OBLICON DIGESTS
PAY V. VDA. DE PALANCA
FACTS:
 Petitioer George Pay is a creditor of Late Justo Palanca : died : 1963
 Claim of petitioner based o promissory note dated 1952 whereby late
Justo Palannca and Rosa Gonzzales Vda de Carlos Palanca promised to
pay George Php 26,900 + 12% interest/annum
 George Pay now before the Court asig Segundina Chua vda. De Palanca
: appointed as administratrix of certain property in Manila assessed at Php
41,800.00
 There was refusal on the part of Segundina to be appointed stating that
property sought to be administered no longer belonged to debtor and that
rights of petitioner creditor had already prescribed.
Ruling of Lower court : DISMISSAL
 Promisory note @1962 :
 “For value receied from time to time since 1947, we promise to pay Mr.
George in his office Php 29,900.00 with interest at rate of 12%/annum
upon receipt by either of the undersigned of cash payments from the
Estate of late Don Carlos Palanca and Justo Palanca.
 Then came this paragraph :“court has inquired whether any cash payment
has been received either of signers of promissory note from Estate of late
Carlos Palanca. Petitioner informed that he does no insist on this
provision but that petitioner is only claiming on his right under promissory
note”
 After which then came the ruling that wording of promissory note “upon
demand” obligation was immediately due.
 Since it was dated 1952: it was clear that more than 10 years have
already transpired from time until to date. Action therefore has prescribed.
Appeal:SC
 Only question: prescription.
Held: Decision affirmed
 Promissory note was executed: Appear that petitioner was hopeful that
the satisfaction of his credit could be realized either through debtor sued
receiving cash payments form he estate of Carlos Palanca presumptively
as one of his heirs or as expressed “upon demand”
 Undeniable : more than 15 years after execution of promissory note---
when this petition was filed
 Art 1179 of CC: “Every obligation whose performance does not
depend upon future or uncertain event or upon a past event
unknown to parties is demandable at once.
 Obligation being due and demandable it would appear that filling of suit
after 15 years was much too late. --- Prescriptive period : 10 years.
GONZALES V. HEIRS OF THOMAS AND PAULA CRUZ
FACTS:
 1983 Paula Ano Cruz together with plaintiffs entered into contract of
lease/purchase with defendant Felix Gonzales, sole proprietor and
manager of Felgon Farms.
Important details in contract of lease :
 For a period of 1 year upon signing
 After the period of contract, Lessee shall purchase property with the price
of P1M + 12%/ annum.
 Upon execution of deed of slae 50% and 25% thereafter shall be paid
every 6 months thereafter
 Annual rental of Php 2,500
 Lessors commit themselves and shall undertake to obtain a separate and
distinct TCT over herirn leased portion to Lessee within reasonable period
of time which shall not n any case exceed 4 years.
 Rentals where paid but upon end of Contract, defendant Gonzales did not
however exercise his option to purchase the property immediately after
expiration of lease.
 He remained in possession of property without paying purchase price
provided in contract of Lease/Purchase and without paying any further
rentals.
 Letter was sent by one of plaintiffs-heirs Ricardo Cruz to defendant
Gonzales informing him of lessor’s decision to rescind the contract of
 OBLICON DIGESTS
Lease/Purchase due to breach committed by defendant + It also served
as a demand for the defendant to vacate the premises.
 Defendant Gonzales refused to vacate and continued the possession
thereof.
 Property subject of Contract of Lease/Purchase is currently the subject of
Extra-Judicial Partition Title of which remains in name of plaintiff’s
predecessor in interest Bernardina Calixto and Severo Cruz.
 Par 9 of contract: clearly indicates that lessors-plaintiffs shall obtain
transfer Cert of Title within 4 years before new contract is to be entered
into. Thus before a deed of sale can be entered ito between parties,
plaintiffs have to obtain the TCT in favor of the Defendant.
TRIAL COURT
 Art 1181 of the New CC: In conditional obligations, the acquisition of rights
as well as the extinguishment or loss of those already acquired shall depend
upon the happening of an event which constitutes as the condition.
 When obligation is assumed by party to a contract is expressly subjected to a
condition, the obligation cannot be enforced against him unless condition is
complied with.
 Failure of plaintiffs to secure the TCT as provided for in the contract does not
entitle them to rescind the contract
 Art 1191 of the New CC: Power to rescind obligations is implied in reciprocal
ones, in case one of the obligors should not comply with what is incumbent
upon him. The injured party may choose between the fulfillmet of obligation,
with payment of damages in either case. He may seek rescission even after
he has chosen fulfillment, if the latter should become impossible.xxx the
power to rescind is given to the injured party Where the plaintiff is the party
who did not perform, he is not entitled to insist upon that the performance of
contract by the defendant or recover damages by reason of his own breach.
CA: REVERSED
 Transfer of title to the property in the appelee’s name cannot be interpreted as
a condition precedent to the payment of agreed purchase price.
 Terms of contract are explicit and require no interpretation. Upon the
expiration of contract of lease, lessee shall purchase the property. There must
first be payment before transfer of title to vendee’s name can be made.
 4 year period only starts to run the moment lessee exercises his right to
purchase.
ISSUES:
INTERPRETATION OF PARAGRAPH 9
 Basic to the rule of interpretation of contracts : understood as bearing that
import most adequate to render it effectual
 Record shows that at time the contract was executed land in question was
still registered to the name of Calixto and Cruz, respondent’s predecessor
in interest. No showing whether respondents were the onl heirs of Cruz or
whether the other half of land named to Calixto was adjudicated to them
by any means.
 Hence when the contract of lease/purchase was executed, there was no
assurance that the respondents were indeed the owners of the lot, in what
concept and to what extent.
 Clear intent of the 9th par. Was for respondents to obtain separate and
distinct TCT in their names. This was necessary to enable them to show
their ownership of stipulated portion and their concomitant right to dispose
of it.
 Nemo dat quod non habet “ no one can give what he does not have”
 In a contract of sale title to property passes to vendee upon delivery of
thing sold. In this case, the respondent could not deliver ownership or title
to a specific of a portion of the yet undivided property.
 Par 9 requires respondent to obtain a TCT.
 Petitioner cannot be compelled to perform his obligation under the
contract only after respondents complied with his obligation.
NINTH CLAUSE: CONDITIONAL PRECEDENT
 Undertaking was a contition precedent to the latter’s obligation to
purchase and pay for thel and.
 Art 1181:
 Condition: every future and uncertain event upon which an
obligation or provision is made to depend. It is the future and
uncertain event upon which the acquisition or resolution of rights
was made
 When the obligation assumed by party to a contract is expressly subject
to a condition, the obligation cannot be enforced against him unless
condition is complied with.
 Obligatory force of conditional obligation is subordinated to the happening
of a future and uncertain event so that if event does not take place,
parties would stand as if conditional obligation has never existed.
RESPONDENT CANNOT RESCIND CONTRACT
 OBLICON DIGESTS

 Because they have not caused he transfer of TCT to their names, which is  At time of execution, parties were not unmindful of the contingency of US govt not
a condition precedent t the petitioner’s obligation allowing the export of goods nor of the fact hat the other foreseen circumstances
therein stated might prevent it.
 Considering these contracts in light of civil law, we cannot but conclude that the
term which parties attempted to fix is so uncertain that one cannot just tell whether
SMITH BELL & CO V. SOTELO MATTI as a matter of fat, those goods could be brought to MNL or not.
 Obligation must bee regarded as conditional.
Facts :  Obligations for the performance of which a day certain has been fixed shall be
demandable only when the day arrives.
 1918, Plantiff Corporation and defendant Sotello entered into contracts whereby  A day certain= must necessarily arrive, even though its date be unknown.
former obliged itself to sell and the latter to purchase  If uncertainty consists of the arrival or non-arrival of the day, the obligation is
conditional and shall be governed by the rules of the next proceeding section.
TANKS Php 21,000.00 New york 3-4 months NO FIXED  In cases lie this, which is not expressly provided for but impliedly covered by the
PERIOD Civil Code, the obligor will be deemed to have sufficiently performed his part if he
EXPELLERS Php 25,000 San Francisco Month of Sept/ has done all that was in is power even if the conistion has not been fulfilled in
ASAP reality.
ELECTRIC 2,000 each Approximate  Obligee having done all that was in his power, was entitled to enforce performance
MOTORS delivery within
90 days—not of obligation
guaranteed  First: When fulfillment of condition does not depend on will of the obligor but on that
 Plaintiff corp notified the defendant Mr. Sotelo of the arrival of these gods but Mr of a third person who can in no way be compelled to carry it out --- judgment of
Sotelo refused o received them and to pay for the prices stipulated. said court ordering other party to comply with his part is not contrary t aw of
 Plaintiffs brought suit against defendant Mr. Sotelo of the arrival of these goods, contracts
but Mr.Sotelo refused to receive them and to pay for pries stipulated.  Fulfullment of condition does not depend on will of obligor but on that of 3rd person
 Defendant Mr.Sotelo and intervenor ManilaOil Refining denied plaintiff’s allegation who can in no way be compelled to carry it out, obligor’s part of contract is
- It was only in May 1919 that it notified the intervenor that said tanks arrived, complied with if he does all that is in his power and has he right to demand
motors and expellers having arrived incomplete and long after date performance of the contract by the other party.
stipulated.  It is sufficiently proved in the records that plaintiff has made all the efforts it could
- Plaintiff’s delay in making delivery possible be expected to make under the circumstances to bring the goods in
- Suffered damages due to nondelivery of thanks and motors in due time. question to manila as soon as possible.
 When time of delivery: not fixed = reasonable time: determined by circumstances
LOWER COURT : absolved the defendants : but rendered judgment against them  Plaintiff did all within his power to comply = reasonable time. Not guilty of delay
ordering them to pay amount of money for sum of goods with legal interest
SECURITY BANK AND TRUST COMPANY V. CA
ISSUE: WON UNDER CONTRACTS ENTERED INTO AND THE CIRCUMSTANCES
ESTABLISHED IN THE RECORD, THE PLAINTIFF HAS FULFILLED IN DUE TME ITS FACTS:
OBLIGATION TO BRNG THE GOODS IN QUESTION IN MANILA
 Private respondent Ysmael ferrer was contracted by petitioners to
HELD: construct building of SBTC in Davao for Php 1,760,000.00/
 Contract dated Feb 4,1980 provided that Ferrer would finish construction
 It appears that these contracts were executed at time of world war when there
within 200 working days
existed rigid restrictions on the export from US of articles like the machinery in
question. (which in fact was known to parties)  Ferrer was able to complete said building within stipulated period but he
was compelled by drastic increase in the cost of construction materials to
incur expenses of about Php 300,000.00 on top of original cost.
 OBLICON DIGESTS

 Additional expenses made known to SBTC through its VP as early as
March 1980, demands were supported by documentary proofs
 March 1981, SBTC Assitant VP Guanio and archi representative
consulted by SBTC verified Ferrer’s claims of additiona cost.
Recommendation was made to settle ferrer’s claim but only for Php
200,000.00.
 SBTC instead of paying denied ever authorizing payment of any amount
beyond its original cost
 SBTC likewise denied any liability for additional cost based on Art 9 of
building contract
 --- if an time prior to completion, increasein prices of construction/lbor
shall supervene through no fault on part of contractor whatsoever or any
act of government and its instrumentalities which directly or indirectly
affects the increase of cost of project, OWNER shall equitably make
appropriate adjustments on mutual agreement/
 Ysmael Ferrer filed a complaint for breach of contract with damages.
 TC ruled for Ferre and ordered SBTC and Rosito Manhit to pay.
 CA affirmed TC decision
 In fact, petitioner bank admitted liability for increased cost when
recommendation was made to settle private respondents claim for 200k .
 Claim was adequately proven
 Art 1182 of CC: conditional obligation shall be void if its fulfillment
depends upon the sole will of the debtor, In present case, mutual
agreement, the absence of which petitioner bank relies upon to
support non-liability for increased construction cos is in effet a
condition depending on bank’s sole will
 Petitioner bank derived benefits when private resp completed building.
 To allow petitioner ban to acquire building at price far below its actual
construction cost would undoubtedly constitute unjust enrichment for bank
to the prejudice of the private respondent.

Petitioner’s argument:

 Petitioners argue that under Art 9, any increase will not automatically
make petitioners liable to pay for such increase cost .
 Appropriate adjustment will be made upon mutual agreement of both
parties. It is contended that since here was no mutual agreement between
parties, petitioner’s obligation to pay amounts above original price never
materialized.

HELD:

 Art 22 of CC: No man ought to be made rich out of another’s injury

 In the present case: petitioner’s argument to support absence of liability
for the cost of construction beyond original contract price in case the cost
of rpoheect increases through no fault of conractor.
 Private respondent informed petitioner of drastic increase in construction
as early as March 1980.
 It is not denied that private respondent incurred additional expenses in
constructing petitioner bank’s building due to drastic and unexpected
increase.