Galicia, Sr. who assert breach of the
conditions as against private respondent's claim anchored on full payment and compliance with the
stipulations thereof.
The court of origin which tried the suit for specific performance filed by private respondent on account of the
herein petitioners' reluctance to abide by the covenant, ruled in favor of the vendee (p. 64, Rollo) while
respondent court practically agreed with the trial court except as to the amount to be paid to petitioners and the
refund to private respondent are concerned (p. 46, Rollo).
There is no dispute that the sum of P3,000.00 listed as first installment was received by Juan Galicia, Sr.
According to petitioners, of the P10,000.00 to be paid within ten days from execution of the instrument, only
P9,707.00 was tendered to, and received by, them on numerous occasions from May 29, 1975, up to
November 3, 1979. Concerning private respondent's assumption of the vendors' obligation to the Philippine
Veterans Bank, the vendee paid only the sum of P6,926.41 while the difference of the indebtedness came from
Celerina Labuguin (p. 73, Rollo). Moreover, petitioners asserted that not a single centavo of the P27,000.00
representing the remaining balance was paid to them. Because of the apprehension that the heirs of Juan
Galicia, Sr. are disavowing the contract inked by their predecessor, private respondent filed the complaint for
specific performance.
In addressing the issue of whether the conditions of the instrument were performed by herein private
respondent as vendee, the Honorable Godofredo G. Rilloraza, Presiding Judge of Branch 31 of the Regional
Trial Court, Third Judicial Region stationed at Guimba, Nueva Ecija, decided to uphold private respondent's
theory on the basis of constructive fulfillment under Article 1186 and estoppel through acceptance of piecemeal
payments in line with Article 1235 of the Civil Code.
Anent the P10,000.00 specified as second installment, the lower court counted against the vendors the candid
statement of Josefina Tayag who sat on the witness stand and made the admission that the check issued as
payment thereof was nonetheless paid on a staggered basis when the check was dishonored (TSN,
September 1, 1983, pp. 3-4; p. 3, Decision; p. 66, Rollo). Regarding the third condition, the trial court noted that
plaintiff below paid more than P6,000.00 to the Philippine Veterans Bank but Celerina Labuquin, the sister and
co-vendor of Juan Galicia, Sr. paid P3,778.77 which circumstance was construed to be a ploy under Article
1186 of the Civil Code that "prematurely prevented plaintiff from paying the installment fully" and "for the
purpose of withdrawing the title to the lot". The acceptance by petitioners of the various payments even beyond
the periods agreed upon, was perceived by the lower court as tantamount to faithful performance of the
obligation pursuant to Article 1235 of the Civil Code. Furthermore, the trial court noted that private respondent
consigned P18,520.00, an amount sufficient to offset the remaining balance, leaving the sum of P1,315.00 to
be credited to private respondent.
On September 12, 1984, judgment was rendered:
frustrated
 "1. Ordering the defendants heirs of Juan Galicia, to execute the Deed of Sale of their
undivided ONE HALF (1/2) portion of Lot No. 1130, Guimba Cadastre, covered by TCT No. NT-
120563, in favor of plaintiff Albrigido Leyva, with an equal frontage facing the national road upon
finality of judgment; that, in their default, the Clerk of Court II, is hereby ordered to execute the
deed of conveyance in line with the provisions of Section 10, Rule 39 of the Rules of Court; prcd
2. Ordering the defendants, heirs of Juan Galicia, jointly and severally to pay attorney's fees of
P6,000.00 and the further sum of P3,000.00 for actual and compensatory damages;
3. Ordering Celerina Labuguin and the other defendants herein to surrender to the Court the
owner's duplicate of TCT No. NT-120563, province of Nueva Ecija, for the use of plaintiff in
registering the portion, subject matter of the instant suit;
4. Ordering the withdrawal of the amount of P18,520.00 now consigned with the Court, and the
amount of P17,204.75 be delivered to the heirs of Juan Galicia as payment of the balance of the
sale of the lot in question, the defendants herein after deducting the amount of attorney's fees and
damages awarded to the plaintiff hereof and the delivery to the plaintiff of the further sum of
P1,315.25 excess or over payment and, defendants to pay the cost of the suit." (p. 69, Rollo).
and following the appeal interposed with respondent court, Justice Dayrit with whom Justices Purisima and
Aldecoa, Jr. concurred, modified the fourth paragraph of the decretal portion to read:
"4. Ordering the withdrawal of the amount of P18,500.00 now consigned with the Court, and that
the amount of P16,870.52 be delivered to the heirs of Juan Galicia, Sr. as payment to the unpaid
balance of the sale, including the reimbursement of the amount paid to Philippine Veterans Bank,
minus the amount of attorney's fees and damages awarded in favor of plaintiff. The excess of
P1,649.48 will be returned to plaintiff. The costs against defendants." (p. 51, Rollo).
As to how the foregoing directive was arrived at, the appellate court declared:
"With respect to the fourth condition stipulated in the contract, the period indicated therein
is deemed modified by the parties when the heirs of Juan Galicia, Sr. accepted payments without
objection up to November 3, 1979. On the basis of receipts presented by appellee commencing
from August 8, 1975 up to November 3, 1979, a total amount of P13,908.25 has been paid, thereby
leaving a balance of P13,091.75. Said unpaid balance plus the amount reimbursable to appellant in
the amount of P3,778.77 will leave an unpaid total of P16,870.52. Since appellee consigned in court
the sum of P18,500.00, he is entitled to get the excess of P1,629.48. Thus, when the heirs of Juan
Galicia, Sr. (obligees) accepted the performance, knowing its incompleteness or irregularity and
without expressing any protest or objection, the obligation is deemed fully complied with (Article
1235, Civil Code)." (p. 50, Rollo)
Petitioners are of the impression that the decision appealed from, which agreed with the conclusions of the trial
court, is vulnerable to attack via the recourse before Us on the principal supposition that the full consideration
of the agreement to sell was not paid by private respondent and, therefore, the contract must be rescinded.
The suggestion of petitioners that the covenant must be cancelled in the light of private respondent's so-called
breach seems to overlook petitioners' demeanor who, instead of immediately filing the case precisely to rescind
the instrument because of non-compliance, allowed private respondent to effect numerous payments posterior
to the grace periods provided in the contract. This apathy of petitioners who even permitted private respondent
to take the initiative in filing the suit for specific performance against them, is akin to waiver or abandonment of
the right to rescind normally conferred by Article 1191 of the Civil Code. As aptly observed by Justice Gutierrez,
Jr. in Angeles vs. Calasanz (135 SCRA 323 [1985]; 4 Paras, Civil Code of the Philippines Annotated, Twelfth
Ed. [1989], p. 203): prcd
" . . . We agree with the plaintiffs-appellees that when the defendants-appellants, instead of
availing of their alleged right to rescind, have accepted and received delayed payments of
installments, though the plaintiffs-appellees have been in arrears beyond the grace period
mentioned in paragraph 6 of the contract, the defendants-appellants have waived, and are now
estopped from exercising their alleged right of rescission . . . "
In Development Bank of the Philippines vs. Sarandi (5 CAR (25) 811; 817-818; cited in 4 Padilla, Civil Code
Annotated, Seventh Ed. [1987], pp. 212-213) a similar opinion was expressed to the effect that:
"In a perfected contract of sale of land under an agreed schedule of payments, while the parties
may mutually oblige each other to compel the specific performance of the monthly amortization
plan, and upon failure of the buyer to make the payment, the seller has the right to ask for a
rescission of the contract under Art. 1191 of the Civil Code, this shall be deemed waived by
acceptance of posterior payments."
Both the trial and appellate courts were, therefore, correct in sustaining the claim of private respondent
anchored on estoppel or waiver by acceptance of delayed payments under Article 1235 of the Civil Code in
that:
"When the obligee accepts the performance, knowing its incompleteness or irregularity, and
without expressing any protest or objection, the obligation is deemed fully complied with."
considering that the heirs of Juan Galicia, Sr. accommodated private respondent by accepting the latter's
delayed payments not only beyond the grace periods but also during the pendency of the case for specific
performance (p. 27, Memorandum for petitioners; p. 166, Rollo). Indeed, the right to rescind is not absolute
and will not be granted where there has been substantial compliance by partial payments (4 Caguioa,
Comments and Cases on Civil Law, First Ed. [1968], p. 132). By and large, petitioners' actuation is
susceptible of but one construction that they are now estopped from reneging from their commitment on
account of acceptance of benefits arising from overdue accounts of private respondent.
Now, as to the issue of whether payments had in fact been made, there is no doubt that the second installment
was actually paid to the heirs of Juan Galicia, Sr. due to Josefina Tayag's admission in judicio that the sum of
P10,000.00 was fully liquidated. It is thus erroneous for petitioners to suppose that "the evidence in the records
do not support this conclusion" (p. 18, Memorandum for Petitioners; p. 157, Rollo). A contrario, when the court
of origin, as well as the appellate court, emphasized the frank representation along this line of Josefina Tayag
before the trial court (TSN, September 1, 1983, pp. 3-4; p. 5, Decision in CA-G.R. CV No. 13339, p. 50, Rollo;
p. 3, Decision in Civil Case No. 681-G, p. 66, Rollo), petitioners chose to remain completely mute even at this
stage despite the opportunity accorded to them, for clarification. Consequently, the prejudicial aftermath of
Josefina Tayag's spontaneous reaction may no longer be obliterated on the basis of estoppel (Article 1431,
Civil Code; Section 4, Rule 129; Section 2(a), Rule 131, Revised Rules on Evidence).
Insofar as the third item of the contract is concerned, it may be recalled that respondent court applied Article
1186 of the Civil Code on constructive fulfillment which petitioners claim should not have been appreciated
because they are the obligees while the proviso in point speaks of the obligor. But, petitioners must concede
that in a reciprocal obligation like a contract of purchase (Ang vs. Court of Appeals, 170 SCRA 286 [1989];
4 Paras, supra, at p. 201), both parties are mutually obligors and also obligees (4 Padilla, supra, at p. 197),
and any of the contracting parties may, upon non-fulfillment by the other privy of his part of the prestation,
rescind the contract or seek fulfillment (Article 1191, Civil Code). In short, it is puerile for petitioners to say that
they are the only obligees under the contract since they are also bound as obligors to respect the stipulation in
permitting private respondent to assume the loan with the Philippine Veterans Bank which petitioners impeded
when they paid the balance of said loan. As vendors, they are supposed to execute the final deed of sale upon
full payment of the balance as determined hereafter. LibLex
Lastly, petitioners argue that there was no valid tender of payment nor consignation of the sum of P18,520.00
which they acknowledge to have been deposited in court on January 22, 1981 five years after the amount of
P27,000.00 had to be paid (p. 23, Memorandum for Petitioners; p. 162, Rollo). Again this suggestion ignores
the fact that consignation alone produced the effect of payment in the case at bar because it was established
below that two or more heirs of Juan Galicia, Sr. claimed the same right to collect (Article 1256, (4), Civil Code;
pp. 4-5, Decision in Civil Case No. 681-G; pp. 67-68, Rollo). Moreover, petitioners did not bother to refute the
evidence on hand that, aside from the P18,520.00 (not P18,500.00 as computed by respondent court) which
was consigned, private respondent also paid the sum of P13,908.25 (Exhibits "F" to "CC"; p. 50, Rollo). These
frustrated
two figures representing private respondent's payment of the fourth condition amount to P32,428.25, less the
P3,778.77 paid by petitioners to the bank, will lead us to the sum of P28,649.48 or a refund of P1,649.48 to
private respondent as overpayment of the P27,000.00 balance.
WHEREFORE, the petition is hereby DISMISSED and the decision appealed from is hereby AFFIRMED with
the slight modification of Paragraph 4 of the dispositive thereof which is thus amended to read:
"4. ordering the withdrawal of the sum of P18,520.00 consigned with the Regional Trial Court, and
that the amount of P16,870.52 be delivered by private respondent with legal rate of interest until
fully paid to the heirs of Juan Galicia, Sr. as balance of the sale including reimbursement of the
sum paid to the Philippine Veterans Bank, minus the attorney's fees and damages awarded in
favor of private respondent. The excess of P1,649.48 shall be returned to private respondent also
with legal interest until fully paid by petitioners. With costs against petitioners." cdrep
SO ORDERED.
Feliciano, Bidin, Davide, Jr. and Romero, JJ ., concur.
Gutierrez, Jr., J ., is on terminal leave.
||| (Tayag v. Court of Appeals, G.R. No. 96053, [March 3, 1993])
FIRST DIVISION
[G.R. No. 149140. September 12, 2006.]
VICTORIA ONG, petitioner, vs. ERNESTO BOGALBAL 1 and HON. COURT OF
APPEALS, respondents.
DECISION
CHICO-NAZARIO, J p:
In this Special Civil Action for Certiorari under Rule 65 of the Rules of Court, petitioner seeks the nullification of
a 22 May 2001 Court of Appeals Resolution denying her Motion for Reconsideration of a 31 March 2000
Decision. 2
The Court of Appeals found the facts to be as follows:
On January 2, 1995, [herein respondent] Ernesto Bogalbal, an architect-contractor doing
business under the name and style of E.B. Bogalbal Construction, entered into an "Owner-
Contractor Agreement" with [herein petitioner] Victoria Ong, a businesswoman, for the
construction of a proposed boutique owned by the latter to be known as Les Galeries de Paris
located at the 3rd Floor of the Shangri-La Plaza, Epifanio Delos Santos Avenue corner Shaw
Boulevard, Mandaluyong City (Exhibits "A" and "1", pp. 100-102, ibid). The agreement provides
that in consideration of the sum of two hundred thousand pesos (P200,000.00), the contractor
agrees to furnish labor, tools and equipment to complete the work on the boutique as per
specification within forty-five (45) days excluding Sundays from the date of delivery of the
construction materials. Payment by the owner shall be made by progress billing to be collected
every two (2) weeks based on the accomplishment of work value submitted by the contractor to
the owner as certified for payment by the architect assigned on site. The agreement likewise
provides for a change order as a result of fluctuation in the cost of labor. Moreover, should the
owner require the contractor to perform work over and above that required, the additional cost
shall be added to the contract amount and if ordered to omit work as required by their agreement,
the cost of work omitted shall be deducted from the contract amount.
Actual work on the project commenced on January 19, 1995. For work accomplished during the
period January 19 to 28, 1995, [respondent Bogalbal] submitted and was paid his progress billing
no. 1 in the sum of P35,950.00 equivalent to 17.975% of the total job to be performed (Exh. "E", p.
106, ibid). Partial billing nos. 2 and 3 for the period from January 29 to February 15, 1995 and
February 16 to March 3, 1995 in the sum of P69,000.00 and P41,500.00, equivalent to 34.65%
and 20.63% of the total job, respectively, were likewise made to respondent and paid for by the
latter (Exhs. "F" and "G", pp. 107-108, ibid.).
It is with respect to progress billing no. 4 that the present controversy arose. When [respondent
Bogalbal] submitted the fourth progress billing on March 31, 1995 for the period covering March
4 to 18, 1995, in the sum of P30,950.00 equivalent to 15.47% of the total job (Exh. "B", p.
103, ibid.), [petitioner Ong] refused to pay the same. As in the previous three billings, the fourth
billing was first evaluated and recommended for payment by Supervising Architect John Noel R.
Cano, an employee of Balce-Sindac and Associates, the principal designer of the [petitioner
Ong's] boutique (Exh. "H-1", p. 110, ibid.).
The reason for [petitioner Ong's] refusal to pay the fourth (4th) progress billing is not clear on the
record. It is [respondent Bogalbal's] contention that [petitioner Ong] refused to pay since she was
insisting that the flooring, which she asked to be changed from vinyl tiles to kenzo flooring where
polyurethane is to be used as coating, be first completed within three (3) days from April 22, 1995.
[Respondent Bogalbal], however, insisted that the same is not possible because the floor needed
to be cured first to avoid adverse chemical reaction of the polyurethane on the color of the flooring.
frustrated
 Due to the insistence of [petitioner Ong] that the flooring be finished in time for the arrival of the
furniture from abroad, [respondent Bogalbal] proceeded with the work but the rushed work
resulted in the reddish reaction of the polyurethane on the floor, which was not acceptable to
respondent (TSN, March 28, 1996, pp. 30-32; June 21, 1996, pp. 15-18).
On the other hand, [petitioner Ong] contends that her refusal to pay was because the fourth billing
was allegedly in excess and over the value of the work accomplished during the period. To settle
the matter, the parties purportedly met whereby [respondent Bogalbal] supposedly agreed to
finish the kenzo flooring on or before April 24, 1995 before [petitioner Ong] would pay the fourth
(4th) progress billing. However, instead of complying with his commitment, [respondent Bogalbal]
abandoned the project on April 24, 1995 when it became apparent that he could not complete the
kenzo flooring on the date agreed upon.
Due to [petitioner Ong's] continued refusal to pay [respondent Bogalbal's] fourth (4th) progress
billing despite written demands from his counsel (Exhs. "C" and "D", pp. 104-105, ibid), the latter
was constrained to file an action for sum of money with damages with the Metropolitan Trial Court
(MeTC) of Caloocan City. EHSADc
The complaint, which was docketed as Civil Case No. 22143 and raffled to Branch 49 of the court,
prayed for actual damages in the total sum of P50,450.00 representing P30,950.00 (4th progress
billing), P16,000.00 on the change order from vinyl tiles to kenzo flooring and an unidentified
amount. It likewise prayed for moral and exemplary damages, as well as attorney's fees.
In her answer with counterclaim, [petitioner Ong] refused payment of the fourth (4th) progress
billing since [respondent Bogalbal] failed to perform what was incumbent upon him under their
agreement, but instead abandoned the job to her great damage and prejudice. As to the
P16,000.00 value of the change order, she alleged that the same was premature since she had
never received any billing for said change order duly certified for payment and approved by the
Architect assigned on site. Besides, [petitioner Ong] averred that the P16,000.00 being charged by
[respondent Bogalbal] was grossly disproportionate with the quantity of the work actually
accomplished by the former. By way of counterclaim, [petitioner Ong] prayed for actual damages
by reason of [respondent Bogalbal's] refusal to finish the job agreed upon which forced her to
hire a new contractor to complete the same for which she paid the sum of P78,000.00 and for loss
of business opportunity in the amount of P50,000.00. She likewise prayed for moral, exemplary
and liquidated damages, as well as attorney's fees.
After trial on the merits, the [MeTC], in a Decision dated June 18, 1998, ruled in favor of
[respondent Bogalbal,] awarding to him the sum of P30,950.00 representing the fourth progress
billing, P13,000.00 representing the value of the accomplished work on the kenzo flooring,
P15,000.00 as attorney's fees, P20,000.00 and P25,000.00 as moral and exemplary damages,
respectively (p. 175, ibid.).
Aggrieved by the decision of the court, [petitioner Ong] elevated the case on appeal to the
Regional Trial Court (RTC) of Caloocan City. The appeal was docketed as Civil Case No. C-18466
and raffled to Branch 126 thereof.
The court a quo, after requiring the parties to submit their respective memoranda, reversed and
set aside the ruling of the MTC and rendered judgment in favor of [petitioner Ong] in a Decision
dated February 18, 1999 (p. 407, ibid.). It is worthy to note that although the RTC ruled in favor of
[petitioner Ong], it did not specify the relief granted to her in the dispositive portion of its
decision. 3
Respondent Bogalbal then filed a Petition for Review with the Court of Appeals. On 31 March 2000, the Court
of Appeals granted the Petition, disposing of the case as follows:
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is hereby GRANTED. The Decision
of the Regional Trial Court dated February 18, 1999 is REVERSED and SET ASIDE, and the
Decision of the Metropolitan Trial Court dated June 18, 1998 is REINSTATED. No pronouncement
as to costs. 4
The dispositive portion of the reinstated 18 June 1998 Metropolitan Trial Court (MeTC) Decision is as follows:
WHEREFORE, after a careful consideration of the foregoing evidence, the Court finds the same to
strongly preponderates (sic) in favor of the plaintiff and hereby orders defendant Victoria Ong to
pay plaintiff Ernesto Bognalbal the amount of THIRTY THOUSAND NINE HUNDRED FIFTY
PESOS (P30,950.00) representing the value of his accomplished work for the period from March 4
to March 18, 1995, the amount of (P13,000.00) THIRTEEN THOUSAND PESOS representing the
value of his accomplished work on the kenzo flooring equivalent to 60% of the agreed fee of
P25,000.00 minus the amount of P2,000.00 paid under the third progress billing, the amount of
FIFTEEN THOUSAND (P15,000.00) PESOS as and for attorney's fees, the amount of TWENTY
THOUSAND (P20,000.00) PESOS AS MORAL damages and the amount of TWENTY-FIVE
THOUSAND (P25,000.00) PESOS as exemplary damages. Defendant is further ordered to pay
the costs of this suit. HDATCc
For lack of sufficient basis, the counterclaim of the defendant is hereby dismissed. 5
On 22 May 2001, the Court of Appeals denied petitioner Ong's Motion for Reconsideration in the assailed
Resolution, a copy of which was received by petitioner, through counsel, on 11 June 2001.
In the instant Petition for Certiorari, filed on 10 August 2001, petitioner Ong alleges that:
THE RESPONDENT COURT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OF JURISDICTION IN DENYING THE MOTION FOR RECONSIDERATION AND IN
RESOLVING THE ABOVE-ENTITLED CASE IN FAVOR OF THE PRIVATE RESPONDENT. 6
Propriety/Impropriety of Special
Civil Action for Certiorari under
Rule 65
Petitioner claims that a special civil action for certiorari is proper since appeal by certiorari under Rule 45 is
limited only to questions of law. This is wrong. The writ of certiorari is proper to correct errors of jurisdiction
committed by the lower court, or grave abuse of discretion which is tantamount to lack of jurisdiction. Where
the error is not one of jurisdiction but an error of law or fact which is a mistake of judgment, appeal is the
remedy. 7
It is true that, as a general rule, in the exercise of the Supreme Court's power of review, the Court is not a trier
of facts and does not normally undertake the re-examination of the evidence presented by the contending
parties during the trial of the case considering that the findings of facts of the Court of Appeals are conclusive
and binding on the Court. However, the Court had recognized several exceptions to this rule, to wit: (1) when
the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is
manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment
is based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its
findings the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions
of both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings
are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the
petition as well as in the petitioner's main and reply briefs are not disputed by the respondent; (10) when the
findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on
record; and (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the
parties, which, if properly considered, would justify a different conclusion. 8
If the allegedly erroneous findings of fact by the Court of Appeals amounts to grave abuse of discretion
amounting to lack of or excess of jurisdiction, the proper remedy would indeed be a petition for certiorari under
Rule 65. However, if the allegedly erroneous findings of fact constitute only a mistake of judgment, the proper
frustrated
remedy is a petition for review on certiorari under Rule 45. Since the petition filed in the case at bar is one of work value submitted by the contractor to the Owner and to be certified for payment by the architect on
under Rule 65, we would be constrained to dismiss the same if we find a mere error of judgment. site," 14 makes the second paragraph of the following provision of the Civil Code applicable:

Credibility of Architect Noel Cano Art. 1730. If it is agreed that the work shall be accomplished to the satisfaction of the proprietor, it
is understood that in case of disagreement the question shall be subject to expert
The contract between petitioner and respondent provides:
judgment. ECaTDc
4.01 Progress Billing will commence 15 days after the Contractor receive[s] the notice to proceed
If the work is subject to the approval of a third person, his decision shall be final, except in case of
from the Owner.
fraud or manifest error.
4.02 Balance will be collected every 2-weeks, based on the accomplishment of work value
The existence of fraud or manifest error, being an exception to the finality of the decision of a third person
submitted by the contractor to the Owner and to be certified for payment by the architect
under Article 1730, should be adequately proven by petitioner Ong.
assigned on site.
Petitioner Ong, however, miserably failed to prove the same. Petitioner Ong's allegation that "the certifications
4.03 Final and full payment of the consideration herein above-mentioned shall be made by the
may have been purposely doctored or engineered in such a fashion as to unduly favor [respondent Bogalbal],
owner to the contractor upon fulfilling the condition set forth and approved by the
in the desire of Architect Cano to return a favor or repay a debt of gratitude" 15 is a bare speculation that
architect assigned on site. 9
cannot be given any credence. It is utterly inappropriate for petitioner Ong to paint Architect Cano as "biased,
Pursuant thereto, the architect on site, Architect John Noel Cano, certified for payment four progress billings, partial, and unprofessional" just because Architect Cano's architectural firm, Balce-Sindac & Associates, was
which petitioner Ong paid on the following dates 10 : allegedly recommended to her by respondent Bogalbal. The fact remains that it was petitioner Ong and Balce-
Sindac & Associates which had privity of contract with each other, petitioner Ong having contracted with the
Partial Part of Project Date of Date of Full latter firm for its project architectural design and plan. Balce-Sindac & Associates, in turn, assigned Architect
Cano as supervising architect on site. The alleged recommendation by respondent Bogalbal is enormously
Progress Date Sent Covered Amount Accomplished Partial Payment inadequate to prove bad faith on the part of Architect Cano. Good faith is always presumed. 16 It is the one
who alleges bad faith who has the burden to prove the same. 17
Billing Period (contract Payment
Neither was petitioner able to prove manifest error on the part of Architect Cano. The presence of Architect
price: Cano only twice or thrice a week was not adequately proven to have made him incompetent to determine the
completion of the project. Determination of project completion requires inspection of a product rather than a
P200,000.00) process. Besides, whereas Architect Cano provided a detailed progress report that substantiate respondent
Bogalbal's allegation that 88.45% of the project had been accomplished, 18 petitioner Ong was not able to
1st 28 January 19-28 6 February
demonstrate her repeated claim that only 60% of the project has been completed. 19 Petitioner Ong alleged
1995 January P35,950.00 17.975 % 1995
that the same was admitted by respondent Bogalbal in the pleadings filed with this Court, 20 but we were
2nd 15 February 29 January 22 February 4 March unable to find any such admission. It seems that petitioner Ong was referring to the Kenzo flooring, 60% of
1995 to 15 P69,300.00 34.650 % 1995 1995 which respondent claims to have finished. 21
February
Time and again, this Court has ruled that the findings of the lower court respecting the credibility of witnesses
3rd 8 March 16 February 24 March 6 April 1995 are accorded great weight and respect since it had the opportunity to observe the demeanor of the witnesses
1995 to 3 March P41,500.00 20.750 % 1995 as they testified before the court. Unless substantial facts and circumstances have been overlooked or
misunderstood by the latter which, if considered, would materially affect the result of the case, this Court will
4th 31 March 4-18 March undauntedly sustain the findings of the lower court. 22In the case at bar, the credibility of Architect Cano was
1995 P30,950.00 15.475 % upheld by the MeTC, which had the opportunity to observe Architect Cano's demeanor as he testified. Neither
the Court of Appeals, nor the RTC, questioned such credibility, the RTC having ruled in favor of petitioner Ong
Total P181,700.00 88.850 % pursuant to an interpretation of law. 23
As earlier stated, this controversy arose with respect to the fourth partial billing. Petitioner Ong claims that the Alleged novation of the Owner-
fourth partial billing is not yet due and demandable, since only 60% of the work has been accomplished. Contractor Agreement
Petitioner Ong claims that Architect Cano's certification as to the accomplishment of the work cannot be
trusted, since Architect Cano was allegedly biased in favor of respondent Bogalbal. 11 Petitioner Ong also claims, as a defense against payment of the fourth progress billing, that "the only reason
why the fourth billing was not paid was because [respondent Bogalbal] himself agreed and committed to
Petitioner Ong claims that "Arch. Cano was an associate of [respondent Bogalbal] in his construction collect the fourth progress billing after he completed the Kenzo flooring." 24 Petitioner Ong claims that,
business, and because of this, he was partial, biased and unprofessional about his work." 12 Petitioner Ong because of this promise, her obligation to pay respondent Bogalbal has not yet become due and
adds that work was conducted on the job site seven days a week, but Architect Cano was present only twice or demandable. 25
thrice a week, and therefore "[h]e was in no position to determine whether or not [respondent Bogalbal]
performed as claimed." 13 The Court of Appeals rejected this argument, ruling that respondent Bogalbal's stoppage of work on the
project prior to its completion cannot justify petitioner Ong's refusal to pay the fourth progress billing and the
The afore-quoted Article 4.02 of the Owner-Contractor Agreement between petitioner Ong and respondent value of respondent Bogalbal's accomplished work on the Kenzo flooring. On the contrary, according to the
Bogalbal, which provides that the "[b]alance shall be collected every 2-weeks, based on the accomplishment Court of Appeals, respondent Bogalbal was justified to refuse to continue the project due to petitioner Ong's
failure to pay the fourth progress billing. 26 According to the Court of Appeals:
frustrated
 Records reveal that [herein respondent Bogalbal] submitted his fourth (4th) progress billing for
work accomplished on [herein petitioner Ong's] boutique for the period covering March 4 to 18,
1995 (Exh. "B", ibid.). Said billing was in accordance with the parties' agreement that it will be
collected every two (2) weeks, based on the accomplishment of work value submitted by the
contractor to the owner and certified for payment by the architect assigned on site (Article 4.02,
Owner-contractor Agreement; Exh. "A-1", p. 101, ibid.). However, [petitioner Ong], immediately
upon her receipt of said billing, refused to pay the same since it was allegedly "in excess and over
the value of the work accomplished during the period." This was, in fact, part of the
statement/findings of the facts of the lower court's decision (p. 2, RTC Decision; p. 400, ibid.).
[Petitioner Ong], at the very outset, refused to pay the fourth (4th) billing despite actual work
accomplished on her botique which was certified by the architect on site, John Noel Cano, all in
accordance with the agreement of the parties. [Respondent Bogalbal's] eventual decision not
to proceed anymore with the contract cannot be used as a reason to justify [petitioner
Ong's] refusal to pay her obligation. This notwithstanding the parties' supposed verbal
agreement that collection of said billing will be held in abeyance until after [respondent
Bogalbal] finished the work on the kenzo flooring which [petitioner Ong] requested to be
changed from its original plan of vinyl tile flooring. The proven fact is that there was work
accomplished on [petitioner Ong's] boutique equivalent to the bill being charged her in the fourth
(4th) progress billing in accordance with their contract. While the fourth (4th) billing covered the
accomplished work therefor as certified by the architect assigned on site, the agreement as to the
kenzo flooring is the subject of another bill covered by the change order. (Emphasis supplied.) 27
The Court of Appeals is in error. If the parties indeed had a verbal agreement that collection of said billing will
be held on abeyance until after respondent Bogalbal finished the work on the Kenzo flooring, there would
have been a novation of petitioner Ong's obligation to pay the price covered by the fourth billing by changing
the principal conditions therefor. This falls under the first type of novation under Article 1291 of the Civil Code
which provides:
Article 1291. 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.
While the subject of novation is, in the Civil Code, included in Book IV, Title I, Chapter 4, which refers to
extinguishment of obligations, the effect of novation may be partial or total. There is partial novation when there
is only a modification or change in some principal conditions of the obligation. It is total, when the obligation is
completely extinguished. 28 Also, the term principal conditions in Article 1291 should be construed to include a
change in the period to comply with the obligation. Such a change in the period would only be a partial
novation, since the period merely affects the performance, not the creation of the obligation. 29
If petitioner Ong's allegation was true, then the fourth partial billing's principal condition that the "(b)alance
shall be collected every 2-weeks, based on the accomplishment of work value submitted by the contractor to
the Owner and to be certified for payment by the architect assigned on site" 30 would have been modified to
include another condition, that of the finishing of the Kenzo flooring by respondent Bogalbal. CHTAIc
As previously discussed, the Court of Appeals did not bother to review the evidence on petitioner Ong's
allegation of respondent Bogalbal's promise to finish the Kenzo flooring before the fourth progress billing shall
be paid. The Court of Appeals instead brushed off the contention with its explanation that "[respondent
Bogalbal's] eventual decision not to proceed anymore with the contract cannot be used as a reason to justify
[petitioner Ong's] refusal to pay her obligation, . . . notwithstanding the parties' supposed verbal agreement that
collection of said billing will be held on abeyance until after [respondent Bogalbal] finished the work on the
kenzo flooring which [petitioner Ong] requested to be changed from its original plan of vinyl tile flooring."
Novation is never presumed. Unless it is clearly shown either by express agreement of the parties or by acts of
equivalent import, this defense will never be allowed. 31
The evidence preponderates in favor of respondent Bogalbal that there had been no novation of the contract.
At best, what was proven was a grudging accommodation on the part of respondent Bogalbal to continue
working on the project despite petitioner Ong's failure to pay the fourth progress billing. Respondent
Bogalbal's fourth partial billing demand letters dated 21 April 1995 and 15 May 1995, both of which were
served upon petitioner Ong after the alleged 20 April 1995 meeting, 32 is inconsistent with the theory that the
meeting had produced a novation of the petitioner Ong's obligation to pay the subject billing.
More importantly, assuming that there was indeed a novation of the obligation of petitioner Ong to pay the
fourth billing so as to include as additional condition the completion of the Kenzo flooring, such new condition
would, nevertheless, be deemed fulfilled. This is pursuant to Article 1186 of the Civil Code, which provides:
Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its
fulfillment.
According to petitioner Ong herself:
Petitioner sent [respondent Bogalbal] letters demanding that he should return to the jobsite with
his people and comply with his commitment. When the demand letters were ignored, petitioner
was constrained to hire the services of another contractor, for which she had to unnecessarily
incur expenses in the amount of P78,000.00. But just the same, the completion of the project was
delayed for eighty two (82) days, which also caused petitioner additional damages. 33
The Civil Code indeed provides that, "(i)f a person obliged to do something fails to do it, the same shall be
executed at his cost. This same rule shall be observed if he does it in contravention of the tenor of the
obligation. Furthermore, it may be decreed that what has been poorly done be undone." 34 There is no
question, however, that such allegation constitutes an admission that Petitioner Ong had voluntarily
prevented the fulfillment of the condition which should have given rise to her obligation to pay the amount of
the fourth billing. Respondent Bogalbal would no longer have the opportunity to finish the Kenzo flooring if
another contractor had already finished the same. Such condition would, hence, be deemed fulfilled under
Article 1186 of the Civil Code, and, therefore, petitioner Ong's obligation to pay the amount of the fourth
billing has been converted to a pure obligation.
Authority of respondent Bogalbal
to abandon work
This Court has held that, even if respondent Bogalbal unjustifiably withdrew from the project, petitioner Ong's
obligation is nevertheless due and demandable because of the third-party certification by Architect Cano on the
completion of the fourth project billing as required by their contract. This Court has also held that petitioner Ong
has not sufficiently proven the alleged contract novation adding a new condition for her payment of the fourth
progress billing.
The following arguments of petitioner Ong are already inconsequential as to whether she should be held liable
for the fourth billing: (1) that the power to resolve contracts under Article 1191 35 of the Civil Code cannot be
invoked extrajudicially in the absence of stipulation to the contrary; 36 (2) that petitioner never rushed
respondent Bogalbal to complete the Kenzo flooring in three days; 37 (3) and that respondent Bogalbal
failed to complete the Kenzo flooring on time because of his incompetence. 38 All these arguments merely
amplify petitioner Ong's primary contention that respondent Bogalbal was not justified in abandoning the
project. 39
The issue of whether or not respondent Bogalbal is justified in abandoning the project is relevant to the
resolution of petitioner Ong's counterclaim against respondent Bogalbal.
The Court rules in favor of petitioner Ong on this score. There is nothing in the record which would justify
respondent Bogalbal's act of abandoning the project.
However, contrary to the finding of the RTC, Article 1724 is inapplicable to this case. Article 1724 provides:
frustrated
 Art. 1724. The contractor who undertakes to build a structure or any other work for a stipulated
price, in conformity with plans and specifications agreed upon with the landowner, can neither
withdraw from the contract nor demand an increase in the price on account of the higher cost of
labor or materials, save when there has been a change in the plans and specifications, provided:
(1) Such change has been authorized by the proprietor in writing; and
(2) The additional price to be paid to the contractor has been determined in writing by both parties.
According to the RTC, the exception in Article 1724 (change in plans and specifications authorized by the
proprietor in writing, and the additional price therefor being determined by the proprietor in writing) applies only
with respect to the prohibition to "demand an increase in the price on account of the higher cost of labor or
materials" and not with respect to the prohibition to "withdraw from the contract." There is therefore no
exception allowed by law insofar as withdrawal from the contract is concerned, and, hence, respondent
Bogalbal cannot claim the change order as a justification for his abandonment of the project. 40
This is incorrect. According to this Court in Arenas v. Court of Appeals, 41 Article 1724 contemplates disputes
arising from increased costs of labor and materials. Article 1724 should, therefore, be read as to prohibit a
contractor from perpetrating two acts: (1) withdrawing from the contract on account of the higher cost of the
labor or materials; and (2) demanding an increase in the price on account of the higher cost of the labor or
materials. 42 This focus on disputes arising from increased cost of labor and materials is even more evident
when the origin of Article 1754 is reviewed. Article 1754 of the 1950 Civil Code is based on Article 1593 43of
the Spanish Civil Code, which states:
Art. 1593. An architect or contractor who, for a lump sum, undertakes the construction of a
building, or any other work to be done in accordance with a plan agreed upon with the owner of
the ground, may not demand an increase of the price, even if the cost of the materials or labor has
increased; but he may do so when any change increasing the work is made in the plans, provided
the owner has given his consent thereto. THcaDA
Article 1593 of the Spanish Civil Code did not contain a similar prohibition against abandonment, and was
entirely focused on its apparent objective to providing an exception to the rule that a contracting party cannot
unilaterally amend (by increasing the contract price) the contract despite supervening circumstances.
Neither party is claiming that the abandonment arose from increased costs of labor and materials. Petitioner
Ong claims that respondent Bogalbal failed to complete the Kenzo flooring on time because of his
incompetence. 44 Respondent Bogalbal claims, on the other hand, that he abandoned the work because of
petitioner Ong's continuing refusal to pay the fourth progress billing in violation of their contract. 45 Since the
dispute has nothing to do with increased costs of labor and materials, Article 1724 is not applicable. 46
Thus, it is the general rules on contracts which are applicable. Expounding on the argument by respondent
Bogalbal, the Court of Appeals held:
It should be noted that the power to rescind obligations is implied in reciprocal ones, in case one
of the obligors should not comply with what is incumbent upon him (par. 1, Art. 1191, Civil Code).
[Herein petitioner Ong's] breach of contract was her failure to pay what she was legally bound to
pay under her contract with [respondent Bogalbal]. Payment, being the very consideration of the
contract, is certainly not a mere casual or slight breach but a very substantial and fundamental
breach as to defeat the object of the parties making the agreement, due to which rescission of the
contract may be had (Ang vs. Court of Appeals, 170 SCRA 286, 296). [Petitioner Ong's]
contention that [respondent Bogalbal] should have had more capital to absorb a little delay in her
payment is not quite tenable (TSN, June 21 1996; p. 7). 47
This Court, however, has held in Tan v. Court of Appeals, 48 that:
[T]he power to rescind obligations is implied in reciprocal ones in case one of the obligors should
not comply with what is incumbent upon him . . . . However, it is equally settled that, in the
absence of a stipulation to the contrary, this power must be invoked judicially; it cannot be
exercised solely on a party's own judgment that the other has committed a breach of the
obligation. Where there is nothing in the contract empowering [a party] to rescind it without
resort to the courts, [such party's] action in unilaterally terminating the contract . . . is
unjustified.
In the case at bar, there is nothing in the Owner-Contractor Agreement empowering either party to rescind it
without resort to the courts. Hence, respondent Bogalbal's unilateral termination the contract without a court
action is unjustified.
Petitioner Ong's Counterclaim
Since respondent Bogalbal is unjustified in abandoning the project, should this Court award damages to
petitioner Ong? Considering that both parties committed a breach of their respective obligations, Article 1192 of
the Civil Code is on all fours:
Art. 1192. In case both parties have committed a breach of the obligation, the liability of the first
infractor shall be equitably tempered by the courts. If it cannot be determined which of the parties
first violated the contract, the same shall be deemed extinguished, and each shall bear his own
damages.
Under this provision, the second infractor is not liable for damages at all; 49 the damages for the second
breach, which would have been payable by the second infractor to the first infractor, being compensated
instead by the mitigation of the first infractor's liability for damages arising from his earlier breach. The first
infractor, on the other hand, is liable for damages, but the same shall be equitably tempered by the courts,
since the second infractor also derived or thought he would derive some advantage by his own act or
neglect. 50 Article 2215, however, seems contradictory, as it gives the court the option whether or not to
equitably mitigate the damages, and does not take into account which infractor first committed breach:
Art. 2215. In contracts, quasi-contracts, and quasi-delicts, the court may equitably mitigate the
damages under circumstances other than the case referred to in the preceding article, 51 as in the
following instances:
(1) That the plaintiff himself has contravened the terms of the contract; . . .
It is a cardinal principle that a statute must be so construed as to harmonize all apparent conflicts, and give
effect to all its provisions whenever possible. 52
Articles 1192 and 2215 of the Civil Code are not irreconcilably conflicting. The plaintiff referred to in Article
2215(1) should be deemed to be the second infractor, while the one whose liability for damages may be
mitigated is the first infractor. Furthermore, the directions to equitably temper the liability of the first infractor in
Articles 1192 and 2215 are both subject to the discretion of the court, despite the word "shall" in Article 1192, in
the sense that it is for the courts to decide what is equitable under the circumstances.
In the case at bar, both respondent Bogalbal and petitioner Ong claim that it was the other party who first
committed a breach of contractual obligations. 53Considering this Court's finding that there had been no
contract novation requiring respondent Bogalbal to finish the Kenzo flooring before the fourth progress billing
shall be paid, it is crystal clear that it was petitioner Ong who first violated the contract. As such, it is petitioner
Ong who is liable to pay damages, which may, however, be reduced, depending on what is equitable under the
circumstances. On the other hand, since respondent Bogalbal is the second infractor, he is not liable for
damages in petitioner Ong's counterclaim. SDHAEC
Care must, however, be judiciously taken when applying Article 1192 of the Civil Code to contracts such as this
where there has been partial performance on the part of either or both reciprocal obligors. Article 1192, in
making the first infractor liable for mitigated damages and in exempting the second infractor from liability for
damages, presupposes that the contracting parties are on equal footing with respect to their reciprocal principal
frustrated
obligations. Actual damages representing deficiencies in the performance of the principal obligation should be Section 4, Rule 65 was, however, amended on 1 September 2000, several months before the filing of this
taken out of the equation. 54 Petition, to insert the following provision:

In the case at bar, the partial performance of respondent Bogalbal (88.85% 55 of the original contract and In case a motion for reconsideration or new trial is timely filed, whether such motion is required or
60% of the Kenzo flooring) is more than the partial payment of petitioner Ong (73.375% 56 of the original not, the sixty (60) day period shall be counted from notice of the denial of said motion.
contract and 0% of the Kenzo flooring).
This insertion gives petitioner Ong a fresh 60-day period to assail the Decision via a Petition for Certiorari,
For reference, the MeTC Decision, which was reinstated by the Court of Appeals, awarded the following to which is what this Petition really seeks and which is how this Court has treated the same.
respondent Bogalbal:
WHEREFORE, the Decision of the Court of Appeals reinstating the Decision of the Metropolitan Trial Court
Value of accomplished work on the original contract P30,950.00 holding petitioner Victoria Ong liable for damages is affirmed. The instant Petition for Certiorari is hereby
for the period 4 to 18 March 1995: DISMISSED for lack of merit. Costs against petitioner. aATHIE

Value of accomplished work on the Kenzo flooring P13,000.00 SO ORDERED.

(60% of the agreed fee of P 25,000, minus P2,000
paid under the third progress billing) Panganiban, C.J., Ynares-Santiago, Austria-Martinez and Callejo, Sr., JJ., concur.

Moral damages P20,000.00 ||| (Ong v. Bogalbal, G.R. No. 149140, [September 12, 2006], 533 PHIL 139-169)

Exemplary damages P25,000.00

TOTAL P88,950.00
Petitioner Ong should first be obliged to pay the value of the accomplished work (P30,950.00 and P13,000.00),
before the damage scheme under Article 1192 of the Civil Code is applied. Therefore, this Court would have
been limited to determining how much of the moral and exemplary damages, for which petitioner Ong is liable,
may be mitigated by the amount of damages caused by respondent Bogalbal, as provided under Article 1192.

As earlier discussed, however, this mitigation is subject to the discretion of the court, depending on what is
equitable under the circumstances. It would have been within this Court's power to mitigate the moral and
exemplary damages for which petitioner Ong is liable if she had only filed an ordinary appeal under Rule 45 of
the Rules of Court. It would be an exaggeration to consider such non-mitigation by the Court of Appeals as
grave abuse of discretion leading to lack of or excess of jurisdiction, which would have been reviewable by this
Court in a certiorari proceeding under Rule 65. 57 Grave abuse of discretion implies a capricious and whimsical
exercise of judgment as is equivalent to lack of jurisdiction, or, when the power is exercised in an arbitrary or
despotic manner by reason of passion or personal hostility, and it must be so patent and gross as to amount to
an evasion of positive duty enjoined or to act at all in contemplation of law. 58 Mere abuse of discretion is not
enough it must be grave. 59

All of the foregoing shows that while there had been some errors of law on the part of the Court of Appeals, the
Petition would still fail even if it were a Petition for Review under Rule 45. With more reason is this Court
constrained to dismiss a Petition for Certiorari under Rule 65, which requires not a mere error in judgment, but
a grave abuse of discretion amounting to lack of or excess of jurisdiction.

Finally, this Court notices that the prayer in the instant Petition for Certiorari only seeks to nullify the Resolution
of the Court of Appeals on petitioner Ong's Motion for Reconsideration, without praying for the nullification of
the Decision itself sought to be reconsidered. The reason seems to be the fact that petitioner Ong, through
counsel, received the Decision more than sixty days prior to the filing of the Petition. A Petition seeking to
nullify such Decision was, thus, perceived to be violative of Section 4, Rule 65 of the 1997 Rules of Civil
Procedure, which originally provides:

SEC. 4. Where petition filed. The petition may be filed not later than sixty (60) days from notice
of the judgment, order or resolution sought to be assailed in the Supreme Court or, if it relates to
the acts or omissions of a lower court or of a corporation, board, officer or person, in the Regional
Trial Court exercising jurisdiction over the territorial area as defined by the Supreme Court. It may
also be filed in the Court of Appeals whether or not the same is in aid of its appellate jurisdiction, .
...

frustrated
 DECISION

CASTRO, C.J p:

This case is a direct appeal from an order of the Court of First Instance of Rizal (Quezon City) dated December
3, 1963, reversing its decision dated October 8, 1963 in favor of the plaintiffs-appellants Rodrigo Enriquez,
Aurea Soriano de Dizon and Urbano Dizon, Jr., in civil case Q-7229, an action for foreclosure of real estate
mortgage. LLpr

This is the second time that the herein party litigants have come to this Court on basically the same causes of
action affecting the same deed of sale with real estate mortgage covenanted between them.

In Rodrigo Enriquez, et al. vs. Socorro A. Ramos (G.R. No. L-18077, September 29, 1962), the plaintiffs-
appellants averred that on November 24, 1958 they sold to the defendant-appellee Socorro A. Ramos 20
subdivision lots in Quezon City for the sum of P235,056 of which only P35,056 had been paid. The balance of
P200,000 was to be liquidated within two years from the date of the execution of the deed of sale, with interest
at six percent for the first year and twelve percent thereafter until fully paid. To secure the payment of that
balance, the defendant-appellee executed in the same document a deed of mortgage in favor of the vendors
on several parcels of land variously situated in Quezon City, Pampanga and Bulacan. The deed of mortgage
embodies certain stipulations which the plaintiffs-appellants invoked, thus:

"During the term and existence of this mortgage, the Mortgagor shall duly pay and discharge, at
her expense, and on their maturity, all lawful taxes or assessments levied or assessed upon the
mortgaged property; in default thereof the Mortgagee may pay and discharge such taxes or
assessments and insure the security of the property, and any and all sums so paid by the
Mortgagee shall be repayable on demand with interest at 6% per annum and be a lien on the
property herein mortgaged.

"xxx xxx xxx

"If for any reason the mortgage cannot be registered, then the whole obligation shall immediately
become due and demandable.

"In the event that the Mortgagor should fail to pay the amount secured by this mortgage or any
part thereof in accordance with the terms and conditions herein set forth, or should she fail to
perform any of the conditions stipulated herein, the Mortgagee shall have the right . . . to foreclose
this mortgage extrajudicially, and to that end the Mortgage is hereby appointed the attorney-in-fact
of the Mortgagor, with full power of substitution, to enter upon and take possession of the
mortgaged property without the order of any court or any authority other than that herein granted,
and to sell and dispose of the same to the highest bidder at public auction after the publication of
notice, in accordance with the provisions of Act No. 3135 of the Philippine Legislature, as
amended."

FIRST DIVISION According to the plaintiffs-appellants in L-18077, the defendant-appellee violated the terms of their
agreement in the following respects:

[G.R. No. L-23616. September 30, 1976.] 1. Inspite of repeated demands, the defendant-appellee refused to pay the sum of P200,000 within
the stipulated period;

2. The mortgage on the Bulacan property was never registered; and

RODRIGO ENRIQUEZ, AUREA SORIANO DE DIZON and URBANO DIZON, JR., plaintiffs-
appellants, vs. SOCORRO A. RAMOS, defendant-appellee. 3. The realty tax for 1959 on the lots mortgaged were not paid by the defendant-appellee.

This Court upheld the findings and conclusions of the trial court which ruled that the actual price of the lots sold
to the defendant-appellee was only P185,056 instead of P235,056, and that only if and when the roads shall

frustrated
have been constructed pursuant to the ordinances of Quezon City "may the period of two years specified in the
contract begin to run." These conclusions were arrived at on account of a private deed entitled "Explanation" in
which the plaintiffs-appellants certified that of the consideration of P235,056 appearing in the questioned deed
of sale with mortgage, P50,000 "represent contribution of Mrs. Socorro A. Ramos for the construction of roads,
which we will undertake in accordance with the provisions of the City Ordinances of Quezon City." cdphil
With reference to the non-payment of the 1959 realty tax and the non-registration of the mortgaged Bulacan
estate, this Court held that "aside from being minor matters, [they] appear sufficiently explained in the brief of
defendant-appellee." In her brief in L-18077, the defendant-appellee had stated that she applied her backpay
certificates to the payment of her realty and income taxes but as she had not yet received said certificates the
payment of the taxes was delayed. On the other hand, the registration of the Bulacan property could not be
undertaken because it was then still registered in both her name and in the name of co-owner. The defendant-
appellee promised that she would pay the taxes in due time and undertake the needed segregation and the
annotation of the lien of the mortgage on the Bulacan property as soon as the vendors proceeded with the
construction of the roads on the purchased lots.
Now, returning to the case at bar, the plaintiffs-appellants charged on May 4, 1963 before the Court of First
Instance of Rizal (Quezon City) that the defendant-appellee has not yet paid the sum of P200,000 despite the
fact that the roads on the questioned lots were completed on May 9, 1960; that the mortgage on the Bulacan
property has not yet been registered; and that the realty taxes corresponding to the years 1959 to 1963 on the
mortgaged lots had not been paid.
The defendant-appellee admits that she has not paid the realty taxes and has not registered the mortgage on
the Bulacan property, but argues that in L-18077 these matters were considered minor ones and also
sufficiently explained by her, invoking the rule of res judicata. The defendant-appellee likewise does not dispute
her non-payment of the sum of P200,000; she contends, however, that the roads have not yet been completed
in accordance with Ordinance No. 2969 of Quezon City, the pertinent portions of which state:
"SEC. 10. The following subdivision improvements shall be constructed or provided in accordance
with the plans and/or specifications as adopted by the Administrative Agency.
"(a) Street pavements. All streets shall be paved. Water-bound macadam pavements on a
suitable base shall be considered the minimum standard or pavement that shall be used.
"(b) Curbs and gutters. All streets shall be provided with concrete curbs and gutters.
"(c) Filling. The subdivision shall be filled up to the grade as may be required by the
Administrative Agency.
"(d) Drainage facilities. The subdivision shall be provided with adequate drainage facilities as
approved by the Administrative Agency.
"(e) Tree Plantings. The subdivider shall plant and grow shade trees, if none are yet existing for
the purpose of this requirement, on the side or sides of every lot adjacent to streets about three (3)
meters from the street line, with a maximum spacing of ten (10) meters.
"(f) Water facilities. The subdivider shall provide the subdivision with adequate water facilities."
According to the defendant-appellee, the roads in question cannot be considered completed because the
plaintiffs-appellants have not yet planted trees nor put up water facilities as required by the foregoing
ordinance. Neither may said roads be considered completed in the legal sense until their construction has
been accepted by the Capital City Planning Commission which was designated to implement Ordinance
2969. Moreover, even if the roads in question have already been constructed in accordance with the
mentioned ordinance, still her obligation to pay the sum of P200,000 has not yet arisen as no previous notice
and demand for payment has been made on her.
We find the posture of the defendant-appellee to be untenable.
1. It is true that in L-18077 this Court held that the non-payment of the 1959 realty tax as well as the non-
registration of the mortgaged Bulacan estate by the defendant-appellee were minor matters aside from being
sufficiently explained by her. That pronouncement, however, should be taken in the light of the environmental
milieu under which L-18077 was decided. The non-payment of the realty tax for a year and the non-registration
of the mortgaged property, within a reasonable time after the execution of a contract may be considered minor
matters, particularly where, in addition, the failure to do so was sufficiently explained, and the mortgagor
promised this Court that positive remedial action would be taken. The opinion of this Court cannot however be
taken as a license for the continued non-fulfillment by the defendant-appellee of her contractual obligations. It
was far from the intention of this Court to allow or enable the litigants to utilize its decision as an instrument
whereby solemnly covenanted obligations could be avoided. In such situation, the continued violation by the
defendant-appellee of the express terms of her contract can no longer be countenanced. As it is, not only has
the defendant-appellee failed to perform the mentioned obligations, by she has likewise entirely failed to deliver
to the plaintiffs-appellants the sum of P50,000 which she promised to contribute to the latter for the
construction of the roads on her lots in accordance with the ordinances of Quezon City. The deed of sale with
mortgage makes it the express duty of the defendant-appellee to pay the realty taxes on the mortgaged lots, to
register the mortgaged estates, and to contribute P50,000 for the construction of roads on the purchased lots.
By its express terms, if the defendant-appellee failed to fulfill these conditions her entire obligation was to
become immediately due and demandable and the mortgagee would have the option to foreclose the
mortgage. These terms of the contract have the force of law between the parties thereto. 1
2. On the issue of whether the construction of the questioned roads has already been completed in accordance
with the ordinances of Quezon City, the evidence adduced below sufficiently supports the plaintiffs-appellants'
position.
At the trial below, the plaintiffs-appellants adduced the testimonies of two witnesses, Oscar Delfin and Atty.
Gelacio L. Dimaano (plaintiffs-appellants' counsel). Delfin testified that he was a construction superintendent of
Wendel Construction Co., Inc. which was contracted to open up roads on the lots in question; that his outfit
undertook the building of the said roads in accordance with the ordinances of Quezon City, having laid out
"type B gutters, concrete curbs, pavement made of Vituminous macadam asphalt;" that construction
commenced on November 2, 1959 and was completed on May 9, 1960 for the sum of P100,000 which has
already been paid by the plaintiffs-appellants; that while the construction was in progress, the defendant-
appellee visited the worksite two or three times and inspected the work being done; and that the certificate of
turnover of the roads was given by the president of his firm to the plaintiffs-appellants. Dimaano, in the main,
corroborated Delfin's testimony, and added that under the mentioned deed of sale with mortgage, the
attorney's fees in case of litigation would be 10% of the amount due. LLjur
At the trial below, the defendant-appellee, pursuant to a partial stipulation of facts, presented a letter dated May
9, 1963 of the Acting City Engineer of Quezon City which states the following:
This is in reply to your letter dated May 3, 1969 requesting inspection of the Mindanao Avenue
Subdivision, Quezon City in which you have purchased thirty-one (31) lots.
"In that connection, I wish to advise you that an ocular inspection has already been made by a
representative of this Office and his report points out that said subdivision is already provided with
curbs and gutters together with drainage facilities. The roads have already been asphalted but no
final test, verification and approval have been undertaken by this Office.
"It was revealed also that water and lighting system have not yet been installed thereat."
In connection with the aforequoted letter, the parties stipulated that the "test, verification and approval
mentioned in Exhibit 1-A is required only when the roads of the subdivision and easements are to be donated
to the City Government, and there is no law as to when the roads of any subdivision are to be donated (to the)
City Government." This stipulation was arrived at after the counsel for the defendant-appellee had conferred
with a representative of the Quezon City Engineer's Office.
frustrated
On the basis of the foregoing items of evidence, not contradicted by the defendant-appellee, the completion of
the roads in question must be regarded as having been sufficiently established.
3. The defendant-appellee, however, argues that the said roads "are not yet completed in the technical, legal
sense. This is because the final say or acceptance by the Administrative Agency was not yet secured." This
posture is inordinately technical and also is devoid of merit. There is nothing at all in Ordinance 2969 of
Quezon City which makes the acceptance by the said agency a condition precedent before a street in Quezon
City may be considered constructed in accordance with Ordinance 2969.
Should the defendant-appellee fail to pay the aforementioned mortgage indebtedness within the period granted
in this decision, the properties mortgaged shall be sold at public auction and the proceeds thereof shall be
applied to the satisfaction of this judgment and the costs of the auction sale. Costs against the defendant-
appellee. The motion of Guillermo N. Pablo "to join defendant-appellee as co-party" is denied. cdasia
Makasiar, Muoz Palma and Martin, JJ ., concur.
Teehankee, J ., concurs in the result.

4. The planting of trees and the installation of water facilities required by section 10 of Ordinance 2969, supra, ||| (Enriquez v. Ramos, G.R. No. L-23616, [September 30, 1976], 165 PHIL 119-129)
which the defendant-appellee says must first be made before the roads in question may be considered legally
completed are matters which could not have been conceivably within the contemplation of the parties. In the
first place, these activities involve a substantial outlay of funds which, by its very nature, should have been
unavoidably referred to in the mentioned "Explanation." In the second place, the said requirements are
imposed on the subdivision owner, and it is obvious from this Court's decision in L-18077 that it was the
defendant-appellee who intended to develop the purchased lots into a subdivision. Thus, this Court said in L-
18077:

"We find no error in the conclusion reached by the court a quo for indeed that is the condition to be
expected by a person who desires to purchase a big parcel of land for purposes of subdivision. In
a subdivision the main improvement to be undertaken before it could be sold to the public is
feeder roads as otherwise it would be inaccessible and valueless and would offer no attraction to
the buying public. And so it is correct to presume as the court a quo did, that when the sale in
question was being negotiated, the construction of roads in the prospective subdivision must have
been uppermost in the mind of defendant for her purpose in purchasing the property was to
develop it into a subdivision. . . ."

In the third place, no evidence has been adduced which would show that the planting of trees and the
putting up of water facilities were within the contemplation of the parties when they were negotiating for the
purchase of the lots in question. And in the fourth place, there is nothing in Ordinance 2969 which would
indicate that a street may be considered completed only when trees are planted on both sides of the street
and water facilities are built on the subdivision. These activities are definitely segregable from the laying out
and construction of roads and cannot be deemed included within the scope of the latter. llcd
5. As to the alleged lack of previous notice of completion and demand for payment, the filing of the case below
is sufficient notice to the defendant-appellee of the completion of the roads in question and of the plaintiffs-
appellants' desire to be paid the purchase price of the questioned lots. The effect of such demand retroacts to
the day of the constitution of the defendant-appellee's obligation. Thus, Article 1187 provides that "The effects
of a conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the
constitution of the obligation. . . ." The contracted obligation of the defendant-appellee under the facts of the
case at bar was to pay the balance of P200,000 within two years from the date the roads in question are
completed. LLphil

Accordingly, the order of the court a quo dated December 3, 1963 is set aside, and judgment is hereby
rendered ordering the defendant-appellee to pay to the plaintiffs-appellants, within ninety (90) days from the
finality of this decision, the following:

1. The sum of P200,000 representing the unpaid balance of her contractual obligation;

2. Interest thereon, as stipulated in the deed of sale with mortgage, at the rate of 6% per
annum from May 9, 1960 up to May 9, 1961, and, thereafter, 12% interest per
annum until the principal amount shall have been fully paid;

3. An amount equivalent to 5% of the mortgage indebtedness of attorney's fees; and

4. The costs.

frustrated