magdalena estate vs

8/13/2019 Magdalena Estate Vs

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MAGDALENA ESTATE VS. MYRICK

71 PHIL. 346

FACTS:

Magdalena Estate, Inc. sold to Louis Myrick lots

No. 28 and 29 of Block 1, Parcel 9 of the San JuanSubdivision, San Juan, Rizal. Their contract of sale

provides that the Price of P7,953 shall be payable

in 120

equal monthly installments of P96.39 each on the

second

day of every month beginning the date of execution

of the

agreement.

In pursuance of said agreement, the vendee made

several payments amounting to P2,596.08, the last

being

due and unpaid was that of May 2, 1930. By reason

of this,

the vendor, through its president, notified the

vendee that,

in view of his inability to comply with the terms of

their

contract, said agreement had been cancelled,

relieving him

of any further obligation thereunder, and that all

amounts

paid by him had been forfeited in favor of the

vendor. To

this communication, the vendee did not reply, and

it

appears likewise that the vendor thereafter did not

require

him to make any further disbursements on account

of the

purchase price.

ISSUE:

Was the petitioner authorized to forfeit thepurchase price paid?

RULING:

No. The contract of sale contains no provision

authorizing the vendor, in the event of failure of the

vendee

to continue in the payment of the stipulated

monthly

installments, to retain the amounts paid to him on

account

of the purchase price. The claim therefore, of thepetitioner

that it has the right to forfeit said sums in its favor

is

untenable. Under Article 1124 of the Civil Code,

however,

he may choose between demanding the fulfillment

of thecontract or its resolution. These remedies are

alternative

and not cumulative, and the petitioner in this case,

having

elected to cancel the contract cannot avail himself

of the

other remedy of exacting performance. As a

consequence

of the resolution, the parties should be restored, as

far as

practicable, to their original situation which can be

approximated only be ordering the return of the

things

which were the object of the contract, with their

fruits and

of the price, with its interest, computed from the

date of

institution of the action.

UNIVERSAL FOOD CORPORATION VS. CA

33 SCRA 1

FACTS:

This is a petition for certiorari by the UFC against

the CA decision of February 13, 1968 declaring the

BILL

OF ASSIGNMENT rescinded, ordering UFC to

return to

Magdalo Francisco his Mafran sauce trademark

and to pay

his monthly salary of P300.00 from Dec. 1, 1960

until the

return to him of said trademark and formula.

In 1938, plaintiff Magdalo V. Francisco, Sr.

discovered a formula for the manufacture of a food

seasoning (sauce) derived from banana fruits

popularly

known as MAFRAN sauce. It was used

commercially since

1942, and in the same year plaintiff registered his

trademark in his name as owner and inventor with

the

Bureau of Patents. However, due to lack of

sufficientcapital to finance the expansion of the business, in


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1960,

said plaintiff secured the financial assistance of

Tirso T.

Reyes who, after a series of negotiations, formed

with

others defendant Universal Food Corporationeventually

leading to the execution on May 11, 1960 of the

aforequoted "Bill of Assignment" (Exhibit A or 1).

On May 31, 1960, Magdalo Francisco entered into

contract with UFC stipulating among other things

that he

be the Chief Chemist and Second Vice-President of

UFC

and shall have absolute control and supervision

over the

laboratory assistants and personnel and in the

purchase

and safekeeping of the chemicals used in the

preparation

of said Mafran sauce and that said positions are

permanent

in nature.

In line with the terms and conditions of the Bill of

Assignment, Magdalo Francisco was appointed

Chief

Chemist with a salary of P300.00 a month.

Magdalo

Francisco kept the formula of the Mafran sauce

secret to

himself. Thereafter, however, due to the alleged

scarcity

and high prices of raw materials, on November 28,

1960,

Secretary-Treasurer Ciriaco L. de Guzman of UFC

issued a

Memorandum duly approved by the President and

GeneralManager Tirso T. Reyes that only Supervisor

Ricardo

Francisco should be retained in the factory and that

the

salary of plaintiff Magdalo V. Francisco, Sr.,

should be

stopped for the time being until the corporation

should

resume its operation. On December 3, 1960,

President and

General Manager Tirso T. Reyes, issued amemorandum to

Victoriano Francisco ordering him to report to the

factory

and produce "Mafran Sauce" at the rate of not less

than

100 cases a day so as to cope with the orders of the

corporation's various distributors and dealers, andwith

instructions to take only the necessary daily

employees

without employing permanent employees. Again,

on

December 6, 1961, another memorandum was

issued by

the same President and General Manager

instructing the

Assistant Chief Chemist Ricardo Francisco, to

recall all

daily employees who are connected in the

production of

Mafran Sauce and also some additional daily

employees

for the production of Porky Pops. On December 29,

1960,

another memorandum was issued by the President

and

General Manager instructing Ricardo Francisco, as

Chief

Chemist, and Porfirio Zarraga, as Acting

Superintendent,

to produce Mafran Sauce and Porky Pops in full

swing

starting January 2, 1961 with further instructions to

hire

daily laborers in order to cope with the full blast

operation.

Magdalo V. Francisco, Sr. received his salary as

Chief

Chemist in the amount of P300.00 a month only

until his

services were terminated on November 30, 1960.On

January 9 and 16, 1961, UFC, acting thru its

President and

General Manager, authorized Porfirio Zarraga and

Paula

de Bacula to look for a buyer of the corporation

including

its trademarks, formula and assets at a price of not

less

than P300,000.00. Due to these successive

memoranda,without plaintiff Magdalo V. Francisco, Sr. being


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recalled

back to work, he filed the present action on

February 14,

1961. Then in a letter dated March 20, 1961, UFC

requested

said plaintiff to report for duty, but the latterdeclined the

request because the present action was already filed

in

court.

ISSUES:

1. Was the Bill of Assignment really one that

involves transfer of the formula for Mafran sauce

itself?

2. Was petitioners contention that Magdalo

Francisco is not entitled to rescission valid?

RULING:

1. No. Certain provisions of the bill would lead

one to believe that the formula itself was

transferred. To

quote, the respondent patentee "assign, transfer

and

convey all its property rights and interest over said

Mafran trademark and formula for MAFRAN

SAUCE

unto the Party of the Second Part," and the last

paragraph states that such "assignment, transfer and

conveyance is absolute and irrevocable (and) in no

case

shall the PARTY OF THE First Part ask, demand

or sue

for the surrender of its rights and interest over said

MAFRAN trademark and mafran formula."

However, a perceptive analysis of the entire

instrument and the language employed therein

would leadone to the conclusion that what was actually ceded

and

transferred was only the use of the Mafran sauce

formula.

This was the precise intention of the parties.

The SC had the following reasons to back up the

above conclusion. First, royalty was paid by UFC

to

Magdalo Francisco. Second, the formula of said

Mafransauce was never disclosed to anybody else. Third,

the Bill

acknowledged the fact that upon dissolution of said

Corporation, the patentee rights and interests of

said

trademark shall automatically revert back to

MagdaloFrancisco. Fourth, paragraph 3 of the Bill declared

only

the transfer of the use of the Mafran sauce and not

the

formula itself which was admitted by UFC in its

answer.

Fifth, the facts of the case undeniably show that

what was

transferred was only the use. Finally, our Civil

Code allows

only the least transmission of right, hence, what

better

way is there to show the least transmission of right

of the

transfer of the use of the transfer of the formula

itself.

2. No. Petitioners contention that Magdalo

Franciscos petition for rescission should be denied

because under Article 1383 of the Civil Code of the

Philippines rescission can not be demanded except

when

the party suffering damage has no other legal

means to

obtain reparation, was of no merit because it is

predicated

on a failure to distinguish between a rescission for

breach

of contract under Article 1191 of the Civil Code

and a

rescission by reason of lesion or economic

prejudice, under

Article 1381, et seq. This was a case of reciprocal

obligation. Article 1191 may be scanned withoutdisclosing

anywhere that the action for rescission thereunder

was

subordinated to anything other than the culpable

breach of

his obligations by the defendant. Hence, the

reparation of

damages for the breach was purely secondary.

Simply put,

unlike Art. 1383, Art. 1191 allows both the

rescission andthe payment for damages. Rescission is not given


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to the

party as a last resort, hence, it is not subsidiary in

nature.

UNIVERSITY OF THE PHILIPPINES VS. DE

LOSANGELES

35 SCRA 102

FACTS:

On November 2, 1960, UP and ALUMCO entered

into a logging agreement whereby the latter was

granted

exclusive authority to cut, collect and remove

timber from

the Land Grant for a period starting from the date

of

agreement to December 31, 1965, extendible for a

period of

5 years by mutual agreement.

On December 8, 1964, ALUMCO incurred an

unpaid account of P219,362.94. Despite repeated

demands, ALUMCO still failed to pay, so UP sent

a notice

to rescind the logging agreement. On the other

hand,

ALUMCO executed an instrument entitled

Acknowledgment of Debt and Proposed Manner

of

Payments. It was approved by the president of UP,

which

stipulated the following:

3. In the event that the payments called for are not

sufficient to liquidate the foregoing indebtedness,

the balance outstanding after the said payments

have been applied shall be paid by the debtor in

full no later than June 30, 1965.

5. In the event that the debtor fails to comply with

any of its promises, the Debtor agrees withoutreservation that Creditor shall have the right to

consider the Logging Agreement rescinded,

without the necessity of any judicial suit

ALUMCO continued its logging operations, but

again incurred an unpaid account. On July 19,1965,

UP

informed ALUMCO that it had, as of that date,

considered

rescinded and of no further legal effect the logging

agreement, and that UP had already taken steps to

haveanother concessionaire take over the logging

operation.

ALUMCO filed a petition to enjoin UP from

conducting the

bidding. The lower court ruled in favor of

ALUMCO,

hence, this appeal.

ISSUE:

Can petitioner UP treat its contract with ALUMCO

rescinded, and may disregard the same before any

judicial

pronouncement to that effect?

RULING:

Yes. In the first place, UP and ALUMCO had

expressly stipulated that upon default by the debtor,

UP

has the right and the power to consider the Logging

Agreement of December 2, 1960 as rescinded

without the necessity of any judicial suit. As to

such special stipulation

and in connection with Article 1191 of the Civil

Code, the

Supreme Court, stated in Froilan vs. Pan Oriental

Shipping

Co:

There is nothing in the law that prohibits the

parties from entering into agreement that violation

of the terms of the contract would cause

cancellation thereof, even without court

intervention. In other words, it is not always

necessary for the injured party to resort to court

for rescission of the contract.

ANGELES VS. CALASANZ

135 SCRA 323

FACTS:

On December 19, 1957, defendants-appellants

Ursula Torres Calasanz and plaintiffs-appelleesBuenaventura Angeles and Teofila Juani entered

into a

contract to sell a piece of land located in Cainta,

Rizal for

the amount of P3,920.00 plus 7% interest per

annum. The

plaintiffs-appellees made a downpayment of

P392.00 upon

the execution of the contract. They promised to pay

the

balance in monthly installments of P41.20 untilfully paid,


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the installment being due and payable on the 19th

day of

each month. The plaintiffs-appellees paid the

monthly

installments until July 1966, when their aggregate

payment already amounted to P4,533.38.

On December 7, 1966, the defendants-appellants

wrote the plantiffs-appellees a letter requesting the

remittance of past due accounts. On January 28,

1967, the

defendants-appellants cancelled the said contract

because

the plaintiffs failed to meet subsequent payments.

The

plaintiffs letter with their plea for reconsideration

of the

said cancellation was denied by the defendants.

The plaintiffs-appellees filed a case before the

Court of First Instance to compel the defendant to

execute

in their favor the final deed of sale alleging inter

alia that

after computing all subsequent payments for the

land in

question, they found out that they have already paid

the

total amount including interests, realty taxes and

incidental expenses. The defendants alleged in their

answer that the plaintiffs violated par. 6 of the

contract to

sell when they failed and refused to pay and/or

offer to pay

monthly installments corresponding to the month

of

August, 1966 for more than 5 months, thereby

constraining the defendants to cancel the said

contract.

The Court of First Instance rendered judgment in

favor of the plaintiffs, hence this appeal.

ISSUE:

Has the Contract to Sell been automatically and

validly cancelled by the defendants-appellants?

RULING:

No. While it is true that par.2 of the contract

obligated the plaintiffs-appellees to pay the

defendants thesum of P3,920 plus 7% interest per annum, it is

likewise

true that under par 12 the seller is obligated to

transfer the

title to the buyer upon payment of the said price.

The contract to sell, being a contract of adhesion,must be construed against the party causing it. The

Supreme Court agree with the observation of the

plaintiffsappellees

to the effect that the terms of a contract must be

interpreted against the party who drafted the same,

especially where such interpretation will help effect

justice

to buyers who, after having invested a big amount

of

money, are now sought to be deprived of the same

thru the

prayed application of a contract clever in its

phraseology,

condemnable in its lopsidedness and injurious in its

effect

which, in essence, and its entirety is most unfair to

the

buyers.

Thus, since the principal obligation under the

contract is only P3,920.00 and the plaintiffs-

appellees

have already paid an aggregate amount of

P4,533.38, the

courts should only order the payment of the few

remaining

installments but not uphold the cancellation of the

contract. Upon payment of the balance of P671.67

without

any interest thereon, the defendant must

immediately

execute the final deed of sale in favor of the

plaintiffs and

execute the necessary transfer of documents, asprovided

in par.12 of the contract.

Sagrada Orden vs. Nacoco 91 Phil. 503 (1952)

Nature: appeal from judgment of CFI of Manila

Facts and Background of the Case

- On Jan 4, 1942, during the Japanese occupation,

Taiwan Tekkosho (Japanese corporation) acquired

the plaintiffs property (land with warehouse in

Pandacan, Manila) for Php140K- On April 4, 1946, after the liberation, the US took


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control and custody of the aforementioned enemys

land under Sect 12 of the Trading with the Enemy

Act

- In the same year, the Copra Export Management

Company occupied the property under

custodianship agreement with the United StatesAlien Property Custodian

- In August 1946, when the Copra Export

Management Co. vacated the property, the National

Coconut Corporation (NACOCO), the defendant,

occupied it next

- Sagrada Orden (plaintiff) files claims on the

property with the Court of First Instance of Manila

and against the Philippine Alien Property

Administrator

- Plaintiff petitions that the sale of the property to

Taiwan Tekkosho should be declared null and void

as it was executed under duress, that the interest of

the Alien Property Custodian be cancelled, and that

NACOCO be given until February 28, 1949 to

recover its equipment form the property and vacate

the premise

- The Republic of the Philippines is allowed to

intervene

- CFI: the defendant (Philippine Alien Property

Administrator) and the intervenor (RP) are released

from any liability but the plaintiff may reserve the

right to recover from NACOCO reasonable rentals

for the use and occupation of the premises

- The sale of the property to the Taiwan Takkesho

was declared void and the plaintiff was given the

right to recover Php3,000/month as reasonable

rental from August 1946 (date when NACOCO

occupied property) to the date NACOCO vacates

the premises

- the judgment is appealed to the SC

Legal Issues

1. WON the defendant is liable to pay rent for

occupying the property in question

Judgment

1. The CFIs decision that the defendant should pay

rent from August 1946 to February 28, 1949 was

reversed, costs against the plaintiff

Ratio

Obligations can only arise from four sources: law,

contracts or quasi-contracts, crime, or negligence

(Art 1089, Spanish Civil Code).

There were no laws or an express agreement

between the defendant or the Alien Property

Custodian with the plaintiff regarding payment of

rent. The property was acquired by the Alien

Property Administrator through law (Trading with

the Enemy Act) on the seizure of alien property and

not as a successor to the interests of the latter.There was no contract of rental b/w them and

Taiwan Takkesho. NACOCO entered possession of

the property from the Alien Property Custodian

without any expectation of liability for its use.

NACOCO did not commit any negligence or

offense, and there was no contract, implied or

otherwise, entered into, that can be used as basis

for claiming rent on the property before the

plaintiff obtained the judgment annulling the sale to

Taiwan Takkesho. The plaintiff has no right to

claim rent from NACOCO.

Important Notes

Article 1157 of the New Civil Code states that

there are 5 sources of obligations: laws, contracts,

quasi-contracts, felonies (acts or omissions

punished by law), and quasi-delicts.

Sagrada Orden Vs Nacoco Kinuha ng Hapon

ang lupa.

Action to recover parcel of land owned by P, and

then because of Japanese war was acquired by

other parties, then possessed by the US govt thru

its custodian then possessed by the defendant

without agreement with the US or with the

plaintiff, and def then leased a part of the land.

Issue: WON defendant is liable to Sagrada and

must pay the rentals.

Held: No. If liable at all must arise from any of

the four sources of obligations. APA was a trustee

of the US and if def liable, not to plaintiff but toUS govt. But defendant not liable for rentals bec

no express agreement bet the APA and Nacoco.

Existence of implied agreement is contrary to

the circumstances.

Source: Contract. But there was none.

Pelayo vs. Lauron husband vs. in-laws

1906-Pelayo complained against Lauron and

Abella. Pelayo a doctor, rendered service to

daughter-in-law then demanded P500 from def.


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Issue: WON Lauron is liable.

Held: No. Husband liable. Art. 142 and 143 or

Family Code. Rendering medical assistance,

mutual oblig. Oblig not presumed. Those

expressly determined in the Code or in speciallaws are the only demandable ones.

Source: Laws. Family Code.

Leung Ben vs. OBrien - Gambling

O Brien filed an action in the court of CFGI of

Manila to recover from Leung Ben the sum of

P15,000 alleged to have been lost by OBrien to

Leung Ben in a series of gambling, banking and

percentage games:

Issue: WON OBrien can recover the money from

Leung Ben.

Held: Yes. Upon general principles, recognized

both in the civil and common law, money lost in

gambling and voluntary paid by the loser to the

winner cannot, in the absence of statute, be

recovered in a civil action. But Act. No. 1757 of

the Phil. Comm, which defines and penalized

different forms of gambling contains numerous

provisions recognizing the right to recover money

lost in gambling. It must therefore be assumed

that the action of plaintiff was based upon the

right to recovery given by section 7 of said Act,

which declares that an action may be brought

against the banker by any person losing money at

a banking or percentage game.

Source: Law. Phil Comm and Civil Code.

G.R. No. L-4920 June 29, 1953FRANCISCO DIANA and SOLEDAD DIANA,

plaintiffs-appellants,

vs.

BATANGAS TRANSPORTATION CO.,

defendant-appellee.

Zosimo D. Tanalega for appellants.

Gibbs, Gibbs, Chuidian and Quasha for appellee.

BAUTISTA ANGELO, J.:

The present appeal stems from a case originally

instituted in the Court of First Instance of Laguna

wherein plaintiffs seek to recover from defendantas a party subsidiarily liable for the crime

committed by an employee in the discharge of his

duty the sum of P2,500 as damages, plus legal

interest, and the costs of action.

The appeal was originally taken to the Court of

Appeals but the case was certified to this court on

the ground that it poses merely a question of law.Plaintiffs are the heirs of one Florenio Diana, a

former employee of the defendant. On June 21,

1945, while Florenio Diana was riding in Truck

No. 14, belonging to the defendant, driven by

Vivencio Bristol, the truck ran into a ditch at Bay,

Laguna, resulting in the death of Florenio Diana

and other passengers. Subsequently, Vivencio

Bristol was charged and convicted of multiple

homicide through reckless imprudence wherein,

among other things, he was ordered to indemnify

the heirs of the deceased in the amount of P2,000.

When the decision became final, a writ of

execution was issued in order that the indemnity

may be satisfied but the sheriff filed a return stating

that the accused had no visible leviable property.

The present case was started when defendant failed

to pay the indemnity under its subsidiary liability

under article 103 of the Revised Penal Code. The

complaint was filed on October 19, 1948 (civil case

No. 9221).

On December 13, 1948, defendant filed a motion to

dismiss on the ground that there was another

action pending between the same parties for the

same cause (civil case No. 8023 of the Court of

First Instance of Laguna) in which the same

plaintiffs herein sought to recover from the same

defendant the amount of P4,500 as damages

resulting from the death of Florenio Diana who

died while on board a truck of defendant due to the

negligent act of the driver Vivencio Bristol. This

first action was predicated on culpa aquiliana.

On December 16, 1948, plaintiffs filed a written

opposition to the motion to dismiss. On February 3,

1949, the lower court, having found the motionwell founded, dismissed the complaint, without

special pronouncement as to costs; and their motion

for reconsideration having been denied, plaintiffs

took the present appeal.

The only question to be determined is whether the

lower court correctly dismissed the complaint on

the sole ground that there was another action

pending between the same parties for the same

cause under Rule 8, section 1(d) of the Rules of

Court.

The determination of this issue hinges on theproper interpretation of Rule 8, section 1 (d) which


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allows the dismissal of a case on the ground that

"there is another action pending between the same

parties for the same cause." Former Justice Moran,

commenting on this ground, says: "In order that

this ground may be invoked, there must be between

the action under consideration and the other action,(1) identity of parties, or at least such as

representing the same interest in both actions; (2)

identity of rights asserted and relief prayed for, the

relief being found on the same facts; and (3) the

identity on the two preceding particulars should be

such that any judgment which may be rendered on

the other action will, regardless of which party is

successful, amount to res adjudicata in the action

under consideration." [I Moran, Comments on the

Rules of Court, (1952), p. 168.].

There is no doubt with regard to the identity of

parties. In both cases, the plaintiffs and the

defendant are the same. With regard to the identity

of reliefs prayed for, a different consideration

should be made. It should be noted that the present

case (civil case No. 9221) stems from a criminal

case in which the driver of the defendant was found

guilty of multiple homicide through reckless

imprudence and was ordered to pay an indemnity

of P2,000 for which the defendant is made

subsidiarily liable under article 103 of the Revised

Penal Code, while the other case (civil case No.

8023) is an action for damages based on culpa

aquiliana which underlies the civil liability

predicated on articles 1902 to 1910 of the old Civil

Code. These two cases involve two different

remedies. As this court aptly said: "A quasi-delict

or culpa aquiliana is a separate legal institution

under the Civil Code, with a substantivity all its

own, and individuality that is entirely apart and

independent from a delict or crime. * * *. A

distinction exists between the civil liability arising

from a crime and the responsibility for cuasi-

delictos or culpa extra-contractual. The samenegligent act causing damages may produce civil

liability arising from a crime under article 100 of

the Revised Penal Code, or create an action for

cuasi-delito or culpa extra-contractual under

articles 1902-1910 of the Civil Code (Barredo vs.

Garcia and Al- mario, 73 Phil., 607). The other

differences pointed out between crimes and culpa

aquiliana are:.

1. That crimes affect the public interest, while

cuasi-delitos are only of private concern.

2. That, consequently, the Penal Code punishes orcorrects the criminal act, while the Civil Code, by

means of indemnification, merely repairs the

damage.

3. That delicts are not as broad as quasi-delicts,

because the former are punished only if there is a

penal law clearly covering them, while the latter,

cuasi-delitos, include all acts in which 'any kind offault or negligence intervenes. (P. 611, supra.).

Considering the distinguishing characteristics of

the two cases, which involve two different

remedies, it can hardly be said that there is identity

of reliefs in both actions as to make the present

case fall under the operation of Rule 8, section 1(d)

of the Rules of Court. In other words, it is a

mistake to say that the present action should be

dismissed because of the pendency of another

action between the same parties involving the same

cause. Evidently, both cases involve different

causes of action. In fact, when the Court of Appeals

dismissed the action based on culpa aquiliana (civil

case No. 8023), this distinction was stressed. It was

there said that the negligent act committed by

defendant's employee is not a quasi crime, for such

negligence is punishable by law. What plaintiffs

should have done was to institute an action under

article 103 of the Revised Penal Code (CA-G.R.

No. 3632-R). And this is what plaintiffs have done.

To deprive them now of this remedy, after the

conviction of defendant's employee, would be to

deprive them altogether of the indemnity to which

they are entitled by law and by a court decision,

which injustice it is our duty to prevent.

Wherefore, the order appealed from is reversed and

the case is hereby remanded to the lower court for

further proceedings. No pronouncement as to costs.

Paras, C.J., Pablo, Bengzon, Padilla, Tuason,

Montemayor, Jugo, and Labrador, JJ., concur.

G.R. No. 109125 December 2, 1994

ANG YU ASUNCION, ARTHUR GO AND KEHTIONG, petitioners,

vs.

THE HON. COURT OF APPEALS and BUEN

REALTY DEVELOPMENT CORPORATION,

respondents.

Assailed, in this petition for review, is the decision

of the Court of Appeals, dated 04 December 1991,

in CA-G.R. SP No. 26345 setting aside and

declaring without force and effect the orders of

execution of the trial court, dated 30 August 1991

and 27 September 1991, in Civil Case No. 87-41058.


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The antecedents are recited in good detail by the

appellate court thusly:

On July 29, 1987 a Second Amended Complaint

for Specific Performance was filed by Ang Yu

Asuncion and Keh Tiong, et al., against Bobby Cu

Unjieng, Rose Cu Unjieng and Jose Tan before theRegional Trial Court, Branch 31, Manila in Civil

Case No. 87-41058, alleging, among others, that

plaintiffs are tenants or lessees of residential and

commercial spaces owned by defendants described

as Nos. 630-638 Ongpin Street, Binondo, Manila;

that they have occupied said spaces since 1935 and

have been religiously paying the rental and

complying with all the conditions of the lease

contract; that on several occasions before October

9, 1986, defendants informed plaintiffs that they

are offering to sell the premises and are giving

them priority to acquire the same; that during the

negotiations, Bobby Cu Unjieng offered a price of

P6-million while plaintiffs made a counter offer of

P5-million; that plaintiffs thereafter asked the

defendants to put their offer in writing to which

request defendants acceded; that in reply to

defendant's letter, plaintiffs wrote them on October

24, 1986 asking that they specify the terms and

conditions of the offer to sell; that when plaintiffs

did not receive any reply, they sent another letter

dated January 28, 1987 with the same request; that

since defendants failed to specify the terms and

conditions of the offer to sell and because of

information received that defendants were about to

sell the property, plaintiffs were compelled to file

the complaint to compel defendants to sell the

property to them.

Defendants filed their answer denying the material

allegations of the complaint and interposing a

special defense of lack of cause of action.

After the issues were joined, defendants filed a

motion for summary judgment which was granted

by the lower court. The trial court found thatdefendants' offer to sell was never accepted by the

plaintiffs for the reason that the parties did not

agree upon the terms and conditions of the

proposed sale, hence, there was no contract of sale

at all. Nonetheless, the lower court ruled that

should the defendants subsequently offer their

property for sale at a price of P11-million or below,

plaintiffs will have the right of first refusal. Thus

the dispositive portion of the decision states:

WHEREFORE, judgment is hereby rendered in

favor of the defendants and against the plaintiffssummarily dismissing the complaint subject to the

aforementioned condition that if the defendants

subsequently decide to offer their property for sale

for a purchase price of Eleven Million Pesos or

lower, then the plaintiffs has the option to purchase

the property or of first refusal, otherwise,

defendants need not offer the property to theplaintiffs if the purchase price is higher than Eleven

Million Pesos.

SO ORDERED.

Aggrieved by the decision, plaintiffs appealed to

this Court in

CA-G.R. CV No. 21123. In a decision promulgated

on September 21, 1990 (penned by Justice

Segundino G. Chua and concurred in by Justices

Vicente V. Mendoza and Fernando A. Santiago),

this Court affirmed with modification the lower

court's judgment, holding:

In resume, there was no meeting of the minds

between the parties concerning the sale of the

property. Absent such requirement, the claim for

specific performance will not lie. Appellants'

demand for actual, moral and exemplary damages

will likewise fail as there exists no justifiable

ground for its award. Summary judgment for

defendants was properly granted. Courts may

render summary judgment when there is no

genuine issue as to any material fact and the

moving party is entitled to a judgment as a matter

of law (Garcia vs. Court of Appeals, 176 SCRA

815). All requisites obtaining, the decision of the

court a quo is legally justifiable.

WHEREFORE, finding the appeal unmeritorious,

the judgment appealed from is hereby AFFIRMED,

but subject to the following modification: The court

a quo in the aforestated decision gave the plaintiffs-

appellants the right of first refusal only if the

property is sold for a purchase price of Eleven

Million pesos or lower; however, considering the

mercurial and uncertain forces in our market

economy today. We find no reason not to grant thesame right of first refusal to herein appellants in the

event that the subject property is sold for a price in

excess of Eleven Million pesos. No pronouncement

as to costs.

SO ORDERED.

The decision of this Court was brought to the

Supreme Court by petition for review on certiorari.

The Supreme Court denied the appeal on May 6,

1991 "for insufficiency in form and substances"

(Annex H, Petition).

On November 15, 1990, while CA-G.R. CV No.21123 was pending consideration by this Court, the


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11/22

register the new title in favor of the aforesaid

plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur

Go.

SO ORDERED.

On the same day, September 27, 1991 the

corresponding writ of execution (Annex C,Petition) was issued. 1

On 04 December 1991, the appellate court, on

appeal to it by private respondent, set aside and

declared without force and effect the above

questioned orders of the court a quo.

In this petition for review on certiorari, petitioners

contend that Buen Realty can be held bound by the

writ of execution by virtue of the notice of lis

pendens, carried over on TCT No. 195816 issued in

the name of Buen Realty, at the time of the latter's

purchase of the property on 15 November 1991

from the Cu Unjiengs.

We affirm the decision of the appellate court.

A not too recent development in real estate

transactions is the adoption of such arrangements

as the right of first refusal, a purchase option and a

contract to sell. For ready reference, we might

point out some fundamental precepts that may find

some relevance to this discussion.

An obligation is a juridical necessity to give, to do

or not to do (Art. 1156, Civil Code). The obligation

is constituted upon the concurrence of the essential

elements thereof, viz: (a) The vinculum juris or

juridical tie which is the efficient cause established

by the various sources of obligations (law,

contracts, quasi-contracts, delicts and quasi-

delicts); (b) the object which is the prestation or

conduct; required to be observed (to give, to do or

not to do); and (c) the subject-persons who, viewed

from the demandability of the obligation, are the

active (obligee) and the passive (obligor) subjects.

Among the sources of an obligation is a contract

(Art. 1157, Civil Code), which is a meeting of

minds between two persons whereby one bindshimself, with respect to the other, to give

something or to render some service (Art. 1305,

Civil Code). A contract undergoes various stages

that include its negotiation or preparation, its

perfection and, finally, its consummation.

Negotiation covers the period from the time the

prospective contracting parties indicate interest in

the contract to the time the contract is concluded

(perfected). The perfection of the contract takes

place upon the concurrence of the essential

elements thereof. A contract which is consensual asto perfection is so established upon a mere meeting

of minds, i.e., the concurrence of offer and

acceptance, on the object and on the cause thereof.

A contract which requires, in addition to the above,

the delivery of the object of the agreement, as in a

pledge or commodatum, is commonly referred to as

a real contract. In a solemn contract, compliancewith certain formalities prescribed by law, such as

in a donation of real property, is essential in order

to make the act valid, the prescribed form being

thereby an essential element thereof. The stage of

consummation begins when the parties perform

their respective undertakings under the contract

culminating in the extinguishment thereof.

Until the contract is perfected, it cannot, as an

independent source of obligation, serve as a

binding juridical relation. In sales, particularly, to

which the topic for discussion about the case at

bench belongs, the contract is perfected when a

person, called the seller, obligates himself, for a

price certain, to deliver and to transfer ownership

of a thing or right to another, called the buyer, over

which the latter agrees. Article 1458 of the Civil

Code provides:

Art. 1458. By the contract of sale one of the

contracting parties obligates himself to transfer the

ownership of and to deliver a determinate thing,

and the other to pay therefor a price certain in

money or its equivalent.

A contract of sale may be absolute or conditional.

When the sale is not absolute but conditional, such

as in a "Contract to Sell" where invariably the

ownership of the thing sold is retained until the

fulfillment of a positive suspensive condition

(normally, the full payment of the purchase price),

the breach of the condition will prevent the

obligation to convey title from acquiring an

obligatory force. 2 In Dignos vs. Court of Appeals

(158 SCRA 375), we have said that, although

denominated a "Deed of Conditional Sale," a sale is

still absolute where the contract is devoid of anyproviso that title is reserved or the right to

unilaterally rescind is stipulated, e.g., until or

unless the price is paid. Ownership will then be

transferred to the buyer upon actual or constructive

delivery (e.g., by the execution of a public

document) of the property sold. Where the

condition is imposed upon the perfection of the

contract itself, the failure of the condition would

prevent such perfection. 3 If the condition is

imposed on the obligation of a party which is not

fulfilled, the other party may either waive thecondition or refuse to proceed with the sale (Art.


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1545, Civil Code). 4

An unconditional mutual promise to buy and sell,

as long as the object is made determinate and the

price is fixed, can be obligatory on the parties, and

compliance therewith may accordingly be exacted.

5An accepted unilateral promise which specifies the

thing to be sold and the price to be paid, when

coupled with a valuable consideration distinct and

separate from the price, is what may properly be

termed a perfected contract of option. This contract

is legally binding, and in sales, it conforms with the

second paragraph of Article 1479 of the Civil

Code, viz:

Art. 1479. . . .

An accepted unilateral promise to buy or to sell a

determinate thing for a price certain is binding

upon the promissor if the promise is supported by a

consideration distinct from the price. (1451a) 6

Observe, however, that the option is not the

contract of sale itself. 7 The optionee has the right,

but not the obligation, to buy. Once the option is

exercised timely, i.e., the offer is accepted before a

breach of the option, a bilateral promise to sell and

to buy ensues and both parties are then reciprocally

bound to comply with their respective

undertakings. 8

Let us elucidate a little. A negotiation is formally

initiated by an offer. An imperfect promise

(policitacion) is merely an offer. Public

advertisements or solicitations and the like are

ordinarily construed as mere invitations to make

offers or only as proposals. These relations, until a

contract is perfected, are not considered binding

commitments. Thus, at any time prior to the

perfection of the contract, either negotiating party

may stop the negotiation. The offer, at this stage,

may be withdrawn; the withdrawal is effective

immediately after its manifestation, such as by its

mailing and not necessarily when the offeree learnsof the withdrawal (Laudico vs. Arias, 43 Phil. 270).

Where a period is given to the offeree within which

to accept the offer, the following rules generally

govern:

(1) If the period is not itself founded upon or

supported by a consideration, the offeror is still free

and has the right to withdraw the offer before its

acceptance, or, if an acceptance has been made,

before the offeror's coming to know of such fact,

by communicating that withdrawal to the offeree

(see Art. 1324, Civil Code; see also Atkins, Kroll& Co. vs. Cua, 102 Phil. 948, holding that this rule

is applicable to a unilateral promise to sell under

Art. 1479, modifying the previous decision in

South Western Sugar vs. Atlantic Gulf, 97 Phil.

249; see also Art. 1319, Civil Code; Rural Bank of

Paraaque, Inc., vs. Remolado, 135 SCRA 409;

Sanchez vs. Rigos, 45 SCRA 368). The right towithdraw, however, must not be exercised

whimsically or arbitrarily; otherwise, it could give

rise to a damage claim under Article 19 of the Civil

Code which ordains that "every person must, in the

exercise of his rights and in the performance of his

duties, act with justice, give everyone his due, and

observe honesty and good faith."

(2) If the period has a separate consideration, a

contract of "option" is deemed perfected, and it

would be a breach of that contract to withdraw the

offer during the agreed period. The option,

however, is an independent contract by itself, and it

is to be distinguished from the projected main

agreement (subject matter of the option) which is

obviously yet to be concluded. If, in fact, the

optioner-offeror withdraws the offer before its

acceptance (exercise of the option) by the optionee-

offeree, the latter may not sue for specific

performance on the proposed contract ("object" of

the option) since it has failed to reach its own stage

of perfection. The optioner-offeror, however,

renders himself liable for damages for breach of the

option. In these cases, care should be taken of the

real nature of the consideration given, for if, in fact,

it has been intended to be part of the consideration

for the main contract with a right of withdrawal on

the part of the optionee, the main contract could be

deemed perfected; a similar instance would be an

"earnest money" in a contract of sale that can

evidence its perfection (Art. 1482, Civil Code).

In the law on sales, the so-called "right of first

refusal" is an innovative juridical relation. Needless

to point out, it cannot be deemed a perfected

contract of sale under Article 1458 of the CivilCode. Neither can the right of first refusal,

understood in its normal concept, per se be brought

within the purview of an option under the second

paragraph of Article 1479, aforequoted, or possibly

of an offer under Article 1319 9 of the same Code.

An option or an offer would require, among other

things, 10 a clear certainty on both the object and

the cause or consideration of the envisioned

contract. In a right of first refusal, while the object

might be made determinate, the exercise of the

right, however, would be dependent not only on thegrantor's eventual intention to enter into a binding


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juridical relation with another but also on terms,

including the price, that obviously are yet to be

later firmed up. Prior thereto, it can at best be so

described as merely belonging to a class of

preparatory juridical relations governed not by

contracts (since the essential elements to establishthe vinculum juris would still be indefinite and

inconclusive) but by, among other laws of general

application, the pertinent scattered provisions of the

Civil Code on human conduct.

Even on the premise that such right of first refusal

has been decreed under a final judgment, like here,

its breach cannot justify correspondingly an

issuance of a writ of execution under a judgment

that merely recognizes its existence, nor would it

sanction an action for specific performance without

thereby negating the indispensable element of

consensuality in the perfection of contracts. 11 It is

not to say, however, that the right of first refusal

would be inconsequential for, such as already

intimated above, an unjustified disregard thereof,

given, for instance, the circumstances expressed in

Article 19 12 of the Civil Code, can warrant a

recovery for damages.

The final judgment in Civil Case No. 87-41058, it

must be stressed, has merely accorded a "right of

first refusal" in favor of petitioners. The

consequence of such a declaration entails no more

than what has heretofore been said. In fine, if, as it

is here so conveyed to us, petitioners are aggrieved

by the failure of private respondents to honor the

right of first refusal, the remedy is not a writ of

execution on the judgment, since there is none to

execute, but an action for damages in a proper

forum for the purpose.

Furthermore, whether private respondent Buen

Realty Development Corporation, the alleged

purchaser of the property, has acted in good faith or

bad faith and whether or not it should, in any case,

be considered bound to respect the registration ofthe lis pendens in Civil Case No. 87-41058 are

matters that must be independently addressed in

appropriate proceedings. Buen Realty, not having

been impleaded in Civil Case No. 87-41058, cannot

be held subject to the writ of execution issued by

respondent Judge, let alone ousted from the

ownership and possession of the property, without

first being duly afforded its day in court.

We are also unable to agree with petitioners that

the Court of Appeals has erred in holding that the

writ of execution varies the terms of the judgmentin Civil Case No. 87-41058, later affirmed in CA-

G.R. CV-21123. The Court of Appeals, in this

regard, has observed:

Finally, the questioned writ of execution is in

variance with the decision of the trial court as

modified by this Court. As already stated, there

was nothing in said decision 13 that decreed theexecution of a deed of sale between the Cu

Unjiengs and respondent lessees, or the fixing of

the price of the sale, or the cancellation of title in

the name of petitioner (Limpin vs. IAC, 147 SCRA

516; Pamantasan ng Lungsod ng Maynila vs. IAC,

143 SCRA 311; De Guzman vs. CA, 137 SCRA

730; Pastor vs. CA, 122 SCRA 885).

It is likewise quite obvious to us that the decision

in Civil Case No. 87-41058 could not have decreed

at the time the execution of any deed of sale

between the Cu Unjiengs and petitioners.

AYSON-SIMON VS. ADAMOS AND FERIA

G.R. NO. L-39378 AUGUST 28, 1984

FACTS:

Defendants, Nicolas Adamos and Vicente Feria,

purchased two lots forming part of the Piedad

Estate in

Quezon City, from Juan Porciuncula. Thereafter,

the

successors-in-interest of the latter filed Civil Case

No. 174

for annulment of the sale and the cancellation of

TCT No.

69475, which had been issued to defendants-

appellants by

virtue of the disputed sale. The Court rendered a

Decision

annulling the saleThe said judgment was affirmed

by the

Appellate Court and had attained finality.

Meanwhile, during the pendency of the case above,

defendants sold the said two lots to Petitioner

Generosa

Ayson-Simon for Php3,800.00 plus Php800.00 for

facilitating the issuance of the new titles in favor of

petitioner. Due to the failure of the defendants to

deliver

the said lots, petitioner filed a civil case for specific

performance. The trial court rendered judgment to

petitioners favor. However, defendants could not

deliverthe said lots because the CA had already annulled


14/22

the sale

of the two lots in Civil Case No. 174. Thus,

petitioner filed

another civil case for the rescission of the contract.

Defendants were contending that petitioner cannotchoose

to rescind the contract since petitioner chose for

specific

performance of the obligation. Also, even though

petitioner can choose to rescind the contract, it

would not

be possible, because it has already prescribed.

ISSUES:

1. Can petitioner choose to rescind the contract

even after choosing for the specific performance of

the obligation?

2. Had the option to rescind the contract

prescribed?

RULING:

1. Yes. The rule that the injured party can

only choose between fulfillment and rescission of

the

obligation, and cannot have both, applies when the

obligation is possible of fulfillment. If, as in this

case, the

fulfillment has become impossible, Article 1191

allows the injured party to seek rescission even

after he has chosen

fulfillment.

2. No. Article 1191 of the Civil Code provides

that the injured party may also seek rescission, if

the

fulfillment should become impossible. The cause of

action

to claim rescission arises when the fulfillment of

theobligation became impossible when the Court of

First

Instance of Quezon City in Civil Case No. 174

declared the

sale of the land to defendants by Juan Porciuncula a

complete nullity and ordered the cancellation of

Transfer

Certificate of Title No. 69475 issued to them. Since

the two

lots sold to plaintiff by defendants form part of the

landinvolved in Civil Case No. 174, it became

impossible for

defendants to secure and deliver the titles to and the

possession of the lots to plaintiff. But plaintiff had

to wait

for the finality of the decision in Civil Case No.

174,According to the certification of the clerk of the

Court of

First Instance of Quezon City (Exhibit "E-2"), the

decision

in Civil Case No. 174 became final and executory

"as per

entry of Judgment dated May 3, 1967 of the Court

of

Appeals." The action for rescission must be

commenced

within four years from that date, May 3, 1967.

Since the

complaint for rescission was filed on August 16,

1968, the

four year period within which the action must be

commenced had not expired.

ARANETA VS PHIL. SUGAR ESTATES

DEVELOPMENT CO.

20 SCRA 330

FACTS:

J. M. Tuason & Co., Inc. is the owner of a big tract

land situated in Quezon City, and on July 28, 1950,

[through Gregorio Araneta, Inc.] sold a portion

thereof to

Philippine Sugar Estates Development Co., Ltd.

The parties stipulated, among in the contract of

purchase and sale with mortgage, that the buyer

will build

on the said parcel land the Sto. Domingo Church

and

Convent while the seller for its part will construct

streets.

But the seller, Gregorio Araneta, Inc., which began

constructing the streets, is unable to finish the

construction of the street in the Northeast side

because a

certain third-party, by the name of Manuel Abundo,

who

has been physically occupying a middle part

thereof,

refused to vacate the same;

Both buyer and seller know of the presence ofsquatters that may hamper the construction of the


15/22

streets

by the seller. On May 7, 1958, Philippine Sugar

Estates

Development Co., Lt. filed its complaint against J.

M.

Tuason & Co., Inc., and instance, seeking tocompel 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.

The lower court and the appellate court ruled in

favor of Phil. Sugar estates, and gave defendant

Gregorio

Araneta, Inc., a period of two (2) years from notice

hereof,

within which to comply with its obligation under

the

contract, Annex "A".

Gregorio Araneta, Inc. resorted to a petition for

review by certiorari to this Court.

ISSUES:

Was there a period fixed?

RULING:

Yes. The fixing of a period by the courts under

Article 1197 of the Civil Code of the Philippines is

sought to

be justified on the basis that petitioner (defendant

below)

placed the absence of a period in issue by pleading

in its

answer that the contract with respondent Philippine

Sugar

Estates Development Co., Ltd. gave petitionerGregorio

Araneta, Inc. "reasonable time within which to

comply

with its obligation to construct and complete the

streets."

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

alreadyelapsed when suit was filed if it had passed, then

the court

should declare that petitioner had breached the

contract,

Was it within the powers of the lower court to set

the

performance of the obligation in two years time?

NO. Even on the assumption that the court should

have

found that no reasonable time or no period at all

had been

fixed (and the trial court's amended decision

nowhere

declared any such fact) still, the complaint not

having

sought that the Court should set a period, the court

could

not proceed to do so unless the complaint included

it as

first amended;

Granting, however, that it lay within the Court's

power to

fix the period of performance, still the amended

decision is

defective in that no basis is stated to support the

conclusion that the period should be set at two

years after

finality of the judgment. The list paragraph of

Article 1197

is clear that the period can not be set arbitrarily.

The law

expressly prescribes that the Court shall determine

such

period as may under the circumstances been

probably

contemplated by the parties.

It must be recalled that Article 1197 of the Civil

Code

involves a two-step process. The Court must firstdetermine 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). This preliminary point settled, the Court

must then

proceed to the second step, and decide what periodwas


16/22

"probably contemplated by the parties" (Do., par.

3). So

that, ultimately, the Court can not fix a period

merely

because in its opinion it is or should be reasonable,

butmust set the time that the parties are shown to have

intended. As the record stands, 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.

Does reasonable time mean that the date of

performance

would be indefinite?

The Court of Appeals objected to this conclusion

that it

would render the date of performance indefinite.

Yet, the

circumstances admit no other reasonable view; and

this

very indefiniteness is what explains why the

agreement did

not specify any exact periods or dates of

performance.

SINGSON ENCARNACION VS. BALDOMAR

77 PHIL 470

FACTS:

Vicente Singson Encarnacion leased his house to

Jacinta Baldomar and her son, Lefrando Fernando

upon a

month-to-month basis. After Manila was liberated

in the

last war, Singson Encarnacio notified Baldomar

and herson Fernando to vacate the house because he

needed it for

his office as a result of the destruction of the

building

where he had his office before. Despite the

demand, the

Baldomar and Fernando continued their occupancy.

The defense of Baldomar and Fernando was that

the

contract with Singson Encarnacion authorized themto

continue occupancy indefinitely while they should

faithfully fulfill their obligation with respect to

payment of

rentals. Singson Encarnacion contended that the

lease had

always and since the beginning been upon a month-tomonth

basis.

ISSUE:

Was it tenable for Singson Encarnacion to

discontinue

the lease of Baldomar and her son?

RULING:

The continuance and fulfillment of the contract of

lease

cannot be made to depend solely and exclusively

upon the

free and uncontrolled choice of the lessees between

continuing paying the rentals or not, completely

depriving

the owner of all say in the matter. The defense of

Baldomar

and Fernando would leave to the sole and exclusive

will of

one of the contracting parties the validity and

fulfillment of

the contract of lease, within the meaning of Article

1256 of

the Civil Code. For if this were allowed, so long as

the

lessee elected to continue the lease by continuing

the

payment of the rentals the owner would never be

able to

discontinue the lease; conversely, although the

owner

should desire the lease to continue, the lessee could

effectively thwart his purpose if he should prefer toterminate the contract by the simple expedient of

stopping

payment of the rentals.

Ong vs. Century (kf)

The Court of First Instance of Iloilo rendered a

judgment in favor of the plaintiff, sentencing the

defendant company to pay him the sum of P45,000,

the value of certain policies of fire insurance, with

legal interest thereon from February 28, 1923, until

payment, with the costs. The defendant companyappealed from this judgment, and now insists that


17/22

the same must be modified and that it must be

permitted to rebuild the house burnt, subject to the

alignment of the street where the building was

erected, and that the appellant be relieved from the

payment of the sum in which said building was

insured.The appellant contends that under clause 14 of the

conditions of the policies, it may rebuild the house

burnt, and although the house may be smaller, yet it

would be sufficient indemnity to the insured for the

actual loss suffered by him.

If this clause of the policies is valid, its effect is to

make the obligation of the insurance company an

alternative one, that is to say, that it may either pay

the insured value of house, or rebuild it. It must be

noted that in alternative obligations, the debtor, the

insurance company in this case, must notify the

creditor of his election, stating which of the two

prestations he is disposed to fulfill, in accordance

with article 1133 of the Civil Code. The object of

this notice is to give the creditor, that is, the

plaintiff in the instant case, opportunity to express

his consent, or to impugn the election made by the

debtor, and only after said notice shall the election

take legal effect when consented by the creditor, or

if impugned by the latter, when declared proper by

a competent court. In the instance case, the record

shows that the appellant company did not give a

formal notice of its election to rebuild, and while

the witnesses, Cedrun and Cacho, speak of the

proposed reconstruction of the house destroyed, yet

the plaintiff did not give his assent to the

proposition, for the reason that the new house

would be smaller and of materials of lower kind

than those employed in the construction of the

house destroyed. Upon this point the trial judge

very aptly says in his decision: "It would be an

imposition unequitable, as well as unjust, to compel

the plaintiff to accept the rebuilding of a smaller

house than the one burnt, with a lower kind ofmaterials than those of said house, without offering

him an additional indemnity for the difference in

size between the two house, which circumstances

were taken into account when the insurance applied

for by the plaintiff was accepted by the defendant."

Election alleged by the appellant to rebuild the

house burnt instead of paying the value of the

insurance is improper.

RONQUILLO VS. COURT OF APPEALS

G.R. No. L-55138

FACTS:

Petitioner Ernesto V. Ronquillo was one of four (4)

defendants for the collection of the sum of

P117,498.98

plus attorney's fees and costs. The other defendants

wereOffshore Catertrade, Inc., Johnny Tan and Pilar

Tan.

On December 13, 1979, the lower court rendered

its Decision based on the compromise agreement,

which

stipulates, among others, that the Plaintiff agrees to

reduce

its total claim of P117,498.95 to only P110,000.00

and

defendants agree to acknowledge the validity of

such claim

and further bind themselves to initially pay out of

the total

indebtedness of P110,000.00 the amount of

P55,000.00

on or before December 24, 1979, the balance of

P55,000.00, defendants individually and jointly

agree to

pay within a period of six months from January

1980, or

before June 30, 1980.

Upon the defendants default, herein private

respondent (then plaintiff) filed a Motion for

Execution.

Ronquillo and another defendant Pilar Tan offered

to pay

their shares of the 55,000 already due.

But on January 22, 1980, private respondent

Antonio So moved for the reconsideration and/or

modification of the aforesaid Order of execution

and

prayed instead for the "execution of the decision inits

entirety against all defendants, jointly and

severally.

Petitioner opposed the said motion arguing that

under the decision of the lower court being

executed which

has already become final, the liability of the four

(4)

defendants was not expressly declared to be

solidary,consequently each defendant is obliged to pay only


18/22

his own

pro-rata or 1/4 of the amount due and payable.

ISSUE:

What is the nature of the liability of the defendants

(including petitioner), was it merely joint, or was itseveral

or solidary?

RULING:

SOLIDARY.

In this regard, Article 1207 and 1208 of the Civil

Code provides -

"Art. 1207. The concurrence of two or more

debtors in one and the same obligation does not

imply that

each one of the former has a right to demand, or

that each

one of the latter is bound to render, entire

compliance with

the prestation. There is a solidary liability only

when the

obligation expressly so states, or when the law or

the

nature of the obligation requires solidarity.

Art. 1208. If from the law, or the nature or the

wording of the obligation to which the preceding

article

refers the contrary does not appear, the credit or

debt shall

be presumed to be divided into as many equal

shares as

there are creditors and debtors, the credits or debts

being

considered distinct from one another, subject to the

Rules

of Court governing the multiplicity of suits."

Clearly then, by the express term of the

compromise agreement, the defendants obligated

themselves to pay their obligation "individually and

jointly."

The term "individually" has the same meaning as

"collectively", "separately", "distinctively",

respectively or

"severally". An agreement to be "individually

liable"undoubtedly creates a several obligation, and a

"several

obligation" is one by which one individual binds

himself to

perform the whole obligation.

The obligation in the case at bar being described as"individually and jointly", the same is therefore

enforceable against one of the numerous obligors.

PNB vs. Independent Planters Association (kf)

Appeal by PNB from the Order of the defunct

Court of First Instance of Manila dismissing PNB's

complaint against several solidary debtors for the

collection of a sum of money on the ground that

one of the defendants (Ceferino Valencia) died

during the pendency of the case (i.e., after the

plaintiff had presented its evidence) and therefore

the complaint, being a money claim based on

contract, should be prosecuted in the testate or

intestate proceeding for the settlement of the estate

of the deceased defendant pursuant to Section 6 of

Rule 86 of the Rules of Court which reads: SEC. 6.

Solidary obligation of decedent.the obligation of

the decedent is solidary with another debtor, the

claim shall be filed against the decedent as if he

were the only debtor, without prejudice to the right

of the estate to recover contribution from the other

debtor. In a joint obligation of the decedent, the

claim shall be confined to the portion belonging to

him.

The appellant assails the order of dismissal,

invoking its right of recourse against one, some or

all of its solidary debtors under Article 1216 of the

Civil Code ART. 1216. The creditor may

proceed against any one of the solidary debtors or

some or all of them simultaneously. The demand

made against one of them shall not be an obstacle

to those which may subsequently be directed

against the others, so long as the debt has not been

fully collected.ISSUE: whether in an action for collection of a sum

of money based on contract against all the solidary

debtors, the death of one defendant deprives the

court of jurisdiction to proceed with the case

against the surviving defendants.

HELD: It is now settled that the quoted Article

1216 grants the creditor the substantive right to

seek satisfaction of his credit from one, some or all

of his solidary debtors, as he deems fit or

convenient for the protection of his interests; and if,

after instituting a collection suit based on contractagainst some or all of them and, during its


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pendency, one of the defendants dies, the court

retains jurisdiction to continue the proceedings and

decide the case in respect of the surviving

defendants.

Similarly, in PNB vs. Asuncion, A cursory perusal

of Section 6, Rule 86 of the Revised Rules of Courtreveals that nothing therein prevents a creditor

from proceeding against the surviving solidary

debtors. Said provision merely sets up the

procedure in enforcing collection in case a creditor

chooses to pursue his claim against the estate of the

deceased solidary, debtor.

It is crystal clear that Article 1216 of the New Civil

Code is the applicable provision in this matter. Said

provision gives the creditor the right to 'proceed

against anyone of the solidary debtors or some or

all of them simultaneously.' The choice is

undoubtedly left to the solidary, creditor to

determine against whom he will enforce collection.

In case of the death of one of the solidary debtors,

he (the creditor) may, if he so chooses, proceed

against the surviving solidary debtors without

necessity of filing a claim in the estate of the

deceased debtors. It is not mandatory for him to

have the case dismissed against the surviving

debtors and file its claim in the estate of the

deceased solidary debtor . . .

Section 6, Rule 86 of the Revised Rules of Court

cannot be made to prevail over Article 1216 of the

New Civil Code, the former being merely

procedural, while the latter, substantive.

IMPERIAL INSURANCE INC. VS. DAVID

133 SCRA 317, November 21, 1984

FACTS:

Felicisimo V. Reyers and his wife Emilia T. David,

herein defendant-appellant, executed 2 indemnity

agreements in favor of appellee The Imperial

InsuranceInc, jointly and severally to assure indemnification

of the

latter of whatever liability it may incur in

connection with

its posting the security bonds to lift the attachments

in 2

civil cases instituted for the amount of P60, 000

and

P40,000, for the benefit of Felicisimo V. Reyes.

The spouses jointly and severally, executedanother indemnity agreement in favor of appellee

to assure

indemnification of the latter under a homestead

bond for

the sum of P7, 500.00 it had executed jointly and

severally

with them in favor of the Development Bank of thePhilippines.

Felicisimo later died and Special Proceedings

entitled In the Matter of the Intestate Estate of

Felicisimo

V. Reyes, commenced. His wife qualified and

took her

oath of office as the administratix of the said

intestate

estate.

Meanwhile, judgment was rendered in the two

Civil Cases against the spouses. Appellee made

demands

on Emilia David to pay the amounts of P60,000

and P40,

000 under the surety bonds and arrears in

premiums

thereon. A motion to dismiss was filed by the

appellant on

the ground the plaintiffs cause of action, if there

be any,

have been barred for its failure to file its claims

against the

estate of the deceased Felicisimo V. Reyes in due

time. She

contends that appellees claim should have been

presented

according to Rule 86 of the Revised Rules of Court

and its

failure to do so operates to bar its claim forever.

After trial, the court rendered judgment against

the herein appellant Emilia T. David.

ISSUE:Can the creditor choose to proceed against the

surviving solidary debtor instead of bringing an

action in

accordance with Rule 86 (sec. 5) of the Revised

Rules of

Court?

RULING:

Yes. Under the law and well-settled jurisprudence,

when the obligation is a solidary one, the creditor

maybring his action in toto against any of the debtors


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obligated

in solidum. In the case at bar, appellant signed a

joint and

several obligation with her husband in favor of

herein

appellee; as a consequence, the latter may demandfrom

either of them the whole obligation. As

distinguished from

a joint obligation where each of the debtor is

entitled only

for a proportionate part of the debt and the creditor

is

entitled only to a proportionate part of the credit, in

a

solidary obligation the creditor may enforce the

entire

obligation against one of the debtors. Moreover, in

the case

of Philippine International Surety vs. Gonzales,

Where the

obligation assumed by several persons is joint and

several,

each of the debtors is answerable for the whole

obligation

with the right to seek contribution from his co-

debtors.

Article 1216 of the Civil Code also states that,

The creditor

may proceed against any one of the solidary

debtors or

some or all of them simultaneously. The demand

made

against one of them shall not be an obstacle to

those

which may subsequently be directed against the

others, so

long as the debt has not been fully collected.

There is

nothing improper, as held in Manila Surety &Fidelity Co.

vs. Villarama, in the creditors filing of an action

against

the surviving solidary debtor alone, instead of

instituting a

proceeding for the settlement of the deceased

debtor

wherein his claim would be filed.

Lambert vs. Fox 26 phil 588 (kf)

This is an action brought to recover a penaltyprescribed on a contract as punishment for the

breach thereof.

Early in 1911 the firm known as John R. Edgar &

Co., engaged in the retail book and stationery

business, found itself in such condition financially

that its creditors, including the plaintiff and the

defendant, together with many others, agreed totake over the business, incorporate it and accept

stock therein in payment of their respective credits.

A few days after the incorporation was completed

plaintiff and defendant entered into the following

agreement: xxx the undersigned mutually and

reciprocally agree not to sell, transfer, or otherwise

dispose of any part of their present holdings of

stock in said John R. Edgar & Co. Inc., till after

one year from the date hereof. Either party

violating this agreement shall pay to the other the

sum of one thousand (P1,000) pesos as liquidated

damages, unless previous consent in writing to

such sale, transfer, or other disposition be obtained.

Notwithstanding this contract the defendant Fox

sold his stock in the said corporation to E. C.

McCullough of the firm of E. C. McCullough &

Co. of Manila, a strong competitor of the said John

R. Edgar & Co., Inc.

The learned trial court decided the case in favor of

the defendant upon the ground that the intention of

the parties as it appeared from the contract in

question was to the effect that the agreement

should be good and continue only until the

corporation reached a sound financial basis, and

that that event having occurred some time before

the expiration of the year mentioned in the contract,

the purpose for which the contract was made and

had been fulfilled and the defendant accordingly

discharged of his obligation thereunder. The

complaint was dismissed upon the merits.

ISSUE: Did the court erred in the construction of

the contract?

HELD: "As for us, we do not construe or interpret

this law. It does not need it. We apply it. Byapplying the law, we conserve both provisions for

the benefit of litigants. The first and fundamental

duty of courts, in our judgment, is to apply the law.

Construction and interpretation come only after it

has been demonstrated that application is

impossible or inadequate without them. They are

the very last functions which a court should

exercise. The majority of the law need no

interpretation or construction. They require only

application, and if there were more application and

less construction, there would be more stability inthe law, and more people would know what the law


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is."

In the case at bar the parties expressly stipulated

that the contract should last one year. No reason is

shown for saying that it shall last only nine months.

Whatever the object was in specifying the year, it

was their agreement that the contract should last ayear and it was their judgment and conviction that

their purposes would not be subversed in any less

time. What reason can give for refusing to follow

the plain words of the men who made the contract?

We see none.

In this jurisdiction penalties provided in contracts

of this character are enforced . It is the rule that

parties who are competent to contract may make

such agreements within the limitations of the law

and public policy as they desire, and that the courts

will enforce them according to their terms. (Civil

Code, articles 1152, 1153, 1154, and 1155; Fornow

vs. Hoffmeister, 6 Phil. Rep., 33; Palacios vs.

Municipality of Cavite, 12 Phil. Rep., 140; Gsell

vs. Koch, 16 Phil. Rep., 1.) The only case

recognized by the Civil Code in which the court is

authorized to intervene for the purpose of reducing

a penalty stipulated in the contract is when the

principal obligation has been partly or irregularly

fulfilled and the court can see that the person

demanding the penalty has received the benefit of

such or irregular performance. In such case the

court is authorized to reduce the penalty to the

extent of the benefits received by the party

enforcing the penalty.

In this jurisdiction, there is no difference between a

penalty and liquidated damages, so far as legal

results are concerned. In either case the party to

whom payment is to be made is entitled to recover

the sum stipulated without the necessity of proving

damages. Indeed one of the primary purposes in

fixing a penalty or in liquidating damages, is to

avoid such necessity.

The suspension of the power to sell has a beneficialpurpose, results in the protection of the corporation

as well as of the individual parties to the contract,

and is reasonable as to the length of time of the

suspension. We do not here undertake to discuss

the limitations to the power to suspend the right of

alienation of stock, limiting ourselves to the

statement that the suspension in this particular case

is legal and valid.

The judgment is reversed, the case remanded with

instructions to enter a judgment in favor of the

plaintiff and against the defendant for P1,000, withinterest; without costs in this instance.

ELEIZEGUI VS MANILA LAWN TENNIS

CLUB

G.R. 967

FACTS:

This suit concerns the lease of a piece of land for a

fixed consideration and to endure at the will of the

lessee.

By the contract of lease the lessee is expressly

authorized

to make improvements upon the land, by erecting

buildings of both permanent and temporary

character, by

making fills, laying pipes, and making such other

improvements as might be considered desirable for

the

comfort and amusement of the members.

With respect to the term of the lease the present

question has arisen. In its decision three theories

have been presented: One which makes the

duration depend upon the will of the lessor, who,

upon one month's notice

given to the lessee, may terminate the lease so

stipulated;

another which, on the contrary, makes it dependent

upon

the will of the lessee, as stipulated; and the third, in

accordance with which the right is reversed to the

courts to

fix the duration of the term.

The first theory is that which has prevailed in the

judgment below, as appears from the language in

which

the basis of the decision is expressed: "The court is

of the

opinion that the contract of lease was terminated by

thenotice given by the plaintiff on August 28 of last

year . . . ."

And such is the theory maintained by the plaintiffs,

which

expressly rests upon article 1581 of the Civil Code,

the law

which was in force at the time the contract was

entered

into (January 25, 1890). The judge, in giving to this

notice

the effect of terminating the lease, undoubtedlyconsiders


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that it is governed by the article relied upon by the

plaintiffs, which is of the following tenor: "When

the term

has not been fixed for the lease, it is understood to

be for

years when an annual rental has been fixed, formonths

when the rent is monthly. . . ." The second clause of

the

contract provides as follows: "The rent of the said

land is

fixed at 25 pesos per month."

ISSUE:

Was there a conventional term, a duration, agreed

upon in the contract in question?

RULING:

Yes. The obligations which, with the force of law,

the lessors assumed by the contract entered into, so

far as

pertaining to the issues, are the following: "First. . .

. They

lease the above-described land to Mr. Williamson,

who

takes it on lease . . . for all the time the members of

the

said club may desire to use it . . . Third. . . . the

owners of

the land undertake to maintain the club as tenant as

long

as the latter shall see fit, without altering in the

slightest

degree the conditions of this contract, even though

the

estate be sold."

In view of these clauses, it can not be said that

there is no stipulation with respect to the duration

of the

lease, or that, notwithstanding these clauses, article1581,

in connection with article 1569, can be applied. If

this were

so, it would be necessary to hold that the lessors

spoke in

vain that their words are to be disregarded a claim

which

can not be advanced by the plaintiffs nor upheld by

any

court without citing the law which detracts all legal

force

from such words or despoils them of their literal

sense.

magdalena estate vs

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