List of cases for Quiz No.

4 and 5 on January 29, 2018:

1. Solar Harvest, Inc. vs. Davao Corrugated Cartoon Corp., G.R. No. 176868,
July 26, 2010

2. Hanlon vs. Hausermann, 40 Phil. 796

Art 1181 Deleon 107

Right of a party to receive a share of profits of a company to berehabilitated shall cease

to exist upon his failure to advance the necessary fundswithin the period stipulated.

Facts: X agreed to advance P75,000.00 for the rehabilitation of Y(mining Company)

which had beencompletely destroyed by flood, forthereof, it being stipulated that the
amount was to be paid to Y within six(6) months from the execution of the contract, and
that upon default ofeither party, the obligation of the other shall be discharged.X failed
to raise the necessary funds. Y was able to secure the fundsfrom other sources. It was
rehabilitated and profits were realized.

Issue: Is X entitled to a share of said profits and to the issuance ofshares of stock in
accordance with the agreement?

Held: No. This is a typical case of a resolutory condition under thecivil law. The contract
expressly provides that upon the happening ofa future and uncertain negative event, the
obligation created by the
agreement shall cease to exist. The right of X was expressly subordinatedto a
resolutory condition, to wit: his failure to raise the necessary fundswithin the period
agreed upon.

3. De la Rama Steamship Co. vs. Tan, 99 Phil. 1034

4. Naga Telephone Co., Inc., et. al. vs. CA, et. al., G.R. No. 107112, February 24,
1994, 48 SCAD 539
Art 1182 Deleon 122

Under the contract of lease of electric light posts, the term thereof shallbe as long as the
lessee has need for the postsbut the termination of the lease issubject also to chance or
the will of a third person.

Facts: Petitioner N, a telephone company, and private respondent C,a private

corporation, entered into a contract for the use by the former inthe operation of its
telephone service the electric light posts of the latter,in consideration to the installation,
free of charge, of ten (10) telephoneconnections for the use of C in specified places.

The contract provides, inter alia:

 “(a) That the term or period of this contract shall be as long asthe party of the fi
rst part [N] has need for the electric light postsof the party of the second part [C] it being
understood that thiscontract shall terminate when for any reason whatsoever, the
partyof the second part is forced to stop, abandoned [sic] its operation asa public
service and it becomes necessary to remove the electric light
post [sic];’’

Apart from applying Article 1267, the Court of Appeals held thecontract was subject to a
potestative condition which rendered theconditional obligation void.Regarding this issue,
N alleges that there is nothing purely potestativeabout the prestations of either party
because N’s permission for free useof telephones is not made to depend purely on its
will, neither is C’spermission for free use of its posts dependent purely on its will.

Held: Contract subject to mixed conditions. — “N’s allegations must beupheld in this
regard. A potestative condition is a condition, the fulfillmentof which depends upon the
sole will of the debtor, in which case, theconditional obligation is void. Based on this
definition, respondentcourt’s finding that the provision in the contract, to wit:
‘(a) That the term or period of this contract shall be as long asthe party of the fi
rst part (petitioner) has need for the electric lightposts of the party of the second part
(private respondent) x xx,’ is apotestative condition, is correct. However, it must have
overlookedthe other conditions in the same provision, to wit:
“x xx it being understood that this contract shall terminatewhen for any reason
whatsoever, the party of the second part(private respondent) is forced to stop,
abandoned (sic) its operationas a public service and it becomes necessary to
remove the electriclight post (sic); which are casual conditions since they depend
onchance, hazard, or the will of a third person.

In sum, the contract is subject to mixed conditions, that is, theydepend partly on the will
of the debtor and partly on chance, hazard orthe will of a third person, which do not
invalidate the aforementioned
provision.’’ (Naga Telephone Co., Inc. vs. Court of Appeals, 230 SCRA 351
[1994].)

5. Song Fo and Co. vs. Hawaiian Phil. Co., 33 SCRA 1

Art 1191 Paras

FACTS: Song Fo and Co. ordered molasses from the Hawaiian-Phil. Co. When the time
for payment came, Song Foand Company was not yet ready to pay. It was only 20
daysafterwards that the buyer offered to pay. The seller accepted theoverdue account,
and started delivering the molasses, but it laterchanged its mind and wrote a letter to
the buyer, cancelling thecontract. The buyer brought this action to enforce
fulfillment.Decide.

HELD: The buyer wins the case for two reasons:

 1) The breach of the contract — the delay of the payment— is only a slight
breach, and is notsubstantial enoughto warrant rescission;
2) Granting that there was a breach, still the seller waivedthis by accepting the
payment of the overdue account. (SeeWarner, Barnes and Co. v. Inza, 4 Phil. 505).

Art 1198 Paras

Song Fo and Co. v. Oria

33 Phil. 3

FACTS: Song Fo and Co. sold a launch to the defendantManuel Oria for P16,000
payable in quarterly installmentsof P1,000 each. The launch was made security forthe
debt. Shortly after delivery to Oria, it was shipwreckedin a storm.

Issue: Should the buyer still pay? If so, when?

HELD: Yes, he must still pay, since the loss of themoney (a generic thing) has not been
extinguished. Moreover,the whole balance becomes due immediately becausethe
security has disappeared even though thru a forcemajeure, unless he can substitute
equally good securities.

Hence, the seller can now collect the entire balance.

6. Filoil Refinery Corp. vs. Mendoza, June 15, 1987

7. Legarda Hermanos vs. Saldaña, L-26578, January 28, 1974

8. Manila Electric Company vs CA, 114 SCRA 173 [1982]

Art 1179 Deleon 102

Vendor seeks rescission of sale for violation by vendee of restrictionimposed in contract

of sale between vendor and previous owner (first vendor).

Facts: The contract of sale of three (3) lots between S (PHHC) and Bprovided that only
construction exclusively for “residential purposes”shall be built on the property, terms
thereof to be binding upon the
successors and assignees of the respective parties. Subsequently, Bsold two (2) lots to
Meralco which established a sub-station within theproperty.Because of the “severe
noise” from the sub-station, B fi led a complaintfor the rescission of the sale.

Issue: Has B the right of action against Meralco for violation of therestriction imposed in
the contract between S and B?

Held: No. It is S which has the right of action against any assignee ofB. S cannot
rescind the contract between B and Meralco because it wasnot a party to it. S’s redress
would be to directly “seek cancellation ofthe title of Meralco, and to repossess the
property” as provided in itscontract with B. (Manila Electric Company vs. Court of
Appeals, 114 SCRA173 [1982].)

9. Osorio vs. Bennet and Prov. Board of Cavite, 41 Phil. 301 [1920]
Art 1191 Deleon 153

Action by donor for recovery of value of property donated and fordamages covering the
cost of fulfilling thecondition of the grant which done failed to perform.

Facts: R, donor, gratuitously granted to E (Province of Cavite) aportion of a fishery

owned by R for the construction of a road subject tothe condition that E would fill up the
space where to build the road with
mud taken from the higher portions of the fishery so it would have thesame level. E
failed to fulfill the condition of the grant.R brought action for the recovery of the value of
the portion of thefishery granted and damages covering the cost of digging up the
higher
portion of the fishery which E failed to perform.

Issue: Is R entitled to the damages claimed?

Held: No. The resolution of a contract and its performance areincompatible with each
other. Having elected the right to rescind, Rcannot at the same time demand the
fulfillment of the obligation. If hecould recover the cost of the digging, that would amount
indirectly to thecompliance by E with the obligation. In that manner, R would at the
sametime be availing himself of the two remedies of resolving the obligationand
exacting its fulfillment. (Osorio vs. Bennet and Prov. Board of Cavite, 41Phil. 301
[1920].)

10. Bengson vs. Chan, L-27283, July 29, 1977

Art 1181 Paras 191

Bengson v. Chan
78 SCRA 113
ISSUE: If a contract provides for arbitration priorto recourse to courts but the case was fi
led without suchneeded arbitration, should the case be dismissed?

HELD: No, for the remedy should be to suspend thecase until after arbitration is
resorted to. (See also R.A.No. 876, otherwise known as the Arbitration Law).

Bengson v. Chan
L-27283, Jul. 29, 1977
FACTS: In a contract for the construction of a condominiumbuilding, it was expressly
agreed that should there be anydispute, a board of arbitrators must fi rst be resorted to
beforetaking any judicial action. The owner went to court because thebuilding was not fi
nished on time, but there was no prior resortto arbitration.
Issue: Will the case now be dismissed?

HELD: No, the case will not be dismissed, although therewas no prior resort to
arbitration. This is so because under theArbitration Law (RA 876), in a case like this,
what the Courtshould do is to refer the matter to the arbitrators who are supposedto be
selected by the parties.

11. Jacinto vs. Chua Leng (C.A.) 45 O.G. 2919

Art 1182 Deleon 114

Validity of stipulation that vendee shall pay the purchase price as soonas the occupants
of the property sold have vacated the same.

Facts: S (seller) fi led an action for specific performance of a contract relating to the sale
of a parcel of land with the improvements existingthereon consisting of a residential
house. The contract stipulates thatthe balance of P39,000.00 will be paid as soon as the
premises have beenvacated by the present occupants, with the further understanding
that“the buyer will take care for the present occupants to vacate the place.”S contends
that the contract is void because the fulfillment of thecondition stipulated depends upon
the exclusive will of the debtor.

Issue: Does the payment of the purchase price by the vendee (B)depends upon his will?

Held: No. S’s contention is untenable. In the first place, should B forone reason or
another show lack of interest in compelling the tenantsto vacate the premises, as he
agreed to do, there is nothing either in thecontract or in the law that could have barred S
from taking the necessaryaction to eject the tenants and thus compel B to pay the
balance.In the second place, should the tenants vacate the premises evenwithout a
demand, B’s obligation to pay the balance would have arisenunavoidably. It is clear,
therefore, that although the fulfillment of thecondition depended partly upon the will of B,
it likewise depended uponthe will of S (obligee) himself and partly upon the tenants.
Consequently,the contract is valid. (Jacinto vs. Chua Leng, [C.A.] 45 O.G. 2919.)

Paras Art 1182

Jacinto v. Chua Leng

(C.A.) 45 O.G. 2919

FACTS: A owned a house rented by B. A sold the houseto C, and C agreed to pay the
balance of the price as soon asB leaves the premises. C was to take care of seeing to it
that Bvacated the house. A now says the contract is void because it ispotestativeon C’s
part.

HELD: The contract is valid. It was not purely potestativeon C’s part.
(a) Firstly — B might vacate of his own accord, and C wouldnow have to pay (so the
fulfillment really in part dependedon the will of a third party).

(b) Secondly — If C did not ask B to leave, A could very well doso by an action of
unlawful detainer against B. And whenB is ousted, C would have to pay.

The condition being mixed, the contract is valid.

12. Litton, et. al. vs. Luzon Surety, Inc., 90 Phil. 783
Art 1183 Paras

Litton, et al. v. Luzon Surety, Inc.

90 Phil. 783
FACTS: Seller owned a piece of land mortgaged to X. Landwas sold to buyer on the
condition that the mortgage would firstbe cancelled. Seller, however, could not have
contact with X.

Issue: Is he still bound to sell?

HELD: No, since the condition has become impossible.

13. Martin vs. Boyero, 55 Phil. 760

Art 1182 De leon 114

Validity of stipulation that vendee shall pay the purchase price uponsettlement by him of
various debts encumbering his property.

Facts: A deed of sale of a hacienda contains the following stipulation:“as soon as D has
paid his debts to B and C, or to any other person orentity to whom D is in debt at
present, or shall in future become indebtedon account of the exploitation of the España
Estate, D shall pay to E, theamount of P20,000.00 according to the following terms. x
xx.”E brought action for the recovery of the purchase price, claiming thatthe stipulation
is void.

Issue: Does the payment of the purchase price by the vendee (D)depends upon his
will?

Held: No. In this case, the payment of the purchase price is conditionedupon the full
settlement by D of the various debts encumbering the estate.

“We must not lose sight of the fact that these debts were then so numerousand pressing
that all of them exceeded the value of the property itself,with all its improvements
making it practically worthless. Of course, thestipulation implied that D was under the
obligation to liquidate them assoon as possible, applying all the products from the estate
which couldbe disposed of to such payment.

Taking this stipulation in this sense, it cannot be said that the duty ofpaying P20,000.00
depended exclusively upon D’s will. With those obligationsupon him, and his own good
intentions and earnest desire whichmust be presumed in the absence of evidence to the
contrary, there arestill other factors determining the paymentof the aforementioned
debts,factors as essential as they are independent of D’s will, and subject tothose
difficulties and hindrances which attend the exploitation of a sugarplantation in the
circumstances as shown by the record. Therefore, Article1182 is not applicable to this
case.” (Martin vs. Boyero, 55 Phil. 762
[1913].)

Art 1184 Paras

Martin v. Boyero
55 Phil. 760

FACTS: A sold Ba parcel of land on condition that the pricewould be paid as soon as B
had paid off the mortgage and otherdebts of the estate. A waited for some time, but
since B had notyet succeeded in paying off the debts, A brought an action tocancel the
sale.

HELD: The sale will not be cancelled. There was no timestipulated here, and besides, B
was trying his best to complywith his agreement. SoB must be given more time.

14. Taylor vs. Yu Tieng Piao, 43 Phil. 873

Art 1182 Deleon 118

Validity of stipulation in a contract of employment that a contract maybe cancelled by

the employer in case of non-arrival within a certain period of aspecific machinery for a
contemplated factory.

Facts: R contracted the services of E as superintendent of an oilfactory which the

former contemplated establishing. At the time thisagreement was made, the machinery
for the contemplated factory had
not been acquired. A provision in the contract is as follows:
“It is understood and agreed that should the machinery to beinstalled in the said
factory fail, for any reason, to arrive in the City ofManila, within a period of six months
from date hereof, this contractmay be cancelled by the party of the second part (R) at its
option,such cancellation, however, not to occur before the expiration of sixmonths.”

The machinery did not arrive.

Issue: Is the condition obnoxious to the first sentence contained inArticle 1182?
Held: No. The condition is valid even though it is made to dependupon the will of the
obligor (R) as it is resolutory in nature. R wouldbe liable even in the absence of proof
showing that the non-arrival wasdue to some cause not having its origin in R’s own act
or will if he wereunder a positive obligation to cause the machinery to arrive. The
contract,however, expresses no such positive obligation. (Taylor vs. Uy Tieng, 43Phil.
873 [1922].)

Art 1186 Paras

Taylor v. Yu Tieng Piao

43 Phil. 873
FACTS: A employed B for 2 years unless within 6 months,machinery already ordered
would not, for any reason, arrive. Acancelled the order, so the machines did not arrive.
At the end ofsix months B was discharged. B now claims salary for the periodof two
years on the ground that the debtor (A) had voluntarily
prevented compliance with the condition.

HELD: B has no right. First, because the condition here isresolutoryand not suspensive;
second, it was expressly agreedthat the failure to arrive could be for “any reason,”
includingA’s own acts. Ordinary words should be given their ordinarysignifications,
unless the parties intended otherwise.

15. PLDT vs. Jeturian, L-7756, July 30, 1955

Art 1186 Deleon 129

Conditions to be entitled to a life pension cannot be fulfilled because ofthe abolition by

company of pension plan.

Facts: Before the war, PLDT established a pension plan for itsemployees by virtue of
which an employee shall be entitled to a lifepension under certain conditions (i.e., age
50 and 20 years of service).After the liberation, because of war losses, the Board of
Directors of PLDTabolished the pension plan. Beneficiaries to the pension plan
broughtaction against PLDT claiming monetary benefits due them under the
plan.

Issue: Should the conditions imposed in the pension plan be deemedfulfilled?

Held: Yes. PLDT may not disregard the plan at will on the groundthat until the
conditions are met, it has no duties whatever toward theemployees. The pension was
not a mere offer of gratuity by the company,
inspired by no other purpose than to benefit its employees.In reality, the plan sought to
induce the employees to continueindefinitely in the service and to spur them to greater
efforts in its service
and increased zeal in its behalf. The plan ripened into a binding contractupon its implied
acceptance by its employees. Not being a donation,there is no statutory requirement
that acceptance of the plan should beexpress. The assent or acceptance of the
employees is inferable from theirentering the employ of the company, on their stay
therein after the planwas made known.

Similarly, the excuse that its war losses extinguished the company’sobligation to
proceed with the pension plan is not meritorious. Itsobligation was a generic one (to pay
money) and such obligations are notextinguished by loss or inability to raise funds. (see
Art. 1263.) (Phil. LongDistance Co. vs. Jeturian, 97 Phil. 981 [1955].)

Art 1188 Paras

Phil. Long Distance Telephone Co. v. Jeturian

L-7756, Jul. 30, 1955

FACTS: The Phil. Long Distance Telephone Co. operateda pension plan prior to the last
Pacifi c War, whereby, subject tocertain conditions (such as age and length of service),
employeeswho retire would be given pensions. After the war, the plan wasabolished
because of losses sustained during the Japanese occupation.

ISSUES:
(a) Pending fulfillment of the conditions (such as the employee’sservice), do the
employees have any right with respectto the pension plan?
(b) Would financial losses during the war authorize abolitionof the plan?

HELD:
(a) Pending fulfillment of the conditions, the employees havea right in expectancy,
which the law protects. Hence, underArt. 1188, appropriate actions may be taken by
them.
(b) Financial losses will not excuse abolition of the pensionplan because the obligation
to pay money is an obligationto give a GENERIC thing.

16. Asturias Sugar Central vs. Pure Cane Molasses Co., 60 Phil. 255

Art 1191 Paras

Asturias Sugar Central v.

Pure Cane Molasses Co.
60 Phil. 255

FACTS: A sold to B some properties. It was agreed thatB, the buyer, should take care
of perfecting within 6 monthsthe title papers to the property. This duty B was not able to
do.

Issue: Despite the fact that B has already paid the price, mayA, the seller, resolve the
contract on the ground that B had notcomplied with the obligation referred to above?
HELD: No. In a case of sale, the corresponding duties are:for the seller to deliver, and
for the buyer to pay. Here the buyerhas paid. Therefore, the seller cannot resolve just
because thetitle papers had not yet been perfected. Had the buyer not yetpaid, it would
have been a different story. (See also Borromeov. Franco, 5 Phil. 49)

17. Borromeo vs. Franco, 5 Phil. 49

Art 1181 Deleon 108

Non-fulfillment of a mere incidental stipulation in a contract of sale.

Facts: S agreed to sell a parcel of land to B. Under the contract, B wasgiven a certain
period within which to arrange and complete the papersrelating to the property. S
refused to proceed with the sale in view of thefailure of B to complete the title papers.B
brought action for specific performance.

Issue: Is the agreement on the part of B to complete the title papers acondition
subsequent?

Held: No, and, therefore, its non-fulfillment did not resolve theobligation of S to sell. It is
a mereincidental stipulation which the partiessaw fit to include in their agreement.
(Borromeo vs. Franco, 5 Phil. 49 [1905];see Roman vs. Grimalt, 6 Phil. 96 [1906],
supra.)

18. Spouses Reynaldo Alcaraz& Esmeralda Alcaraz vs. Pedro M. Tangga-an, et. al.,
G.R. No. 128568, April 9, 2003

Art 1191 Paras

Extrajudicial Rescission
Spouses Reynaldo Alcaraz& Esmeralda Alcaraz v.
Pedro M. Tangga-an, et al., GR 128568, Apr. 9, 2003

FACTS: Petitioner-spouses rescinded the contract of leasewithout judicial approval.

Due to the change in ownership ofthe land, petitioner-spouses decided to unilaterally
cancel thecontract because Virgilio supposedly became the new owner ofthe house
after acquiring title to the lot. They alleged that therewas no reason anymore to perform
their obligations as lesseesbecause the lesser had ceased to be the owner of the
house.

HELD: There is nothing in the lease contract that allowsthe parties to extrajudicially
rescind the same in case of violationof the terms thereof. Extrajudicial rescission of a
contractis not possible without an express stipulation to that effect. (Art.1191). What
petitioner-spouses should have done was to fi le aspecial civil action for interpleader for
claimants to litigate theirclaims and to deposit rentals in court.

19. Rios vs. Jacinto Palma, et. al., 49 Phil. 7

 Art 1191 Paras

Rios v. Jacinto Palma, et al.

49 Phil. 7

FACTS: A lease contract for 15 years at P400 a month wascomplied with for only 3
years, after which the lessee did not payrent. The lessor asked the lessee to vacate the
premises, if hecould not afford to pay. The lessee then turned over the premisesto the
lessor. Now the lessor demands rent for the remaining 12years.

HELD: Since the lessor decided to select rescission, he isnow entitled to possession,
but not to the future rents for theunexpired term. He cannot have both remedies of
rescissionand specific performance. Had the back rentals not been paidyet, he would
have been entitled to them. In the instant case,he can collect only special damages
those that resulted fromthe breach, not necessarily the unexpired rents. (See Rubio
deLarena v. Villanueva, 53 Phil. 932).

20. Rubio de Larena vs. Villanueva, 53 Phil. 932