43 Nakpil v CA, L-47851, October 3, 1986
PARAS, J.
TOPIC: Fortuitous event
DOCTRINE: To exempt the obligor from liability under Article 1174 of the Civil
Code, for a breach of an obligation due to an "act of God," the following must
concur: (a) the cause of the breach of the obligation must be independent of
the will of the debtor; (b) the event must be either unforseeable or
unavoidable; (c) the event must be such as to render it impossible for the
debtor to fulfill his obligation in a normal manner; and (d) the debtor must be
free from any participation in, or aggravation of the injury to the creditor.
FACTS:
• The plaintiff, Philippine Bar Association, a civic-non-profit
association, incorporated under the Corporation Law, decided to
construct an office building on its 840 square meters lot located at
the comer of Aduana and Arzobispo Streets, Intramuros, Manila.
The construction was undertaken by the United Construction, Inc.
on an "administration" basis, on the suggestion of Juan J. Carlos, the
president and general manager of said corporation. The proposal
was approved by plaintiff's board of directors and signed by its
president Roman Ozaeta, a third-party defendant in this case. The
plans and specifications for the building were prepared by the other
third-party defendants Juan F. Nakpil & Sons. The building was
completed in June, 1966.
• In the early morning of August 2, 1968 an unusually strong
earthquake hit Manila and its environs and the building in question
sustained major damage. The front columns of the building buckled,
causing the building to tilt forward dangerously. The tenants
vacated the building in view of its precarious condition. As a
temporary remedial measure, the building was shored up by United
Construction, Inc. at the cost of P13,661.28.
• On November 29, 1968, the plaintiff commenced this action for the
recovery of damages arising from the partial collapse of the building
against United Construction, Inc. and its President and General
Manager Juan J. Carlos as defendants. Plaintiff alleges that the
collapse of the building was accused by defects in the construction,
the failure of the contractors to follow plans and specifications and
violations by the defendants of the terms of the contract.
• Defendants in turn filed a third-party complaint against the
architects who prepared the plans and specifications, alleging in
essence that the collapse of the building was due to the defects in
the said plans and specifications.
• The Commissioner eventually submitted his report on September
25, 1970 with the findings that while the damage sustained by the
PBA building was caused directly by the August 2, 1968 earthquake
whose magnitude was estimated at 7.3 they were also caused by
the defects in the plans and specifications prepared by the third-
party defendants' architects, deviations from said plans and
specifications by the defendant contractors and failure of the latter
to observe the requisite workmanship in the construction of the
building and of the contractors, architects and even the owners to
exercise the requisite degree of supervision in the construction of
subject building.
• Because of another earthquake on April 7, 1970, the trial court after
the needed consultations, authorized the total demolition of the
building
ISSUE: W/N the defendants are liable for the damage
HELD: Yes
RULING:
• There is no dispute that the earthquake of August 2, 1968 is a
fortuitous event or an act of God.
• if upon the happening of a fortuitous event or an act of God, there
concurs a corresponding fraud, negligence, delay or violation or
contravention in any manner of the tenor of the obligation as
provided for in Article 1170 of the Civil Code, which results in loss or
damage, the obligor cannot escape liability.
• Thus it has been held that when the negligence of a person concurs
with an act of God in producing a loss, such person is not exempt
from liability by showing that the immediate cause of the damage
was the act of God.
• The negligence of the defendant and the third-party defendants
petitioners was established beyond dispute both in the lower court
and in the Intermediate Appellate Court. Defendant United
Construction Co., Inc. was found to have made substantial
deviations from the plans and specifications. and to have failed to
observe the requisite workmanship in the construction as well as to
exercise the requisite degree of supervision; while the third-party
defendants were found to have inadequacies or defects in the plans
and specifications prepared by them. As correctly assessed by both
courts, the defects in the construction and in the plans and
specifications were the proximate causes that rendered the PBA
building unable to withstand the earthquake of August 2, 1968. For
this reason the defendant and third-party defendants cannot claim
exemption from liability.
• The records show that the lower court spared no effort in arriving at
the correct appreciation of facts by the referral of technical issues to
a Commissioner chosen by the parties whose findings and
conclusions remained convincingly unrebutted by the
intervenors/amicus curiae who were allowed to intervene in the
Supreme Court.
• In any event, the relevant and logical observations of the trial court
as affirmed by the Court of Appeals that "while it is not possible to
state with certainty that the building would not have collapsed were
those defects not present, the fact remains that several buildings in
the same area withstood the earthquake to which the building of
the plaintiff was similarly subjected," cannot be ignored.
44 FIL ESTATE PROPERTIES INC V SPS RONQUILLO
GR No. 185798 | January 13, 2014 | PEREZ
TOPIC: FORTUITOUS EVENT; NCC 1174
DOCTRINE:
Requisites of Fortuitous Event:
(a) the cause of the breach of the obligation must be independent of
the will of the debtor;
(b) the event must be either unforeseeable or unavoidable;
(c) the event must be such as to render it impossible for the debtor to
fulfill his obligation in a normal manner; and,
(d) the debtor must be free from any participation in or aggravation of
the injury to the creditor.
EMERGENCY RECIT: (short case)
FACTS:
1. Petitioner Fil Estate Properties Inc is the owner and developer of Central
Park Place Tower, its co petitioner Fil Estate Network is its authorized
marketing agent. Sps Ronquillo and Maria Ronquillo bought a
condominium from them for P5.1M.
2. The Ronquillos executed a Reservation application agreement, agreeing
to deposit P200K as reservation fee. They paid the down payment and
monthly amortizations.
3. Upon learning that the construction has topped, the also stopped paying
the monthly amortization and demanded full refund of the amount they
already paid. Fil Estate refused so they filed a complaint for refund and
damages before HLURB.
4. The HLURB ordered Fil Estate Properties and Fil Estate Network solidary
jointly and severally liable. The Arbiter considered petitioners’ failure to
develop the condominium project as a substantial breach of their
obligation which entitles respondent to seek for rescission with payment
of damages and that economic hardship is not an excuse for contractual
and legal delay.
5. Petitioners appealed with OP and CA which were both denied. They claim
that the 1997 Asian financial crisis that caused the delay befalling the real
estate industry constitutes as a fortuitous event.
ISSUE/S:
WON Asian financial crisis constitute a fortuitous event which would justify
delay by petitioners in the performance of their contractual obligation? - NO
HELD:
• The Court in the ase of Fil Estate v Spouses Go stated that the Asian
financial crisis is not an instance of caso fortuito. This case has the same
factual milieu as the instant case, which involves the same company but a
different condominium project.
• The company’s failure to develop the condominium project despite
substantial payment of the contract price amounts to breach of their
obligation.
• A real estate enterprise engaged in the pre-selling of condominium units
is concededly a master in projections on commodities and currency
movements and business risks. The fluctuating movement of the
Philippine peso in the foreign exchange market and currency exchange
rate is an everyday occurrence. Thus the 1997 Asian financial crisis cannot
be held as unforeseen and beyond the control of a business corporation
that will amount to a fortuitous event justifying the delay of the
construction project.
45 Cheng et.al. v CA and Philam Insurance
G.R. No. 144169; 28 March 2001
Topic: Remedies of Creditors, Accion Pauliana | Ponente: J. Kapunan | Author:
Enriquez
Doctrine: 1) That the plaintiff asking for rescission has a credit prior to, the
alienation, although demandable later; 2) That the debtor has made a
subsequent contract conveying a patrimonial benefit to a third person; 3) That
the creditor has no other legal remedy to satisfy his claim, but would benefit by
rescission of the conveyance to the third person; 4) That the act being
impugned is fraudulent; 5) That the third person who received the property
conveyed, if by onerous title, has been an accomplice in the fraud.
Facts:
1. Petitioner Cheng is the owner of Butuan Shipping Lines. PH Agri Trading
Corp. shipped on board the vessel of Cheng 3,400 bags of copra. The said
shipment is covered by a marine insurance policy issued by American
Home Insurance Company (respondent Philam's assured).
2. However, it sank. Because of the loss, the insurer, American Home, paid
the amount of P354,000.00 (the value of the copra) to the consignee.
3. Having been subrogated into the rights of the consignee, American Home
instituted a Civil Case to recover the money paid to the consignee, based
on breach of contract of carriage. While the case was still pending or on
1989, Cheng executed deeds of donations of parcels of land in favor of his
children, herein co-petitioners.
4. On Dec. 1993, the RTC ruled against Cheng and a writ of execution was
granted. When the sheriff, accompanied by counsel of respondent
Philam, went to Butuan City on Jan. 1997, to enforce the alias writ of
execution, they discovered that petitioner Khe Hong Cheng no longer had
any property and that he had conveyed the subject properties to his
children.
5. Thus, Philam filed a complaint for the rescission of the deeds of donation.
It alleged that Cheng executed the aforesaid deeds in fraud of his
creditors, including respondent Philam.
6. Cheng filed a MTD on the ground that the action had already prescribed.
They posited that the registration of the deeds of donation on December
27, 1989 constituted constructive notice and since the complaint a
quo was filed only on February 25, 1997, or more than four (4) years after
said registration, the action was already barred by prescription.
7. RTC and CA ruled against Cheng. Hence, this petition.
Issue/Held: When did the four (4) year prescriptive period as provided for in
Article 1389 of the Civil Code for respondent Philam to file its action for
rescission of the subject deeds of donation commence to run? From the
moment the cause of action accrues. Petition DENIED.
Ratio:
• Article 1389 of the Civil Code simply provides that, "The action to claim
rescission must be commenced within four years." Since this provision of
law is silent as to when the prescriptive period would commence, the
general rule, i.e., from the moment the cause of action accrues,
therefore, applies (Art. 1150).
• Article 1383 of the Civil Code provides as follows:
Art. 1383. An action for rescission is subsidiary; it cannot be
instituted except when the party suffering damage has no other
legal means to obtain reparation for the same.
• It is thus apparent that an action to rescind or an accion pauliana must be
of last resort, availed of only after all other legal remedies have been
exhausted and have been proven futile. For an accion pauliana to accrue,
the following requisites must concur: (SEE DOCTRINE)
• To count the 4 year prescriptive period to rescind an allegedly fraudulent
contract from the date of registration of the conveyance with the Register
of Deeds, as alleged by the Cheng, would run counter to Article 1383 as
well as settled jurisprudence. It would likewise violate the third requisite.
• An accion pauliana thus presupposes the following: 1) A judgment; 2) the
issuance by the trial court of a writ of execution for the satisfaction of the
judgment, and 3) the failure of the sheriff to enforce and satisfy the
judgment of the court. It requires that the creditor has exhausted the
property of the debtor: The date of the decision of the trial court is
immaterial. What is important is that the credit of the plaintiff antedates
that of the fraudulent alienation by the debtor of his property. After all,
the decision of the trial court against the debtor will retroact to the time
when the debtor became indebted to the creditor.
• Even if respondent Philam was aware, as of December 27, 1989, that
petitioner Khe Hong Cheng had executed the deeds of donation in favor
of his children, the complaint against Butuan Shipping Lines and/or
petitioner Khe Hong Cheng was still pending before the trial court.
• Had respondent Philam filed his complaint on December 27, 1989, such
complaint would have been dismissed for being premature. Not only
were all other legal remedies for the enforcement of respondent Philam's
claims not yet exhausted at the time the needs of donation were
executed and registered. Respondent Philam would also not have been
able to prove then that petitioner Khe Hong Cheng had no more property.
46 SIGUAN v. LIM
G.R. No. 134685 | November 19, 1999
Doctrine:
The general rule is that rescission requires the existence of creditors at the time
of the alleged fraudulent alienation, and this must be proved as one of the
bases of the judicial pronouncement setting aside the contract.
Facts:
▪ August 1990 – Lim issued two Metrobank checks in the sums of
P300,000 and P241,668, respectively, payable to “cash.” Upon
presentment by Siguan with the drawee bank, the checks were
dishonored for the reason “account closed.” Demands to make good
the checks proved futile.
▪ A criminal case for violation of Batas Pambansa Blg. 22 was filed
against Lim. RTC Cebu convicted him as charged. The case is pending
for review before the SC.
▪ * It also appears that on July 1990, Lim was convicted of estafa but
eventually acquitted by SC but maintained the civil liability.
▪ July 2, 1991 – a Deed of Donation4conveying the following parcels of
land and purportedly executed by LIM on August 10, 1989 in favor
of her children, Linde, Ingrid and Neil, was registered with the Office
of the Register of Deeds of Cebu City.
▪ Siguan filed an accion pauliana against Lim and her children to
rescind the questioned Deed of Donation and to declare as null and
void the new transfer certificates of title issued for the lots covered
by the questioned Deed.
 ▪ RTC ordered the recision but it was reversed by the CA 1. The fact that the consideration of the conveyance is fictitious or is
inadequate;
Issue/s: Whether the questioned Deed of Donation was made in fraud of 2. A transfer made by a debtor after suit has begun and while it is
petitioner and, therefore, rescissible. pending against him;
3. A sale upon credit by an insolvent debtor;
Held: No. Claim against LIM was constituted only in August 1990, or a year 4. Evidence of large indebtedness or complete insolvency;
after the questioned alienation. Thus, the first two requisites for the rescission 5. The transfer of all or nearly all of his property by a debtor, especially
of contracts are absent. when he is insolvent or greatly embarrassed financially;
6. The fact that the transfer is made between father and son, when
Ruling: there are present other of the above circumstances; and
The general rule is that rescission requires the existence of creditors at the time The failure of the vendee to take exclusive possession of all the property
of the alleged fraudulent alienation, and this must be proved as one of the
bases of the judicial pronouncement setting aside the contract. Without any 47 Gaite v. Fonacier
prior existing debt, there can neither be injury nor fraud. While it is necessary G.R. No. 123456 | 25 DECEMBER 2018 |J.B.L. Reyes| Mendoza
that the credit of the plaintiff in the accion pauliana must exist prior to the
fraudulent alienation, the date of the judgment enforcing it is immaterial. Even
if the judgment be subsequent to the alienation, it is merely declaratory, with Doctrine:
retroactive effect to the date when the credit was constituted. What characterizes a conditional obligation is the fact that its efficacy or
obligatory force is subordinated to the happening of a future and uncertain
The Court was not convinced with the allegation of Siguan that the questioned event; so that if the suspensive condition does not take place, the parties
deed was antedated to make it appear that it was made prior to Siguan’s would stand as if the conditional obligation had never existed.
credit. Notably, that deed is a public document, it having been acknowledged
before a notary public. As such, it is evidence of the fact which gave rise to its Facts:
execution and of its date. ▪ Fonacier owned 11 lode iron mineral claims, known as Dawahan Group, in
The fact that the questioned Deed was registered only on 2 July 1991 is not Jose Panganiban, Camarines Norte. He appointed Gaite as his attorney-
enough to overcome the presumption as to the truthfulness of the statement in-fact in the exploration and development of said mineral claims on a
of the date in the questioned deed, which is 10 August 1989. royalty basis of P0.50/ton of ore extracted therein.
Accion Pauliana ▪ Gaite assigned conveyance of the same to his solely-owned company
Requisites In this case Larap Iron Mines, subject to the same royalty basis required by Fonacier.
the plaintiff asking for rescission has Claim against Lim – August 1990 With the said venture, plaintiff caused development of the mining claims
a credit prior to the alienation, Alienation – August 1989 (e.g. construction of roads, mining facilities), and extracted ore.
although demandable later ▪ Fonacier then decided to rescind the power of attorney given to Gaite,
the debtor has made a subsequent Claim against Lim – August 1990 which the latter agreed to subject to P20,000 plus 10% royalties that
contract conveying a patrimonial Alienation – August 1989 Fonacier would receive for the mining claims.
benefit to a third person ▪ Gaite then transferred all his interests and rights over Larap Iron Mines,
Even assuming arguendo that petitioner became a creditor of LIM prior to the including all records and documents. In addition, plaintiff transferred to
celebration of the contract of donation defendant all his rights and interests over the “24,000 tons of iron ore,
the creditor has no other legal The term “subsidiary remedy” has more or less” in exchange for P75,000, P10,000 of which was paid upon
remedy to satisfy his claim been defined as “the exhaustion of all signing of the Revocation of Power of Attorney, with the balance of
remedies by the prejudiced creditor P65,000 to be paid from the first letter of credit covering the first
to collect claims due him before shipment of iron ores and from the first amount derived from the local
rescission is resorted to.” sale or iron ore made by Larap Mines.
Petitioner neither alleged nor proved ▪ For the remaining P65,000, defendant presented plaintiff a surety bond
that she did so with the former (Fonacier) as principal and Larap Mines and its
the act being impugned is fraudulent For presumption of fraud to apply, it stockholders as sureties. But plaintiff sought an additional bond
must be established that the donor underwritten by a bonding company. Thus defendant put up another
did not leave adequate properties bond with Far Eastern Surety and Insurance Co., but it provided that the
which creditors might have recourse liability
for the collection of their credits ▪ of the surety company would only have effect if there had been actual
existing before the execution of the sale of iron ore for an amount not less than P65,000, and that this liability
donation. would expire after one year, that is on December 8, 1955.
▪ On December 8, 1955, bond with Far Eastern had expired and was not
It was not sufficiently established that renewed, none of the 24,000 tons of iron ore had been sold and Fonacier
the properties left behind by LIM and the other sureties were unable to pay Gaite P65,000 upon his
were not sufficient to cover her debts demand. Gaite then brought action for the payment of P65,000.
existing before the donation was ▪ Defendants countered that payment of the P65,000 was conditioned on
made sale of iron ore by the company, which had not happened, rendering their
the third person who received the obligation to pay not yet demandable and that only 7,573 tons of the
property conveyed, if it is by onerous estimated 24,000 was actually delivered to them. Lower court ruled in
title, has been an accomplice in the favor of plaintiff.
fraud ▪

*Just in case: Issue/s:

With regard to estafa case:
Only the creditor who brought the action for rescission can benefit from the
rescission; those who are strangers to the action cannot benefit from its
effects. And the revocation is only to the extent of the plaintiff creditor’s
unsatisfied credit; as to the excess, the alienation is maintained. Thus,
petitioner cannot invoke the credit of Suarez to justify rescission of the subject
deed of donation
Badges of Fraud (Not Exclusive)
Whether the lower court erred in holding that the obligation of Fonacier to pay
Gaite the P65K is one with a period or term and not one with a suspensive
condition, and that the term expired on December 8, 1955.
Held: NO
Ruling:
1. The SC affirmed the lower court’s decision that the shipment or local sale of
the iron ore is not a condition precedent (or suspensive) to the payment of the
balance of P65,000.00, but was only a suspensive period or term.
What characterizes a conditional obligation is the fact that its efficacy or
obligatory force (as distinguished from its demandability) is subordinated to
the happening of a future and uncertain event; so that if the suspensive
condition does not take place, the parties would stand as if the conditional
obligation had never existed.
2. The words of the contract express no contingency in the buyers obligation to
pay: “The balance of P65K will be paid out of the first letter of credit covering
the first shipment of iron ores x x x” etc.
There is no uncertainty that the payment will have to be made sooner or later;
what is undetermined is merely the exact date at which it will be made. By the
very terms of the contract, therefore, the existence of the obligation to pay is
recognized; only its maturity or demandability is deferred. 
 Cruz
3. To subordinate the obligation to pay the remaining P65,000.00 to the sale or
shipment of the ore as a condition precedent, would be tantamount to leaving
the payment at the discretion of the debtor, for the sale or shipment could not
be made unless the appellants took steps to sell the ore.
4. The sale of the ore to Fonacier was a sale on credit, and not an aleatory
contract where the transferor, Gaite, would assume the risk of not being paid
at all; and that the previous sale or shipment of the ore was not a suspensive
condition for the payment of the balance of the agreed price, but was intended
merely to fix the future date of the payment.
48 GONZALES v. HEIRS OF THOMAS AND PAULA CRUZ
G.R. No. 131784; 16 September 1999
Topic: Conditional Obligations | Ponente: Panganiban, J. | Author:
Pagcaliwagan
Doctrine: When the obligation assumed by a party to a contract is expressly
subjected to a condition, the obligation cannot be enforced against him unless
the condition is complied with. Furthermore, [t]he obligatory force of a
conditional obligation is subordinated to the happening of a future and
uncertain event, so that if that event does not take place, the parties would
stand as if the conditional obligation had never existed.
Emergency Recit: The heirs (LESSOR) and Gonzales (LESSEE) entered into a
Contract of Lease/Purchase. Gonzales did not exercise his option to purchase
the property after the expiration of the 1-year lease and remained in
possession of the land without paying. Paragraph 9 of the contract states that:
“The LESSORS hereby commit themselves and shall undertake to obtain a
separate and distinct T.C.T. over the herein leased portion to the LESSEE.” The
heirs filed a complaint for recovery of possession. Gonzales argued that the
heirs breached paragraph 9. The issue is WON paragraph 9 is a condition
precedent before Gonzales could exercise his option to buy the property.
Facts:
• Cruz and the heirs of Thomas and Paula Cruz (LESSORS) entered into
a Contract of Lease/Purchase with Gonzales (LESSEE) of a half-
portion of a parcel of land. The Contract of Lease/Purchase contains
the following provisions:
“1. The terms of this Contract is for a period of one year upon the
signing thereof. After the period of this Contract, the LESSEE shall
purchase the property on the agreeable price of One Million Pesos
(P1,000,000.00) payable within Two (2) Years period with an interest
of 12% per annum subject to the devalued amount of the Philippine
Peso
9. The LESSORS hereby commit themselves and shall undertake to
obtain a separate and distinct T.C.T. over the herein leased portion
to the LESSEE within a reasonable period of time which shall not in
any case exceed four (4) years, after which a new Contract shall be
executed by the herein parties which shall be the same in all
respects with this Contract of Lease/Purchase insofar as the terms
and conditions are concerned.”
• Gonzales did not exercise his option to purchase the property
immediately after the expiration of the 1-year lease. He remained in
possession of the property without paying the purchase price
provided for in the Contract and without paying any further rentals.
• The heirs sent a letter to Gonzales informing him of their decision to
rescind the Contract due to a breach committed by the latter.
o Letter served as a demand to vacate the premises. But
Gonzales refused to vacate.
• Property subject of the Contract is currently the subject of an extra-
judicial partition. Title to the property remains in the name of the
plaintiffs’ predecessor-in-interest, Bernardino Calixto and Severo
• The heirs filed a complaint for recovery of possession of the
property alleging that Gonzales has not purchased the property
after the lapse of 1 year, thus they seek to rescind the Contract and
recover the property. While Gonzales alleged breach of paragraph
nine.
Issue/s: WON paragraph nine of the Contract is a condition precedent before
Gonzales could exercise his option to buy the property.
Held: Yes.
Ruling:
• The ninth provision was intended to ensure that respondents would
have a valid title over the specific portion they were selling to
petitioner. Only after the title is assured, may the obligation to buy
the land and to pay the sums stated in the Contract be enforced
within the period stipulated. Verily, the petitioner’s obligation to
purchase has not yet ripened and cannot be enforced until and
unless respondents can prove their title to the property subject of
the Contract.
• Because the ninth clause required respondents to obtain a separate
and distinct TCT in their names and not in the name of petitioner, it
logically follows that such undertaking was a condition precedent to
the latter’s obligation to purchase and pay for the land. Put
differently, petitioner’s obligation to purchase the land is a
conditional one and is governed by Article 1181 of the Civil Code.
• Condition has been defined as every future and uncertain event
upon which an obligation or provision is made to depend. It is a
future and uncertain event upon which the acquisition or resolution
of rights is made to depend by those who execute the juridical act.
Without it, the sale of the property under the Contract cannot be
perfected, and petitioner cannot be obliged to purchase the
property. When the consent of a party to a contract is given subject
to the fulfillment of a suspensive condition, the contract is not
perfected unless that condition is first complied with.
• The Court has held that [w]hen the obligation assumed by a party to
a contract is expressly subjected to a condition, the obligation
cannot be enforced against him unless the condition is complied
with. Furthermore, [t]he obligatory force of a conditional obligation
is subordinated to the happening of a future and uncertain event, so
that if that event does not take place, the parties would stand as if
the conditional obligation had never existed.
• In this case, the obligation of the petitioner to buy the land cannot
be enforced unless respondents comply with the suspensive
condition that they acquire first a separate and distinct TCT in their
names. The suspensive condition not having been fulfilled, then the
obligation of the petitioner to purchase the land has not arisen.
49 GONZALES v. HEIRS OF THOMAS AND PAULA CRUZ
G.R. No. 131784; 16 September 1999
Topic: suspensive condition | Ponente: Panganiban, J. | Author: Pagcaliwagan /
Pineda
Doctrine: When the consent of a party to a contract is given subject to the
fulfillment of a suspensive condition, the contract is not perfected unless that
condition is first complied with.
Emergency Recit: The heirs (LESSOR) and Gonzales (LESSEE) entered into a
Contract of Lease/Purchase. Gonzales did not exercise his option to purchase
the property after the expiration of the 1-year lease and remained in
possession of the land without paying. Paragraph 9 of the contract states that:
“The LESSORS hereby commit themselves and shall undertake to obtain a
separate and distinct T.C.T. over the herein leased portion to the LESSEE.” The
heirs filed a complaint for recovery of possession. Gonzales argued that the
heirs breached paragraph 9. The issue is WON paragraph 9 is a condition
precedent before Gonzales could exercise his option to buy the property.
Facts:
• Cruz and the heirs of Thomas and Paula Cruz (LESSORS) entered into
a Contract of Lease/Purchase with Gonzales (LESSEE) of a half-
portion of a parcel of land. The Contract of Lease/Purchase contains
the following provisions:
“1. The terms of this Contract is for a period of one year upon the
signing thereof. After the period of this Contract, the LESSEE shall
purchase the property on the agreeable price of One Million Pesos
(P1,000,000.00) payable within Two (2) Years period with an interest
of 12% per annum subject to the devalued amount of the Philippine
Peso
9. The LESSORS hereby commit themselves and shall undertake to
obtain a separate and distinct T.C.T. over the herein leased portion
to the LESSEE within a reasonable period of time which shall not in
any case exceed four (4) years, after which a new Contract shall be
executed by the herein parties which shall be the same in all
respects with this Contract of Lease/Purchase insofar as the terms
and conditions are concerned.”
• Gonzales did not exercise his option to purchase the property
immediately after the expiration of the 1-year lease. He remained in
possession of the property without paying the purchase price
provided for in the Contract and without paying any further rentals.
• The heirs sent a letter to Gonzales informing him of their decision to
rescind the Contract due to a breach committed by the latter.
o Letter served as a demand to vacate the premises. But
Gonzales refused to vacate.
• Property subject of the Contract is currently the subject of an extra-
judicial partition. Title to the property remains in the name of the
plaintiffs’ predecessor-in-interest, Bernardino Calixto and Severo
Cruz
• The heirs filed a complaint for recovery of possession of the
property alleging that Gonzales has not purchased the property
after the lapse of 1 year, thus they seek to rescind the Contract and
recover the property. While Gonzales alleged breach of paragraph
nine.
Issue/s: WON paragraph nine of the Contract is a condition precedent before
Gonzales could exercise his option to buy the property.
Held: Yes.
Ruling:
• The ninth provision was intended to ensure that respondents would
have a valid title over the specific portion they were selling to
petitioner. Only after the title is assured, may the obligation to buy
the land and to pay the sums stated in the Contract be enforced
within the period stipulated. Verily, the petitioner’s obligation to
purchase has not yet ripened and cannot be enforced until and
unless respondents can prove their title to the property subject of
the Contract.
• Because the ninth clause required respondents to obtain a separate
and distinct TCT in their names and not in the name of petitioner, it
logically follows that such undertaking was a condition precedent to
the latter’s obligation to purchase and pay for the land. Put
differently, petitioner’s obligation to purchase the land is a
conditional one and is governed by Article 1181 of the Civil Code.
• Condition has been defined as every future and uncertain event
upon which an obligation or provision is made to depend. It is a
future and uncertain event upon which the acquisition or resolution
of rights is made to depend by those who execute the juridical act.
Without it, the sale of the property under the Contract cannot be
perfected, and petitioner cannot be obliged to purchase the
property. When the consent of a party to a contract is given subject
to the fulfillment of a suspensive condition, the contract is not
perfected unless that condition is first complied with.
• The Court has held that [w]hen the obligation assumed by a party to
a contract is expressly subjected to a condition, the obligation
cannot be enforced against him unless the condition is complied
with. Furthermore, [t]he obligatory force of a conditional obligation
is subordinated to the happening of a future and uncertain event, so
that if that event does not take place, the parties would stand as if
the conditional obligation had never existed.
• In this case, the obligation of the petitioner to buy the land cannot
be enforced unless respondents comply with the suspensive
condition that they acquire first a separate and distinct TCT in their
names. The suspensive condition not having been fulfilled, then the
obligation of the petitioner to purchase the land has not arisen.
#50 Coronel v. CA
G.R. No. 103577; October 7, 1996
Topic: Suspensive Condition | Ponente: J. MELO | Author: S A Y O.. Sorry
complicated case
Doctrine:
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.
Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily
prevents its fulfillment.
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 .
Facts:
1. Defendants-appellants Romulo Coronel, et. al. (Coronels) executed a
document entitled Receipt of Down Payment in favor of plaintiff Ramona
Patricia Alcaraz (Ramona) which is reproduced hereunder:
RECEIPT OF DOWN PAYMENT (DP)
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 or 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:
a. Ramona will make a down payment of 50k pesos upon
execution of the document aforestated;
b. 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 50k DP
 c. 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 1.190M.
2. On the same date plaintiff-appellee Concepcion D. Alcaraz (Concepcion),
mother of Ramona, paid the DP of 50k
3. On February 6, 1985, the property originally registered in the name of the
Coronels father was transferred in their names.
4. On February 18, 1985, the Coronels sold the disputed property to
intervenor-appellant Catalina B. Mabanag (Catalina)
5. For this reason, Coronels canceled and rescinded the contract with
Ramona by depositing the down payment paid by Concepcion in the
bank in trust for Ramona Patricia Alcaraz.
6. On February 22, 1985, Concepcion, et. al., filed a complaint for a specific
performance against the Coronels.
Issue/s:
Was the contract a Conditional Contract of Sale or Contract to Sell?-
Conditional Contract of Sale.
WON the obligation became demandable due to the fulfillment of the
suspensive condition- YES
Ruling:
Contract To Sell
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.
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.
Conditional Contract of Sale
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.
So…
▪ 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.
▪ 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 petitioners 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 change 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 ownership of the
subject house and lot to the buyer if the documents were then in order.
▪ 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.
▪ 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.)
▪ Besides, it should be stressed and emphasized that what is more
controlling than 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.
▪ The inevitable conclusion is that on January 19, 1985, as evidenced by the
document denominated as Receipt of Down Payment the parties entered
into a contract of sale subject to the suspensive condition that the sellers
shall effect
the issuance of new certificate title from that of their father’s name to their
names and that, on February 6, 1985, this condition was fulfilled.
▪ 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.
51 PARKS v PROVINCE OF TARLAC
G.R. No. L-24190 | 13 July 1926| J. Avanceña| TIGLAO
TOPIC: Resolutory (Condition Subsequent)
DOCTRINE: When a condition is imposed and the compliance of which cannot
be effected except when the right is deemed acquired, such condition cannot
be a condition precedent. Therefore, it is a condition subsequent.
ER: Cirer and Hill donated a parcel of land with a condition that Tarlac should
construct a school and a park on it within six months from the time of
donation. After six months, it was not constructed. The prescriptive period to
revoke the donation started from this moment. Since the complaint was only
filed more than 10 years from this time, the action is said to have prescribed.
Nonetheless, the donation was perfected at that time and was subject to a
condition subsequent because the property had to be donated to them before
they can even possibly construct anything, subject only to the condition
provided in this case.
FACTS:
1. Cirer and Hill donated parcels of land to the Municipality of Tarlac
on the condition that it be used absolutely and exclusively for the
erection of a school and public parks, which should commence
within six (6) months from the donation.
2. The municipal president accepted and registered the donation.
3. Cirer and Hill later sold the same property to Parks.
4. Parks filed a complaint seeking the annulment of the earlier
donation to Tarlac. He further seeks that he be declared the
absolute owner of the property. Parks allege that the conditions of
the donation were not complied with.
ISSUE/S:
W/N the conditions are conditions subsequent – YES
W/N the donation is effective – YES; furthermore, it can no longer be revoked
because it is barred by prescription.
HELD/RULING:
It is true that the conditions have not been complied with, but these conditions
are not conditions precedent.
The characteristic of a condition precedent is that the acquisition of a right is
not effected while said condition is not complied with. Nothing is acquired,
there is only an expectancy of a right.
When a condition is imposed and the compliance of which cannot be effected
except when the right is deemed acquired, such condition cannot be a
condition precedent. Therefore, it is a condition subsequent.
In this case, the conditions that a public school and a park be made of the
donated land could not be complied with except after giving effect to the
donation. The done could not do any work on the donated land if the donation
had not really been effected because it would be an invasion of another’s title.
These conditions are conditions subsequent.
Even in a condition subsequent, non-compliance with the condition is sufficient
cause for the revocation of the donation. However, the period for bringing an
action for revocation has prescribed.
The period of prescription of this class of action is ten (10) years. The action for
revocation arose on April 1911. The complaint in this action was presented only
in July 1924, more than 10 years after the cause has accrued. Clearly, it has
prescribed.
52. Central Philippine University v CA
G.R. No. 112127 July 17, 1995
Topic: Resolutory (condition subsequent) | Ponente: J. Bellosillo| Author:
Valera
Doctrine: Under Art. 1181, on conditional obligations, the acquisition of rights
as well 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 is such a resolutory one. The donation had to be valid
before the fulfillment of the condition. If there was no fulfillment with the
condition such as what obtains in the instant case, the donation may be
revoked & all rights which the donee may have acquired shall be deemed lost &
extinguished
Facts:
▪ In 1939, Don Ramon Lopez Sr. executed a deed of donation in favor of
the Central Philippine College(Central Philippine university) of parcel of
land. For which a new TCT was issued in the name of the done CPU with
the following annotations:
 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
cornerstone 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
• In 1989, private respondents(Heirs of Don Ramon Lopez Sr.) filed an
annulmaent of donation, reconveyance and damges against CPU
alleging that since 1939,up to the time of action was filed. CPU had
not complied with the conditions of the donation.
• On its answer CPU alleged that the right of private respondents to
file the action had prescribed. that it did not violate any of the
conditions in the deed of donation because it never used the
donated property 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.
• The Trial court ruled that CPU failed to comply with the conditions
of the donation and declared it null and void.
• On appeal to the CA, the CA held 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 CA 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 it remanded the case to the
RTC to determine the period in which CPU should comply.
Issue/s: WON petitioner failed to comply the resolutely conditions annotated
at the back of petitioner’s certificate of title without a fixed period when to
comply with such conditions?
Held: Yes. Lorem ipsum dolor sit amet.
Ruling:
Under Art. 1181, on conditional obligations, the acquisition of rights as well 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 is such a resolutory one. The donation had to be valid before the
fulfillment of the condition. If there was no fulfillment with the condition such
as what obtains in the instant case, the donation may be revoked & all rights
which the donee may have acquired shall be deemed lost & extinguished.
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.
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
53. ALFONSO QUIJADA, et al v. CA and REGALADO MONTEJAR, et al
G.R. No. 126444. December 4, 1998
Topic: Resolutory (Condition subsequent) | Ponente: Martinez, J. | Author:
Acido
Doctrine: It has been ruled that when a person donates land to another on the
condition that the latter would build upon the land a school, the condition
imposed is not a condition precedent or a suspensive condition but a resolutory
one.
Facts:
1. Petitioners are the children of the late Trinidad Corvera Vda. de
Quijada. Trinidad was one of the heirs of the late Pedro Corvera and
inherited from the latter the two-hectare parcel of land subject of
the case, situated in the barrio of San Agustin, Talacogon, Agusan
del Sur.
2. On April 5, 1956, Trinidad Quijada together with her siblings
executed a conditional deed of donation of the parcel of land
subject of the case in favor of the Municipality of Talacogon, the
condition being that the parcel of land shall be used solely and
exclusively as part of the campus of the proposed provincial high
school in Talacogon. Apparently, Trinidad remained in possession of
the parcel of land despite the donation.
3. On July 29, 1962, Trinidad sold 1 hectare of the subject parcel of
land to private respondent Regalado Mondejar. Eventually, the
remaining 1 hectare was sold to Mondejar as well, verbally, without
the benefit of a written deed of sale and evidenced solely by
receipts of payment.
4. In 1987, the proposed provincial high school having failed to
materialize, the Sangguniang Bayan of the municipality of Talacogon
enacted a resolution reverting the 2 hectares of land donated back
to the donors. In the meantime, Mondejar sold portions of the land
to the other private respondents.
5. On July 5, 1988, petitioners filed a complaint against private
respondents for quieting of title, recovery of possession, and
ownership of parcels of land with claim for attorney's fees and
damages, claiming that at the time of the alleged sale to Regalado
Mondejar by Trinidad Quijada, the land still belonged to the
Municipality of Talacogon, hence, the supposed sale was null and
void.
6. Trial court favored petitioners, but this was reversed by the CA,
ruling that the sale made by Trinidad Quijada to respondent
Mondejar was valid as the former retained an inchoate interest on
the lots by virtue of the automatic reversion clause in the deed of
donation.
Issue: Whether the sale of the subject property made by Trinidad Quijada to
respondent Mondejar is void, considering that at that time, ownership was
already transferred to the Municipality of Talacogon.
Held: No, the sale is valid. CA decision affirmed.
Ruling:
1. The donation made on April 5, 1956 by Trinidad Quijada and her
siblings was subject to the condition that the donated property shall
be "used solely and exclusively as a part of the campus of the
proposed Provincial High School in Talacogon." The donation further
provides that should "the proposed Provincial High School be
discontinued or if the same shall be opened but for some reason or
another, the same may in the future be closed" the donated
property shall automatically revert to the donor. Such condition, not
being contrary to law, morals, good customs, public order or public
policy was validly imposed in the donation.
2. When the Municipality's acceptance of the donation was made
known to the donor, the former became the new owner of the
donated property -- donation being a mode of acquiring and
transmitting ownership - notwithstanding the condition imposed by
the donee. The donation is perfected once the acceptance by the
donee is made known to the donor. Accordingly, ownership is
immediately transferred to the latter and that ownership will only
revert to the donor if the resolutory condition is not fulfilled.
3. In this case, that resolutory condition is the construction of the
school. It has been ruled that when a person donates land to
 another on the condition that the latter would build upon the land a
school, the condition imposed is not a condition precedent or a
suspensive condition but a resolutory one. Thus, at the time of the
sales made in 1962 towards 1968, Trinidad could not have sold the
lots since she had earlier transferred ownership thereof by virtue of
the deed of donation. So long as the resolutory condition subsists
and is capable of fulfillment, the donation remains effective and the
donee continues to be the owner subject only to the rights of the
donor or his successors-in-interest under the deed of
donation. Since no period was imposed by the donor on when must
the donee comply with the condition, the latter remains the owner
so long as he has tried to comply with the condition within a
reasonable period.
4. Such period, however, became irrelevant herein when the donee-
Municipality manifested through a resolution that it cannot comply
with the condition of building a school and the same was made
known to the donor. Only then - when the non-fulfillment of the
resolutory condition was brought to the donor's knowledge - that
ownership of the donated property reverted to the donor as
provided in the automatic reversion clause of the deed of donation.
5. The donor may have an inchoate interest in the donated property
during the time that ownership of the land has not reverted to
her. Such inchoate interest may be the subject of contracts including
a contract of sale. In this case, however, what the donor sold was
the land itself which she no longer owns. It would have been
different if the donor-seller sold her interests over the property
under the deed of donation which is subject to the possibility of
reversion of ownership arising from the non-fulfillment of the
resolutory condition.
6. A perfected contract of sale cannot be challenged on the ground of
non-ownership on the part of the seller at the time of its perfection;
hence, the sale is still valid. The consummation, however, of the
perfected contract is another matter. It occurs upon the
constructive or actual delivery of the subject matter to the buyer
when the seller or her successors-in-interest subsequently acquires
ownership thereof. Such circumstance happened in this case when
petitioners -- who are Trinidad Quijada's heirs and successors-in-
interest -- became the owners of the subject property upon the
reversion of the ownership of the land to them. Consequently,
ownership is transferred to respondent Mondejar and those who
claim their right from him. Article 1434 of the New Civil Code
supports the ruling that the seller's "title passes by operation of law
to the buyer."
54. LIM V. COURT OF APPEALS
G.R. No. 87047 | 31 OCTOBER 1990
Topic: Potestative| Ponente: Regalado, J. | Author: Castro
Doctrine: The disputed stipulation “for as long as the defendant needed the
premises and can meet and pay said increases” is a purely potestative
condition because it leaves the effectivity and enjoyment of leasehold rights to
the sole and exclusive will of the lessee.
Facts:
1. Benito Dy entered into a contract of lease with Francisco Lao Lim for
a period of 3 years (1976-1979). After the stipulated term expired,
Dy refused to vacate the premises, so Lim filed an ejectment suit.
The suit was then terminated after the court approved their
compromise agreement.
2. They stipulated “That the term of the lease shall be renewed every
three years retroacting from October 1979 to October 1982; after
which the abovenamed rental shall be raised automatically by 20%
every three years for as long as defendant needed the premises and
can meet and pay the said increases, the defendant to give notice of
his intent to renew sixty (60) days before the expiration of the
term;”. The lease continued from 1979 to 1985.
3. Lim advised Dy that he would no longer renew the contract
effecting October 1985. However, Dy wanted to renew the contract.
4. Lim did not agree to the renewal, hence, he filed another ejectment
suit against Dy. The MTC, RTC, and the CA all ruled that the
stipulation which allows the lessee to stay on the premises as long
as he needs it and can pay rents is valid.
Issue: Whether the stipulation in the compromise agreement is valid
Held: No
Ruling:
Contrary to the ruling of respondent court, the disputed stipulation “for as
long as the defendant needed the premises and can meet and pay said
increases” is a purely potestative condition because it leaves the effectivity
and enjoyment of leasehold rights to the sole and exclusive will of the lessee.
The invalidity of a condition in a lease contract similar to the one at bar has
been resolved in Encarnacion vs. Baldomar, et al., where we ruled that in an
action for ejectment, the defense interposed by the lessees that the contract of
lease authorized them to continue occupying the premises as long as they paid
the rents is untenable, because it would leave to the lessees the sole power to
determine whether the lease should continue or not. As stated therein, “(i)f
this defense were to be allowed, so long as defendants elected to continue the
lease by continuing the payment of the rentals, the owner would never be able
to discontinue it; conversely, although the owner should desire the lease to
continue, the lessees could effectively thwart his purpose if they should prefer
to terminate the contract by the simple expedient of stopping payment of the
rentals. This, of course, is prohibited by the aforesaid article of the Civil Code.
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 and no equality exists between the lessor and the
lessee since the life of the contract is dictated solely by the lessee.
Resultantly, the contract of lease should be and is hereby construed as
providing for a definite period of three (3) years and that the automatic
increase of the rentals by twenty percent (20%) will take effect only if the
parties decide to renew the lease. A contrary interpretation will result in a
situation where the continuation and effectivity of the contract will depend
only upon the will of the lessee, in violation of Article 1308 of the Civil Code
and the aforesaid doctrine in Encarnacion.
It is likewise a suspensive condition because the renewal of the lease, which
gives rise to a new lease, depends upon said condition. It should be noted that
a renewal constitutes a new contract of lease although with the same terms
and conditions as those in the expired lease. It should also not be overlooked
that said condition is not resolutory in nature because it is not a condition that
terminates the lease contract. The lease contract is for a definite period of
three (3) years upon the expiration of which the lease automatically
terminates.
55 Silos v PNB, G.R. No. 181045, July 2, 2014
DEL CASTILLO, J.
TOPIC: Potestative
DOCTRINE: In loan agreements, it cannot be denied that the rate of interest is a
principal condition, if not the most important component. Thus, any
modification thereof must be mutually agreed upon; otherwise, it has no
binding effect. Moreover, the Court cannot consider a stipulation granting a
party the option to prepay the loan if said party is not agreeable to the
arbitrary interest rates imposed. Premium may not be placed upon a
stipulation in a contract which grants one party the right to choose whether to
continue with or withdraw from the agreement if it discovers that what the
other party has been doing all along is improper or illegal.
FACTS:
Spouses Eduardo and Lydia Silos (petitioners) have been in business for about
two decades of operating a department store and buying and selling of ready-
to-wear apparel. Respondent Philippine National Bank (PNB) is a banking
corporation organized and existing under Philippine laws.
To secure a one-year revolving credit line of ₱150,000.00 obtained from PNB,
petitioners constituted in August 1987 a Real Estate Mortgage over a 370-
square meter lot in Kalibo, Aklan. In July 1988,the credit line was increased to
₱1.8 million and the mortgage was correspondingly increased to ₱1.8 million.
And in July 1989, a Supplement to the Existing Real Estate Mortgage was
executed to cover the same credit line, which was increased to ₱2.5 million,
and additional security was given in the form of a 134-square meter lot. In
addition, petitioners issued eight Promissory Notes and signed a Credit
Agreement.
The Credit Agreement contained stipulations including:
“The Borrower agrees that the Bank may modify the interest rate in
the Loan depending on whatever policy the Bank may adopt in the
future, including without limitation, the shifting from the floating
interest rate system to the fixed interest rate system, or vice versa.
Where the Bank has imposed on the Loan interest at a rate per
annum, which is equal to the Bank’s spread over the current floating
interest rate, the Borrower hereby agrees that the Bank may,
without need of notice to the Borrower, increase or decrease its
spread over the floating interest rate at any time depending on
whatever policy it may adopt in the future.”
Respondent regularly renewed the line from 1990 up to 1997, and petitioners
made good on the promissory notes, religiously paying the interests without
objection or fail. But in 1997, petitioners faltered when the interest rates
soared due to the Asian financial crisis. Petitioners’ sole outstanding
promissory note for ₱2.5 million became past due, and despite repeated
demands, petitioners failed to make good on the note. Thus, PNB foreclosed on
the mortgage.
More than a year later, petitioners filed Civil Case, seeking annulment of the
foreclosure sale and an accounting of the PNB credit. Petitioners theorized that
after the first promissory note where they agreed to pay 19.5% interest, the
succeeding stipulations for the payment of interest in their loan agreements
with PNB – which allegedly left to the latter the sole will to determine the
interest rate – became null and void. Petitioners added that because the
interest rates were fixed by respondent without their prior consent or
agreement, these rates are void, and as a result, petitioners should only be
made liable for interest at the legal rate of 12%.
ISSUE: W/N the petitioners are correct
HELD: Yes
RULING: In a number of decided cases, the Court struck down provisions in
credit documents issued by PNB to, or required of, its borrowers which allow
the bank to increase or decrease interest rates "within the limits allowed by
law at any time depending on whatever policy it may adopt in the future."
P.D. No. 1684 and C.B. Circular No. 905 no more than allow contracting parties
to stipulate freely regarding any subsequent adjustment in the interest rate
that shall accrue on a loan or forbearance of money, goods or credits. In fine,
they can agree to adjust, upward or downward, the interest previously
stipulated. However, contrary to the stubborn insistence of petitioner bank, the
said law and circular did not authorize either party to unilaterally raise the
interest rate without the other’s consent.
There can be no contract in the true sense in the absence of the element of
agreement, or of mutual assent of the parties. If this assent is wanting on the
part of the one who contracts, his act has no more efficacy than if it had been
done under duress or by a person of unsound mind.
Contract changes must be made with the consent of the contracting parties.
The minds of all the parties must meet as to the proposed modification,
especially when it affects an important aspect of the agreement. In the case of
loan contracts, it cannot be gainsaid that the rate of interest is always a vital
component, for it can make or break a capital venture. Thus, any change must
be mutually agreed upon, otherwise, it is bereft of any binding effect.
The unilateral action of the PNB in increasing the interest rate on the private
respondent’s loan violated the mutuality of contracts ordained in Article 1308
of the Civil Code:
Art. 1308. The contract must bind both contracting parties; its
validity or compliance cannot be left to the will of one of them.
Petitioners never agreed in writing to pay the increased interest rates
demanded by respondent bank in contravention to the tenor of their credit
agreement. Escalation clauses are not basically wrong or legally objectionable
so long as they are not solely potestative but based on reasonable and valid
grounds. petitioners are correct in arguing that estoppel should not apply to
them, for "estoppel cannot be predicated on an illegal act. As between the
parties to a contract, validity cannot be given to it by estoppel if it is prohibited
by law or is against public policy. PNB also violated Truth in lending Act.
56 NAGA V CA
GR No. 107112 | FEB 24, 1994| NOCON | DELFIN
TOPIC: CASUAL
DOCTRINE:
A contract 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, is valid.
EMERGENCY RECIT: (short case)
FACTS:
6. Petitioner Naga Telephone Co (NATELCO) renders local and long distance
telephone service while Camarines Sur II Electric Cooperative (CASURECO
II) is a private corporation operating electric service in Naga City.
7. They entered into a contract for the use by NATELCO in the operation of
it’s telephone service the electric light posts CASURECO in Naga City. In
exchange, NATELCO agreed to install, free of charge, ten (10) telephone
connections for the use by CASURECO.
8. The contract provided:
“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 light post”
9. After being in effect for 10 yrs, CASURECO filed a reformation of contract
with RTC Naga alleging the contract was one sided and in violation of
NEA guidelines for reasonable compensation for the use of posts.
(P10/mo.
10. NATELCO files for MTD stating that:
a. No COA for reformation of contract
b. Barred by prescription (filed more than 10yrs)
c. Estoppel
11. RTC ruled that the contract be reformed. It held that while the contract
appeared to be fair to both parties when it was entered into, it had
become disadvantageous and unfair to CASURECO 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.
12. It further held that the contract was subject to a potestative condition in
favor if NATELCO.
ISSUE/S:
WON the court the contract was subject to a postestative condition making the
contract void? - NO

HELD:
• 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, the finding that the provision in the
contract, to wit:
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, towit:
. . . 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 servicevand 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.
• 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.
57 TOMAS OSMENA v CENORA RAMA
G.R. No. 4437; 9 September 2018
Topic: Conditional Obligations, Types of conditions, As to cause or origin,
Mixed| Ponente: J. Johnson | Author: Enriquez
Doctrine: A condition which depended upon her (debtor’s) exclusive will, and is
void. Art. 1115 of the Civil Code.
Facts:
▪ On Nov. 15, 1890, Rama entered into a contract (loan agreement) in the
amount of 200 pesos with Victoriano Osmena (Victoriano) wherein Rama
will pay in sugar in the following months.
▪ Rama then entered into another loan agreement with Victoriano.
▪ Victoriano then died. The said contracts become the property of his heir
Rafols. Rafols then ceded to Tomas Osmena (Tomas) all her right and
interest in the said contract.
▪ Tomas then presented the contracts to Rama for payment and she
acknowledged her responsibility upon said contracts by an indorsement
upon them in the following language:
On this date I hereby promise, in the presence of two witness, that if
the house of strong materials in which I live in Pagina is sold, I will
pay my indebtedness to Don Tomas Osmeña as set forth in this
document. (Signed Rama)
▪ Rama not having paid, Tomas commenced an action in the CFI of Cebu.
▪ Rama answered by filing a general denial and special defense of
prescription.
▪ CFI ruled in favor of Tomas.
▪ Rama argued before the Court that in the acknowledgment above quoted
of the indebtedness made by Rama, she imposed the condition that she
would pay the obligation if she sold her house.
Issue/Held: Whether the condition is valid? No, it is VOID.
Ratio:
• The SC said that “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.
• CFI decision is affirmed.
58 Smith, Bell & Co. v. Sotelo Matti
G.R. No. 16570 | October 14, 2015
Doctrine:
Where the fulfillment of the condition does not depend on the will of the
obligor, but on that of a third person who can in no way be compelled to carry
it out, the obligor's part of the contract is complied with, if he does all that is in
his power, and it then becomes incumbent upon the other contracting party to
comply with the terms of the contract.
ER: The Smith, Bell & Co. and Sotelo entered into contracts whereby Sotelo will
buy tanks, expellers, and motors from the company. The company allegedly
failed to deliver the items on time (please see the table below for quick
reference). However, the SC said that there is no period that was actually
agreed upon and the condition involved in this case is mixed because the
fulfillment of such, is dependent on the will of the obligor and a third party (US
Government). Thus, (please see doctrine)
Facts:
▪ August 1918 – Smith, Bell & Co. and Vicente Sotelo entered into contracts
whereby the company obligated itself to sell, and Sotelo to purchase from
it, two steel tanks, for the total price P21,000, the same to be shipped
from New York and delivered at Manila "within three or four months;"
two expellers at the price of P25,000 each, which were to be shipped
from San Francisco in the month of September 1918 or as soon as
possible; and two electric motors at the price of P2,000 each, as to the
delivery of which stipulation was made, couched in these words:
"Approximate delivery within ninety days.—This is not guaranteed."
▪ The tanks arrived at Manila on the 27th of April, 1919; the expellers on
the 26th of October, 1918; and the motors on the 27th of February, 1919
▪ The corporation notified the defendant, Mr. Sotelo, of the arrival of these
goods, but Mr. Sotelo refused to receive them and to pay the prices
stipulated. The company brought suit against Sotelo.
Contract Arrival
Tanks Within 3 or 4 months (December April 1919
1918)
Expellers September 1918 or as soon as October 1918
possible
Motors Approximate delivery within 90 Februray,
days (not guaranteed) 1919
Issue/s: Whether or not the company is guilty of delay
Held: No.
Ruling:
*just in case:
Stipulation in the Contract
Tanks To be delivered within 3 or 4 months—The promise or indication
of shipment carries with it absolutely no obligation on our part—
Government regulations, railroad embargoes, lack of vessel
space, the exigencies of the requirements of the United States
Government, or a number of causes may act to entirely vitiate
the indication of shipment as stated. In other words, the order is
accepted on the basis of shipment at Mill's convenience, time of
shipment being merely an indication of what we hope to
accomplish
Expellers The following articles, hereinbelow more particularly described,
to be shipped at San Francisco within the month of September
/18, or as soon as possible.—Two Anderson oil expellers…
Motors Approximate delivery within ninety days.—This is not
guaranteed.—This sale is subject to our being able to obtain
Priority Certificate, subject to the United States Government
requirements and also subject to confirmation of
manufacturers."
In all these contracts, there is a final clause as follows:
"The sellers are not responsible for delays caused by fires, riots on
land or on the sea, strikes or other causes known as 'Force Majeure' entirely
beyond the control of the sellers or their representatives." Under these
stipulations, it cannot be said that any definite date was fixed for the delivery
of the goods.
The oral evidence falls short of fixing such period.
These contracts were executed at the time of the world war when
there existed rigid restrictions on the export from the United States of articles
like the machinery in question, and maritime, as well as railroad, transportation
was difficult, which fact was known to the parties.
At the time of the execution of the contracts, the parties were not
unmindful of the contingency of the United States Government not allowing
the export of the goods, nor of the fact that the other foreseen circumstances
therein stated might prevent it.
Considering these contracts in the light of the civil law, we cannot
but conclude that the term which the parties attempted to fix is so uncertain
that one cannot tell just whether, as a matter of fact, those articles could be
brought to Manila or not. If that is the case, as we think it is, the obligation
must be regarded as conditional.
Obligations for the performance of which a day certain has been
fixed shall be demandable only when the day arrives.
- "A day certain is understood to be one which must necessarily
arrive, even though its date be unknown.
And as the export of the machinery in question was, as stated in
the contract, contingent upon the sellers obtaining certificate of priority and
permission of the United States Government, subject to the rules and
regulations, as well as to railroad embargoes, then the delivery was subject to
a condition the fulfillment of which depended not only upon the effort of the
herein plaintiff, but upon the will of third persons who could in no way be
compelled to fulfill the condition. In cases like this, which are not expressly
provided for, but impliedly covered, by the Civil Code, The obligor will be
deemed to have sufficiently performed his part of the obligation, if he has
done all that was in his power, even if the condition has not been fulfilled in
reality.
The law implies, however, that if no time is fixed, delivery shall be
made within a reasonable time, in the absence of anything to show that an
immediate delivery is intended When the contract provides for delivery 'as
soon as possible' the seller is entitled to a reasonable time, in view of all the
circumstances, such as the necessities of manufacture, or of putting the goods
in condition for delivery. Delivery 'Shortly.'—In a contract for the sale of
personal property to be delivered 'shortly,' it is the duty of the seller to tender
delivery within a reasonable time and if he tenders delivery after such time the
buyer may reject.
The record shows, as we have stated, that the plaintiff did all within
its power to have the machinery arrive at Manila as soon as possible, and
immediately upon its arrival it notified the purchaser of the fact and offered to
deliver it to him. Taking these circumstances into account, we hold that the
said machinery was brought to Manila by the plaintiff within a reasonable time.
59. Rustan Pulp and Paper Mills v. IAC, Iligan Diversified Products, and Lluch
G.R. No. 70789| 19 OCTOBER 1992| J. MELO
Doctrine:
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.
Facts:
Petitioner-Rustan Pulp had established a pulp and paper mill, and Respondent-
Lluch, a holder of a forest products license, sent a letter to negotiate with
Petitioner wherein in essence, the latter would supply raw materials to the
former. Such negotiations concluded in a contract of sale, subject to the ff.
Stipulations:
▪ That Rustan has the option to buy from other sllers wo are equally qualified
and holders of appropriate licenses; 

▪ That Rustan will not buy from sellers whose goods emanated from Lluch’s
concession; 

▪ That Lluch has priority in supplying materials to Rustan; and 

▪ That Rustan has the right to stop delivery of raw materials when it has
determined that its supply is sufficient, and will have the prerogative to
have deliveries continue when raw materials become necessary, provided
that the seller is given sufficient notice.
On Sept. 30, 1968, Vergara, Rustan’s Manager, sent a letter to Lluch informing
him that their supply had become sufficient and that they will not be needing
further delivery.
Lluch sought to clarify the contents of said letter, inquiring as to whether the
said requested stoppage was temporary or permanent, an inquiry which
remained unanswered by Rustan.
Thus, Lluch resumed deliveries, which continued to be accepted by Rustan until
December 23, 1968. The petitioners also continued to accept deliveries of
supplies from other sellers.
Because of those events, however, Lluch filed a complaint for contractual
breach against Rustan, which was dismissed. On appeal, however, they have
raised the issues to the SC, hence, this case.
Issue/s:
Whether the contractual stipulations as to Rustan’s right to stop delivery of raw
materials are valid. 

Held: NO
Ruling:
Lluch is correctly apprehensive as to the conditions for delivery, considering
that the stipulated prerogative suggests a condition solely dependent upon the
will of Rustan. Rustan can stop delivery of raw materials from Lluch if the
supply at the plant is sufficent, a fact which only petitioners can ascertain. The
resumption of delivery is dependent as well on the will of Rustan, given that it
will happen only if according to the petitioners, supply is once more necessary.
Furthermore, given that the company still continued to accept supplies from
Lluch and other sellers, it is doubtful that Rustan truly had sufficient supplies.
Rustan’s contentions that such actions were just an ‘act of generous
accomodation’ are almost unbelievable; aside from being contrary to normal
business practices. So, why would any business continue to accept raw
materials which they do not need and which would result in losses just to be
accomodating?
Therefore, because of the purely potestative imposition, the stipulation must
be taken out 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. Of course, it is true that a condition which is both potestative and
resolutory may be valid; however, that applies only at the birth, not the
fulfillment, of an existing obligation.
With regard to the claim of damages and attorney’s fees against Tantoco and
Vergara, the Court said that the Petitioner and Manager of a corporation who
entered into and signed a contract in his official capacity cannot be made libale
under his individual capacity in the absence of stipulations to that effect,
because the personality of the corporation is separate and distinct from that of
theirs.
60 ROMERO v. COURT OF APPEALS
G.R. No. 107207; 23 November 1995
Topic: Kinds of obligation; as to cause or origin; potestative; mixed | Ponente:
Vitug, J. | Author: Pagcaliwagan
Doctrine: The undertaking required of private respondent is "mixed" condition
"dependent not on the will of the vendor alone but also of third persons like
the squatters and government agencies and personnel concerned."
Emergency Recit:
Facts:
• Romero and his foreign partners decided to put up a central
warehouse in Metro Manila. After the announcement, Spouses
Flores, accompanied by a broker, offered a parcel of land.
• Romero visited the property and, except for the presence of
squatters in the area, he found the place suitable for a central
warehouse.
• Spouses Flores called on Romero with a proposal that he should
advance P50K which could be used in taking up an ejectment case
 against the squatters, Spouses Flores would agree to sell the
property for only P800 per square meter. Thus, a Deed of
Conditional Sale was executed between the parties.
• Pursuant to agreement Spouses Flores filed a complaint against the
squatter families. A judgment was rendered ordering the
defendants to vacate the premises.
• Spouses Flores sought to return the P50K since they could not get
rid of the squatters on the lot. But Romero refused the tender and
proposed that he shall take it upon himself to eject the squatters
(expenses chargeable to purchase price of land).
• Romero was advised by Spouses’ counsel that the Deed of
Conditional Sale had been rendered null and void by virtue of his
client’s failure to evict the squatters from the premises within the
agreed period.
• Spouses Flores prompted by Romero’s continued refusal to accept
the return of P50K advance payment filed with the RTC for the
rescission of the deed of conditional sale.
Issue/s: WON Spouses Flores can demand the rescission of the contract.
Ruling: NO.
• From the moment the contract is perfected, the parties are bound
not only to the fulfillment of what has been expressly stipulated but
also to all the consequences which, according to their nature, may
be in keeping with good faith, usage and law. Under the agreement,
private respondent is obligated to evict the squatters on the
property. The ejectment of the squatters is a condition the
operative act of which sets into motion the period of compliance by
petitioner of his own obligation, i.e., to pay the balance of the
purchase price. Private respondent's failure "to remove the
squatters from the property" within the stipulated period gives
petitioner the right to either refuse to proceed with the agreement
or waive that condition in consonance with Article 1545 of the Civil
Code. This option clearly belongs to petitioner and not to private
respondent.
• We share the opinion of the appellate court that the undertaking
required of private respondent does not constitute a "potestative
condition dependent solely on his will" that might, otherwise, be
void in accordance with Article 1182 of the Civil Code but a "mixed"
condition "dependent not on the will of the vendor alone but also of
third persons like the squatters and government agencies and
personnel concerned." We must hasten to add, however, that
where the so-called "potestative condition" is imposed not on the
birth of the obligation but on its fulfillment, only the obligation is
avoided, leaving unaffected the obligation itself.
• In contracts of sale particularly, Article 1545 of the Civil Code,
aforementioned, allows the obligee to choose between proceeding
with the agreement or waiving the performance of the condition. It
is this provision which is the pertinent rule in the case at bench.
Here, evidently, petitioner has waived the performance of the
condition imposed on private respondent to free the property from
squatters.
61 ROMAN CATHOLIC ARCHBISHOP OF MANILA, SPS. IGNAO v. CA, ESTATE OF
SPS. DE CASTRO
G.R. No. 77425; 19 June 1991
Topic: possible/impossible obligations | Ponente: J. Regalado | Author: Pineda
Doctrine:
This condition, being unreasonable, it is considered impossible. As it is
impossible, pursuant to NCC 727, it is not considered imposed.
Facts:
• In 1930, Sps. De Castro executed a deed of donation in favor of
Roman Catholic Archbishop of Manila (RCA) covering a parcel of
land in Cavite.
o The Deed provides that the donee shall not dispose or
sell the property within 100 years from the execution of
the Deed, otherwise a violation would render ipso facto
void the Deed of Donation. This would result in
automatic reversion of the property.
• In 1980, within the prohibitive period, RCA executed a deed of sale
in favor of Sps. Ignao. RCA sold the property to Sps. Ignao.
• The Estate of Sps. De Castro filed a complaint for nullification of
deed of donation, rescission of contract, and reconveyance of
property with damages against RCA and Sps. Ignao.
o RCA and Sps. Ignao argue that the action has prescribed.
They invoke NCC 764: revocation prescribes four years
from non-compliance with the condition
Issue/s:
1. W/N the cause of action of Sps. De Castro has prescribed
2. W/N the revocation of donation could be granted
Held:
1. NO.
2. NO.
Ruling:
1. NO. NCC 764 not applicable as the Deed of Donation provides for automatic
reversion in case of violation of the condition therein. The provision is valid, as
parties have the autonomy to agree on the terms of a contract. Hence, judicial
declaration not necessary.
• A judicial action for rescission of a contract is not necessary where
the contract provides that it may be revoked and cancelled for
violation of any of its terms and conditions. A judicial action is
proper only when there is absence of a special provision granting
the power of cancellation.
• The validity of such a stipulation in the deed of donation providing
for the automatic reversion of the donated property to the donor
upon non-compliance of the condition was upheld in the recent case
of De Luna, et al. vs. Abrigo, et al. It was held therein that said
stipulation is in the nature of an agreement granting a party the
right to rescind a contract unilaterally in case of breach, without
need of going to court, and that, upon the happening of the
resolutory condition or non-compliance with the conditions of the
contract, the donation is automatically revoked without need of a
judicial declaration to that effect.
• In contracts providing for automatic revocation, judicial intervention
is necessary not for purposes of obtaining a judicial declaration
rescinding a contract already deemed rescinded by virtue of an
agreement providing for rescission even without judicial
intervention, but in order to determine whether or not the
rescission was proper.
2. NO. Revocation relies on the condition against alienation for a 100-year
period. This condition, being unreasonable, it is considered impossible. As it is
impossible, pursuant to NCC 727, it is not considered imposed. Thus, RCA was
at liberty to sell the property to Sps. Ignao.
• The condition of the 100-year prohibitive period is an undue
restriction on the rights arising from ownership of RCA and Sps.
Ignao. It is, thus, contrary to public policy. Although the donor may
impose certain conditions in the deed of donation, the same must
not be contrary to law, morals, good customs, public order and
public policy.
• The prohibition in the deed of donation against the alienation of the
property for an entire century, being an unreasonable emasculation
and denial of an integral attribute of ownership, should be declared
as an illegal or impossible condition within the contemplation of
Article 727 of the Civil Code.
o Consequently, as specifically stated in said statutory
provision, such condition shall be considered as not
imposed.
 o The net result is that, absent said proscription, the deed
of sale supposedly constitutive of the cause of action for
the nullification of the deed of donation is not in truth
violative of the latter hence, for lack of cause of action,
the case for the Estate must fail.
62. Araneta v. Phil Sugar
G.R. No. L-22558 May 31, 1967
Topic: Source of period/term | Ponente: J. JBL Reyes | Author: Laureta
Doctrine: Article 1197 of the Civil Code involves a two-step process.
1. The Court must first determine that "the obligation does not fix a period"
(or that the period is made to depend upon the will of the debtor)," but from
the nature and the circumstances it can be inferred that a period was
intended".
2. The Court must decide what period was "probably contemplated by the
parties".
Facts:
1. JM Tuason & Co. (Tuason Co.) through Araneta Inc. sold a portion of
its Sta. Mesa Heights property for sum of P430K to Philippine Sugar
Estates Development Co., Ltd. (Phil Sugar)
2. The parties stipulated in the contract of purchase and sale with
mortgage:
Buyer will: build the Sto. Domingo Church and Convent
Seller will: construct streets on the NE and NW and SW sides of the
land so it will be surrounded by streets on all four sides; and the
street on the NE side shall be named "Sto. Domingo Avenue"
3. The buyer, Phil Sugar finished the construction of Sto. Domingo
Church and Convent, but the seller, Araneta, Inc. is unable to finish
the construction of Sto. Domingo Ave because a third-party -
Manuel Abundo, who has been physically occupying a middle part
thereof, refused to vacate the same.
4. Phil Sugar filed its complaint against Tuason Co seeking to compel
the latter to comply with their obligation, as stipulated in the above-
mentioned deed of sale, and/or to pay damages in the event they
failed or refused to perform said obligation.
5. Araneta Inc & Tuazon Co. defense is that the action was premature
since its obligation to construct the streets in question was without
a definite period which needs to be fixed first by the court in a
proper suit for that purpose before a complaint for specific
performance will prosper.
6. The lower court, after finding that "the proven facts precisely
warrants the fixing of such a period" fixed the period to 2 years from
notice thereof.
7. In the CA, Araneta Inc argued that relief granted, i.e., fixing of a
period was not justified by the pleadings and not supported by the
facts submitted at the trial of the case in the court below and that
the relief granted in effect allowed a change of theory after the
submission of the case for decision. CA denied, hence this petition
for certiorari.
Issue/s: W/N lower court was correct in fixing the period/time for
compliance? NO.
Held: Reversed. Obligations of petitioner Araneta, Inc. is fixed at the date that
all the squatters on affected areas are finally evicted therefrom.
1. The fixing of a period by the courts under Article 1197 of the Civil
Code is sought to be justified on the basis that Phil Sugar placed the
absence of a period in issue by pleading in its answer that the
contract with Phil Sugar gave petitioner Araneta, Inc. "reasonable
time within which to comply with its obligation to construct and
complete the streets."
2. The issue is not whether the court should fix the time of
performance, but whether or not the parties agreed that the
petitioner should have reasonable time to perform its part of the
bargain.
3. If the contract so provided, then there was a period fixed, a
"reasonable time;" and all that the court should have done was to
determine if that reasonable time had already elapsed when suit
was filed if it had passed, then the court should declare that
petitioner had breached the contract, as averred in the complaint,
and fix the resulting damages.
4. On the other hand, if the reasonable time had not yet elapsed, the
court perforce was bound to dismiss the action for being premature.
5. But in no case can it be logically held that under the allegations, the
intervention of the court to fix the period for performance was
warranted, for Article 1197 is precisely predicated on the absence of
any period fixed by the parties.
6. The complaint did not ask the court to set a period for the original
decision. It is clear that the complaint proceeded on the theory that
the period for performance had already elapsed, that the contract
had been breached and defendant was already answerable in
damages.
7. Article 1197 of the Civil Code involves a two-step process.
1. The Court must first determine that "the obligation does not
fix a period" (or that the period is made to depend upon the
will of the debtor)," but from the nature and the
circumstances it can be inferred that a period was intended"
(Art. 1197, pars. 1 and 2).
2. Court must decide what period was "probably contemplated
by the parties".
8. In this case, the trial Court appears to have pulled the two-year
period set in its decision out of thin air, since no circumstances are
mentioned to support it. Plainly, this is not warranted by the Civil
Code.
9. The contract shows that the parties were fully aware that the land
was occupied by squatters. Parties knew that they could not take
the law into their own hand but must resort to legal processes in
evicting the squatters, the duration of which cannot be determined
in advance. In fact case against Abundo is still pending. Thus, the
parties must have intended to defer the performance of the
obligations under the contract until the squatters were duly evicted.
35 Central Philippine University v. CA
G.R. No. 112127 July 17, 1995
Topic: As to source - NCC Art. 1197 | Ponente: Bellosillo, J. | Author: Acido
Doctrine: 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.
Facts:
1. In 1939, Don Ramon Lopez Sr. executed a deed of donation in favor
of the Central Philippine College (Central Philippine university) of
parcel of land. For which a new TCT was issued in the name of the
done CPU with the following annotations:
a. 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;
b. The said college shall not sell, transfer or convey to any
third party nor in any way encumber said land;
c. The said land shall be called "RAMON LOPEZ CAMPUS",
and the said college shall be under obligation to erect a
cornerstone 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
2. In 1989, private respondents (Heirs of Don Ramon Lopez Sr.) filed an
annulmaent of donation, reconveyance, and damges against CPU
alleging that since 1939, up to the time of action was filed. CPU had
not complied with the conditions of the donation.
3. In its answer CPU alleged that the right of private respondents to file
the action had prescribed. that it did not violate any of the
 conditions in the deed of donation because it never used the
donated property 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.
4. The trial court ruled that CPU failed to comply with the conditions of
the donation and declared it null and void.
5. On appeal, the CA 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 it remanded
the case to the RTC to determine the period in which CPU should
comply.
Issue: Whether the CA correctly remanded the case to the trial court for the
fixing of the period within which petitioner would establish a medical college.
Held: No. RTC decision reinstated.
Ruling:
Whether the defendant-appellant can rebuild the house burnt as a sufficient
idemnity to the inured for the actual loss suffered by him.
APPLICABLE LAW:
Article 1199:
A person alternatively bound by different prestations shall completely perform
one of them.
The creditor cannot be compelled to receive part of one and part of the other
undertaking. (1131)
HELD:
Yes. The defendant may build the house as an alternative prestation, freeing
him from the payment of the sum in which the building was insured. This
conclusion is in line with The Civil Code’s Article 1131.
Paying the sum in which the building was insured is one of the 2 prestations
provided in one of the clauses stipulating the conditions of the policies. Based
on the same Article of the Civil Code, the complete performance of one of
them is sufficient to extinguish the obligation. While there are several
prestations, only one is due.

1. 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.
2. 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.
3. This general rule however cannot be applied considering the
different set of circumstances existing in the instant case. More than
a reasonable period of 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.

Ong Guan Can v. The Century Insurance Co. (46 PHIL. 592), December 2, 1924
FACTS:
PLAINTIFFS-APPELLEES: Ong Guan Can and the Bank of the Philippine Islands
DEFENDANT-APPELLANT: The Century Insurance Co., LTD.
PONENTE: Villamor, J.
The plaintiff owned a building that was insured against fire by the defendant in
the sum of Php 30,000, including the merchandise therein contained in the sum
of Php 15,000. Both the house and merchandise insured were burned in
February 28, 1923 while the policies issued by the defendant in favor of the
plaintiff were still in force.

The CFI of Iloilo granted the case in favor of the plaintiff that The Century
Insurance Co. should pay Ong Guan Can the sum of Php 45,000 as the total
value of the insured house and merchandise. The Insurance Company appealed
that the judgment be modified to permit it to rebuild the house and that they
be relieved from the payment of the sum in which the building was insured.

ISSUE: