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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OF ASSIGNMENT rescinded, ordering UFC to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
dis- miss 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 dam- ages 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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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
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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
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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
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"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
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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
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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.