Civil Law - Case Digests on Oblicon - For Oral Recit

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MONDRAGON PERSONAL SALES, INC. vs. VICTORIANO S. SOLA, JR.,G.R. No. 174882, Januar 21, 2!1"

# $ MAR%MAR J&ROLAN

Do'(r)n*$

Compensation is a mode of extinguishing to the concurrent amount the obligations of persons who in their own right and as principals are reciprocally debtors and creditors of each other. Legal compensation takes place by operation of law when all the requisites are

present, as opposed to conventional compensation which takes place when the parties agree tocompensate their mutual obligations even in the absence of some requisites.

+a'(s$

Petitioner Mondragon Personal Sales Inc., a company engaged in the business of selling various consumer products through a network of sales representatives, entered into a Contractof Services with respondent Victoriano S. Sola, r. for a period of three years. !nder the saidcontract, respondent, as service contractor, would provide service facilities, i.e., bodega cumoffice, to petitioner"s products, sales force and customers in #eneral Santos City and as such, he

was entitled to commission or service fee.

$he agreement then came into effect when petitioner"s goods were delivered torespondent"s bodega and were sold by petitioner"s employees. Prior to the e%ecution of thecontract, however, respondent&s wife, 'ina Sola, had an e%isting obligation with petitionerarising from her (ranchise )istributorship *greement with the latter. +n anuary -, //0,respondent wrote a letter addressed to 1enato #. de 'eon, petitioner"s Vice2President for(inance, wherein he acknowledged and confirmed his wife&s indebtedness to petitioner in theamount of P ,/34, 05.34 6the other accountability in the sum of P ,5/7,7/ . 0 was still sub8ectto reconciliation9 and, together with his wife, bound himself to pay on installment basis the saiddebt. Conse:uently, petitioner withheld the payment of respondent"s service fees from (ebruary to *pril //0 and applied the same as partial payments to the debt which he obligated to pay. +n

*pril /, //0, respondent closed and suspended operation of his office cum bodega wherepetitioner"s products were stored and customers were being dealt with.

+n May 5, //0, respondent filed with the 1$C of )avao, a Complaint for accountingand rescission against petitioner alleging that petitioner withheld portions of his service feescovering the months from +ctober //5 to anuary //0 and his whole service fees for thesucceeding months of (ebruary to *pril //0, the total amount of which was P , 7 .;5< thatpetitioner"s act grossly hampered, if not paraly=ed, his business operation, thus left with noother recourse, he suspended operations to minimi=e losses. >e prayed for the rescission of thecontract of services and for petitioner to render an accounting of his service fees.

In its *nswer with Counterclaim, petitioner contended that respondent&s letter datedanuary -, //0 addressed to petitioner"s Vice2President for (inance, confirmed and obligated

himself to pay on installment basis the accountability of his wife with petitioner, thus



respondent"s service fees?commission earned for the period of (ebruary to *pril //0amounting to P 0,757.7 was applied by way of compensation to the amounts owing to it< thatall the service fees earned by respondent prior to (ebruary //0 were fully paid to him. In his1eply and *nswer to petitioner"s counterclaim, respondent averred that he was made to believethat the sales commission contained in petitioner"s memorandum dated uly 0, //5 would be

applicable to him< that it was improper for petitioner to confuse respondent"s transaction withthat of his wife as it was divergent in nature and terms.

$he 1$C rendered its )ecision in favor of defendant and against plaintiff. 1espondentfiled his appeal to the C* to which petitioner filed its appellee"s brief. +n (ebruary 7, 77-, theC* rendered its assailed decision granting the appeal and rescinded the Contract of Services.Petitioner"s motion for reconsideration was denied in a 1esolution.

Issu*s$

@hether or not the C* erredA

. In finding that petitioner breached its contract with respondent and that there is nocompensation in accordance to *rticle 3/ of the Civil Code<

. In finding that respondent did not assume the obligation of his wife<

*- $

$he C* found that petitioner"s act of withholding respondent"s service fees and thereafterapplying them as partial payment to the obligation of respondent"s wife with petitioner wasunlawful, considering that respondent never assumed his wife&s obligation, thus, there can be nolegal compensation under *rticle 3/ of the Civil Code.

@e do not agree.

In his letter dated anuary -, //0 addressed to Mr. 1enato #. )e 'eon, petitioner"s Vice2President for (inance, respondent wrote, and which we :uote in fullA

#entlemenA

$his refers to the account of my wife, 'ina 6Beng9 Sola, with Mondragon Personal Sales,Inc. in the amount of P4,5-4, 34.;;. +f this total amount, we are initially confirming the totalamount of P ,/34, 05.34 as due from 'ina 6Beng9 Sola, while the remaining balance of P ,5/7,7/ . 0 will be sub8ect to a reconciliation on or before (ebruary 0, //0.

In recognition of 'ina 6Beng9 Sola"s account, we undertake to pay P 77,777.77 on or before (ebruary 7 , //0 and the balance of P ,;34, 05.34 plus interest of ; per annum and

administrative charge per month on the diminishing balance will be covered by postdatedchecks of not less than P 77,777.77 per month starting (ebruary ;, //0 and every end of themonth thereafter but not to e%ceed eighteen 6 ;9 months or uly 4 , //-.

% % % % % % %



I fully understand and voluntarily agree to the above undertaking with full knowledge of the conse:uences which may arise therefrom.

Very truly yours,

6signed9 Victoriano S. Sola

* reading of the letter shows that respondent becomes a co2debtor of his wife"saccountabilities with petitioner. Dotably, the last paragraph of his letter which states EI fully understand and voluntarily agree to the above undertaking with full knowledge of theconse:uences which may arise therefromE and which was signed by respondent alone, showsthat he solidarily bound himself to pay such debt. Based on the letter, respondent"s wife had anaccount with petitioner in the amount of P4,5-4, 34.;;, out of which only the amount of P ,/34, 05.34 was confirmed while the remaining amount of P ,5/7,7 /. 0 would still be sub8ect

to reconciliation. *s respondent bound himself to pay the amount of P ,/34, 05.34, he becomespetitioner"s principal debtor to such amount.

@e find that petitioner"s act of withholding respondent"s service fees?commissions andapplying them to the latter"s outstanding obligation with the former is merely anacknowledgment of the legal compensation that occurred by operation of law between theparties. Compensation is a mode of e%tinguishing to the concurrent amount the obligations of persons who in their own right and as principals are reciprocally debtors and creditors of eachother. 'egal compensation takes place by operation of law when all the re:uisites are present, asopposed to conventional compensation which takes place when the parties agree to compensatetheir mutual obligations even in the absence of some re:uisites. 'egal compensation re:uires

the concurrence of the following conditionsA

6 9 $hat each one of the obligors be bound principally, and that he be at the same time aprincipal creditor of the other<

6 9 $hat both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same :uality if the latter has been stated<

649 $hat the two debts be due<

659 $hat they be li:uidated and demandable<

609 $hat over neither of them there be any retention or controversy, commenced by thirdpersons and communicated in due time to the debtor.

@e find the presence of all the re:uisites for legal compensation. Petitioner andrespondent are both principal obligors and creditors of each other. $heir debts to each otherconsist in a sum of money. 1espondent acknowledged and bound himself to pay petitioner theamount of P ,/34, 05.34 which was already due, while the service fees owing to respondent by petitioner become due every month. 1espondent"s debt is li:uidated and demandable, and



petitioner"s payments of service fees are li:uidated and demandable every month as they falldue. (inally, there is no retention or controversy commenced by third persons over either of thedebts. $hus, compensation is proper up to the concurrent amount where petitioner owesrespondent P 0,757.7 for service fees, while respondent owes petitioner P ,/34, 05.34.

ELI/A#ET DEL CARMEN, P*()()on*r, vs. SPO&SES RESTIT&TO SA#ORDO anMIMA MA IL&M0SA#ORDO, R*s on *n(s.

G.R. No. 18172", Au us( 11, 2!14# $ Fllen 1. Dalia

TOPIC$ FG$ID#!IS>MFD$ +( +B'I#*$I+DS2P*HMFD$ +1 PF1(+1M*DCF

DOCTRINE$

It is settled that compliance with the requisites of a valid consignation is mandatory.

Failure to comply strictly with any of the requisites will render the consignation void. ne of these requisites is a valid prior tender of payment.

+ACTS$

1espondent 1estituto Sabordo 61estituto9 filed an original action for declaratory relief with damages and prayer for a writ of preliminary in8unction raising the issue of whether or notthe Suico spouses have the right to recover from respondents 'ots 07- and 0 5. $he court ruledin favor of the Suico spouses directing that the latter have until +ctober 4 , //7 within which toredeem or buy back from respondents 'ots 07- and 0 5 for the sum of +DF >!D)1F)

$@FD$H2SFVFD $>+!S*D) (IVF >!D)1F) PFS+S 6P 3,077.779.

In the meantime, $oribio Suico 6$oribio9 died leaving his widow, Fufrocina, and severalothers, including herein petitioner, as legal heirs. 'ater, they discovered that respondentsmortgaged 'ots 07- and 0 5 with 1epublic Planters Bank 61PB9 as security for a loan which,subse:uently, became delin:uent.

Claiming that they are ready with the payment of P 3,077.77, but alleging that they cannot determine as to whom such payment shall be made, petitioner and her co2heirs filed a

Complaint with the 1$C seeking to compel herein respondents and 1PB to interplead andlitigate between themselves their respective interests on the abovementioned sum of money. $heComplaint also prayed that respondents be directed to substitute 'ots 07- and 0 5 with otherreal estate properties as collateral for their outstanding obligation with 1PB and that the latter

be ordered to accept the substitute collateral and release the mortgage on 'ots 07- and 0 5.!pon filing of their complaint, the heirs of $oribio deposited the amount of P 3,077.77 withthe 1$C.



1espondents filed their *nswer with Counterclaim praying for the dismissal of the aboveComplaint on the grounds that 6 9 the action for interpleader was improper since 1PB is notlaying any claim on the sum of P 3,077.77< 6 9 that the period within which the complainantsare allowed to purchase 'ots 07- and 0 5 had already e%pired< 649 that there was no valid

consignation, and 659 that the case is barred by litis pendenciaor res 8udicata.

Petitioner"s main contention is that the consignation which she and her co2heirs made was a 8udicial deposit based on a final 8udgment and, as such, does not re:uire compliance withthe re:uirements of *rticles 0- and 03 of the Civil Code.

ISS&E$

@hether or not there is a valid consignation.

R&LING$

$here is no valid consignation. It is settled that compliance with the re:uisites of a validconsignation is mandatory. (ailure to comply strictly with any of the re:uisites will render theconsignation void. +ne of these re:uisites is a valid prior tender of payment. !nder *rticle 0-,the only instances where prior tender of payment is e%cused areA 6 9 when the creditor is absentor unknown, or does not appear at the place of payment< 6 9 when the creditor is incapacitatedto receive the payment at the time it is due< 649 when, without 8ust cause, the creditor refuses togive a receipt< 659 when two or more persons claim the same right to collect< and 609 when thetitle of the obligation has been lost.

Done of these instances are present in the instant case. $he fact that the sub8ect lots arein danger of being foreclosed does not e%cuse petitioner and her co2heirs from tenderingpayment to respondents, as directed by the court. $hus, the SC finds that petitioner and her co2heirs failed to make a prior valid tender of payment to Sabordo.

AVELINA A#ARIENTOS RE#&S3&ILLO su5s()(u(* 5 6*r 6*)rs, * '* (E *-)n a R. Gua-v*9: vs. SPS. DOMINGO an EMELINDA RE#&S3&ILLO

G&ALVE/

G.R. No. 2!4!2; Jun* 4, 2!14

# $ Fisone Bri% 1. Manuales

Do'()n*<s$

In absolute simulation , there is a colorable contract but it has no substance as the partieshave no intention to be bound by it. $he main characteristic of an absolute simulation is that theapparent contract is not really desired or intended to produce legal effect or in any way alter the



8uridical situation of the parties. *s a result, an absolutely simulated or fictitious contract isvoid , and the parties may recover from each other what they may have given under the contract.>owever, if the parties state a false cause in the contract to conceal their real agreement, thecontract is relatively simulated and the parties are still bound by their real agreement. >ence,

where the essential re:uisites of a contract are present and the simulation refers only to the

content or terms of the contract, the agreement is absolutely binding and enforceable betweenthe parties and their successors in interest.

+a'(s $

Petioners *velina *barientos 1ebus:uillo 6*velina9 and Salvador +rosco 6Salvador9 fileda Complaint for annulment and revocation of an *ffidavit of Self2*d8udication and a )eed of

*bsolute Sale. In it, petitioners alleged that *velina was one of the children of Fulalio *barientos 6Fulalio9 and Victoria Villareal 6Victoria9. Fulalio died intestate on uly 4, /-5,survived by his wife Victoria, si% legitimate children, and one illegitimate child, namelyA 6 9

*velina *barientos21ebus:uillo, petitioner in this case< 6 9 (ortunata *barientos2+rosco, themother of petitioner Salvador< 649 1osalino *barientos< 659 uan *barientos< 609 (eliciano

*barientos< 6-9 *braham *barientos< and 639 Carlos *barientos. >is wife Victoria eventually died intestate on une 47, /;4.

+n his death, Fulalio left behind an untitled parcel of land in 'ega=pi City consisting of two thousand eight hundred si%ty2nine6 ,;-/9 s:uare meters, more or less, which was covered

by $a% )eclaration *1P Do. 6$)9 7 5 .

In 77 , *velina was supposedly made to sign two 6 9 documents by her daughterFmelinda 1ebus:uillo2#ualve= 6Fmelinda9 and her son2in2law )omingo #ualve= 6)omingo9,respondents in this case, on the prete%t that the documents were needed to facilitate the titlingof the lot. It was only in 774, as petitioner&s claim that *velina reali=ed that what she signed

was an *ffidavit of Self2 *d8udication and a )eed of *bsolute Sale in favor of respondents. *srespondents purportedly ignored her when she tried to talk to them, *velina sought theintervention of the 1$C to declare null and void the two 6 9 documents in order to reinstate$)7 5 and so correct the in8ustice done to the other heirs of Fulalio.

Issu*$ @hether or not there was a simulation of contract.

Ru-)n $

$he Civil Code providesA *rt. 450. Simulation of a contract may be absolute or relative.$he former takes place when the parties do not intend to be bound at all< the latter, when the

parties conceal their true agreement. *rt. 45-. *n absolutely simulated or fictitious contract is void. * relative simulation, when it does not pre8udice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy binds the parties totheir real agreement.

In absolute simulation, there is a colorable contract but it has no substance as the partieshave no intention to be bound by it. $he main characteristic of an absolute simulation is that theapparent contract is not really desired or intended to produce legal effect or in any way alter the



8uridical situation of the parties. *s a result, an absolutely simulated or fictitious contract is void, and the parties may recover from each other what they may have given under the contract.>owever, if the parties state a false cause in the contract to conceal their real agreement, thecontract is relatively simulated and the parties are still bound by their real agreement. >ence,

where the essential re:uisites of a contract are present and the simulation refers only to the

content or terms of the contract, the agreement is absolutely binding and enforceable betweenthe parties and their successors in interest.

In the present case, the true intention of the parties in the e%ecution of the )eed of *bsolute Sale is immediately apparent from respondents& very own *nswer to petitioners&Complaint. *s respondents themselves acknowledge, the purpose of the )eed of *bsolute Sale

was simply to Efacilitate the titling of the sub8ectJ property,E not to transfer the ownership of thelot to them. (urthermore, respondents concede that petitioner Salvador remains in possessionof the property and that there is no indication that respondents ever took possession of thesub8ect property after its supposed purchase. Such failure to take e%clusive possession of thesub8ect property or, in the alternative, to collect rentals from its possessor, is contrary to the

principle of ownership and is a clear badge of simulation that renders the whole transaction void.

LAND #AN= O+ T E P ILIPPINES, vs. EIRS O+ SPO&SES JORJA RIGOR0SORIANO AND MAGIN SORIANO, NAMEL%$ MARIVEL S. CARANDANG AND

JOSEP SORIANO,G.R. No. 178"12 Januar "!, 2!1"

ByA *ngeline C. HgaKa

Do'(r)n*$ !nder "rticle #$#% of the Civil Code, a compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one alreadycommenced.

+a'(s A

$he respondents are the children of the late Spouses or8a 1igor2Soriano and Magin Soriano,the owners of the two parcels of land.

$he properties became sub8ect to +peration 'and $ransfer 6+'$9 and were valued by the 'andBank and the )epartment of *grarian 1eform 6)*19 at P 7,777.77?hectare. Contending,however, that such valuation was too low compared to e%isting valuations of agricultural lands,

the respondents commenced this action for 8ust compensation, claiming that the properties wereirrigated lands that usually yielded 07 cavans per hectare per season at a minimum of twoseasons per year. $hey asked that a final valuation of the properties be pegged atP ,;77,777.77, based on *dministrative +rder Do. - , Series of // and 1epublic *ct Do.--03.

'and Bank disagreed



1$C ruled 8udgment is hereby rendered ordering the defendant 'and Bank of the Philippines topay petitioner Manolo #oduco the total amount of +ne Million $wo >undred $wenty Seven$housand (ive >undred Seventy +ne L 7? 77 6P , 3,03 . 79%%%

'and Bank and the respondents filed separate motions for reconsideration, but the 1$C denied

their motions on *ugust 5, 770.

>ence, this petition

>owever during the pendency of the appeal, on (ebruary /, 7 , 'and Bank submitted to theCourt a so2called oint Manifestation and Motion 61eA !nconditional *cceptance of 1evaluation9 dated (ebruary /, 7 , stating that the approval by 'and Bank&s responsibleofficers of the revaluation of the properties pursuant to )*1 *dministrative +rder Do. dated(ebruary ;, 7 7, Series of 7 7%%% was communicated to the respondents for theirunconditional acceptance.

Issu* A @hether or not the 8udgment on appeal be now resolved on the basis of the acceptance of payment by the respondents. 7

Ru-)n A

!nder the resolution dated March , 7 , the Court re:uired the respondents to comment on'and Bank&s submission of the oint Manifestation and Motion.

+n )ecember 5, 7 , 'and Bank submitted a Manifestation, informing the Court that theparties had filed by registered mail their oint Motion to *pprove the *ttached *greement,submitting therewith their *greement dated Dovember /, 7 .

$here is no :uestion that the foregoing *greement was a compromise that the parties freely and voluntarily entered into for the purpose of finally settling their dispute in this case. !nder *rticle 7 ; of the Civil Code, a compromise is a contract whereby the parties, by makingreciprocal concessions, avoid a litigation or put an end to one already commenced. *ccordingly,a compromise is either 8udicial, if the ob8ective is to put an end to a pending litigation, ore%tra8udicial, if the ob8ective is to avoid a litigation. *s a contract, a compromise is perfected by mutual consent. >owever, a 8udicial compromise, while immediately binding between theparties upon its e%ecution, is not e%ecutory until it is approved by the court and reduced to a

8udgment. 0$he validity of a compromise is dependent upon its compliance with the re:uisites

and principles of contracts dictated by law. *lso, the terms and conditions of a compromisemust not be contrary to law, morals, good customs, public policy and public order. -

* review of the terms of the *greement, particularly paragraph - and paragraph 3, indicates thatit is a 8udicial compromise because the parties intended it to terminate their pending litigation

by fully settling their dispute. Indeed, with the respondents thereby e%pressly signifying theirEunconditional or absolute acceptance and full receipt of the foregoing amounts as 8ustcompensation for sub8ect properties %%%pending before the Supreme Court, closed and



terminated,E the ultimate ob8ective of the action to determine 8ust compensation for thelandowners was achieved.

P ILIPPINE NATIONAL #AN=, *()()on*r, vs. SPO&SES ENRI3&E MANALO >ROSALINDA JACINTO, ARNOLD J. MANALO, ARNEL J. MANALO, an ARMA J.

MANALO, r*s on *n(sG.R. No. 1744"". +*5ruar 24, 2!14.:

ByA Frnesto Miguel B. *moresDo'(r)n*<s$

"rticle &'$% of the Civil Code expresses what is known in law as the principle of mutuality of contracts. It provides that (the contract must bind both the contracting parties) its validity orcompliance cannot be left to the will of one of them.(

+a'(s$

1espondent Spouses Fnri:ue Manalo and 1osalinda acinto 6Spouses Manalo9 appliedfor an *ll2Purpose Credit (acility in the amount of P ,777,777.77 with Philippine DationalBank 6PDB9 to finance the construction of their house. *fter PDB granted their application, they e%ecuted a 1eal Fstate Mortgage in favor of PDB over their property.

It was agreed upon that the Spouses Manalo would make monthly payments on theinterest. >owever, PDB claimed that their last recorded payment was made on )ecember, //3.$hus, PDB sent a demand letter to them on their overdue account and re:uired them to settlethe account. PDB sent another demand letter because they failed to heed the first demand.

*fter the Spouses Manalo still failed to settle their unpaid account despite the twodemand letters, PDB foreclose the mortgage. )uring the foreclosure sale, PDB was the highest

bidder for P 0, 3,777.77 of the mortgaged properties of the Spouses Manalo. $he sheriff issued to PDB the Certificate of Sale dated Dovember 4, 777.

*fter more than a year after the Certificate of Sale had been issued to PDB, the SpousesManalo instituted this action for the nullification of the foreclosure proceedings and damages.$hey alleged that they had obtained a loan for P ,777,777.77 from a certain Benito $an uponarrangements made by *ntoninus Huvienco, then the #eneral Manager of PDB"s BangkalBranch where they had transacted< that they had been made to understand and had beenassured that the P ,777,777.77 would be used to update their account, and that their loan

would be restructured and converted into a long2term loan< that they had been surprised tolearn, therefore, that had been declared in default of their obligations, and that the mortgage ontheir property had been foreclosed and their property had been sold< and that PDB did notcomply with Section 4 of *ct Do. 4 40, as amended

*fter trial, the 1$C rendered its decision in favor of PDB.



+n appeal, the C* found it necessary to pass upon the issues of PDB"s failure to specify the applicable interest and the lack of mutuality in the e%ecution of the credit agreementsconsidering the earlier cited observation made by the trial court in its decision. *pplying *rticle

/0- of the Civil Code, the C* held that PDB"s failure to indicate the rate of interest in the creditagreements would not e%cuse the Spouses Manalo from their contractual obligation to pay

interest to PDB because of the e%press agreement to pay interest in the credit agreements.Devertheless, the C* ruled that PDB"s inadvertence to specify the interest rate should beconstrued against it because the credit agreements were clearly contracts of adhesion due totheir having been prepared solely by PDB.

Issu*<s$

@hether or not the C* erred in declaring that the interest rates and subse:uent increases were invalid for lack of mutuality between the contracting parties

*- $

$he C* was correct.

$he credit agreement e%ecuted succinctly stipulated that the loan would be sub8ected tointerest at a rate Edetermined by the Bank to be its prime rate plus applicable spread, prevailingat the current month.E $his stipulation was carried over to or adopted by the subse:uentrenewals of the credit agreement. PDB thereby arrogated unto itself the sole prerogative todetermine and increase the interest rates imposed on the Spouses Manalo. Such a unilateraldetermination of the interest rates contravened the principle of mutuality of contracts embodiedin *rticle 47; of the Civil Code.

$he Court has declared that a contract where there is no mutuality between the partiespartakes of the nature of a contract of adhesion, and any obscurity will be construed against theparty who prepared the contract, the latter being presumed the stronger party to the agreement,and who caused the obscurity. PDB should then suffer the conse:uences of its failure tospecifically indicate the rates of interest in the credit agreement.

$he unilateral determination and imposition of the increased rates is violative of theprinciple of mutuality of contracts under *rticle 47; of the Civil Code, which provides that" tJhe contract must bind both contracting parties< its validity or compliance cannot be left to the

will of one of them. *ny contract which appears to be heavily weighted in favor of one of theparties so as to lead to an unconscionable result, thus partaking of the nature of a contract of

adhesion, is void. *ny stipulation regarding the validity or compliance of the contract left solely to the will of one of the parties is likewise invalid. 6Fmphasis supplied9

RODRIGO RIVERA, Petitioner , v. SPO&SES SALVADOR C &A AND S. VIOLETA C &A, Respondents.

G.R. No. 1844?8, Januar 14, 2!1?SPS. SALVADOR C &A AND VIOLETA S. C &A, Petitioners , v. RODRIGO

RIVERA, Respondent .



G.R. NO. 184472# $ Marietes M. Sumampong

DOCTRINE$

*hose obliged to deliver or to do something incur in delay from the time the obligee +udiciallyor extra+udicially demands from them the fulfillment of their obligation.

However, the demand by the creditor shall not be necessary in order that delaymay exist:

(1) When the obligation or the law expressly so declare ) or#- hen from the nature and the circumstances of the obligation it appears that the

designation of the time when the thing is to be delivered or the service is to be rendered was acontrolling motive for the establishment of the contract) or

'- hen demand would be useless, as when the obligor has rendered it beyond his power to perform.

+ACTS$

$he parties were friends of long standing having known each other since /34A 1ivera andSalvador are kumpadres , the former is the godfather of the Spouses Chua&s son. +n 5 (ebruary

//0, 1ivera obtained a loan from the Spouses Chua as evidenced by a Promissory Dote, in theamount of P 7,777.77+, to be paid on )ecember 4 , //0. It was agreed that failure to pay the amount on due date will be charge to a (IVF PF1CFD$ 60 9 interest monthly from the dateof default until the entire obligation is fully paid for. Should the note be referred to a lawyer forcollection, a sum e:uivalent to twenty percent 6 7 9 of the total amount due and payable as andfor attorney&s fees which in no case shall be less than P0,777.77 and to pay in addition the costof suit and other incidental litigation e%pense.

*lmost three years from the date of payment stipulated , 1ivera, as partial payment for the loan,issued and delivered to the Spouses Chua a check drawn against 1ivera&s current account in theamount of P 0,777.77 and another check presumably issued by 1ivera, duly signed and dated,

but blank as to payee and amount. +stensibly, as per understanding by the parties, was filled outin the amount of P 44,505.77 with cashN as payee. Purportedly, both checks were simply partialpayment for 1ivera&s loan in the principal amount of P 7,777.77. !pon presentment forpayment, the two checks were dishonored for the reason account closed.N

)espite repeated demands and because of 1ivera&s un8ustified refusal to pay, the Spouses Chua were constrained to file a suit. In his *nswer with Compulsory Counterclaim, 1ivera counteredthatA 6 9 he never e%ecuted the sub8ect Promissory Dote< 6 9 in all instances when he obtained a

loan from the Spouses Chua, the loans were always covered by a security< 649 at the time of thefiling of the complaint, he still had an e%isting indebtedness to the Spouses Chua, secured by areal estate mortgage, but not yet in default< 659 PCIB Check Do. 4 5 signed by him which hedelivered to the Spouses Chua on )ecember //;, should have been issued in the amount of only P ,477.77, representing the amount he received from the Spouses Chua&s saleslady< 609contrary to the supposed agreement, the Spouses Chua presented the check for payment in theamount of P 44,505.77< and 6-9 there was no demand for payment of the amount of P 7,777.77 prior to the encashment of PCIB Check Do. 7 4 5.



1ivera claimed forgery of the sub8ect Promissory Dote and denied his indebtedness thereunder.!pon order of the Me$C, the testimony of the DBI e%pert was sought to e%amine the purportedsignature of 1ivera appearing in the Promissory Dote and compared the signature appearing onseveral documents. $he e%pert concluded that the :uestioned signature appearing in thePromissory Dote and the specimen signatures appearing on the other documents submitted

were written by one and the same person. $o rebut the testimony of DBI Senior )ocumentF%aminer, 1ivera only reiterated his averment that the signature appearing on the Promissory Dote was not his signature and that he did not e%ecute the Promissory Dote.

*fter trial, the Me$C ruled in favor of the Spouses Chua and on appeal, the 1egional $rial Courtaffirmed the )ecision of the Me$C, but deleted the award of attorney&s fees to the Spouses Chua.

!ndaunted, 1ivera appealed to the Court of *ppeals which affirmed 1ivera&s liability under thePromissory Dote, reduced the imposition of interest on the loan from -7 to per annum ,and reinstated the award of attorney&s fees in favor of the Spouses Chua.

>ence, these appeal.

ISS&E$

@>F$>F1 +1 D+$ $>F >+D+1*B'F C+!1$ +( *PPF*'S F11F) ID >+')ID# $>*$)FM*D) IS D+ '+D#F1 DFCFSS*1H ID >+')ID# 1IVF1* 'I*B'F (+1 $>F S$*$F)ID$F1FS$ !P+D )F(*!'$.

ELD$

1ivera argues that even assuming the validity of the Promissory Dote, demand was still

necessary in order to charge him liable thereunder. $he Promissory Dote is une:uivocal aboutthe date when the obligation falls due and becomes demandableO4 )ecember //0. *s of anuary //-, 1ivera had already incurred in delay when he failed to pay the amount of

P 7,777.77 due to the Spouses Chua on 4 )ecember //0 under the Promissory Dote.

*rticle -/ of the Civil Code e%plicitly providesA "rt. &&/0. *hose obliged to deliver or to do something incur in delay from the time the obligee +udicially or extra+udicially demands from them the fulfillment of their obligation.

However, the demand by the creditor shall not be necessary in order that delaymay exist:

(1) When the obligation or the law expressly so declare ) or#- hen from the nature and the circumstances of the obligation it appears that the

designation of the time when the thing is to be delivered or the service is to be rendered was acontrolling motive for the establishment of the contract) or

'- hen demand would be useless, as when the obligor has rendered it beyond his power to perform.



In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment oneof the parties fulfills his obligation, delay by the other begins.

In the first two paragraphs, it is not sufficient that the law or obligation fi%es a date forperformance< it must further state e%pressly that after the period lapses, default will commence.

@e refer to the clause in the Promissory Dote containing the stipulation of interest. $he date of default under the Promissory Dote is anuary //-, the day following 4 )ecember //0, thedue date of the obligation. +n that date, 1ivera became liable for the stipulated interest whichthe Promissory Dote says is e:uivalent to 0 a month. In sum, until 4 )ecember //0, demand

was not necessary before 1ivera could be held liable for the principal amount of P 7,777.77.$hereafter, on anuary //-, upon default, 1ivera became liable to pay the Spouses Chuadamages, in the form of stipulated interest without waiting for demand as e%pressly statedtherein.

$he liability for damages of those who default, including those who are guilty of delay, in theperformance of their obligations is laid down on *rticle 37 of the Civil Code.

ALEJANDRO V. TAN=E vs. DEVELOPMENT #AN= O+ T E P ILIPPINES,STERLING S IPPING LINES, INC., R&PERTO V. TAN=E , VICENTE ARENAS,

an ASSET PRIVATI/ATION TR&ST,G.R. No. 171428. Nov* 5*r 11, 2!1"

# : 'ucks Mae )igaum

Do'(r)n*<s$

*he first, or causal fraud referred to in "rticle &''%, are those deceptions ormisrepresentations of a serious character employed by one party and without which the other

party would not have entered into the contract. 1olo incidente, or incidental fraud which isreferred to in "rticle &'22, are those which are not serious in character and without which theother party would still have entered into the contract. 1olo causante determines or is theessential cause of the consent, while dolo incidente refers only to some particular or accident of the obligation. *he effects of dolo causante are the nullity of the contract and theindemnification of damages, and dolo incidente also obliges the person employing it to paydamages.

+a'(s$

1uperto $ankeh approached his borther, *le8andro $ankeh and proposed to the latter to

8oin his corporation which is operating shipping vessels. 1uperto signified to *le8andro that they need to ac:uire a new vessel for their business and in order to do that, they needed a loan.

*le8andro together with 1uperto and others signed a promissory note in favor of the )BP for aloan amounting to 4.0. $he same amount used to ac:uire the said vessel.

@hen 1uperto invited *le8andro to 8oin in the company, the former promised the latterfree ,777 free shares as member of the B+) and assuring the latter that his eldest son shallhave a position in the company. But when the said promise was not fulfilled for *le8andro wasonly able to participate in the Board meeting only once in order to be introduced to the )BP



+fficers. >e was also not allowed to browse on the financial data of the company. $hesecircumstances prompted the petitioner to severe his ties with the company and notified the )BPof the said action. >e then demanded to be released from all liabilities arising from thecorporation&s activities specially that of the promissory note.

'ater on, it came to his knowledge that the said vessel sub8ect of the promissory note wassold for an inade:uate price and that )BP ran after the signatories of the promissory note forthe remaining balance of the loan. $his fact forced *le8andro to file a case against 1uperto, )BP,and other persons with the 1$C on the ground that he was led to sign into the promissory noteas a signatory and as such he was thereby defrauded by his brother.

$he 1$C rendered a decision in favor of *le8andro but was later on reversed by the C* on appeal. $he C* alleged that there was no fraud on the part of 1uperto when he signed thepromissory note. $hat he had affi%ed his signature on it voluntarily knowng fully well of theconse:uences of such act.

>ence, the Petition.

Issu*<s$

@hether or not there was causal fraud in the fi%ing of *le8andro&s signature in thepromissory note.

*- $

Do, there was none. But there is incidental fraud present in the said case.

$he first, or causal fraud referred to in *rticle 44;, are those deceptions ormisrepresentations of a serious character employed by one party and without which the otherparty would not have entered into the contract. )olo incidente, or incidental fraud which isreferred to in *rticle 455, are those which are not serious in character and without which theother party would still have entered into the contract. )olo causante determines or is theessential cause of the consent, while dolo incidente refers only to some particular or accident of the obligation. $he effects of dolo causante are the nullity of the contract and theindemnification of damages, and dolo incidente also obliges the person employing it to pay damages.

urisprudence has shown that in order to constitute fraud that provides basis to annulcontracts, it must fulfill two conditions. (irst, the fraud must be dolo causante or it must befraud in obtaining the consent of the party. Second, this fraud must be proven by clear andconvincing evidence.

Deither law nor 8urisprudence distinguishes whether it is dolo incidente or dolo causantethat must be proven by clear and convincing evidence. It stands to reason that both doloincidente and dolo causante must be proven by clear and convincing evidence. $he only :uestion is whether this fraud, when proven, may be the basis for making a contract voidable6dolo causante9, or for awarding damages 6dolo incidente9, or both.



*n assessment of the allegations in the pleadings and the findings of fact of both the trialcourt and appellate court based on the evidence on record led to the conclusion that there had

been no dolo causante committed against the petitioner by 1uperto V. $ankeh. $he petitionerhad given his consent to become a shareholder of the company without contributing a single

peso to pay for the shares of stock given to him by 1uperto V. $ankeh. *lthough there was no fraud that had been undertaken to obtain petitioner&s consent,

there was fraud in the performance of the contract. $he records showed that petitioner had beenun8ustly e%cluded from participating in the management of the affairs of the corporation. $hise%clusion from the management in the affairs of Sterling Shipping 'ines, Inc. constituted fraudincidental to the performance of the obligation. In #eralde=, this Court defined incidental fraudas those which are not serious in character and without which the other party would still haveentered into the contract.N

RO@ENA R. SALONTE vs.COMMISSION ON A&DIT, C AIRPERSON MA. GRACIA P&LIDO0TAN,COMMISSIONER J&ANITO G. ESPINO, JR., COMMISSIONER EIDI L.

MENDO/A, an +ORT&NATA M. R&#ICO, DIRECTOR IV, COA COMMISSIONSECRETARIAT, )n (6*)r o )')a- 'a a')()*s

G.R. No. 2!7"48B Au us( 1;, 2!14ByA Qia=el C. *ndales

Do'(r)n*$

bligations with a resolutory period take effect at once, but terminate upon arrival of the daycertain. " day certain is understood to be that which must necessarily come, although it maynot be known when. If the uncertainty consists in whether the day will come or not, theobligation is conditional.

+a'(s$

+n *pril -, /;/, the City of Mandaue and (.(. Cru= and Co., Inc. 6(.(. Cru=9 entered into aContract of 1eclamation in which (.(. Cru=, in consideration of a defined land sharing formulathus stipulated, agreed to undertake, at its own e%pense, the reclamation of ;7 hectares, moreor less, of foreshore and submerged lands from the Cabahug Causeway in that city.

$he timetables, i.e., commencement of the contract and pro8ect completion, are provided inparagraphs and 0 of the Contract which stateA

. C+MMFDCFMFD$. @ork on the reclamation shall commence not later than uly /;/J, after this contract shall be ratified by the Sanggunian Panlungsod<

% % % %

0. C+D$1*C$ )!1*$I+D. $he pro8ect is estimated to be completed in - years.>owever, if all the infrastructures within the +@DF1S& share of the pro8ect are already completed within the -2year period agreed upon, any e%tension of time for works to bedone within the share of the )FVF'+PF1S, shall be at the discretion of the



)FVF'+PF1S, as a growing city, changes in re:uirements of the lot buyers areinevitable.

+n a best effort basis, the construction of roadways, drainage system and open spaces inthe area designated as share of the City of Mandaue, shall be completed not later than)ecember 4 , // .

Subse:uently, the parties inked in relation to the above pro8ect a Memorandum of *greement 6M+*9 dated +ctober 5, /;/ whereby the City of Mandaue allowed (.(. Cru=to put up structures on a portion of a parcel of land owned by the city for the use of and tohouse (.(. Cru= personnel assigned at the pro8ect site, sub8ect to terms particularly providedin paragraphs 4, 5 and 0 of the M+*A

49 $hat (.(. Cru= desires to use a portion of a parcel of land of the City of Mandaue % % % to thee%tent of 5/0 s:uare meters % % % to be used by them in the construction of their offices to houseits personnel to supervise the Mandaue City 1eclamation Pro8ect % % %.

59 $hat the City of Mandaue agrees to the desire of (.(. Cru= to use a portion of the parcel of land % % % for the latter to use for the construction of their offices to house its personnel tosupervise the said Mandaue City 1eclamation Pro8ect with no rental to be paid by (.(. Cru= tothe City of Mandaue.

09 $hat the City of Mandaue and (.(. Cru= have agreed that upon the completion of theMandaue City 1eclamation Pro8ect, all improvements introduced by (.(. Cru= to the portion of the parcel % % % e%isting upon the completion of the said Mandaue City 1eclamation Pro8ect shallipso facto belong to the City of Mandaue in ownership as compensation for the use of said parcelof land by (.(. Cru= without any rental whatsoever.

Pursuant to the M+*, (.(. Cru= proceeded to construct the housing units and other facilities. @hen the City of Mandaue undertook the Metro Cebu )evelopment Pro8ect II 6MC)P II9, partof which re:uired the widening of the Plaridel F%tension Mandaue Causeway. >owever, thestructures and facilities built by (.(. Cru= sub8ect of the M+* stood in the direct path of the road

widening pro8ect. $hus, the )epartment of Public @orks and >ighways 6)P@>9 and Samuel B.)ar=a, MC)P II pro8ect director, entered into an *greement to )emolish, 1emove and1econstruct Improvement dated uly 4, //3 with (.(. Cru= whereby the latter would demolishthe improvements outside of the boundary of the road widening pro8ect and, in return, receivethe total amount of PhP ,7;5,;4-.5 in compensation.

*ccordingly, petitioner 1owena B. 1ances2Solante, >uman 1esource Management +fficer III,prepared and, with the approval of )ar=a, then issued )isbursement Voucher 6)V9 Do. 7 2732;;2/3 dated uly 5, //3 for PhP ,7;5,;4-.5 in favor of (.(. Cru=.

$hereafter, )ar=a addressed a letter2complaint to the +ffice of the +mbudsman, Visayas,inviting attention to several irregularities regarding the implementation of MC)P II. $he letter

was referred to the C+* which then issued *ssignment +rder Do. 77727-4 for a team to auditthe accounts of MC)P II. (ollowing an audit, the audit team issued Special *udit +ffice 6S*+91eport Do. 7772 ;, par. 0 of which statesA



(.(. Cru= and Company, Inc. was paid P ,7;5,;4-.5 for the cost of the property affected by the widening of Plaridel F%tension, Mandaue Causeway. >owever, under Section 0 of its M+* withMandaue City, the former was no longer the lawful owner of the properties at the time thepayment was made.

Based on the above findings, the S*+ audit team, issued the adverted D) 777277 2 7 26/39disallowing the payment of PhP ,7;5,;4-.5 to (.(. Cru= and naming that company, )ar=a andSolante liable for the transaction. $herefrom, Solante sought reconsideration, while (.(. Cru=appealed, but the motion for reconsideration and the appeal were 8ointly denied, which (.(.Cru= in time appealed to C+* Central.

In its (ebruary 0, 77; )ecision, the C+*, affirmed D) 777277 2 7 2/3 on the strength of the following premisesA

(rom the above provision of the M+*, it is clear that the improvements introduced by (.(. Cru=% % % would be owned by the City upon completion of the pro8ect which under the Contract of reclamation should have been in //0. >owever, the pro8ect was not completed in //0 and evenin //3 when M)CP paid for these improvements. $he fact that the reclamation pro8ect had not

yet been completed or turned over to the City of Mandaue by (.(. Cru= in //3 or two years afterit should have been completed, does not negate the right over such improvements by the City % %%. Clearly, the intention of the stipulation is for (.(. Cru= % % % to compensate the government forthe use of the land on which the office, pavement, canteen, e%tension shed, house and septictank were erected. $hus, to make the government pay for the cost of the demolishedimprovements will defeat the intention of parties as regards compensation due from thecontractor for its use of the sub8ect land. !nder *rticle 4 0 of the Civil Code, from the momenta contract is perfected, the parties are bound to the fulfillment to what has been e%pressly stipulated and all the conse:uences which according to their nature, may be in keeping with

good faith, usage and law. $hus, even if the contractual stipulations may turn out to befinancially disadvantageous to any party, such will not relieve any or both parties from theircontractual obligations.

(rom such decision, Solante filed a Motion for 1econsideration which was denied by the C+* ina 1esolution dated Dovember 0, 7 wherein the commission heldA

% % % $he arguments of Ms. Solante that as long as the Pro8ect has not yet been turned over, theownership of the said improvements would not be ac:uired yet by the City would put the entirecontract at the mercy of (.(. Cru= L Co., Inc., thus, negating the mutuality of contracts principlee%pressed in *rticle 47; of the Dew Civil Code, which statesA

*rt. 47;. $he contracts must bind both contracting parties< its validity or compliance cannot beleft to the will of one of them.

+n (ebruary 0, 7 4, Solante received a Dotice of (inality of )ecision 6D()9 stating that theC+* )ecision dated (ebruary 0, 77; and 1esolution dated Dovember 0, 7 have becomefinal and e%ecutory, a copy of the 1esolution having been served on the parties on Dovember /,

7 by registered mail.



>ence, the instant petition.

Issu*$

@hether or not the City of Mandaue owned during the period material the properties that weredemolished.

Ru-)n $

$he petition is meritorious.

$he Civil Code provision on obligations with a period is relevant. *rticle /4 thereof providesA

*rticle /4. +bligations for whose fulfillment a day certain has been fi%ed, shall be demandableonly when that day comes.

+bligations with a resolutory period take effect at once, but terminate upon arrival of the day certain.

* day certain is understood to be that which must necessarily come, although it may not beknown when.

If the uncertainty consists in whether the day will come or not, the obligation is conditional, andit shall be regulated by the rules of the preceding Section.

* plain reading of the Contract of 1eclamation reveals that the -2year period provided forpro8ect completion, or, with like effect, termination of the contract was a mere estimate andcannot be considered a period or a Eday certainE in the conte%t of the afore:uoted *rt. /4.

$o be clear, par. 0 of the Contract of 1eclamation statesA E$he pro8ect is estimated to becompleted in - years.E *s such, the lapse of - years from the perfection of the contract did not,

by itself, make the obligation to finish the reclamation pro8ect demandable, such as to put theobligor in a state of actionable delay for its inability to finish. $hus, (.(. Cru= cannot be deemedto be in delay.

Moreover, even if we consider the allotted - years within which (.(. Cru= was supposed tocomplete the reclamation pro8ect, the lapse thereof does not automatically mean that (.(. Cru=

was in delay.

*s may be noted, the City of Mandaue never made a demand for the fulfillment of its obligationunder the Contract of 1eclamation. *rticle -/ of the Civil Code on the interaction of demand

and delay and the e%ceptions to the re:uirement of demand relevantly statesA

*rticle -/. $hose obliged to deliver or to do something incur in delay from the time the obligee 8udicially or e%tra8udicially demands from them the fulfillment of their obligation.

>owever, the demand by the creditor shall not be necessary in order that delay may e%istA

6 9 @hen the obligation or the law e%pressly so declares< or



6 9 @hen from the nature and the circumstances of the obligation it appears that thedesignation of the time when the thing is to be delivered or the service is to be rendered was acontrolling motive for the establishment of the contract< or

649 @hen demand would be useless, as when the obligor has rendered it beyond his power toperform.

In reciprocal obligations, neither party incurs in delay if the other does not comply or is notready to comply in a proper manner with what is incumbent upon him. (rom the moment one of the parties fulfills his obligation, delay by the other begins.

In the instant case, the records are bereft of any document whence to deduce that the City of Mandaue e%acted from (.(. Cru= the fulfillment of its obligation under the reclamation contract.

*nd to be sure, not one of the e%ceptions to the re:uisite demand under *rt. -/ is established,let alone asserted.

*s it were, the Mandaue2(.(. Cru= M+* states that the structures built by ( .(. Cru= on the

property of the city will belong to the latter only upon the completion of the pro8ect. Clearly, thecompletion of the pro8ect is a suspensive condition that has yet to be fulfilled. !ntil thecondition arises, ownership of the structures properly pertains to ( .(. Cru=.

$o be clear, the M+* does not state that the structures shall inure in ownership to the City of Mandaue after the lapse of - years from the e%ecution of the Contract of 1eclamation. @hat theM+* does provide is that ownership of the structures shall vest upon, or ipso facto belong to,the City of Mandaue when the Contract of 1eclamation shall have been completed. 'ogically,

before such time, or until the agreed reclamation pro8ect is actually finished, (.(. Cru= owns thestructures. $he payment of compensation for the demolition thereof is 8ustified. $hedisallowance of the payment is without factual and legal basis.

T E METROPOLITAN #AN= AND TR&ST COMPAN%, Petitioner, vs. ANA GRACEROSALES AND %O %&= TO, 1espondents.

G.R. No. 18"2!4<Januar 1", 2!14# C-*(us V)--a or

Do'(r)n*$ $he E>old +utE clause applies only if there is a valid and e%isting obligation arisingfrom any of the sources of obligation enumerated in *rticle 03 of the Civil Code, to witA law,contracts, :uasi2contracts, delict, and :uasi2delict.

+a'(s

1espondents opened with petitioner, a domestic banking corporation a8oint )ollar *ccountwithan initial deposit of !S 5,777.77.+n uly 4 , 774, petitioner issued a E>old +utE orderagainst respondents& accounts.

1espondents filed before the1$C of Manila a Complaint for Breach of +bligation and Contract with )amages, against petitioner alleging that they attempted several times to withdraw theirdeposits but were unable to because petitioner had placed their accounts under E>old +utEstatus.



Petitioner alleged that respondents have no cause of action because it has a valid reason forissuing the E>old +utE order. It averred that they filed a criminal complaint for Fstafa againstrespondent due to its fraudulent scheme that causes them to reimburse their client the amountof !S 30,777.77.

$he 1$C finds petitioner liable for damages for breach of contract.$he Court ruled that it is theduty of petitioner to release the deposit to respondents as the act of withdrawal of a bank depositis an act of demand by the creditor and that the proper recourse of petitioner is against itsnegligent employees and not against respondents.

Petitioner appealed to the C* who affirmed the ruling of the 1$C. Petitioner filed this recourse.

Issu*$

@>F$>F1 +1 D+$ $>F E>+')2+!$E P1+VISI+D ID $>F *PP'IC*$I+D *D) *#1FFMFD$ (+1 )FP+SI$ *CC+!D$ *PP'H ID $>IS C*SF.

Ru-)n $

$he Petition is bereft of merit.

$he E>old +utE clause does not applyto the instant case.

Petitioner&s reliance on the E>old +utE clause in the *pplication and *greement for )eposit *ccount is misplaced.

$he E>old +utE clause applies only if there is a valid and e%isting obligation arising from any of the sources of obligation enumerated in *rticle 03 of the Civil Code, to witA law, contracts,:uasi2contracts, delict, and :uasi2delict. In this case, petitioner failed to show that respondents

have an obligation to it under any law, contract, :uasi2contract, delict, or :uasi2delict. *ndalthough a criminal case was filed by petitioner against respondent 1osales, this is not enoughreason for petitioner to issue a E>old +utE order as the case is still pending and no final

8udgment of conviction has been rendered against respondent 1osales. In fact, it is significant tonote that at the time petitioner issued the E>old +utE order, the criminal complaint had not yet

been filed. $hus, considering that respondent 1osales is not liable under any of the five sourcesof obligation, there was no legal basis for petitioner to issue the E>old +utE order. *ccordingly,

we agree with the findings of the 1$C and the C* that the E>old +utE clause does not apply inthe instant case.

In view of the foregoing, we find that petitioner is guilty of breach of contract when itun8ustifiably refused to release respondents& deposit despite demand. >aving breached its

contract with respondents, petitioner is liable for damages.In closing, it must be stressed that while we recogni=e that petitioner has the right to protectitself from fraud or suspicions of fraud, the e%ercise of his right should be done within the

bounds of the law and in accordance with due process, and not in bad faith or in a wantondisregard of its contractual obligation to respondents.



*)rs O +aus(o C. I na')o, Na *- Mar *- D. I na')o0Mana-o, M)- a D. I na')o0Mana-o An +aus()no D. I na')o vs. o * #an *rs Sav)n s An Trus( Co an ,

S ous*s P6)--) An T6*- a Ro r) u*9, Ca(6*r)n*, R* no- > J*an*((*, A--Surna * /un) a,

G.R. No. 17778", Januar 2", 2!1" y: Marie *ngelee V. Hgnacio

Do'(r)n* A

hen there is merely an offer by one party without acceptance of the other, there is nocontract.

+a'(s A

Petitioner (austo Ignacio owned several parcels of land in Cabuyao, 'aguna. @hen itobtained a loan from the bank 6P077,7779, it mortgaged two parcels of land as security.

>owever, petitioner failed to pay its loan prompting respondent bank to foreclose the mortgage.$he bank succeeded in foreclosing the land. Petitioner, however, failed to repurchase the land within the redemption period. )espite the lapse of such period and the consolidation of title inrespondent bank, petitioner offered to repurchase the properties. $he present controversy wasfuelled by petitioner"s stance that a verbal repurchase?compromise agreement was actually reached and implemented by the parties.

$he bank made several dispositions of the land using petitioner as the middleman2 broker. 'ater, petitioner sent respondent bank a letter e%pressing his willingness to pay theamount of P-77,777 in full, and re:uested respondent bank to release to him the remainingparcels of land covered by $C$ Dos. 70; and $2 05-0; 6Esub8ect propertiesE9.1espondent

bank however, turned down his re:uest. $his prompted petitioner to cause the annotation of anadverse claim on the said titles. But before such annotation, respondent bank already sold thesub8ect properties to private respondents.

1egional $rial Court

It ruled in favor of the respondent and declared the contract of sale between the bank and private respondents null and void. $he compromise agreement amounts to a valid contractof sale between petitioner, as Buyer, and respondent bank, as Seller. >ence, in entertainingother buyer for the same properties already sold to petitioner with intention to increase itsrevenues, respondent bank acted in bad faith and is thus liable for damages to the petitioner.

Court of *ppeals

It reversed 1$C&s decision. $here was no written conformity by respondent bank"sofficers to the amended conditions for repurchase which were unilaterally inserted by petitioner.Conse:uently, no contract of repurchase was perfected and respondent bank acted well withinits rights when it sold the sub8ect properties to herein respondents2intervenors.



Issu* A

@hether a contract for the repurchase of the foreclosed properties was perfected between petitioner and respondent bank.

Ru-)n A

Do, there was no perfected contract for repurchase.

Contracts are perfected by mere consent, which is manifested by the meeting of the offerand the acceptance upon the thing and the cause which are to constitute the contract.

Contracts that are consensual in nature, like a contract of sale, are perfected upon meremeeting of the minds. +nce there is concurrence between the offer and the acceptance upon thesub8ect matter, consideration, and terms of payment, a contract is produced. $he offer must becertain. $o convert the offer into a contract, the acceptance must be absolute and must not:ualify the terms of the offer< it must be plain, une:uivocal, unconditional, and without variance

of any sort from the proposal. * :ualified acceptance, or one that involves a new proposal, constitutes a counter2offer

and is a re8ection of the original offer. Conse:uently, when something is desired which is note%actly what is proposed in the offer, such acceptance is not sufficient to generate consent

because any modification or variation from the terms of the offer annuls the offer.

In the case at bench, Petitioner set a different repurchase price and also modified theterms of payment, which even contained a unilateral condition for payment of the balance6P-77,7779, that is, depending on petitioner"s Efinancial position.E

PF$I$I+D IS )FDIF).

SF)r* R*a-( D*v*- *n( Cor ora()on vs. %u,G.R. No. 2!71"", Mar'6 ;, 2!1?

# $ urdelyn C. 1epaso

Do'(r)n*$

*he right of rescission of a party to an obligation under "rticle &&0& of the Civil Code is predicated on a breach of faith by the other party who violates the reciprocity between them.*he breach contemplated in the said provision is the obligor3s failure to comply with anexisting obligation. hen the obligor cannot comply with what is incumbent upon it, theobligee may seek rescission and, in the absence of any +ust cause for the court to determine the

period of compliance, the court shall decree the rescission.

+ACTS$



In this case, the respondent ayne Hu and petitioner Swire 1ealty )evelopmentCorporation entered into a Contract to Sell on uly 0, //0 covering one residentialcondominium unit, specifically !nit 4773 of the Palace of Makati, located at P. Burgos cornerCaceres Sts., Makati City, with an area of 43.47 s:uare meters for the total contract price of P3,0 /,43 .;7, payable in e:ual monthly installments until September 5, //3. 1espondent

likewise purchased a parking lot in the same condominium building for P-77,777.77.

+n September 5, //3, respondent paid the full purchase price of P3,0 /,43 .;7 for theunit while making a down payment of P 7,777.77 for the parking lot. >owever,notwithstanding full payment of the contract price, petitioner failed to complete and deliver thesub8ect unit on time. $his prompted respondent to file a Complaint for 1escission of Contract

with )amages before the >ousing and 'and !se 1egulatory Board 6 4L!56 9 F%pandedDational Capital 1egion (ield +ffice 6 78C5F 9.

+n +ctober /, 775, the >'!1B FDC1(+ rendered a )ecision dismissing respondent&scomplaint. It ruled that rescission is not permitted for slight or casual breach of the contract but

only for such breaches as are substantial and fundamental as to defeat the ob8ect of the partiesin making the agreement. Petitioner moved for reconsideration, but the same was denied by the>'!1B Board of Commissioners in a 1esolution.!nfa=ed, petitioner appealed to the +ffice of the President 6 9 9 on *ugust 3, 773.In a )ecision, the +P, through then )eputy F%ecutiveSecretary Manuel #aite, dismissed petitioner&s appeal on the ground that it failed to promptly file its appeal before the +P. 1espondent sought reconsideration of said resolution, however, thesame was denied by the +P in a 1esolution.Conse:uently, respondent filed an appeal to theCourt of *ppeals.Petitioner moved for reconsideration, however, the C* denied the same.

ISS&E$

@hether or not rescission of the contract is proper in the instant case.

R&LING$

Hes, rescission of the contract is proper in the instant case. *rticle / of the Civil Codesanctions the right to rescind the obligation in the event that specific performance becomesimpossible. It provides tha the power to rescind obligations is implied in reciprocal ones, in caseone of the obligors should not comply with what is incumbent upon him.

$he in8ured party may choose between the fulfillment and the rescission of the obligation, withthe payment of damages in either case. >e may also seek rescission, even after he has chosenfulfillment, if the latter should become impossible. $he court shall decree the rescission claimed,unless there be 8ust cause authori=ing the fi%ing of a period. $his is understood to be withoutpre8udice to the rights of third persons who have ac:uired the thing, in accordance with *rticles

4;0 and 4;; and the Mortgage 'aw. cr

Basic is the rule that the right of rescission of a party to an obligation under *rticle /of the Civil Code is predicated on a breach of faith by the other party who violates the reciprocity



between them. $he breach contemplated in the said provision is the obligor&s failure to comply with an e%isting obligation. @hen the obligor cannot comply with what is incumbent upon it, theobligee may seek rescission and, in the absence of any 8ust cause for the court to determine theperiod of compliance, the court shall decree the rescission.

$he Supreme Court said that it is evident that the report on the ocular inspectionconducted on the sub8ect condominium pro8ect and sub8ect unit shows that the amenities underthe approved plan have not yet been provided as of May 4, 77 , and that the sub8ect unit hasnot been delivered to respondent as of *ugust ;, 77 , which is beyond the period of development of )ecember /// under the license to sell. Incontrovertibly, petitioner hadincurred delay in the performance of its obligation amounting to breach of contract as it failed tofinish and deliver the unit to respondent within the stipulated period. $he delay in thecompletion of the pro8ect as well as of the delay in the delivery of the unit is a breach of statutory and contractual obligations which entitle respondent to rescind the contract , demand a refundand payment of damages.

S ous*s #*ro( vs S)a no,GR No. 188;44, ; Ju- 2!14.# $ Dai=a Mae D. delos Santos

To )'$ Solidary +bligation

Do'(r)n*$

" solidary obligation is one in which each of the debtors is liable for the entire obligation, and each of the creditors is entitled to demand the satisfaction of the whole obligation from any or

all of the debtors. n the other hand, a +oint obligation is one in which each debtors is liableonly for a proportionate part of the debt, and the creditor is entitled to demand only a proportionate part of the credit from each debtor. *he wellentrenched rule is that solidaryobligations cannot be inferred lightly. *hey must be positively and clearly expressed. "liability is solidary (only when the obligation expressly so states, when the law so provides orwhen the nature of the obligation so requires.(

+a'(s$

Macaria Berot 6Macaria9 and spouses 1odolfo Berot 61odolfo9 and 'ilia Berot 6'ilia9 contracteda loan from (elipe Siapno 6Siapno9 in the amount of Php477,777 with annual interest of 5 perannum. * certain parcel of land was mortgaged to cover as a security. $he contract providesA:"ll debtors, for a single loan, bind themselves to cede, transfer and convey by way of real estate mortgage all their rights, interest and participation in the sub+ect parcel of land including the improvements thereon in favor of the plaintiff and that should they fail to

perform their obligation the mortgage will be foreclosed.;

Macaaria died in 7 4. @hen the load became due, the debtors defaulted prompting themortgagee to institute foreclosure proceedings. In the course of the proceeding, the debtorsadmitted that a load was obtained among them. $he court ruled that their obligation is solidary.



Issu*$

@hether or not the obligation solidary.

*- $

NO. $he obligation is not solidary, but 8oint. !nder the law, when there is a concurrence of twoor more debtors under a single obligation, the obligation is presumed to be 8oint. (urther, for itto be considered as solidary, it must be made e%pressly by law, or by the nature of the obligationitself.

In the instant case, the testimony of debtors admitting that they contracted a loan establishedonly the e%istence of the load. >ence, there being no e%press term of solidarity, the presumptionof 8oint liability will apply. It is incumbent upon the party alleging to prove otherwise with apreponderance of evidence that obligation under the loan contract is indeed 8oint and several, orsolidary.

STRONG OLD INS&RANCE CO., INC., VS. SPO&SES STROEMG.R. No. 2!4 8; Januar 21, 2!1?# $ >ope Cesely >. Ba:uero

Do'(r)n*<s$

*he state has continuously encouraged the use of dispute resolution mechanisms to promote party autonomy. 4owever, where a surety in a construction contract actively participates in acollection suit, as in the case of <tronger, it is estopped from raising +urisdiction later.

"ssuming that <tronger is privy to the construction agreement, they cannot be allowed toinvoke arbitration at this late stage of the proceedings since to do so would go against the

law=s goal of prompt resolution of cases in the construction industry.

+a'(s$

Spouses 1une and 'ea Stroem 6Spouses Stroem9 entered into an +wners2Contractor *greement with *sis2'eif L Company, Inc. 6*sis2'eif9 for the construction of a two2storey houseon the lot owned by Spouses Stroem, in *ntipolo, 1i=al.

Pursuant to the agreement, *sis2'eif secured Performance Bond in the amountof P5,077,777.77 from Stronghold Insurance Company, Inc. 6Stronghold9. Stronghold and

*sis2'eif, through Ms. Ma. Cynthia *sis2'eif, bound themselves 8ointly and severally to pay theSpouses Stroem the agreed amount in the event that the construction pro8ect is not completed.

*sis2'eif failed to finish the pro8ect on time despite repeated demands of the Spouses Stroem,subse:uently rescinded the agreement, and then hired an independent appraiser to evaluate theprogress of the construction pro8ect.

Stronghold sent a letter to *sis2'eif re:uesting that the company settle its obligations with the Spouses Stroem. Do response was received from *sis2'eif. Spouses Stroem filed a



Complaint for breach of contract and for sum of money with a claim for damages against *sis2'eif, Ms. Cynthia *sis2'eif, and Stronghold. +nly Stronghold was served summons. Ms. Cynthia

*sis2'eif allegedly absconded and moved out of the country.

$he 1$C decided in favor of the Spouses, and ordered Stronghold to pay the former.Both parties appealed, however, the Court of *ppeals affirmed the decision of 1$C. Strongholdargues that the trial court did not ac:uire 8urisdiction over the case in view of the arbitrationclause in the agreement and considering that 61.*. ;3-9 e%plicitly confines the court&s authority only to pass upon the issue. Contrary to Stronghold&s argument, Spouses Stroem argues thatstronghold is liable for the full amount of the performance bond. $he terms of the bond clearly show that Stronghold is liable as surety.

Issu*<s$

$he main issue here is whether the dispute O liability of a surety under a performance bond O is connected to a construction contract and, therefore, falls under the e%clusive 8urisdiction of the CI*C, and thus liable even if not privy to the contract.

*- $

$he court resolves to deny the Petition. $he 8urisdiction of the CI*C, under F.+. 77;,may include but is not limited to violation of specifications for materials and workmanship<

violation of the terms of agreement< interpretation and?or application of contractual timeanddelays< maintenance and defects< payment, default of employer or contractor and changes incontract cost.

* guarantee or a surety contract under *rticle 753 of the Civil Code of the Philippines isan accessory contract because it is dependent for its e%istence upon the principal obligationguaranteed by it. *t first look, the +wners2Contractor *greement and the performance bond

reference each other< the performance bond was issued pursuant to the construction agreement. * performance bond is a kind of suretyship agreement.

It is settled that the surety&s solidary obligation for the performance of the principaldebtor&s obligation is indirect and merely secondary. Devertheless, the surety&s liability to theEcreditor or promisee of the principal is said to be direct, primary and absolute< in other words,he is directly and e:ually bound with the principal.E In the present case, *rticle 3 of the +wners2Contractor *greement merely stated that a performance bond shall be issued in favor of respondents, in which case petitioner and *sis2'eif Builders and?or Ms. Ma. Cynthia *sis2'eif shall pay P 5,077,777.77 in the event that *sis2'eif fails to perform its duty under the +wners2Contractor *greement. Conse:uently, the performance bond merely referenced the contractentered into by respondents and *sis2'eif.

$o be clear, it is in the +wners2Contractor *greement that the arbitration clause isfound. $he construction agreement was signed only by respondents and the contractor, *sis2'eif, as represented by Ms. Ma. Cynthia *sis2'eif. I( )s 5as)' (6a( HCon(ra'(s (a * * *'(on- 5*(F**n (6* ar()*s, (6*)r ass) ns an 6*)rsH. No( 5*)n a ar( (o (6*'ons(ru'()on a r** *n(, *()()on*r 'anno( )nvo * (6* ar5)(ra()on '-aus*.P*()()on*r, (6us, 'anno( )nvo * (6* ur)s )'()on o (6* CIAC.



Mor*ov*r, *()()on*r s )nvo'a()on o (6* ar5)(ra()on '-aus* * *a(s (6*ur os* o ar5)(ra()on )n r*-a()on (o (6* 'ons(ru'()on 5us)n*ss. T6* s(a(* 6as

'on()nuous- *n'oura * (6* us* o )s u(* r*so-u()on *'6an)s s (o ro o(*ar( au(ono .

oF*v*r, F6*r* a sur*( )n a 'ons(ru'()on 'on(ra'( a'()v*- ar()') a(*s )n a'o--*'()on su)(, )( )s *s(o * ro ra)s)n ur)s )'()on -a(*r. Assu )n (6a(

*()()on*r )s r)v (o (6* 'ons(ru'()on a r** *n(, (6* 'anno( 5* a--oF* (o )nvo *ar5)(ra()on a( (6)s -a(* s(a * o (6* ro'** )n s s)n'* (o o so Fou- o a a)ns( (6*-aFKs oa- o ro ( r*so-u()on o 'as*s )n (6* 'ons(ru'()on )n us(r . $his case isdenied. So ordered.

Documents

Civil Law - Case Digests on Oblicon - For Oral Recit