OBLICON (Kinds of Conditions) |1

[G.R. No. 103577. October 7, 1996.] On our presentation of the TCT already in or name, We will immediately execute the deed
of absolute sale of said property and Miss Ramona Patricia Alcaraz shall immediately pay
ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL, the balance of the P1,190,000.00.
ANNABELLE C. GONZALES (for herself and on behalf of Floraida C. Tupper, as
attorney-in-fact), CIELITO A. CORONEL, FLORAIDA A. ALMONTE, and Clearly, the conditions appurtenant to the sale are the following:chanrob1es virtual 1aw
CATALINA BALAIS MABANAG, Petitioners, v. THE COURT OF APPEALS, library
CONCEPCION D. ALCARAZ and RAMONA PATRICIA ALCARAZ, assisted by
GLORIA F. NOEL as attorney-in-fact, Respondents. 1. Ramona will make a down payment of Fifty Thousand (P50,000.00) Pesos upon
execution of the document aforestated;
DECISION
2. The Coronels will cause the transfer in their names of the title of the property registered
MELO, J.: in the name of their deceased father upon receipt of the Fifty Thousand (P50,000.00) Pesos
The petition before us has its roots in a complaint for specific performance to compel down payment.
herein petitioners (except the last named, Catalina Balais Mabanag) to consummate the sale
of a parcel of land with its improvements located along Roosevelt Avenue in Quezon City 3. Upon the transfer in their names of the subject property, the Coronels will execute the
entered into by the parties sometime in January 1985 for the price of P1,240,000.00 deed of absolute sale in favor of Ramona and the latter will pay the former the whole
balance of One Million One Hundred Ninety Thousand (P1,190,000.00) Pesos.
The undisputed facts of the case were summarized by respondent court in this
wise:chanrob1es virtual 1aw library On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz (hereinafter
referred to as Concepcion), mother of Ramona, paid the down payment of Fifty Thousand
On January 19, 1985, defendants-appellants Romulo Coronel, Et. Al. (hereinafter referred (P50,000.00) Pesos (Exh. "B", Exh. "2").
to as Coronels) executed a document entitled "Receipt of Down Payment" (Exh. "A") in
favor of plaintiff Ramona Patricia Alcaraz (hereinafter referred to as Ramona) which is On February 6, 1985, the property originally registered in the name of the Coronels’ father
reproduced hereunder:chanrob1es virtual 1aw library was transferred in their names under TCT No. 327043 (Exh. "D" ; Exh. "4")

RECEIPT OF DOWN PAYMENT On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to
intervenor-appellant Catalina B. Mabanag (hereinafter referred to as Catalina) for One
P1,240,000.00 — Total amount Million Five Hundred Eighty Thousand (P1,580,000.00) Pesos after the latter has paid
Three Hundred Thousand (P300,000.00) Pesos (Exhs. "F-3" ; Exh. "6-C")
50,000.00 — Down payment
————————————— For this reason, Coronels canceled and rescinded the contract (Exh. "A") with Ramona by
P1,190,000.00 — Balance depositing the down payment paid by Concepcion in the bank in trust for Ramona Patricia
Alcaraz.
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty
Thousand Pesos purchase price of our inherited house and lot, covered by TCT No. 119627 On February 22, 1985, Concepcion, Et Al., filed a complaint for specific performance
of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00. against the Coronels and caused the annotation of a notice of lis pendens at the back of
We bind ourselves to effect the transfer in our names from our deceased father, Constancio TCT No. 327403 (Exh. "E" ; Exh. "5").
P. Coronel, the transfer certificate of title immediately upon receipt of the down payment
above-stated. On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering the
same property with the Registry of Deeds of Quezon City (Exh. "F" ; Exh. "6").
 OBLICON (Kinds of Conditions) |2

On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject
property in favor of Catalina (Exh. "G" ; Exh. "7"). Macabebe, Pampanga for Quezon City, March 1, 1989.

On June 5, 1985, a new title over the subject property was issued in the name of Catalina (Rollo, p. 106)
under TCT No. 351582 (Exh. "H" ; Exh. "8").
A motion for reconsideration was filed by petitioners before the new presiding judge of the
(Rollo, pp. 134-136) Quezon City RTC but the same was denied by Judge Estrella T. Estrada, thusly:chanrob1es
virtual 1aw library
In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City) the
parties agreed to submit the case for decision solely on the basis of documentary exhibits. The prayer contained in the instant motion, i.e., to annul the decision and to render anew
Thus, plaintiffs therein (now private respondents) proffered their documentary evidence decision by the undersigned Presiding Judge should be denied for the following reasons:
accordingly marked as Exhibits "A" through "J", inclusive of their corresponding (1) The instant case became submitted for decision as of April 14, 1988 when the parties
submarkings. Adopting these same exhibits as their own, then defendants (now petitioners) terminated the presentation of their respective documentary evidence and when the
accordingly offered and marked them as Exhibits "1" through "10", likewise inclusive of Presiding Judge at that time was Judge Reynaldo Roura. The fact that they were allowed to
their corresponding submarkings. Upon motion of the parties, the trial court gave them file memoranda at some future date did not change the fact that the hearing of the case was
thirty (30) days within which to simultaneously submit their respective memoranda, and an terminated before Judge Roura and therefore the same should be submitted to him for
additional 15 days within which to submit their corresponding comment or reply thereto, decision; (2) When the defendants and intervenor did not object to the authority of Judge
after which, the case would be deemed submitted for resolution. Reynaldo Roura to decide the case prior to the rendition of the decision, when they met for
the first time before the undersigned Presiding Judge at the hearing of a pending incident in
On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura, Civil Case No. Q-46145 on November 11, 1988, they were deemed to have acquiesced
who was then temporarily detailed to preside over Branch 82 of the RTC of Quezon City. thereto and they are now estopped from questioning said authority of Judge Roura after
On March 1, 1989, judgment was handed down by Judge Roura from his regular bench at they received the decision in question which happens to be adverse to them; (3) While it is
Macabebe, Pampanga for the Quezon City branch, disposing as follows:chanrob1es virtual true that Judge Reynaldo Roura was merely a Judge-on-detail at this Branch of the Court,
1aw library he was in all respects the Presiding Judge with full authority to act on any pending incident
submitted before this Court during his incumbency. When he returned to his Official
WHEREFORE, judgment for specific performance is hereby rendered ordering defendant Station at Macabebe, Pampanga, he did not lose his authority to decide or resolve such
to execute in favor of plaintiffs a deed of absolute sale covering that parcel of land cases submitted to him for decision or resolution because he continued as Judge of the
embraced in and covered by Transfer Certificate of Title No. 327403 (now TCT No. Regional Trial Court and is of co-equal rank with the undersigned Presiding Judge. The
331582) of the Registry of Deeds for Quezon City, together with all the improvements standing rule and supported by jurisprudence is that a Judge to whom a case is submitted
existing thereon free from all liens and encumbrances, and once accomplished, to for decision has the authority to decide the case notwithstanding his transfer to another
immediately deliver the said document of sale to plaintiffs and upon receipt thereof, the branch or region of the same court (Sec. 9, Rule 135, Rule of Court).
plaintiffs are ordered to pay defendants the whole balance of the purchase price amounting
to P1,190,000.00 in cash. Transfer Certificate of Title No. 331582 of the Registry of Deeds Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989
for Quezon City in the name of intervenor is hereby canceled and declared to be without rendered in the instant case, resolution of which now pertains to the undersigned Presiding
force and effect. Defendants and intervenor and all other persons claiming under them are Judge, after a meticulous examination of the documentary evidence presented by the
hereby ordered to vacate the subject property and deliver possession thereof to plaintiffs. parties, she is convinced that the Decision of March 1, 1989 is supported by evidence and,
Plaintiffs’ claim for damages and attorney’s fees, as well as the counterclaims of therefore, should not be disturbed.
defendants and intervenors are hereby dismissed.
IN VIEW OF THE FOREGOING, the "Motion for Reconsideration and/or to Annul
No pronouncement as to costs. Decision and Render Anew Decision by the Incumbent Presiding Judge" dated March 20,
1989 is hereby DENIED.
So Ordered.
 OBLICON (Kinds of Conditions) |3

SO ORDERED. Court, as were the courts below, is now called upon to adjudge what the real intent of the
parties was at the time the said document was executed.
Quezon City, Philippines, July 12, 1989.
The Civil Code defines a contract of sale, thus:chanrob1es virtual 1aw library
(Rollo, pp. 108-109)
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer
Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court of the ownership of and to deliver a determinate thing, and the other to pay therefor a price
Appeals (Buena, Gonzaga-Reyes, Abad Santos (P), JJ.,) rendered its decision fully certain in money or its equivalent.
agreeing with the trial court.
Sale, by its very nature, is a consensual contract because it is perfected by mere consent.
Hence, the instant petition which was filed on March 5, 1992. The last pleading, private The essential elements of a contract of sale are the following:chanrob1es virtual 1aw
respondents’ Reply Memorandum, was filed on September 15, 1993. The case was, library
however, re-raffled to undersigned ponente only on August 28, 1996, due to the voluntary
inhibition of the Justice to whom the case was last assigned. a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for
the price;
While we deem it necessary to introduce certain refinements in the disquisition of
respondent court in the affirmance of the trial court’s decision, we definitely find the b) Determinate subject matter; and
instant petition bereft of merit.
c) Price certain in money or its equivalent.
The heart of the controversy which is the ultimate key in the resolution of the other issues
in the case at bar is the precise determination of the legal significance of the document Under this definition, a Contract to Sell may not be considered as a Contract of Sale
entitled "Receipt of Down Payment" which was offered in evidence by both parties. There because the first essential element is lacking. In a contract to sell, the prospective seller
is no dispute as to the fact that said document embodied the binding contract between explicitly reserves the transfer of title to the prospective buyer, meaning, the prospective
Ramona Patricia Alcaraz on the one hand, and the heirs of Constancio P. Coronel on the seller does not as yet agree or consent to transfer ownership of the property subject of the
other, pertaining to a particular house and lot covered by TCT No. 119627, as defined in contract to sell until the happening of an event, which for present purposes we shall take as
Article 1305 of the Civil Code of the Philippines which reads as follows:chanrob1es virtual the full payment of the purchase price. What the seller agrees or obliges himself to do is to
1aw library fulfill his promise to sell the subject property when the entire amount of the purchase price
is delivered to him. In other words the full payment of the purchase price partakes of a
Art. 1305. A contract is a meeting of minds between two persons whereby one binds suspensive condition, the non-fulfillment of which prevents the obligation to sell from
himself, with respect to the other, to give something or to render some service. arising and thus, ownership is retained by the prospective seller without further remedies
by the prospective buyer. In Roque v. Lapuz (96 SCRA 741 [1980]), this Court had
While, it is the position of private respondents that the "Receipt of Down Payment" occasion to rule:chanrob1es virtual 1aw library
embodied a perfected contract of sale, which perforce, they seek to enforce by means of an
action for specific performance, petitioners on their part insist that what the document Hence, We hold that the contract between the petitioner and the respondent was a contract
signified was a mere executory contract to sell, subject to certain suspensive conditions, to sell where the ownership or title is retained by the seller and is not to pass until the full
and because of the absence of Ramona P. Alcaraz, who left for the United States of payment of the price, such payment being a positive suspensive condition and failure of
America, said contract could not possibly ripen into a contract of absolute sale. which is not a breach, casual or serious, but simply an event that prevented the obligation
of the vendor to convey title from acquiring binding force.
Plainly, such variance in the contending parties’ contentions is brought about by the way
each interprets the terms and/or conditions set forth in said private instrument. Withal, Stated positively, upon the fulfillment of the suspensive condition which is the full
based on whatever relevant and admissible evidence may be available on record, this payment of the purchase price, the prospective seller’s obligation to sell the subject
property by entering into a contract of sale with the prospective buyer becomes
 OBLICON (Kinds of Conditions) |4

demandable as provided in Article 1479 of the Civil Code which states:chanrob1es virtual seller’s title per se, but the latter, of course, may be sued for damages by the intending
1aw library buyer.

Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally In a conditional contract of sale, however, upon the fulfillment of the suspensive condition,
demandable. the sale becomes absolute and this will definitely affect the seller’s title thereto. In fact, if
there had been previous delivery of the subject property, the seller’s ownership or title to
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is the property is automatically transferred to the buyer such that, the seller will no longer
binding upon the promissor if the promise is supported by a consideration distinct from the have any title to transfer to any third person. Applying Article 1544 of the Civil Code, such
price. second buyer of the property who may have had actual or constructive knowledge of such
defect in the seller’s title, or at least was charged with the obligation to discover such
A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first
while expressly reserving the ownership of the subject property despite delivery thereof to buyer’s title. In case a title is issued to the second buyer, the first buyer may seek
the prospective buyer, binds himself to sell the said property exclusively to the prospective reconveyance of the property subject of the sale.
buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase
price. With the above postulates as guidelines, we now proceed to the task of deciphering the real
nature of the contract entered into by petitioners and private respondents.
A contract to sell as defined hereinabove, may not even be considered as a conditional
contract of sale where the seller may likewise reserve title to the property subject of the It is a canon in the interpretation of contracts that the words used therein should be given
sale until the fulfillment of a suspensive condition, because in a conditional contract of their natural and ordinary meaning unless a technical meaning was intended (Tan v. Court
sale, the first element of consent is present, although it is conditioned upon the happening of Appeals, 212 SCRA 586 [1992]). Thus, when petitioners declared in the said "Receipt of
of a contingent event which may or may not occur. If the suspensive condition is not Down Payment" that they —
fulfilled, the perfection of the contract of sale is completely abated (cf. Homesite and
Housing Corp. v. Court of Appeals, 133 SCRA 777 [1984]). However, if the suspensive Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty
condition is fulfilled, the contract of sale is thereby perfected, such that if there had already Thousand Pesos purchase price of our inherited house and lot, covered by TCT No.
been previous delivery of the property subject of the sale to the buyer, ownership thereto 1199627 of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00.
automatically transfers to the buyer by operation of law without any further act having to
be performed by the seller. without any reservation of title until full payment of the entire purchase price, the natural
and ordinary idea conveyed is that they sold their property.
In a contract to sell, upon the fulfillment of the suspensive condition which is the full
payment of the purchase price, ownership will not automatically transfer to the buyer When the "Receipt of Down Payment" is considered in its entirety, it becomes more
although the property may have been previously delivered to him. The prospective seller manifest that there was a clear intent on the part of petitioners to transfer title to the buyer,
still has to convey title to the prospective buyer by entering into a contract of absolute sale. but since the transfer certificate of title was still in the name of petitioner’s father, they
could not fully effect such transfer although the buyer was then willing and able to
It is essential to distinguish between a contract to sell and a conditional contract of sale immediately pay the purchase price. Therefore, petitioners-sellers undertook upon receipt
specially in cases where the subject property is sold by the owner not to the party the seller of the down payment from private respondent Ramona P. Alcaraz, to cause the issuance of
contracted with, but to a third person, as in the case at bench. In a contract to sell, there a new certificate of title in their names from that of their father, after which, they promised
being no previous sale of the property, a third person buying such property despite the to present said title, now in their names, to the latter and to execute the deed of absolute
fulfillment of the suspensive condition such as the full payment of the purchase price, for sale whereupon, the latter shall, in turn, pay the entire balance of the purchase price.
instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the
relief of reconveyance of the property. There is no double sale in such case. Title to the The agreement could not have been a contract to sell because the sellers herein made no
property will transfer to the buyer after registration because there is no defect in the owner- express reservation of ownership or title to the subject parcel of land. Furthermore, the
circumstance which prevented the parties from entering into an absolute contract of sale
 OBLICON (Kinds of Conditions) |5

pertained to the sellers themselves (the certificate of title was not in their names) and not The Court significantly notes that this suspensive condition was, in fact, fulfilled on
the full payment of the purchase price. Under the established facts and circumstances of the February 6, 1985 (Exh. "D" ; Exh. "4"). Thus, on said date, the conditional contract of sale
case, the Court may safely presume that, had the certificate of title been in the names of between petitioners and private respondent Ramona P. Alcaraz became obligatory, the only
petitioners-sellers at that time, there would have been no reason why an absolute contract act required for the consummation thereof being the delivery of the property by means of
of sale could not have been executed and consummated right there and then. the execution of the deed of absolute sale in a public instrument, which petitioners
unequivocally committed themselves to do as evidenced by the "Receipt of Down
Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely promise Payment."cralaw virtua1aw library
to sell the property to private respondent upon the fulfillment of the suspensive condition.
On the contrary, having already agreed to sell the subject property, they undertook to have Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to the
the certificate of title changed to their names and immediately thereafter, to execute the case at bench. Thus,
written deed of absolute sale.
Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon
Thus, the parties did not merely enter into a contract to sell where the sellers, after the thing which is the object of the contract and upon the price.
compliance by the buyer with certain terms and conditions, promised to sell the property to
the latter. What may be perceived from the respective undertakings of the parties to the From that moment, the parties may reciprocally demand performance, subject to the
contract is that petitioners had already agreed to sell the house and lot they inherited from provisions of the law governing the form of contracts.
their father, completely willing to transfer full ownership of the subject house and lot to the
buyer if the documents were then in order. It just so happened, however, that the transfer Art. 1181. In conditional obligations, the acquisition of rights, as well as the
certificate of title was then still in the name of their father. It was more expedient to first extinguishment or loss of those already acquired, shall depend upon the happening of the
effect the change in the certificate of title so as to bear their names. That is why they event which constitutes the condition.
undertook to cause the issuance of a new transfer of the certificate of title in their names
upon receipt of the down payment in the amount of P50,000.00. As soon as the new Since the condition contemplated by the parties which is the issuance of a certificate of title
certificate of title is issued in their names, petitioners were committed to immediately in petitioners’ names was fulfilled on February 6, 1985, the respective obligations of the
execute the deed of absolute sale. Only then will the obligation of the buyer to pay the parties under the contract of sale became mutually demandable, that is, Petitioners, as
remainder of the purchase price arise. sellers, were obliged to present the transfer certificate of title already in their names to
private respondent Ramona P. Alcaraz, the buyer, and to immediately execute the deed of
There is no doubt that unlike in a contract to sell which is most commonly entered into so absolute sale, while the buyer on her part, was obliged to forthwith pay the balance of the
as to protect the seller against a buyer who intends to buy the property in installment by purchase price amounting to P1,190,000.00.
withholding ownership over the property until the buyer effects full payment therefor, in
the contract entered into in the case at bar, the sellers were the ones who were unable to It is also significant to note that in the first paragraph in page 9 of their petition, petitioners
enter into a contract of absolute sale by reason of the fact that the certificate of title to the conclusively admitted that:chanrob1es virtual 1aw library
property was still in the name of their father. It was the sellers in this case who, as it were,
had the impediment which prevented, so to speak, the execution of a contract of absolute 3. The petitioners-sellers Coronel bound themselves "to effect the transfer in our names
sale. from our deceased father Constancio P. Coronel, the transfer certificate of title immediately
upon receipt of the downpayment above-stated." The sale was still subject to this
What is clearly established by the plain language of the subject document is that when the suspensive condition. (Emphasis supplied.)
said "Receipt of Down Payment" was prepared and signed by petitioners Romulo A.
Coronel, Et Al., the parties had agreed to a conditional contract of sale, consummation of (Rollo, p. 16)
which is subject only to the successful transfer of the certificate of title from the name of
petitioners’ father, Constancio P. Coronel to their names. Petitioners themselves recognized that they entered into a contract of sale subject to a
suspensive condition. Only, they contend, continuing in the same paragraph,
that:chanrob1es virtual 1aw library
 OBLICON (Kinds of Conditions) |6

Article 774 of the Civil Code defines Succession as a mode of transferring ownership as
. . . Had petitioners-sellers not complied with this condition of first transferring the title to follows:chanrob1es virtual 1aw library
the property under their names, there could be no perfected contract of sale. (Emphasis
supplied.) Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and
obligations to the extent and value of the inheritance of a person are transmitted through his
(Ibid.) death to another or others by his will or by operation of law.

not aware that they have set their own trap for themselves, for Article 1186 of the Civil Petitioners-sellers in the case at bar being the sons and daughters of the decedent
Code expressly provides that:chanrob1es virtual 1aw library Constancio P. Coronel are compulsory heirs who were called to succession by operation of
law. Thus, at the point their father drew his last breath, petitioners stepped into his shoes
Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its insofar as the subject property is concerned, such that any rights or obligations pertaining
fulfillment. thereto became binding and enforceable upon them. It is expressly provided that rights to
the succession are transmitted from the moment of death of the decedent (Article 777, Civil
Besides, it should be stressed and emphasized that what is more controlling these mere Code; Cuison v. Villanueva, 90 Phil. 850 [1952]).
hypothetical arguments is the fact that the condition herein referred to was actually and
indisputably fulfilled on February 6. 1985, when a new title was issued in the names of Be it also noted that petitioners’ claim that succession may not be declared unless the
petitioners as evidenced by TCT No. 327403 (Exh "D" ; Exh. "4"). creditors have been paid is rendered moot by the fact that they were able to effect the
transfer of the title to the property from the decedent’s name to their names on February 6.
The inevitable conclusion is that on January 19, 1985, as evidenced by the document 1985.
denominated as "Receipt of Down Payment" (Exh. "A" ; Exh "1"), the parties entered into
a contract of sale subject only to the suspensive condition that the sellers shall effect the Aside from this, petitioners are precluded from raising their supposed lack of capacity to
issuance of new certificate of title from that of their father’s name to their names and that, enter into an agreement at that time and they cannot be allowed to now take a posture
on February 6, 1985, this condition was fulfilled (Exh. "D" ; Exh "4"). contrary to that which they took when they entered into the agreement with private
respondent Ramona P. Alcaraz. The Civil Code expressly states that:chanrob1es virtual
We, therefore, hold that, in accordance with Article 1187 which pertinently provides — 1aw library

Art. 1187. The effects of conditional obligation to give, once the condition has been Art. 1431. Through estoppel an admission or representation is rendered conclusive upon
fulfilled, shall retroact to the day of the constitution of the obligation . . . the person making it, and cannot be denied or disproved as against the person relying
thereon.
In obligations to do or not to do, the courts shall determine, in each case, the retroactive
effect of the condition that has been complied with. Having represented themselves as the true owners of the subject property at the time of
sale, petitioners cannot claim now that they were not yet the absolute owners thereof at that
the rights and obligations of the parties with respect to the perfected contract of sale time.
became mutually due and demandable as of the time of fulfillment or occurrence of the
suspensive condition on February 6, 1985. As of that point in time, reciprocal obligations Petitioners also contend that although there was in fact a perfected contract of sale between
of both seller and buyer arose. them and Ramona P. Alcaraz, the latter breached her reciprocal obligation when she
rendered impossible the consummation thereof by going to the United States of America,
Petitioners also argue there could been no perfected contract on January 19, 1985 because without leaving her address, telephone number, and Special Power of Attorney (Paragraphs
they were then not yet the absolute owners of the inherited property. 14 and 15, Answer with Compulsory Counterclaim to the Amended Complaint, p. 2; Rollo,
p. 43), for which reason, so petitioners conclude, they were correct in unilaterally
We cannot sustain this argument. rescinding the contract of sale.
 OBLICON (Kinds of Conditions) |7

We do not agree with petitioners that there was a valid rescission of the contract of sale in Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the
the instant case. We note that these supposed grounds for petitioners’ rescission, are mere obligee judicially or extrajudicially demands from them the fulfillment of their obligation.
allegations found only in their responsive pleadings, which by express provision of the x x x
rules, are deemed controverted even if no reply is filed by the plaintiffs (Sec. 11, Rule 6,
Revised Rules of Court). The records are absolutely bereft of any supporting evidence to
substantiate petitioners’ allegations. We have stressed time and again that allegations must In reciprocal obligations, neither party incurs in delay if the other does not comply or is not
be proven by sufficient evidence (Ng Cho Cio v. Ng Diong, 110 Phil. 882 [1961]; Recaro ready to comply in a proper manner with what is incumbent upon him. From the moment
v. Embisan, 2 SCRA 598 [1961]). Mere allegation is not an evidence (Lagasca v. De Vera, one of the parties fulfill his obligation, delay by the other begins. (Emphasis supplied.)
79 Phil. 376 [19471]).
There is thus neither factual nor legal basis to rescind the contract of sale between
Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on petitioners and respondents.
February 6, 1985, we cannot justify petitioners-sellers’ act of unilaterally and
extrajudicially rescinding the contract of sale, there being no express stipulation With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave
authorizing the sellers to extrajudicially rescind the contract of sale. (cf Dignos v. CA, 158 rise to a case of double sale where Article 1544 of the Civil Code will apply, to
SCRA 375 [1988]; Taguba v. Vda. de Leon, 132 SCRA 722 [1984]) wit:chanrob1es virtual 1aw library

Moreover, petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz Art. 1544. If the same thing should have been sold to different vendees, the ownership shall
because although the evidence on record shows that the sale was in the name of Ramona P. be transferred to the person who may have first taken possession thereof in good faith, if it
Alcaraz as the buyer, the sellers had been dealing with Concepcion D. Alcaraz, Ramona’s should be movable property.
mother, who had acted for and in behalf of her daughter, if not also in her own behalf.
Indeed, the down payment was made by Concepcion D. Alcaraz with her own personal Should if be immovable property, the ownership shall belong to the person acquiring it
check (Exh. "B" ; Exh. "2") for and in behalf of Ramona P. Alcaraz. There is no evidence who in good faith first recorded it in the Registry of Property.
showing that petitioners ever questioned Concepcion’s authority to represent Ramona P.
Alcaraz when they accepted her personal check. Neither did they raise any objection as Should there be no inscription, the ownership shall pertain to the person who in good faith
regards payment being effected by a third person. Accordingly, as far as petitioners are was first in the possession; and, in the absence thereof to the person who presents the oldest
concerned, the physical absence of Ramona P. Alcaraz is not a ground to rescind the title, provided there is good faith.
contract of sale.
The record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as proof
Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her of the second contract of sale was registered with the Registry of Deeds of Quezon City
obligation to pay the full purchase price is concerned. Petitioners who are precluded from giving rise to the issuance of a new certificate of title in the name of Catalina B. Mabanag
setting up the defense of the physical absence of Ramona P. Alcaraz as above-explained on June 5, 1985. Thus, the second paragraph of Article 1544 shall apply.
offered no proof whatsoever to show that they actually presented the new transfer
certificate of title in their names and signified their willingness and readiness to execute the The above-cited provision on double sale presumes title or ownership to pass to the first
deed of absolute sale in accordance with their agreement. Ramona’s corresponding buyer, the exceptions being: (a) when the second buyer, in good faith, registers the sale
obligation to pay the balance of the purchase price in the amount of P1,190,000.00 (as ahead of the first buyer, and (b) should there be no inscription by either of the two buyers,
buyer) never became due and demandable and, therefore, she cannot be deemed to have when the second buyer, in good faith, acquires possession of the property ahead of the first
been in default. buyer. Unless, the second buyer satisfies these requirements, title or ownership will not
transfer to him to the prejudice of the first buyer.
Article 1169 of the Civil Code defines when a party in a contract involving reciprocal
obligations may be considered in default, to wit:chanrob1es virtual 1aw library In his commentaries on the Civil Code, an accepted authority on the subject, now a
distinguished member of the Court, Justice Jose C. Vitug, explains:chanrob1es virtual 1aw
library
 OBLICON (Kinds of Conditions) |8

property in a previous sale, the registration will constitute a registration in bad faith and
The governing principle is prius tempore, potior jure (first in time, stronger in right). will not confer upon him any right. (Salvoro v. Tanega, 87 SCRA 349 [1981];citing Palarca
Knowledge by the first buyer of the second sale cannot defeat the first buyer’s rights except v. Director of Land, 43 Phil. 146; Cagaoan v. Cagaoan, 43 Phil. 554; Fernandez v.
when the second buyer first registers in good faith the second sale (Olivares v. Gonzales, Mercader, 43 Phil. 581.)
159 SCRA 33). Conversely, knowledge gained by the second buyer of the first sale defeats
his rights even if he is first to register, since knowledge taints his registration with bad faith Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz,
(see also Astorga v. Court of Appeals, G.R. No. 58530, 26 December 1984). In Cruz v. perfected on February 6, 1985, prior to that between petitioners and Catalina B. Mabanag
Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it was held that it is essential, to on February 18, 1985, was correctly upheld by both the courts below.
merit the protection of Art. 1544, second paragraph, that the second realty buyer must act
in good faith in registering his deed of sale (citing Carbonell v. Court of Appeals, 69 SCRA Although there may be ample indications that there was in fact an agency between Ramona
99, Crisostomo v. CA, G.R. No. 95843, 02 September 1992). as principal and Concepcion, her mother, as agent insofar as the subject contract of sale is
concerned, the issue of whether or not Concepcion was also acting in her own behalf as a
(J. Vitug, Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604). co-buyer is not squarely raised in the instant petition, nor in such assumption disputed
between mother and daughter. Thus, We will not touch this issue and no longer disturb the
Petitioners point out that the notice of lis pendens in the case at bar was annotated on the lower courts’ ruling on this point.
title of the subject property only on February 22, 1985, whereas, the second sale between
petitioners Coronels and petitioner Mabanag was supposedly perfected prior thereto or on WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the
February 18, 1985. The idea conveyed is that at the time petitioner Mabanag, the second appealed judgment AFFIRMED.
buyer, bought the property under a clean title, she was unaware of any adverse claim or
previous sale, for which reason she is a buyer in good faith. SO ORDERED.

We are not persuaded by such argument. Narvasa, C.J., Davide, Jr. and Francisco, JJ., concur.

In a case of double sale, what finds relevance and materiality is not whether or not the Panganiban, J., took no part.
second buyer was a buyer in good faith but whether or not said second buyer registers such
second sale in good faith, that is, without knowledge of any defect in the title of the
property sold. G.R. No. 172346, July 24, 2013
SPOUSES NAMEAL AND LOURDES BONROSTRO, Petitioners, v. SPOUSES
As clearly borne out by the evidence in this case, petitioner Mabanag could not have in JUAN AND CONSTANCIA LUNA, Respondents.
good faith, registered the sale entered into on February 18, 1985 because as early as
February 22, 1985, a notice of lis pendens had been annotated on the transfer certificate of DECISION
title in the names of petitioners, whereas petitioner Mabanag registered the said sale DEL CASTILLO, J.:
sometime in April, 1985. At the time of registration, therefore, petitioner Mabanag knew
that the same property had already been previously sold to private respondents, or, at least, Questioned in this case is the Court of Appeals’ (CA) disquisition on the matter of interest.
she was charged with knowledge that a previous buyer is claiming title to the same
property. Petitioner Mabanag cannot close her eyes to the defect in petitioners’ title to the Petitioners spouses Nameal and Lourdes Bonrostro (spouses Bonrostro) assail through this
property at the time of the registration of the property. Petition for Review on Certiorari1 the April 15, 2005 Decision2 of the CA in CA-G.R. CV
No. 56414 which affirmed with modifications the April 4, 1997 Decision3 of the Regional
This Court had occasions to rule that:chanrob1es virtual 1aw library Trial Court (RTC) of Quezon City, Branch 104 in Civil Case No. Q-94-18895. They
likewise question the CA’s April 17, 2006 Resolution4 denying their motion for partial
If a vendee in a double sale registers the sale after he has acquired knowledge that there reconsideration.
was a previous sale of the same property to a third party or that another person claims said
 OBLICON (Kinds of Conditions) |9

Factual Antecedents obligation, the spouses Bonrostro prayed that the court fix the period within which they can
pay the spouses Luna.
In 1992, respondent Constancia Luna (Constancia), as buyer, entered into a Contract to
Sell5 with Bliss Development Corporation (Bliss) involving a house and lot identified as The spouses Bonrostro likewise belied that they were not paying the monthly amortization
Lot 19, Block 26 of New Capitol Estates in Diliman, Quezon City. Barely a year after, to New Capitol Estates and asserted that on November 18, 1993, they paid Bliss, the
Constancia, this time as the seller, entered into another Contract to Sell6 with petitioner developer of New Capitol Estates, the amount of P46,303.44. Later during trial, Lourdes
Lourdes Bonrostro (Lourdes) concerning the same property under the following terms and testified that Constancia instructed Bliss not to accept amortization payments from anyone
conditions:cralavvonlinelawlibrary as evidenced by her March 4, 1993 letter12 to Bliss.
The stipulated price of P1,250,000.00 shall be paid by the VENDEE to the VENDOR in
the following manner:cralavvonlinelawlibrary On April 4, 1997, the RTC rendered its Decision13 focusing on the sole issue of whether
the spouses Bonrostro’s delay in their payment of the installments constitutes a substantial
(a) P200,000.00 upon signing x x x [the] Contract To Sell, breach of their obligation under the contract warranting rescission. The RTC ruled that the
(b) P300,000.00 payable on or before April 30, 1993, delay could not be considered a substantial breach considering that Lourdes (1) requested
(c) P330,000.00 payable on or before July 31, 1993, for an extension within which to pay; (2) was willing and ready to pay as early as the last
(d) P417,000.00 payable to the New Capitol Estate, for 15 years at [P6,867.12] a month, week of October 1993 and even wrote Atty. Carbon about this on November 24, 1993; (3)
x x x [I]n the event the VENDEE fails to pay the second installment on time, [t]he gave Constancia a down payment of P200,000.00; and, (4) made payment to Bliss.
VENDEE will pay starting May 1, 1993 a 2% interest on the P300,000.00 monthly.
Likewise, in the event the VENDEE fails to pay the amount of P630,000.00 on the The dispositive portion of the said Decision reads:cralavvonlinelawlibrary
stipulated time, this CONTRACT TO SELL shall likewise be deemed cancelled and WHEREFORE, in view of the foregoing, judgment is hereby rendered as
rescinded and x x x 5% of the total contract price [of] P1,250,000.00 shall be deemed follows:cralavvonlinelawlibrary
forfeited in favor of the VENDOR. Unpaid monthly amortization shall likewise be
deducted from the initial down payment in favor of the VENDOR.7 1.) Declaring [t]he Contract to Sell executed by the plaintiff [Constancia] and defendant
[Lourdes] with respect to the house and lot located at Blk. 26, [L]ot 19, New Capitol
Immediately after the execution of the said second contract, the spouses Bonrostro took Estate[s], Diliman[,] Quezon City to be in force and effect. And that Lourdes Bonrostro
possession of the property. However, except for the P200,000.00 down payment, Lourdes must remain in the possession of the premises.
failed to pay any of the stipulated subsequent amortization payments.
2.) Ordering the defendant[s] to pay plaintiff[s] within 60 days from receipt of this
Ruling of the Regional Trial Court decision the sum of P300,000.00 plus an interest of 2% per month from April 1993 to
November 1993.
On January 11, 1994, Constancia and her husband, respondent Juan Luna (spouses Luna),
filed before the RTC a Complaint8 for Rescission of Contract and Damages against the 3.) Ordering the defendant[s] to pay plaintiff[s] within sixty (60) days from receipt of this
spouses Bonrostro praying for the rescission of the contract, delivery of possession of the decision the sum of P330,000.00 plus an interest of 2% [per month] from July 1993 to
subject property, payment by the latter of their unpaid obligation, and awards of actual, November 1993.
moral and exemplary damages, litigation expenses and attorney’s fees.
4.) Ordering the defendant[s] to reimburse plaintiff[s] the sum of P214,492.62 which
In their Answer with Compulsory Counterclaim,9 the spouses Bonrostro averred that they plaintiff[s] paid to Bliss Development Corporation.
were willing to pay their total balance of P630,000.00 to the spouses Luna after they sought
from them a 60-day extension to pay the same.10 However, during the time that they were No pronouncement as to Cost.
ready to pay the said amount in the last week of October 1993, Constancia and her lawyer,
Atty. Arlene Carbon (Atty. Carbon), did not show up at their rendezvous. On November SO ORDERED.14
24, 1993, Lourdes sent Atty. Carbon a letter11 expressing her desire to pay the balance, but
received no response from the latter. Claiming that they are still willing to settle their
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 10

As their Motion for Reconsideration15 was likewise denied in an Order16 dated July 15, Considering that Lourdes had incurred x x x delay in the performance of her obligations,
1997, the spouses Luna appealed to the CA.17 she should pay (i) interest at the rate of 2% per month on the sum of P300,000.00 from
May 1, 1993 until fully paid and (ii) interest at the legal rate on the amounts of
Ruling of the Court of Appeals P330,000.00 and P214,492.62 from the date of default (August 1, 1993 and April 4, 1997
[date of the appealed decision], respectively) until the same are fully paid x x x 21
In its Decision18 of April 15, 2005, the CA concluded that since the contract entered into
by and between the parties is a Contract to Sell, rescission is not the proper remedy. Hence, the dispositive portion of the said Decision:cralavvonlinelawlibrary
Moreover, the subject contract being specifically a contract to sell a real property on WHEREFORE, the appealed decision is AFFIRMED with the MODIFICATIONS that
installment basis, it is governed by Republic Act No. 655219 or the Maceda Law, Section 4 paragraphs 2, 3, and 4 of its dispositive portion shall now read:cralavvonlinelawlibrary
of which states:cralavvonlinelawlibrary
Sec. 4. In case where less than two years of installment were paid, the seller shall give the 2.) Ordering the defendants to pay plaintiffs the sum of P300,000.00 plus interest thereon at
buyer a grace period of not less than sixty days from the date the installment became due. the rate of 2% per month from May 1, 1993 until fully paid;

If the buyer fails to pay the installments due at the expiration of the grace period, the seller 3.) Ordering the defendants to pay plaintiffs the sum of P330,000.00 plus interest thereon at
may cancel the contract after thirty days from receipt by the buyer of the notice of the legal rate from August 1, 1993 until fully paid; and
cancellation or the demand for rescission of the contract by a notarial act. (Emphases
supplied) 4.) Ordering the defendants to reimburse plaintiffs the sum of P214,492.62, whichplaintiffs
paid to Bliss Development Corporation, plus interest thereon at the legal rate from filing of
The CA held that while the spouses Luna sent the spouses Bonrostro letters20 rescinding the complaint until fully reimbursed.
the contract for non-payment of the sum of P630,000.00, the same could not be considered
as valid and effective cancellation under the Maceda Law since they were made within the SO ORDERED.22
60-day grace period and were not notarized. The CA concluded that there being no
cancellation effected in accordance with the procedure prescribed by law, the contract The spouses Luna no longer assailed the ruling. On the other hand, the spouses Bonrostro
therefore remains valid and subsisting. filed a Partial Motion for Reconsideration23 questioning the above-mentioned
modifications. The CA, however, denied for lack of merit the said motion in a
The CA also affirmed the RTC’s finding that Lourdes was ready to pay her obligation on Resolution24 dated April 17, 2006.
November 24, 1993.
Hence, this Petition for Review on Certiorari.
However, the CA modified the RTC Decision with respect to interest, Issue
viz:cralavvonlinelawlibrary
Nevertheless, there is a need to modify the appealed decision insofar as (i) the interest The basic issue in this case is whether the CA correctly modified the RTC Decision with
imposed on the sum of P300,000.00 is only for the period April 1993 to November 1993; respect to interests.
(ii) the interest imposed on the sum of P330,000.00 is 2% per month and is only for the
period July 1993 to November 1993; (iii) it does not impose interest on the amount of The Parties’ Arguments
P214,492.62 which was paid by Constancia to BLISS in behalf of Lourdes x x x
As may be recalled, the RTC under paragraphs 2 and 3 of the dispositive portion of its
The rule is that ‘no interest shall be due unless it has been expressly stipulated in writing’ Decision ordered the spouses Bonrostro to pay the spouses Luna the sums of P300,000.00
(Art. 1956, Civil Code). However, the contract does not provide for interest in case of plus interest of 2% per monthfrom April 1993 to November 1993 and P330,000.00 plus
default in payment of the sum of P330,000.00 to Constancia and the monthly amortizations interest of 2% per month from July 1993 to November 1993, respectively. The CA
to BLISS. modified these by reckoning the payment of the 2% interest on the P300,000.00 from May
1, 1993 until fully paid and by imposing interest at the legal rate on the P330,000.00
reckoned from August 1, 1993 until fully paid.
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 11

installments [i]n due time, she was able to communicate with the plaintiffs through letters
The spouses Bonrostro harp on the factual finding of the RTC, as affirmed by the CA, that requesting for an extension of two months within which to pay the installment[s]. In fact,
Lourdes was willing and ready to pay her obligation as evidenced by her November 24, on November 24, 1993 defendant informed Atty. Arlene Carbon that she was ready to pay
1993 letter to Atty. Carbon. They also assert that the sending of the said letter constitutes a the installments and the money is ready for pick-up. However, plaintiff did not bother to
valid tender of payment on their part. Hence, they argue that they should not be assessed get or pick-up the money without any valid reason. It would be very prejudicial on the part
any interest subsequent to the date of the said letter. Neither should they be ordered to pay of the defendant if the contract to sell be rescinded considering that she made a
interest on the amount of P214,492.62 which covers the amortizations paid by the spouses downpayment of P200,000.00 and made partial amortization to the Bliss Development
Luna to Bliss. They point out that it was Constancia who prevented them from fulfilling Corporation. In fact, the defendant testified that she is willing and ready to pay the balance
their obligation to pay the amortizations when she instructed Bliss not to accept payment including the interest on November 24, 1993.
from them.25
The Court is of the opinion that the delay in the payment of the balance of the purchase
The spouses Luna, on the other hand, aver that the November 24, 1993 letter of Lourdes is price of the house and lot is not [so] substantial [as to] warrant the rescission of the contract
not equivalent to tender of payment since the mere sending of a letter expressing the to sell. The question of whether a breach of contract is substantial depends upon the
intention to pay, without the accompanying payment, cannot be considered a valid tender attendant circumstance. x x x28
of payment. Also, if the spouses Bonrostro were really willing and ready to pay at that
time and assuming that the spouses Luna indeed refused to accept payment, the former Clearly, the RTC arrived at the above-quoted conclusion based on its mistaken premise that
should have resorted to consignation. Anent the payment of amortization, the spouses rescission is applicable to the case. Hence, its determination of whether there was
Luna explain that under the parties’ Contract to Sell, Lourdes was to assume Constancia’s substantial breach. As may be recalled, however, the CA, in its assailed Decision, found
balance to Bliss by paying the monthly amortization in order to avoid the cancellation of the contract between the parties as a contract to sell, specifically of a real property on
the earlier Contract to Sell entered into by Constancia with Bliss.26 However, since installment basis, and as such categorically declared rescission to be not the proper remedy.
Lourdes was remiss in paying the same, the spouses Luna were constrained to pay the This is considering that in a contract to sell, payment of the price is a positive suspensive
amortization. They thus assert that reimbursement to them of the said amount with interest condition, failure of which is not a breach of contract warranting rescission under Article
is proper considering that by reason of such payment, the spouses Bonrostro were spared 119129 of the Civil Code but rather just an event that prevents the supposed seller from
from the interests and penalties which would have been imposed by Bliss if the being bound to convey title to the supposed buyer.30 Also, and as correctly ruled by the
amortizations remained unpaid. CA, Article 1191 cannot be applied to sales of real property on installment since they are
Our Ruling governed by the Maceda Law.31

The Petition lacks merit. There being no breach to speak of in case of non-payment of the purchase price in a
contract to sell, as in this case, the RTC’s factual finding that Lourdes was willing and able
The spouses Bonrostro’s reliance on the to pay her obligation – a conclusion arrived at in connection with the said court’s
RTC’s factual finding that Lourdes was determination of whether the non-payment of the purchase price in accordance with the
willing and ready to pay on November terms of the contract was a substantial breach warranting rescission – therefore loses
24, 1993 is misplaced. significance. The spouses Bonrostro’s reliance on the said factual finding is thus
misplaced. They cannot invoke their readiness and willingness to pay their obligation on
As mentioned, the RTC in resolving the Complaint focused on the sole issue of whether the November 24, 1993 as an excuse from being made liable for interest beyond the said date.
failure of spouses Bonrostro to pay the installments of P300,000.00 on April 30, 1993 and
P330,000.00 on July 31, 1993 is a substantial breach of their obligation under the contract The spouses Bonrostro are liable for
as to warrant the rescission of the same.27 The said court ratiocinated, interest on the installments due from the
viz:cralavvonlinelawlibrary date of default until fully paid.
After careful evaluation of the evidence testimonial and documentary, the Court believes
that the defendants[’] delay in the payment of the two installment[s] is not so substantial
[as to] warrant [rescission] of contract. Although, the defendant failed to pay the two
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 12

The spouses Bonrostro assert that Lourdes’ letter of November 24, 1993 amounts to tender spouses Luna to Bliss as amortization.
of payment of the remaining balance amounting to P630,000.00. Accordingly, thenceforth,
accrual of interest should be suspended. The spouses Bonrostro want to be relieved from paying interest on the amount of
P214,492.62 which the spouses Luna paid to Bliss as amortizations by asserting that they
Tender of payment “is the manifestation by the debtor of a desire to comply with or pay an were prevented by the latter from fulfilling such obligation. They invoke Art. 1186 of the
obligation. If refused without just cause, the tender of payment will discharge the debtor of Civil Code which provides that “the condition shall be deemed fulfilled when the obligor
the obligation to pay but only after a valid consignation of the sum due shall have been voluntarily prevents its fulfillment.”
made with the proper court.”32 “Consignation is the deposit of the [proper amount with a
judicial authority] in accordance with rules prescribed by law, after the tender of payment However, the Court finds Art. 1186 inapplicable to this case. The said provision explicitly
has been refused or because of circumstances which render direct payment to the creditor speaks of a situation where it is the obligor who voluntarily prevents fulfillment of the
impossible or inadvisable.”33 condition. Here, Constancia is not the obligor but the obligee. Moreover, even if this
significant detail is to be ignored, the mere intention to prevent the happening of the
“Tender of payment, without more, produces no effect.”34 “[T]o have the effect of condition or the mere placing of ineffective obstacles to its compliance, without actually
payment and the consequent extinguishment of the obligation to pay, the law requires the preventing fulfillment is not sufficient for the application of Art. 1186.37 Two requisites
companion acts of tender of payment and consignation.”35 must concur for its application, to wit: (1) intent to prevent fulfillment of the condition;
and, (2) actual prevention of compliance.38
As to the effect of tender of payment on interest, noted civilist Arturo M. Tolentino
explained as follows:cralavvonlinelawlibrary In this case, while it is undisputed that Constancia indeed instructed Bliss on March 4,
When a tender of payment is made in such a form that the creditor could have immediately 1994 not to accept payment from anyone but her, there is nothing on record to show that
realized payment if he had accepted the tender, followed by a prompt attempt of the debtor Bliss heeded the instruction of Constancia as to actually prevent the spouses Bonrostro
to deposit the means of payment in court by way of consignation, the accrual of interest on from making payments to Bliss. There is no showing that subsequent to the said letter, the
the obligation will be suspended from the date of such tender.But when the tender of spouses Bonrostro attempted to make payment to and was refused by Bliss. Neither was
payment is not accompanied by the means of payment, and the debtor did not take any there a witness presented to prove that Bliss indeed gave effect to the instruction contained
immediate step to make a consignation, then interest is not suspended from the time of in Constancia’s letter. While Bliss’ Project Development Officer, Mr. Ariel Cordero,
such tender. x x x x36 (Emphasis supplied) testified during trial, nothing could be gathered from his testimony regarding this except
for the fact that Bliss received the said letter.39 In view of these, the spouses Luna could
Here, the subject letter merely states Lourdes’ willingness and readiness to pay but it was not be said to have placed an effective obstacle as to actually prevent the spouses Bonrostro
not accompanied by payment. She claimed that she made numerous telephone calls to from making amortization payments to Bliss.
Atty. Carbon reminding the latter to collect her payment, but, neither said lawyer nor
Constancia came to collect the payment. After that, the spouses Bonrostro took no further On the other hand, there are telling circumstances which militate against the spouses
steps to effect payment. They did not resort to consignation of the payment with the proper Bonrostro’s claimed keenness to comply with their obligation to pay the monthly
court despite knowledge that under the contract, non-payment of the installments on the amortization. After the execution of the contract in January 1993, they immediately took
agreed date would make them liable for interest thereon. The spouses Bonrostro possession of the property but failed to make amortization payments. It was only after
erroneously assumed that their notice to pay would excuse them from paying interest. seven months or on November 18, 1993 that they made payments to Bliss in the amount of
Their claimed tender of payment did not produce any effect whatsoever because it was not P46,303.44.40 Whether the same covers previous unpaid amortizations is also not clear as
accompanied by actual payment or followed by consignation. Hence, it did not suspend the the receipt does not indicate the same41 and per Statement of Account42 as of March 8,
running of interest. The spouses Bonrostro are therefore liable for interest on the subject 1994 issued by Bliss, the unpaid monthly amortizations for February to November 1993 in
installments from the date of default until full payment of the sums of P300,000.00 and the total amount of P78,271.69 remained outstanding. There was also no payment made of
P330,000.00. the amortizations due on December 4, 1993 and January 4, 199443 before the filing of the
Complaint on January 11, 1994.
The spouses Bonrostro are likewise liable
for interest on the amount paid by the
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 13

On the part of the spouses Luna, it is understandable that they paid the amortizations due. SO ORDERED.
The assumption of payment of the monthly amortization to Bliss was made part of the
obligations of the spouses Bonrostro under their contract with the spouses Luna precisely Carpio, (Chairperson), Brion, Perez, and Perlas-Bernabe, JJ., concur.
to avoid the cancellation of the earlier contract entered into by Constancia with Bliss. But
as the spouses Bonrostro failed in this obligation, the spouses Luna were constrained to pay
Bliss to avoid the adverse effect of such failure. This act of the spouses Luna proved to be
even more beneficial to the spouses Bonrostro as the cancellation of the Contract to Sell [G.R. No. 24190. July 13, 1926. ]
between Constancia and Bliss would result in the cancellation of the subsequent Contract
to Sell between Constancia and Lourdes. Also, the spouses Bonrostro were relieved from GEORGE L. PARKS, Plaintiff-Appellant, v. TARLAC, MUNICIPALITY OF
paying the penalties that would have been imposed by Bliss if the monthly amortizations TARLAC, CONCEPCION CIRER, and JAMES HILL, her husband, Defendants-
covered by the said payment remained unpaid. The Statements of Account44 issued by Appellees.
Bliss clearly state that each monthly amortization is due on or before the fourth day of
every month and a penalty equivalent to 1/10th of 1% per day of delay shall be imposed for Jos. N. Wolfson for Appellant.
all payments made after due date. That translates to 3% monthly or 36% per annum rate of
interest, three times higher than the 12% per annum rate of interest correctly imposed by Provincial Fiscal Lopez de Jesus for the Province and Municipality of Tarlac.
the CA.
SYLLABUS
Hence, the resulting situation is that the spouses Luna are constrained to part with their 1. IMMOVABLE PROPERTY; CONDITIONAL DONATION, CONDITION
money while the spouses Bonrostro, despite being remiss in their obligation to pay the PRECEDENT. — The characteristic of condition. precedent is that the acquisition of the
monthly amortization, are relieved from paying higher penalties at the expense of the right is not effected while said condition is not complied with or is not deemed complied
former. This is aside from the fact that the spouses Bonrostro are in continued possession with. Meanwhile nothing is acquired and there is only an expectancy of right.
of the subject property and are enjoying the beneficial use thereof. Under the Consequently, when a condition is imposed, the compliance of which cannot be effected
circumstances and considering that the spouses Bonrostro are obviously in delay in except when the right is deemed acquired, such condition cannot be a condition precedent.
complying with their obligation to pay the amortizations due from February 1993 to
January 1995 for which the spouses Luna paid P214,492.62,45 the CA correctly ordered 2. ID.; ID.; ACTION FOR REVOCATION; PRESCRIPTION. — The action for the
the reimbursement to the latter of the said amount with interest. “Delay in the performance revocation of a donation is not excluded from the statute of limitations And not only this,
of an obligation is looked upon with disfavor because, when a party to a contract incurs — the law itself recognizes the prescriptibility of the action for the revocation of a
delay, the other party who performs his part of the contract suffers damages thereby.”46 donation, providing a special period of five years for the revocation by the subsequent birth
As discussed, the spouses Luna obviously suffered damages brought about by the failure of of children (art. 646, Civil Code), and one year for the revocation by reason of ingratitude.
the spouses Bonrostro to comply with their obligation on time. “And, sans elaboration of If no special period is provided for the prescription of the action for revocation for
the matter at hand, damages take the form of interest x x x.”47 Under Article 2209 of the noncompliance of the conditions of the donation (art. 647, Civil Code), it is because, in this
Civil Code, “[i]f the obligation consists in the payment of a sum of money, and the debtor respect, the donation is considered onerous and is governed by the law or contracts and the
incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall general rules of prescription. Under the laws in force (sec. 43, Code of Civ. Proc.) the
be the payment of the interest agreed upon, and in the absence of stipulation, the legal period of prescription of this class; of action is ten years.
interest x x x.” There being no stipulation on interest in case of delay in the payment of
amortization, the CA thus correctly imposed interest at the legal rate which is now 12% per
annum. DECISION

WHEREFORE, the Petition for Review on Certiorari is DENIED and the assailed Decision
dated April 15, 2005 and the Resolution dated April 17, 2006 of the Court of Appeals in AVANCEÑA, C.J. :
CA-G.R. CV No. 56414 areAFFIRMED.
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 14

On October 18, 1910, Concepcion Cirer and James Hill, the owners of parcel of land No. 2 period of six months from the date of the ratification by the parties of the document
referred to in the complaint, donated it perpetually to the municipality of Tarlac, Province evidencing the donation. It is true that this condition has not been complied with. The
of Tarlac, under certain conditions specified in the public document in which they made allegation, however, that it is a condition precedent is erroneous. The characteristic of a
this donation. The donation was accepted by Mr. Santiago de Jesus in the same document condition precedent is that the acquisition of the right is not effected while said condition is
on behalf of the municipal council of Tarlac of which he was the municipal president. The not complied with or is not deemed complied with. Meanwhile nothing is acquired and
parcel thus donated was later registered in the name of the donee, the municipality of there is only an expectancy of right. Consequently, when a condition is imposed, the
Tarlac. On January 15, 192l, Concepcion Cirer and James Hill sold this parcel to the herein compliance of which cannot be effected except then the right is deemed acquired, such
plaintiff George L. Parks. On August 24, 1923, the municipality of Tarlac transferred the condition cannot a condition precedent. In the present case the condition that a public
parcel to the Province of Tarlac which, by reason of this transfer, applied for and obtained school be erected and a public park made of the donated land, work on the same to
the registration thereof in its name, the corresponding certificate of title having been issued commence within six months from the date of the ratification of the donation by the
to it. parties, could not be complied with except after giving effect to the donation. The donee
could not do any work on the donated land if the donation had not really been effected,
The plaintiff, George L. Parks, alleging that the conditions of the donation had not been because it would be an invasion of another’s title, for the land would have continued to
complied with and invoking the sale of this parcel of land made by Concepcion Cirer and belong to the donor so long as the condition imposed was not complied with.
James Hill in his favor, brought this action against the Province of Tarlac, the municipality
of Tarlac, Concepcion Cirer and James Hill and prayed that he be declared the absolute The appellant also contends that, in any event, the condition not having been complied
owner entitled to the possession of this parcel, that the transfer of the same by the with, even supposing that it was not a condition precedent but subsequent, the non-
municipality of Tarlac to the Province of Tarlac be annulled, and the transfer certificate compliance thereof is sufficient cause for the revocation of the donation. This is correct.
issued to the Province of Tarlac cancelled. But the period for bringing an action for the revocation of the donation has prescribed. That
this action is prescriptible, there is no doubt. There is no legal provision which excludes
The lower court dismissed the complaint. this class of action from the statute of limitations. And not only this, — the law itself
recognizes the prescriptibility of the action for the revocation of a donation, providing a
The plaintiff has no right of action. If he has any, it is only by virtue of the sale of this special period of five years for the revocation by the subsequent birth of children (art. 646,
parcel made by Concepcion Cirer and James Hill in his favor on January 15, 1921, but that Civil Code), and one year for their revocation by reason of ingratitude. If no special period
sale cannot have any effect. This parcel having been donated by Concepcion Cirer and is provided for the prescription of the action for revocation for noncompliance of the
James Hill to the municipality of Tarlac, which donation was accepted by the latter, the conditions of the donation (art. 647, Civil Code), it is because in this respect the donation is
title to the property was transferred to the municipality of Tarlac. It is true that the donation considered onerous and is governed by the law of contracts and the general rules of
might have been revoked for the causes, if any provided by the law, but the fact is that it prescription. Under the laws in force (sec. 43, Code of Civ. Proc.) , the period of
was not revoked when Concepcion Cirer and James Hill made the sale of this parcel to the prescription of this class of action is ten years. The action for the revocation of the donation
plaintiff. Even supposing that causes existed for the revocation of this donation, still, it was for this cause arose on April 19, 1911, that is, six months after the ratification of the
necessary, in order to consider it revoked, either that the revocation had been consented to instrument of donation of October 18, 1910. The complaint in this action was presented
by the donee, the municipality of Tarlac, or that it had been judicially decreed. None of July 5, 1924, more than ten years after this cause accrued.
these circumstances existed when Concepcion Cirer and James Hill sold this parcel to the
plaintiff. Consequently, when the sale was made Concepcion Cirer and James Hill were no By virtue of the foregoing, the judgment appealed from is affirmed with the costs against
longer the owners of this parcel and could dot have sold it to the plaintiff, nor could the the appellant. So ordered.
latter have acquired it from them.
Street, Villamor, Ostrand, Johns, Romualdez and Villa-Real, JJ., concur.
But the appellant contends that a condition precedent having been imposed in the donation
and the same not having been complied with, the donation never became effective. We find
no merit in this contention. The appellant refers to the condition imposed that one of the [G.R. No. 112127. July 17, 1995.]
parcels donated was to be used absolutely and exclusively for the erection of a central
school and the other for a public park, the work to commence in both cases within the
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CENTRAL PHILIPPINE UNIVERSITY, Petitioner, v. COURT OF APPEALS, ORIGINAL CONTRACT. — The claim of petitioner that prescription bars the instant
REMEDIOS FRANCO, FRANCISCO N. LOPEZ, CECILIA P. VDA. DE LOPEZ, action of private respondents is unavailing. The condition imposed by the donor, i.e., the
REDAN LOPEZ AND REMARENE LOPEZ,Respondents. building of a medical school upon the land donated, depended upon the exclusive will of
the donee as to when this condition shall be fulfilled. When petitioner accepted the
Juanito M. Acanto for Petitioner. donation, it bound itself to comply with the condition thereof. Since the time within which
the condition should be fulfilled depended upon the exclusive will of the petitioner, it has
Santos B. Aguadera for Private Respondents. been held that its absolute acceptance and the acknowledgment of its obligation provided in
the deed of donation were sufficient to prevent the statute of limitations from barring the
action of private respondents upon the original contract which was the deed of donation.
SYLLABUS
4. ID.; ID.; ID.; ID.; IN CASE OF REVOCATION, A CAUSE OF ACTION ARISES
WHEN THAT WHICH SHOULD HAVE BEEN DONE IS NOT DONE, OR THAT
1. CIVIL LAW; PROPERTY; MODES OF ACQUIRING OWNERSHIP; DONATION; WHICH SHOULD NOT HAVE BEEN DONE IS DONE. — The time from which the
CONSIDERED ONEROUS WHEN EXECUTED FOR A VALUABLE cause of action accrued for the revocation of the donation and recovery of the property
CONSIDERATION WHICH IS CONSIDERED THE EQUIVALENT OF THE donated cannot be specifically determined in the instant case. A cause of action arises when
DONATION. — A clear perusal of the condition set forth in the deed of donation executed that which should have been done is not done, or that which should not have been done is
by Don Ramon Lopez, Sr., gives us no alternative but to conclude that his donation was done. In cases where there is no special provision for such computation, recourse must be
onerous, one executed for a valuable consideration which is considered the equivalent of had to the rule that the period must be counted from the day on which the corresponding
the donation itself, e.g., when a donation imposes a burden equivalent to the value of the action could have been instituted. It is the legal possibility of bringing the action which
donation. A gift of land to the City of Manila requiring the latter to erect schools, construct determines the starting point for the computation of the period. In this case, the starting
a children’s playground and open streets on the land was considered an onerous donation. point begins with the expiration of a reasonable period and opportunity for petitioner to
Similarly, where Don Ramon Lopez donated the subject parcel of land to petitioner but fulfill what has been charged upon it by the donor.
imposed an obligation upon the latter to establish a medical college thereon, the donation
must be for an onerous consideration. 5. ID.; ID.; ID.; ID.; GENERALLY, WHEN THE OBLIGATION DOES NOT FIX A
PERIOD BUT FROM ITS NATURE AND CIRCUMSTANCES IT CAN BE INFERRED
2. ID.; ID.; ID.; ID.; MAY BE REVOKED FOR NON-FULFILLMENT OR NON- THAT A PERIOD WAS INTENDED COURT MAY FIX THE PERIOD FOR
COMPLIANCE OF THE CONDITIONS SET FORTH THEREIN; CASE AT BAR. — COMPLIANCE — The period of time for the establishment of a medical college and the
Under Art. 1181 of the Civil Code, on conditional obligations, the acquisition of rights, as necessary buildings and improvements on the property cannot be quantified in a specific
well as the extinguishment or loss of those already acquired, shall depend upon the number of years because of the presence of several factors and circumstances involved in
happening of the event which constitutes the condition. Thus, when a person donates land the erection of an educational institution, such as government laws and regulations
to another on the condition that the latter would build upon the land a school, the condition pertaining to education, building requirements and property restrictions which are beyond
imposed was not a condition precedent or a suspensive condition but a resolutory one. It is the control of the donee. Thus, when the obligation does not fix a period but from its nature
not correct to say that the schoolhouse had to be constructed before the donation became and circumstances it can be inferred that a period was intended, the general rule provided
effective, that is, before the donee could become the owner of the land, otherwise, it would in Art. 1197 of the Civil Code applies, which provides that the courts may fix the duration
be invading the property rights of the donor. The donation had to be valid before the thereof because the fulfillment of the obligation itself cannot be demanded until after the
fulfillment of the condition. If there was no fulfillment or compliance with the condition, court has fixed the period for compliance therewith and such period has arrived.
such as what obtains in the instant case, the donation may now be revoked and all rights
which the donee may have acquired under it 6. ID.; ID.; ID.; ID.; WHEN OBLIGOR CANNOT COMPLY WITH WHAT IS
INCUMBENT UPON HIM, THE OBLIGEE MAY SEEK RESCISSION; EXCEPTION.
3. ID.; ID.; ID.; ID.; DONEE’S ACCEPTANCE AND ACKNOWLEDGMENT OF ITS — This general rule however cannot be applied considering the different set of
OBLIGATION PROVIDED IN THE DEED, SUFFICIENT TO PREVENT THE circumstances existing in the instant case. More than a reasonable period of fifty (50) years
STATUTE OF LIMITATION FROM BARRING THE ACTION OF DONOR UPON THE has already been allowed petitioner to avail of the opportunity to comply with the condition
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even if it be burdensome, to make the donation in its favor forever valid. But, of the medical college as the condition of the donation in the present case is one such
unfortunately, it failed to do so. Hence, there is no more need to fix the duration of a term prestation.
of the obligation when such procedure would be a mere technicality and formality and
would serve no purpose than to delay or lead to an unnecessary and expensive 2. ID.; ID.; ID.; ID.; WHEN NO FIXED PERIOD IN WHICH THE CONDITION
multiplication of suits. Moreover, under Art. 1191 of the Civil Code, when one of the SHOULD BE FULFILLED, IT IS THE DUTY OF THE COURT TO FIX A SUITABLE
obligors cannot comply with what is incumbent upon him, the obligee may seek rescission TIME FOR ITS FULFILLMENT. — J. Davide, Jr., cannot subscribe to the view that the
and the court shall decree the same unless there is just cause authorizing the fixing of a provisions of Article 1197 cannot be applied here. The conditions/obligations imposed by
period. In the absence of any just cause for the court to determine the period of the the donor herein are subject to a period. I draw this conclusion/based on our previous
compliance, there is no more obstacle for the court to decree the rescission claimed. ruling which, although made almost 90 years ago, still finds application in the present case.
In Barreto v. City of Manila, we said that when the contract of donation, as the one
7. ID.; ID.; ID.; ID.; IN CASE OF GRATUITOUS DONATION DOUBTS SHOULD BE involved therein, has no fixed period in which the condition should be fulfilled, the
RESOLVED IN FAVOR OF THE LEAST TRANSMISSION OF RIGHTS AND provisions of what is now Article 1197 (then Article 1128) are applicable and it is the duty
INTERESTS. — Finally, since the questioned deed of donation herein is basically a of the court to fix a suitable time for its fulfillment. Indeed, from the nature and
gratuitous one, doubts referring to incidental circumstances of a gratuitous contract should circumstances of the conditions/obligations of the present donation, it can be inferred that a
be resolved in favor of the least transmission of rights and interests. Records are clear and period was contemplated by the donor. Don Ramon Lopez could not have intended his
facts are undisputed that since the execution of the deed of donation up to the time of filing property to remain idle for a long period of time when in fact, he specifically burdened the
of the instant action, petitioner has failed to comply with its obligation as donee. Petitioner donee with the obligation to set up a medical college therein and thus put his property to
has slept on its obligation for an unreasonable length of time. Hence, it is only just and good use. There is a need to fix the duration of the time within which the conditions
equitable now to declare the subject donation already ineffective and, for all purposes, imposed are to be fulfilled.
revoked so that petitioner as donee should now return the donated property to the heirs of
the donor, private respondents herein, by means of reconveyance. 3. ID.; ID.; ID.; ID.; MERE FACT THAT THERE IS NO TIME FIXED AS TO WHEN
THE CONDITION THEREOF ARE TO BE FULFILLED DOES NOT IPSO FACTO
DAVIDE, JR., J, dissenting opinion:chanrob1es virtual 1aw library MEAN THAT THE STATUTE OF LIMITATION WILL NOT APPLY. — There is
misplaced reliance again on a previous decision of this Court in Osmeña v. Rama. That
1. CIVIL LAW; PROPERTY, MODES OF ACQUIRING OWNERSHIP; DONATION; case does not speak of a deed of donation as erroneously quoted and cited by the majority
IN LAW OF DONATION, "CONDITIONS" REFERS TO OBLIGATION OR CHARGES opinion. It speaks of a contract for a. sum of money where the debtor herself imposed a
IMPOSED BY THE DONOR ON THE DONEE. — There is no conditional obligation to condition which will determine when she will fulfill her obligation to pay the creditor, thus,
speak of in this case. It seems that the "conditions" imposed by the donor and as the word making the fulfillment of her obligation dependent upon her will. What we have here,
is used in the law of donations confused with "conditions" as used in the law of obligations. however, is not a contract for a sum of money but a donation where the donee has not
In his annotation of Article 764 of the Civil Code on Donations, Arturo M. Tolentino, imposed any conditions on the fulfillment of its obligations. Although it is admitted that the
citing the well-known civilists such as Castan, Perez Gonzalez and Alguer, and Colin & fulfillment of the conditions/obligations of the present donation may be dependent on the
Capitant, states clearly the context within which the term "conditions" is used in the law of will of the donee as to when it will comply therewith, this did not arise out of a condition
donations, to wit: The word "conditions" in this article does not refer to uncertain events on which the donee itself imposed. It is believed that the donee was not meant to and does not
which the birth or extinguishment of a juridical relation depends, but it is used in the vulgar have absolute control over the time within which it will perform its obligations. It must still
sense of obligations or charges imposed by the donor on the donee. It is used, not in its do so within a reasonable time. What that reasonable time is, under the circumstances, for
technical or strict legal sense, but in its broadest sense. (Italics supplied) Clearly then, when the courts to determine. Thus, the mere fact that there is no time fixed as to when the
the law and the deed of donation speaks of "conditions" of a donation, what are referred to conditions of the donation are to be fulfilled does not ipso facto mean that the statute of
are actually the obligations, charges or burdens imposed by the donor upon the donee and limitations will not apply anymore and the action to revoke the donation becomes
which would characterize the donation as onerous. In the present case, the donation is, imprescriptible.
quite obviously, onerous, but it is more properly called a "modal donation." A modal
donation is one in which the donor imposes a prestation upon the donee. The establishment 4. ID.; ID.; ID.; ID.; ACTION TO REVOKE THEREOF PRESCRIBES IN FOUR (4)
YEARS. — More recently, in De Luna v. Abrigo, this Court reiterated the ruling in Parks
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and said that: It is true that under Article 764 of the New Civil Code, actions for the or any of its parks shall be put in a fund to be known as the "RAMON LOPEZ CAMPUS
revocation of a donation must be brought within four (4) years from the non-compliance of FUND" to be used for improvements of said campus and erection of a building thereon." 1
the conditions of the donation. However, it is Our opinion that said article does not apply to
onerous donations in view of the specific provision of Article 733 providing that onerous On 31 May 1989, privates respondents, who are the heirs of Don Ramon Lopez, Sr., filed
donations are governed by the rules on contracts. In the light of the above, the rules on an action for annulment of donation, reconveyance and damages against CPU alleging that
contracts and the general rules on prescription and not the rules on donations are applicable since 1939 up to the time the action was filed the latter had not complied with the
in the case at bar. The law applied in both cases is Article 1144(1). It refers to the conditions of the donation. Private respondents also argued that petitioner had in fact
prescription of an action upon a written contract, which is what the deed of an onerous negotiated with the National Housing Authority (NHA) to exchange the donated property
donation is. The prescriptive period is ten years from the time the cause of action accrues, with another land owned by the latter.
and that is, from the expiration of the time within which the donee must comply with the
conditions/obligations of the donation. As to when this exactly is remains to be determined, In its answer petitioner alleged that the right of private respondents to file the action had
and that is for the courts to do as reposed upon them by Article 1197. prescribe; that it did not violate any of the conditions in the deed of donation because it
never used the donated properly for any other purpose than that for which it was intended;
and, that it did not sell, transfer or convey it to any third party.
DECISION
On 31 May 11991, the trial court held that petitioner failed to comply with the conditions
of the donation and declared it null and void. The court a qua further directed petitioner to
BELLOSILLO, J.: execute a deed of reconveyance of the property in favor of the heirs of the donor, namely,
private respondents herein.

CENTRAL PHILIPPINE UNIVERSITY filed this petition for review on certiorari of the Petitioner appealed to the Court of Appeals which on 18 June 1993 ruled that the ruled that
decision of the Court of Appeals which reversed that of the Regional trial Court of Iloilo the annotations at the back of petitioner’s certificate of title were resolutory conditions
City directing petitioner to reconvey to private respondents the property donated to it by breach of which should terminate the rights of the done thus making the donation
their predecessor-in-interest. revocable.

Sometime in 1939, the late Don Ramon Lopez, Sr., who was then a member of the Board The appellate court also found that while the first condition mandated petitioner to utilize
of Trustees of the Central Philippine College (now Central Philippine University [CPU]), the donated property for the establishment of a medical school, the donor did not fix a
executed a deed of donation in favor of the latter of a parcel of land identified as Lot No. period within which the condition must be fulfilled, hence, until a period was fixed for the
3174-B-1 of the subdivision plan Psd-1144, then a portion of Lot No. 3174-B, for which fulfillment of the condition, petitioner could not be considered as having failed to comply
Transfer Certificate of Title No. T-3910-A was issued in the name of the donee CPU with with its part of the bargain. Thus, the appellate court rendered its decision reversing the
the following annotations copied from the deed of donation. appealed decision and remanding the case to the court of origin for the determination of the
time within which petitioner should comply with the firs t condition annotated in the
1. The land described shall be utilized by the CPU exclusively for the establishment and certificate of title.
use of a medical college with all its buildings as part of the curriculum:chanrob1es virtual
1aw library Petitioner now alleged that the court of Appeals erred: (a) in holding that the quoted
annotations in the certificate of title of petitioner are onerous obligations and resolutory
2. The said college shall not sell, transfer or convey to any third party nor in any way conditions of the donation which must be fulfilled non-compliance of which would render
encumber said land; the donation revocable; (b) in holding that the issue of prescription does not deserve
"disquisition;" and, (c) in remanding the case to the trial court for the fixing of the period
3. The said land shall be called "RAMON LOPEZ CAMPUS", and the said college shall be within which petitioner would establish a medical college. 2
under obligation to erect a cornerstones bearing that name. Any net income from the land
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We find it difficult to sustain the petition. A clear perusal of the conditions set forth in the
deed of donation executed by Don Ramon Lopez, Sr., gives us no alternative but to The period of time for the establishment of a medical college and the necessary buildings
conclude that this donation was onerous, one executed for a valuable consideration which and improvements on the property cannot be quantified in a specific number of years
is considered the equivalent of the donation itself, e.g., when a donation imposes a burden because of the presence of several factors and circumstances involved in the erection of an
equivalent to the value of the donation. A gift of land to the City of Manila requiring the educations institution, such as government laws and regulations pertaining to government
latter to erect schools, construct a children’s playground and open streets on the land was laws and regulations pertaining to education, building requirements and property
considered an onerous donation. 3 Similarly, where Don Ramon Lopez donated the subject restrictions which are beyond the control of the donee.chanrobles.com:cralaw:red
parcel of land to petitioner but imposed an obligation upon the latter to establish a medical
college thereon, the donation must be for an onerous considerations. Thus, when the obligation does not fix a period but from its nature and circumstances it can
be inferred that a period was intended, the general rule provided in Art. 1197 of the Civil
Under Art. 1181 of the Civil Code, on conditional obligations, the acquisition of rights, as Code applies, which provides that the courts may fix the duration thereof because the
well as the extinguishment or loss of those already acquired, shall depend upon the fulfillment of the obligation itself cannot be demanded until after the court has fixed the
happening of the event which constitutes the condition. Thus, when a person donates land period for compliance therewith and such period has arrived. 8
to another on the condition that the latter would build upon the land a school, the condition
imposed was not a condition precedent or a suspensive condition but a resolutory one. 4 It This general rule however cannot be applied considering the different set of circumstances
is not correct to say that the schoolhouse had to be constructed before the donation became existing in the instant case. More than a reasonable period of fifty (50) years has already
effective, that is, before the donee could become the owner of the land, otherwise, it would been allowed petitioner to avail of the opportunity to comply with the condition even if it
be invading the property rights of the donor. The donation had to be valid before the be burdensome, to make the donation in its favor forever valid. But, unfortunately, it failed
fulfillment of the condition. 5 If there was no fulfillment or compliance with the condition, to do so. Hence, there is no more need to fix the duration of a term of the obligation when
such as what obtains in the instant case, the donation may now be revoked and all rights such procedure would be a mere technicality and formality and would serve no purpose
which the donee may have acquired under it shall be deemed lost and extinguished. that to delay or lead to an unnecessary and expensive multiplication of suits. 9 Moreover,
under Art. 1191 of the Civil Code, when one of the obligors cannot comply with what is
The claim of petitioner that prescription bars the instant action of private respondents is incumbent upon him, the obligee may seek rescission and the court shall decree the same
unavailing. The condition imposed by the donor, i.e., the building of a medical school upon unless there is just cause authorizing the fixing of a period. In the absence of any just cause
the land donated, depended upon the exclusive will of the donee as to when this condition for the court to determine the period of the compliance, there is no more obstacle for the
shall fulfilled. When petitioner accepted the donation, it bound itself to comply with the court to decree the rescission claimed. Finally, since the questioned deed of donation herein
condition thereof. Since the time within which the condition should be fulfilled depended is basically a gratuitous one, doubts referring to incidental circumstances of a gratuitous
upon the exclusive will of the petitioner, it has been held that its absolute acceptance and contract should be resolved in favor of the least transmission of rights and interest. 10
the acknowledgement of its obligation provided in the deed of donation were sufficient to Records are clear and facts are undisputed that since the execution of the deed of donation
prevent the statute of limitations from barring the action of private respondents upon the up to the time of filing of the instant action, petitioner has failed t comply with its
original contract which was the deed of donation. 6 obligation for an unreasonable length of time. Hence, it is only just and equitable now to
declare the subject donation already ineffective and, for all purposes, revoked so that
Moreover, the time from which the cause of action accrued for the revocation of the petitioner as donee should now return the donated property to the heirs of the donor,
donation and recovery of the property donated cannot be specifically determined in the private respondents herein by means of reconveyance.
instant case. A cause of action arises when that which should have been done is not done,
or that which should not have been done is done. 7 In cases where there is no special WHEREFORE, the decision of the Regional Trial Court of Iloilo, Br. 34, of 31 May 1991
provision for such computation, recourse must be had to the rule that the period must be is REINSTATED and AFFIRMED, and the decision of the Court of Appeals of 18 June
counted from the day on which the corresponding action could have been instituted. It is 1993 is accordingly MODIFIED. Consequently, petitioner is directed to reconvey to
the legal possibility of bringing the action which determines the starting point for the private respondents Lot No. 3174-B-1 of the subdivision plan Psd-1144 covered by
computation of the period. In this case, the starting point begins with the expiration of a Transfer Certificate of Title No. T-3910-A within thirty (30) days from the finality of this
reasonable period and opportunity for petitioner to fulfill what has been charged upon it by judgment.
the donor.
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 19

Costs against petitioner. obligations or charges imposed by the donor on the done. It is used, not in its technical or
strict legal sense, but in its broadest sense. 1 (Emphasis supplied)
SO ORDERED.
Clearly then, when the law and the deed of donation speaks of "conditions" of a donation,
Quiason and Kapunan, JJ., concur. what are referred to are actually the obligations, charges or burdens imposed by the donor
Separate Opinions upon the donee and which would characterize the donation as onerous. In the present case,
the donation is, quite obviously, onerous, but it is more properly called a "modal donation."
A modal donation is one in which the donor imposes a prestation upon the donee. The
DAVIDE, JR., J., dissenting:chanrob1es virtual 1aw library establishment of the medical college as the condition of the donation in the present case is
one such prestation.
I agree with the view in the majority opinion that the donation in question in onerous
considering the conditions imposed by the donor on the donee which created reciprocal The conditions imposed by the donor Don Ramon Lopez determines neither the existence
obligations upon both parties. Beyond that, I beg to disagree. nor the extinguishment of the obligations of the donor and the donee with respect to the
donation. In fact, the conditions imposed by Don Ramon Lopez upon the donee are the
First of all, may I point out an inconsistency in the majority opinion’s description of the very obligations of the donation — to build the medical college and use the property for the
donation in question. In one part, it says that the donation in question is onerous. Thus, on purposes specified in the deed of donation. It is very clear that those obligations are
page 4 it states:chanrobles law library : red unconditional, the fulfillment, performance, existence or extinguishment of which is not
dependent on any future or uncertain event or past and unknown event, as the Civil Code
We find if difficult to sustain the petition. A clear perusal of the conditions set forth in the would define a conditional obligation. 2
deed of donation executed by Don Ramon Lopez, Sr., give us no alternative but to
conclude that his donation was onerous, one executed for a value consideration which is Reliance on the case of Parks v. Province of Tarlac 3 as cited on page 5 of the majority
considered the equivalent of the donation itself, e.g., when a donation imposes a burden opinion is erroneous in so far as the latter stated that the condition in Parks is a resolutory
equivalent to the value of the donation . . . (Emphasis supplied) one and applied this on the present case. A more careful reading of this Court’s decision
would reveal that nowhere did we say, whether explicitly or impliedly, that the donation in
Yet, in the last paragraph of page 8 it states that the donation is basically a gratuitous one. that case, which also has a condition imposed to build a school and a public park upon the
The pertinent portion thereof reads:chanrob1es virtual 1aw library property donated, is a resolutory condition. 4 It is incorrect to say that the "conditions" of
the donation there or in the present case are resolutory conditions because, applying Article
Finally, since the questioned deed of donation herein is basically a gratuitous one, doubts 1181 of the Civil Code, that would mean that upon fulfillment of the conditions, the rights
referring to incidental circumstances of a gratuitous contract should be resolved in favor of already acquired will be extinguished. Obviously, that could not have been the intention of
the least transmission of rights and interest . . . (Emphasis supplied) the parties.

Second, the discussion on conditional obligations is unnecessary. There is no conditional What the majority opinion probably had in mind was that the conditions are resolutory
obligation to speak of in this case. It seems that the "conditions" imposed by the donor and because if they are not complied with, the rights of the donee as such will be extinguished
as the world is used in the law of donations is confused with "conditions" as used in the and the donation will be revoked. To my mind, though, it is more accurate to state that the
law of obligations. In his annotation of Article 764 of the Civil Code on Donations, Arturo conditions here are not resolutory conditions but, for the reasons stated above, are the
M. Tolentino, citing the well-known civilists such as Castan, Perez Gonzalez and Alguer, obligations imposed by the donor.
and Colin & Capitant, states clearly the context within the term "conditions" is used in the
law of donations, to wit:chanrob1es virtual 1aw library Third, I cannot subscribe to the view that the provisions of Article 1197 cannot be applied
here. The conditions/obligations imposed by the donor herein are subject to a period. I
The word "conditions" in this article does not refer to uncertain events on which the birth draw this conclusion based on our previous ruling which, although made almost 90 years
or extinguishment of a juridical relation depends, but is used in the vulgar sense of ago, still finds application in the present case. In Barretto v. City of Manila, 5 we said that
when the contract of donation, as the one involved therein, has no fixed period in which the
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condition should be fulfilled, the provisions of what is now Article 1197 (then Articles ingratitude. If no special period is provided for the prescription of the action for revocation
1128) are applicable and it is the duty of the court to fix a suitable time for its fulfillment. for noncompliance of the conditions of the donation [Art. 647, now Art. 764], it is because
Indeed, from the nature and circumstances of the conditions/obligations of the present in this respect the donation is considered onerous and is governed by the law of contracts
donation, it can be inferred that a period was contemplated by the donor. Don Ramon and the general rules of prescription. 7
Lopez could not have intended his property to remain idle for a long period of time when in
fact, he specifically burdened the donee with the obligation to set up a medical college More recently, in De Lune v. Abrigo, 8 this Court reiterated the ruling in Parks and said
therein and thus put his property to good use. There is a need to fix the duration of the time that:chanrob1es virtual 1aw library
within which the conditions imposed are to be fulfilled.
It is true that under Article 764 of the New Civil Code, actions for the revocation of a
It is also important to fix the duration or period for the performance of the donation must be brought within four (4) years from the non-compliance of the conditions
conditions/obligations in the donation in resolving the petitioner’s claim that prescription of the donation. However, it is Our opinion that said article does not apply to onerous
has already barred the present action. I disagree once more with the ruling of the majority donations in view of the specific provisions of Article 733 providing that onerous
that the action of the petitioners is not barred by the statute of limitations. There is donations are governed by the rules on contracts.
misplaced reliance again on a previous decision on this Court in Osmeña v. Rama. 6 That
case does not speak of a deed of donation as erroneously quoted and cited by the majority In the light of the above, the rules on contracts and the general rules on prescription and not
opinion. It speaks of a contract for a sum of money where the debtor herself imposed a the rules on donations are applicable in the case at bar.
condition which will determine when she will fulfill her obligation to pay the creditor, thus,
making the fulfillment of her obligation dependent upon her will. What we have here, The law applied in both cases Article 1144(1). It refers to the prescription of an action upon
however, is not a contract for a sum of money but a donation where the donee has not a written contract, which is what the deed of an onerous donation is. The prescriptive
imposed any conditions on the fulfillment of its obligations. Although it is admitted that the period is ten years from the time the cause of action accrues, and that is, from the
fulfillment of the conditions/obligations of the present donation may be dependent on the expiration of the time within which the donee must comply with the conditions/obligations
will of the donee as to when it will comply therewith, this did not arise out of a condition of the donation. As to when this exactly is remains to be determined, and that is for the
which the donee itself imposed. It is believed that the donee was not meant to and does not courts to do as reposed upon them by Article 1197.
have absolute control over the time within which it will perform its obligations. It must still
do so within a reasonable time. What that reasonable time is, under the circumstances, for For the reasons expressed above, I register my dissent. According, the decision of the Court
the courts to determine. Thus, the mere fact that there is no time fixed as to when the of Appeals must be upheld, except its ruling that the conditions of the donation are
conditions of the donation are to be fulfilled does not ipso facto mean that the statute of resolutory.
limitations will not apply anymore and the action to revoke the donation becomes
imprescriptible. Padilla, J., concurs.

Admittedly, the donation now in question is an onerous donation and is governed by the
law on contracts (Article 733) and the case of Osmeña, being one involving a contract, may [G.R. No. 126444 : December 04, 1998]
apply. But we must not lose sight of the fact that it is still a donation for which this Court
itself applied the pertinent law to resolve situations such as this. That the action to revoke ALFONSO QUIJADA, CRESENTE QUIJADA, REYNELDA QUIJADA,
the donation can still prescribe has been the pronouncement of this Court as early as 1962 DEMETRIO QUIJADA, ELIUTERIA QUIJADA, EULALIO QUIJADA, AND
in the case of Parks which, on this point, finds relevance in this case. There, this Court said, WARLITO QUIJADA, PETITIONERS, VS. COURT OF APPEALS, REGALADO
MONDEJAR, RODULFO GOLORAN, ALBERTO ASIS, SEGUNDINO RAS,
[that] this action [for the revocation of the donation] is prescriptible, there is no doubt. ERNESTO GOLORAN, CELSO ABISO, FERNANDO BAUTISTA, ANTONIO
There is no legal provision which excludes this class of action from the statute of MACASERO, AND NESTOR MAGUINSAY, RESPONDENTS.
limitations. And not only this, the law itself recognizes the prescriptibility of the action for
the revocation of a donation, providing a special period of [four] years for the revocation DECISION
by the subsequent birth of children [Art. 646, now Art. 763], and . . . by reason of
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 21

MARTINEZ, J.: special defense, defendants-appellants (respondents) alleged that plaintiffs' action is barred
by laches or has prescribed.
Petitioners, as heirs of the late Trinidad Quijada, filed a complaint against private
respondents for quieting of title, recovery of possession and ownership of parcels of land "The court a quo rendered judgment in favor of plaintiffs-appellees (petitioners): firstly
with claim for attorney's fees and damages. The suit was premised on the following facts because 'Trinidad Quijada had no legal title or right to sell the land to defendant Mondejar
found by the Court of Appeals, which is materially the same as that found by the trial in 1962, 1966, 1967 and 1968, the same not being hers to dispose of because ownership
court: belongs to the Municipality of Talacogon' (Decision, p. 4; Rollo, p. 39) and, secondly, that
"Plaintiffs-appellees (petitioners) are the children of the late Trinidad Corvera Vda. de the deed of sale executed by Trinidad Quijada in favor of Mondejar did not carry with it the
Quijada. Trinidad was one of the heirs of the late Pedro Corvera and inherited from the conformity and acquiescence of her children, more so that she was already 63 years old at
latter the two-hectare parcel of land subject of the case, situated in the barrio of San the time, and a widow (Decision, p. 6; Rollo, p. 41)."[1]
Agustin, Talacogon, Agusan del Sur. On April 5, 1956, Trinidad Quijada together with her
sisters Leonila Corvera Vda. de Sequeña and Paz Corvera Cabiltes and brother Epapiadito The dispositive portion of the trial court's decision reads:
Corvera executed a conditional deed of donation (Exh. C) of the two-hectare parcel of land
subject of the case in favor of the Municipality of Talacogon, the condition being that the "WHEREFORE, viewed from the above perceptions, the scale of justice having tilted in
parcel of land shall be used solely and exclusively as part of the campus of the proposed favor of the plaintiffs, judgment is, as it is hereby rendered:
provincial high school in Talacogon. Apparently, Trinidad remained in possession of the
parcel of land despite the donation. On July 29, 1962, Trinidad sold one (1) hectare of the 1) ordering the Defendants to return and vacate the two (2) hectares of land to Plaintiffs as
subject parcel of land to defendant-appellant Regalado Mondejar (Exh. 1). Subsequently, described in Tax Declaration No. 1209 in the name of Trinidad Quijada;
Trinidad verbally sold the remaining one (1) hectare to defendant-appellant (respondent)
Regalado Mondejar without the benefit of a written deed of sale and evidenced solely by 2) ordering any person acting in Defendants' behalf to vacate and restore the peaceful
receipts of payment. In 1980, the heirs of Trinidad, who at that time was already dead, filed possession of the land in question to Plaintiffs;
a complaint for forcible entry (Exh. E) against defendant-appellant (respondent) Regalado
Mondejar, which complaint was, however, dismissed for failure to prosecute (Exh. F). In 3) ordering the cancellation of the Deed of Sale executed by the late Trinidad Quijada in
1987, the proposed provincial high school having failed to materialize, the Sangguniang favor of Defendant Regalado Mondejar as well as the Deeds of Sale/Relinquishments
Bayan of the municipality of Talacogon enacted a resolution reverting the two (2) hectares executed by Mondejar in favor of the other Defendants;
of land donated back to the donors (Exh. D). In the meantime, defendant-appellant
(respondent) Regalado Mondejar sold portions of the land to defendants-appellants 4) ordering Defendants to remove their improvements constructed on the questioned lot;
(respondents) Fernando Bautista (Exh. 5), Rodolfo Goloran (Exh. 6), Efren Guden (Exh. 7)
and Ernesto Goloran (Exh. 8). 5) ordering the Defendants to pay Plaintiffs, jointly and severally, the amount of
P10,000.00 representing attorney's fees;
"On July 5, 1988, plaintiffs-appellees (petitioners) filed this action against defendants-
appellants (respondents). In the complaint, plaintiffs-appellees (petitioners) alleged that 6) ordering Defendants to pays the amount of P8,000.00 as expenses of litigation; and
their deceased mother never sold, conveyed, transferred or disposed of the property in
question to any person or entity much less to Regalado Mondejar save the donation made 7) ordering Defendants to pay the sum of P30,000.00 representing moral damages.
to the Municipality of Talacogon in 1956; that at the time of the alleged sale to Regalado
Mondejar by Trinidad Quijada, the land still belongs to the Municipality of Talacogon, SO ORDERED."[2]
hence, the supposed sale is null and void. On appeal, the Court of Appeals reversed and set aside the judgment a quo[3] ruling that
the sale made by Trinidad Quijada to respondent Mondejar was valid as the4 former
"Defendants-appellants (respondents), on the other hand, in their answer claimed that the retained an inchoate interest on the lots by virtue of the automatic reversion clause in the
land in dispute was sold to Regalado Mondejar, the one (1) hectare on July 29, 1962, and deed of donation.[4] Thereafter, petitioners filed a motion for reconsideration. When the
the remaining one (1) hectare on installment basis until fully paid. As affirmative and/or CA denied their motion,[5] petitioners instituted a petition for review to this Court arguing
principally that the sale of the subject property made by Trinidad Quijada to respondent
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 22

Mondejar is void, considering that at that time, ownership was already transferred to the land itself which she no longer owns. It would have been different if the donor-seller sold
Municipality of Talacogon. On the contrary, private respondents contend that the sale was her interests over the property under the deed of donation which is subject to the possibility
valid, that they are buyers in good faith, and that petitioners' case is barred by laches.[6] of reversion of ownership arising from the non-fulfillment of the resolutory condition.

We affirm the decision of the respondent court. As to laches, petitioners' action is not yet barred thereby. Laches presupposes failure or
neglect for an unreasonable and unexplained length of time, to do that which, by exercising
The donation made on April 5, 1956 by Trinidad Quijada and her brother and sisters[7] due diligence, could or should have been done earlier;[14] "it is negligence or omission to
was subject to the condition that the donated property shall be "used solely and exclusively assert a right within a reasonable time, thus, giving rise to a presumption that the party
as a part of the campus of the proposed Provincial High School in Talacogon."[8] The entitled to assert it either has abandoned or declined to assert it."[15] Its essential elements
donation further provides that should "the proposed Provincial High School be of:
discontinued or if the same shall be opened but for some reason or another, the same may a) Conduct on the part of the defendant, or of one under whom he claims, giving rise to the
in the future be closed" the donated property shall automatically revert to the donor.[9] situation complained of;
Such condition, not being contrary to law, morals, good customs, public order or public
policy was validly imposed in the donation.[10] b) Delay in asserting complainant's right after he had knowledge of the defendant's
conduct and after he has an opportunity to sue;
When the Municipality's acceptance of the donation was made known to the donor, the
former became the new owner of the donated property -- donation being a mode of c) Lack of knowledge or notice on the part of the defendant that the complainant would
acquiring and transmitting ownership[11] - notwithstanding the condition imposed by the assert the right on which he bases his suit; and,
donee. The donation is perfected once the acceptance by the donee is made known to the
donor.[12] Accordingly, ownership is immediately transferred to the latter and that d) Injury or prejudice to the defendant in the event relief is accorded to the
ownership will only revert to the donor if the resolutory condition is not fulfilled. complainant."[16]
are absent in this case. Petitioners' cause of action to quiet title commenced only when the
In this case, that resolutory condition is the construction of the school. It has been ruled property reverted to the donor and/or his successors-in-interest in 1987. Certainly, when
that when a person donates land to another on the condition that the latter would build upon the suit was initiated the following year, it cannot be said that petitioners had slept on their
the land a school, the condition imposed is not a condition precedent or a suspensive rights for a long time. The 1960's sales made by Trinidad Quijada cannot be the reckoning
condition but a resolutory one.[13] Thus, at the time of the sales made in 1962 towards point as to when petitioners' cause of action arose. They had no interest over the property at
1968, the alleged seller (Trinidad) could not have sold the lots since she had earlier that time except under the deed of donation to which private respondents were not privy.
transferred ownership thereof by virtue of the deed of donation. So long as the resolutory Moreover, petitioners had previously filed an ejectment suit against private respondents
condition subsists and is capable of fulfillment, the donation remains effective and the only that it did not prosper on a technicality.
donee continues to be the owner subject only to the rights of the donor or his successors-in-
interest under the deed of donation. Since no period was imposed by the donor on when Be that at it may, there is one thing which militates against the claim of petitioners. Sale,
must the donee comply with the condition, the latter remains the owner so long as he has being a consensual contract, is perfected by mere consent, which is manifested the moment
tried to comply with the condition within a reasonable period. Such period, however, there is a meeting of the minds[17] as to the offer and acceptance thereof on three (3)
became irrelevant herein when the donee-Municipality manifested through a resolution that elements: subject matter, price and terms of payment of the price.[18] ownership by the
it cannot comply with the condition of building a school and the same was made known to seller on the thing sold at the time of the perfection of the contract of sale is not an element
the donor. Only then - when the non-fulfillment of the resolutory condition was brought to for its perfection. What the law requires is that the seller has the right to transfer ownership
the donor's knowledge - that ownership of the donated property reverted to the donor as at the time the thing sold is delivered.[19] Perfection per se does not transfer ownership
provided in the automatic reversion clause of the deed of donation. which occurs upon the actual or constructive delivery of the thing sold.[20] A perfected
contract of sale cannot be challenged on the ground of non-ownership on the part of the
The donor may have an inchoate interest in the donated property during the time that seller at the time of its perfection; hence, the sale is still valid.
ownership of the land has not reverted to her. Such inchoate interest may be the subject of
contracts including a contract of sale. In this case, however, what the donor sold was the
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 23

The consummation, however, of the perfected contract is another matter. It occurs upon the
constructive or actual delivery of the subject matter to the buyer when the seller or her
successors-in-interest subsequently acquires ownership thereof. Such circumstance [G.R. No. 87047. October 31, 1990.]
happened in this case when petitioners -- who are Trinidad Quijada's heirs and successors-
in-interest -- became the owners of the subject property upon the reversion of the FRANCISCO LAO LIM, Petitioner, v. COURT OF APPEALS and BENITO
ownership of the land to them. Consequently, ownership is transferred to respondent VILLAVICENCIO DY,Respondents.
Mondejar ands those who claim their right from him. Article 1434 of the New Civil Code
supports the ruling that the seller's "title passes by operation of law to the buyer."[21] This Gener E . Asuncion for Petitioner.
rule applies not only when the subject matter of the contract of sale is goods,[22] but also
to other kinds of property, including real property.[23] Natividad T . Perez for Private Respondent.

There is also no merit in petitioners' contention that since the lots were owned by the
municipality at the time of the sale, they were outside the commerce of men under Article DECISION
1409 (4) of the NCC;[24] thus, the contract involving the same is inexistent and void from
the beginning. However, nowhere in Article 1409 (4) is it provided that the properties of a REGALADO, J.:
municipality, whether it be those for public use or its patrimonial property[25] are outside Respondent Court of Appeals having affirmed in toto on June 30, 1988 in CA-G.R. SP No.
the commerce of men. Besides, the lots in this case were conditionally owned by the 13925 1 the decision of the Regional Trial Court of Manila, Branch XLVI, in Civil Case
municipality. To rule that the donated properties are outside the commerce of men would No. 8742719, entitled "Francisco Lao Lim v. Benito Villavicencio Dy," petitioner seeks the
render nugatory the unchallenged reasonableness and justness of the condition which the reversal of such affirmance in the instant petition.
donor has the right to impose as owner thereof. Moreover, the objects referred to as
outsides the commerce of man are those which cannot be appropriated, such as the open The records show that private respondent entered into a contract of lease with petitioner for
seas and the heavenly bodies. a period of three (3) years, that is, from 1976 to 1979. After the stipulated term expired,
private respondent refused to vacate the premises, hence, petitioner filed an ejectment suit
With respect to the trial court award of attorneys fees, litigation expenses and moral against the former in the City Court of Manila, docketed therein as Civil Case No. 051063-
damages, there is neither factual nor legal basis thereof. Attorneys fees and expenses of CV. The case was terminated by a judicially approved compromise agreement of the
litigation cannot, following the general rule in Article 2208 of the New Civil Code, be parties providing in part:jgc:chanrobles.com.ph
recovered in this case, there being no stipulation to that effect and the case does not fall
under any of the exceptions.[26] It cannot be said that private respondents had compelled "3. That the term of the lease shall be renewed every three years retroacting from October
petitioners to litigate with third persons. Neither can it be ruled that the former acted in 1979 to October 1982; after which the abovenamed rental shall be raised automatically by
"gross and evident bad faith" in refusing to satisfy the latters claims considering that 20% every three years for as long as defendant needed the premises and can meet and pay
private respondents were under an honest belief that they have a legal right over the the said increases, the defendant to give notice of his intent to renew sixty (60) days before
property by virtue of the deed of sale. Moral damages cannot likewise be justified as none the expiration of the term;" 2
of the circumstances enumerated under Articles 2219[27] and 2220[28] of the New Civil
Code concur in this case. By reason of said compromise agreement the lease continued from 1979 to 1982, then from
1982 to 1985. On April 17, 1985, petitioner advised private respondent that he would no
WHEREFORE, by virtue of the foregoing, the assailed decision of the Court of Appeals is longer renew the contract effective October, 1985.3 However, on August 5, 1985, private
AFFIRMED. respondent informed petitioner in writing of his intention to renew the contract of lease for
another term, commencing November, 1985 to October, 1988. 4 In reply to said letter,
SO ORDERED. petitioner advised private respondent that he did not agree to a renewal of the lease contract
upon its expiration in October, 1985. 5
Melo (Acting Chairman), Puno, and Mendoza, JJ., concur.
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 24

On January 15, 1986, because of private respondent’s refusal to vacate the premises, by the aforesaid article of the Civil Code. (8 Manresa, 3d ed., pp. 626, 627; Cuyugan v.
petitioner filed another ejectment suit, this time with the Metropolitan Trial Court of Santos, 34 Phil. 100.)"
Manila in Civil Case No. 114659-CV. In its decision of September 24, 1987, said court
dismissed the complaint on the grounds that (1) the lease contract has not expired, being a The continuance, effectivity and fulfillment of a contract of lease cannot be made to
continuous one the period whereof depended upon the lessee’s need for the premises and depend exclusively upon the free and uncontrolled choice of the lessee between continuing
his ability to pay the rents; and (2) the compromise agreement entered into in the aforesaid the payment of the rentals or not, completely depriving the owner of any say in the matter.
Civil Case No. 051063-CV constitutes res judicata to the case before it. 6 Mutuality does not obtain in such a contract of lease and no equality exists between the
lessor and the lessee since the life of the contract is dictated solely by the lessee.chanrobles
Petitioner appealed to the Regional Trial Court of Manila which, in its decision of January virtual lawlibrary
28, 1988 in Civil Case No. 8742719, affirmed the decision of the lower court. 7
The interpretation made by respondent court cannot, therefore, be upheld. Paragraph 3 of
As stated at the outset, respondent Court of Appeals affirmed in full said decision of the the compromise agreement, read and interpreted in its entirety, is actually to the effect that
Regional Trial Court and held that (1) the stipulation in the compromise agreement which, the last portion thereof, which gives the private respondent sixty (60) days before the
in its formulation, allows the lessee to stay on the premises as long as he needs it and can expiration of the term the right to give notice of his intent to renew, is subject to the first
pay rents is valid, being a resolutory condition and, therefore, beyond the ambit of Article portion of said paragraph that "the term of the lease shall be renewed every three (3)
1308 of the Civil Code; and (2) that a compromise has the effect of res judicata. 8 years," thereby requiring the mutual agreement of the parties. The use of the word "renew"
and the designation of the period of three (3) years clearly confirm that the contract of lease
Petitioner’s motion for reconsideration having been denied by respondent Court of is limited to a specific period and that it is not a continuing lease. The stipulation provides
Appeals, this present petition is now before us. We find the same to be meritorious. for a renewal of the lease every three (3) years; there could not be a renewal if said lease
did not expire, otherwise there is nothing to renew.
Contrary to the ruling of respondent court, the disputed stipulation "for as long as the
defendant needed the premises and can meet and pay said increases" is a purely potestative Resultantly, the contract of lease should be and is hereby construed as providing for a
condition because it leaves the effectivity and enjoyment of leasehold rights to the sole and definite period of three (3) years and that the automatic increase of the rentals by twenty
exclusive will of the lessee. It is likewise a suspensive condition because the renewal of the percent (20%) will take effect only if the parties decide to renew the lease. A contrary
lease, which gives rise to a new lease, depends upon said condition. It should be noted that interpretation will result in a situation where the continuation and effectivity of the contract
a renewal constitutes a new contract of lease although with the same terms and conditions will depend only upon the will of the lessee, in violation of Article 1308 of the Civil Code
as those in the expired lease. It should also not be overlooked that said condition is not and the aforesaid doctrine in Encarnacion. The compromise agreement should be
resolutory in nature because it is not a condition that terminates the lease contract. The understood as bearing that import which is most adequate to render it effectual. 10 Where
lease contract is for a definite period of three (3) years upon the expiration of which the the instrument is susceptible of two interpretations, one which will make it invalid and
lease automatically terminates.chanrobles.com : virtual law library illegal and another which will make it valid and legal, the latter interpretation should be
adopted. 11
The invalidity of a condition in a lease contract similar to the one at bar has been resolved
in Encarnacion v. Baldomar, Et Al., 9 where we ruled that in an action for ejectment, the Moreover, perpetual leases are not favored in law, nor are covenants for continued
defense interposed by the lessees that the contract of lease authorized them to continue renewals tending to create a perpetuity, and the rule of construction is well settled that a
occupying the premises as long as they paid the rents is untenable, because it would leave covenant for renewal or for an additional term should not be held to create a right to
to the lessees the sole power to determine whether the lease should continue or not. As repeated grants in perpetuity, unless by plain and unambiguous terms the parties have
stated therein," (i)f this defense were to be allowed, so long as defendants elected to expressed such intention. 12 A lease will not be construed to create a right to perpetual
continue the lease by continuing the payment of the rentals, the owner would never be able renewals unless the language employed indicates clearly and unambiguously that it was the
to discontinue it; conversely, although the owner should desire the lease to continue, the intention and purpose of the parties to do so. 13 A portion in a lease giving the lessee and
lessees could effectively thwart his purpose if they should prefer to terminate the contract his assignee the right to perpetual renewals is not favored by the courts, and a lease will be
by the simple expedient of stopping payment of the rentals. This, of course, is prohibited construed as not making such a provision unless it does so clearly. 14
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 25

As we have further emphasized:jgc:chanrobles.com.ph judgment, (2) the court which rendered it had jurisdiction over the subject matter and the
parties, (3) it must be a judgment on the merits, and (4) there must be identity between the
"It is also important to bear in mind that in a reciprocal contract like a lease, the period of two cases as to parties, subject matter and cause of action. 19
the lease must be deemed to have been agreed upon for the benefit of both parties, absent
language showing that the term was deliberately set for the benefit of the lessee or lessor In the case at bar, the fourth requisite is lacking. Although there is identity of parties, there
alone. We are not aware of any presumption in law that the term of a lease is designed for is no identity of subject matter and cause of action. The subject matter in the first ejectment
the benefit of the lessee alone. Koh and Cruz in effect rested upon such a presumption. But case is the original lease contract while the subject matter in the case at bar is the lease
that presumption cannot reasonably be indulged in casually in an era of rapid economic created under the terms provided in the subsequent compromise agreement. The lease
change, marked by, among other things, volatile costs of living and fluctuations in the executed in 1978 is one thing; the lease constituted in 1982 by the compromise agreement
value of the domestic currency. The longer the period the more clearly unreasonable such a is another.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph
presumption would be. In an age like that we live in, very specific language is necessary to
show an intent to grant a unilateral faculty to extend or renew a contract of lease to the There is also no identity, in the causes of action. The test generally applied to determine the
lessee alone, or to the lessor alone for that matter. We hold that the above-quoted rulings in identity of causes of action is to consider the identity of facts essential to their
Koh v. Ongsiaco and Cruz v. Alberto should be and are overruled." 15 maintenance, or whether the same evidence would sustain both causes of action. 20 In the
case at bar, the delict or the wrong in the first case is different from that in the second, and
In addition, even assuming that the clause "for as long as the defendant needed the the evidence that will support and establish the cause of action in the former will not
premises and can meet and pay, said increases" gives private respondent an option to renew suffice to support and establish that in the latter.
the lease, the same will be construed as providing for but one renewal or extension and,
therefore, was satisfied when the lease was renewed in 1982 for another three (3) years. A In the first ejectment case, the cause of action was private respondent’s refusal to comply
general covenant to renew is satisfied by one renewal and will not be construed to confer with the lease contract which expired on December 31, 1978. In the present case, the cause
the right to more than one renewal unless provision is clearly and expressly made for of action is a similar refusal but with respect to the lease which expired in October, 1985
further renewals. 16 Leases which may have been intended to be renewable in perpetuity under the compromise agreement. While the compromise agreement may be res judicata as
will nevertheless be construed as importing but one renewal if there is any uncertainty in far as the cause of action and issues in the first ejectment case is concerned, any cause of
that regard. 17 action that arises from the application or violation of the compromise agreement cannot be
said to have been settled in said first case. The compromise agreement was meant to settle,
The case of Buccat v. Dispo, Et Al., 18 relied upon by respondent court, to support its as it did only settle, the first case. It did not, as it could not, cover any cause of action that
holding that respondent lessee can legally stay on the premises for as long as he needs it might arise thereafter, like the present case which was founded on the expiration of the
and can pay the rents, is not in point. In said case, the lease contract provides for an lease in 1985, which necessarily requires a different set of evidence. The fact that the
indefinite period since it merely stipulates" (t)hat the lease contract shall remain in full compromise agreement was judicially approved does not foreclose any cause of action
force and effect as long as the land will serve the purpose for which it is intended as a arising from a violation of the terms thereof.chanrobles virtual lawlibrary
school site of the National Business Institute, but the rentals now stipulated shall be subject
to review every after ten (10) years by mutual agreement of the parties." This is in clear WHEREFORE, the decision of respondent Court of Appeals is REVERSED and SET
contrast to the case at bar wherein, to repeat, the lease is fixed at a period of three (3) years ASIDE. Private respondent is hereby ordered to immediately vacate and return the
although subject to renewal upon agreement of the parties, and the clause "for as long as possession of the leased premises subject of the present action to petitioner and to pay the
defendant needs the premises and can meet and pay the rents" is not an independent monthly rentals due thereon in accordance with the compromise agreement until he shall
stipulation but is controlled by said fixed term and the option for renewal upon agreement have actually vacated the same. This judgment is immediately executory.
of both parties.
SO ORDERED.
On the second issue, we agree with petitioner that respondent court erred in holding that
the action for ejectment is barred by res judicata. While it is true that a compromise Melencio-Herrera , Paras, Padilla and Sarmiento, JJ., concur.
agreement has the effect of res judicata, this doctrine does not apply in the present case. It
is elementary that for a judgment to be a bar to a subsequent case, (1) it must be a final
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 26

[G.R. No. 107112. February 24, 1994.] Furthermore, a bare reading of this article reveals that it is not a requirement thereunder
that the contract be for future service with future unusual change. According to Senator
NAGA TELEPHONE CO., INC. (NATELCO) AND LUCIANO M. MAGGAY, Arturo M. Tolentino, Article 1267 states in our law the doctrine of unforeseen events. This
Petitioners, v. THE COURT OF APPEALS AND CAMARINES SUR II ELECTRIC is said to be based on the discredited theory of rebus sic stantibus in public international
COOPERATIVE, INC. (CASURECO II),Respondents. law; under this theory, the parties stipulate in the light of certain prevailing conditions, and
once these conditions cease to exist the contract also ceases to exist. Considering practical
needs and the demands of equity and good faith, the disappearance of the basis of a
SYLLABUS contract gives rise to a right to relief in favor of the party prejudiced.

3. ID.; ID.; POTESTATIVE CONDITION; MEANING THEREOF; APPLICATION IN

1. CIVIL LAW; OBLIGATION AND CONTRACTS; RULE WHERE A PERSON BY CASE AT BAR. — A potestative condition is a condition, the fulfillment of which
HIS CONTRACT CHARGES HIMSELF WITH AN OBLIGATION POSSIBLE TO BE depends upon the sole will of the debtor, in which case, the conditional obligation is void.
PERFORMED. — The case of Reyes v. Caltex (Philippines), Inc. enunciated the doctrine Based on this definition, respondent court’s finding that the provision in the contract, to
that where a person by his contract charges himself with an obligation possible to be wit:" (a) That the term or period of this contract shall be as long as the party of the first part
performed, he must perform it, unless its performance is rendered impossible by the act of (petitioner) has need for the electric light posts of the party of the second part (private
God, by the law, or by the other party, it being the rule that in case the party desires to be respondent) . . ." is a potestative condition, is correct. However, it must have overlooked
excused from performance in the event of contingencies arising thereto, it is his duty to the other conditions in the same provision, to wit: ". . . it being understood that this contract
provide the basis therefor in his contract. With the enactment of the New Civil Code, a new shall terminate when for any reason whatsoever, the party of the second part (private
provision was included therein namely, Article 1267 which provides: "When the service respondent) is forced to stop, abandoned (sic) its operation as a public service and it
has become so difficult as to be manifestly beyond the contemplation of the parties, the becomes necessary to remove the electric light post (sic);" which are casual conditions
obligor may also be released therefrom, in whole or in part." In the report of the Code since they depend on chance, hazard, or the will of a third person. In sum, the contract is
Commission, the rationale behind this innovation was explained, thus: "The general rule is subject to mixed conditions, that is, they depend partly on the will of the debtor and partly
that impossibility of performance releases the obligor. However, it is submitted that when on chance, hazard or the will of a third person, which do not invalidate the aforementioned
the service has become so difficult as to be manifestly beyond the contemplation of the provision.
parties, the court should be authorized to release the obligor in whole or in part. The
intention of the parties should govern and if it appears that the service turns out to be so 4. ID.; PRESCRIPTION OF ACTIONS; RULE ON WRITTEN CONTRACT. — Article
difficult as to have been beyond their contemplation, it would be doing violence to that 1144 of the New Civil Code provides, inter alia, that an action upon a written contract must
intention to hold the obligor still responsible." In other words, fair and square consideration be brought within ten (10) years from the time the right of the action accrues. Clearly, the
underscores the legal precept therein. ten (10) year period is to be reckoned from the time the right of action accrues which is not
necessarily the date of execution of the contract. As correctly ruled by respondent court,
2. ID.; ID.; "SERVICE" UNDER ART. 1267 REFERS TO THE PERFORMANCE OF AN private respondent’s right of action arose "sometime during the latter part of 1982 or in
OBLIGATION; CASE AT BAR. — Petitioners assert earnestly that Article 1267 of the 1983 when according to Atty. Luis General, Jr. . . ., he was asked by (private respondent’s)
New Civil Code is not applicable primarily because the contract does not involve the Board of Directors to study said contract as it already appeared disadvantageous to (private
rendition of service or a personal prestation and it is not for future service with future respondent). (Private respondent’s) cause of action to ask for reformation of said contract
unusual change. Instead, the ruling in the case Occeña, Et. Al. v. Jabson, etc, Et Al., (G.R. should thus be considered to have arisen only in 1982 or 1983, and from 1982 to January 2,
No. L-44349, October 29, 1976, 73 SCRA 637) which interpreted the article, should be 1989 when the complaint in this case was filed, ten (10) years had not yet elapsed."
followed in resolving this case. Besides, said article was never raised by the parties in their
pleadings and was never the subject of trial and evidence. Article 1267 speaks of "service"
which has become so difficult. Taking into consideration the rationale behind this DECISION
provision, the term "service" should be understood as referring to the "performance" of the
obligation. In the present case, the obligation of private respondent consists in allowing
petitioners to use its posts in Naga City, which is the service contemplated in said article. NOCON, J.:
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 27

On November 1, 1977, the parties entered into a contract (Exh. "A") for the use by
petitioners in the operation of its telephone service the electric light posts of private
The case of Reyes v. Caltex (Philippines), Inc. 1 enunciated the doctrine that where a respondent in Naga City. In consideration therefor, petitioners agreed to install, free of
person by his contract charges himself with an obligation possible to be performed, he must charge, ten (10) telephone connections for the use by private respondent in the following
perform it, unless its performance is rendered impossible by the act of God, by the law, or places:jgc:chanrobles.com.ph
by the other party, it being the rule that in case the party desires to be excused from
performance in the event of contingencies arising thereto, it is his duty to provide the basis "(a) 3 units — The Main Office of (private respondent);
therefor in his contract.chanrobles.com:cralaw:red
(b) 2 Units — The Warehouse of (private respondent);
With the enactment of the New Civil Code, a new provision was included therein namely,
Article 1267 which provides:jgc:chanrobles.com.ph (c) 1 Unit — The Sub-Station of (private respondent) at Concepcion Pequeña;

"When the service has become so difficult as to be manifestly beyond the contemplation of (d) 1 Unit — The Residence of (private respondent’s) President;
the parties, the obligor may also be released therefrom, in whole or in part."cralaw
virtua1aw library (e) 1 Unit — The Residence of (private respondent’s) Acting General Manager; &

In the report of the Code Commission, the rationale behind this innovation was explained, (f) 2 Units — To be determined by the General Manager. 3
thus:jgc:chanrobles.com.ph
Said contract also provided:jgc:chanrobles.com.ph
"The general rule is that impossibility of performance releases the obligor. However, it is
submitted that when the service has become so difficult as to be manifestly beyond the "(a) That the term or period of this contract shall be as long as the party of the first part has
contemplation of the parties, the court should be authorized to release the obligor in whole need for the electric light posts of the party of the second part it being understood that this
or in part. The intention of the parties should govern and if it appears that the service turns contract shall terminate when for any reason whatsoever, the party of the second part is
out to be so difficult as to have been beyond their contemplation, it would be doing forced to stop, abandoned [sic] its operation as a public service and it becomes necessary to
violence to that intention to hold the obligor still responsible." 2 remove the electric lightpost;" (sic) 4

In other words, fair and square consideration underscores the legal precept therein. It was prepared by or with the assistance of the other petitioner, Atty. Luciano M. Maggay,
then a member of the Board of Directors of private respondent and at the same time the
Naga Telephone Co., Inc. remonstrates mainly against the application by the Court of legal counsel of petitioner.
Appeals of Article 1267 in favor of Camarines Sur II Electric Cooperative, Inc. in the case
before us. Stated differently, the former insists that the complaint should have been After the contract had been enforced for over ten (10) years, private respondent filed on
dismissed for failure to state a cause of action.chanrobles.com.ph : virtual law library January 2, 1989 with the Regional Trial Court of Naga City (Br. 28) C.C. No. 89-1642
against petitioners for reformation of the contract with damages, on the ground that it is too
The antecedent facts, as narrated by respondent Court of Appeals are, as one-sided in favor of petitioners; that it is not in conformity with the guidelines of the
follows:chanrob1es virtual 1aw library National Electrification Administration (NEA) which direct that the reasonable
compensation for the use of the posts is P10.00 per post, per month; that after eleven (11)
Petitioner Naga Telephone Co., Inc. (NATELCO) is a telephone company rendering local years of petitioners’ use of the posts, the telephone cables strung by them thereon have
as well as long distance service in Naga City while private respondent Camarines Sur II become much heavier with the increase in the volume of their subscribers, worsened by the
Electric Cooperative, Inc. (CASURECO II) is a private corporation established for the fact that their linemen bore holes through the posts at which points those posts were broken
purpose of operating an electric power service in the same city. during typhoons; that a post now costs as much as P2,630.00; so that justice and equity
demand that the contract be reformed to abolish the inequities thereon.chanrobles.com.ph :
virtual law library
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 28

many subscribers therein who could not be served by them because of lack of facilities; and
As second cause of action, private respondent alleged that starting with the year 1981, that while the telephone lines strung to the posts were very light in 1977, said posts have
petitioners have used 319 posts in the towns of Pili, Canaman, Magarao and Milaor, become heavily loaded in 1989.chanrobles law library
Camarines Sur, all outside Naga City, without any contract with it; that at the rate of
P10.00 per post, petitioners should pay private respondent for the use thereof the total (2) Engr. Antonio Borja, Chief of private respondent’s Line Operation and Maintenance
amount of P267,960.00 from 1981 up to the filing of its complaint; and that petitioners had Department, declared that the posts being used by petitioners totalled 1,403 as of April 17,
refused to pay private respondent said amount despite demands. 1989, 192 of which were in the towns of Pili, Canaman, and Magarao, all outside Naga
City (Exhs. "B" and "B-1"); that petitioners’ cables strung to the posts in 1989 are much
And as third cause of action, private respondent complained about the poor servicing by bigger than those in November, 1977; that in 1987, almost 100 posts were destroyed by
petitioners of the ten (10) telephone units which had caused it great inconvenience and typhoon Sisang: around 20 posts were located between Naga City and the town of Pili
damages to the tune of not less than P100,000.00 while the posts in barangay Concepcion, Naga City were broken at the middle which had
been bored by petitioner’s linemen to enable them to string bigger telephone lines; that
In petitioners’ answer to the first cause of action, they averred that it should be dismissed while the cost per post in 1977 was only from P700.00 to P1,000.00, their costs in 1989
because (1) it does not sufficiently state a cause of action for reformation of contract; (2) it went up from P1,500.00 to P2,000.00, depending on the size; that some lines that were
is barred by prescription, the same having been filed more than ten (10) years after the strung to the posts did not follow the minimum vertical clearance required by the National
execution of the contract; and (3) it is barred by estoppel, since private respondent seeks to Building Code, so that there were cases in 1988 where, because of the low clearance of the
enforce the contract in the same action. Petitioners further alleged that their utilization of cables, passing trucks would accidentally touch said cables causing the posts to fall and
private respondent’s post could not have caused their deterioration because they have resulting in brown-outs until the electric lines were repaired.
already been in use for eleven (11) years; and that the value of their expenses for the ten
(10) telephone lines long enjoyed by private respondent free of charge are far in excess of (3) Dario Bernardez, Project Supervisor and Acting General Manager of private respondent
the amounts claimed by the latter for the use of the posts, so that if there was any inequity, and Manager of Region V of NEA, declared that according to NEA guidelines in 1985
it was suffered by them. (Exh. "C"), for the use by private telephone systems of electric cooperatives’ posts, they
should pay a minimum monthly rental of P4.00 per post, and considering the escalation of
Regarding the second cause of action, petitioners claimed that private respondent had asked prices since 1985, electric cooperatives have been charging from P10.00 to P15.00 per
for telephone lines in areas outside Naga City for which its posts were used by them; and post, which is what petitioners should pay for the use of the posts.
that if petitioners had refused to comply with private respondent’s demands for payment
for the use of the posts outside Naga City, it was probably because what is due to them (4) Engineer Antonio Macandog, Department Head of the Office of Services of private
from private respondent is more than its claim against them. respondent, testified on the poor service rendered by petitioners’ telephone lines, like the
telephone in their Complaints Section which was usually out of order such that they could
And with respect to the third cause of action, petitioners claimed, inter alia, that their not respond to the calls of their customers. In case of disruption of their telephone lines, it
telephone service had been categorized by the National Telecommunication Corporation would take two to three hours for petitioners to reactivate them notwithstanding their calls
(NTC) as "very high" and of "superior quality."cralaw virtua1aw library on the emergency line.

During the trial, private respondent presented the following witnesses:chanrob1es virtual (5) Finally, Atty. Luis General, Jr., private respondent’s counsel, testified that the Board of
1aw library Directors asked him to study the contract sometime during the latter part of 1982 or in
1983, as it had appeared very disadvantageous to private Respondent. Notwithstanding his
(1) Dioscoro Ragragio, one of the two officials who signed the contract in its behalf, recommendation for the filing of a court action to reform the contract, the former general
declared that it was petitioner Maggay who prepared the contract; that the understanding managers of private respondent wanted to adopt a soft approach with petitioners about the
between private respondent and petitioners was that the latter would only use the posts in matter until the term of General Manager Henry Pascual who, after failing to settle the
Naga City because at that time, petitioners’ capability was very limited and they had no matter amicably with petitioners, finally agreed for him to file the present action for
expectation of expansion because of legal squabbles within the company; that private reformation of contract.
respondent agreed to allow petitioners to use its posts in Naga City because there were
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 29

On the other hand, petitioner Maggay testified to the following effect:chanrob1es virtual respondent’s operation and when its Board of Directors did not yet have any experience in
1aw library that business, it had become disadvantageous and unfair to private respondent because of
subsequent events and conditions, particularly the increase in the volume of the subscribers
(1) It is true that he was a member of the Board of Directors of private respondent and at of petitioners for more than ten (10) years without the corresponding increase in the
the same time the lawyer of petitioner when the contract was executed, but Atty. Gaudioso number of telephone connections to private respondent free of charge. The trial court
Tena, who was also a member of the Board of Directors of private respondent, was the one concluded that while in an action for reformation of contract, it cannot make another
who saw to it that the contract was fair to both parties. contract for the parties, it can, however, for reasons of justice and equity, order that the
contract be reformed to abolish the inequities therein. Thus, said court ruled that the
(2) With regard to the first cause of action:chanrob1es virtual 1aw library contract should be reformed by ordering petitioners to pay private respondent
compensation for the use of their posts in Naga City, while private respondent should also
(a) Private respondent has the right under the contract to use ten (10) telephone units of be ordered to pay the monthly bills for the use of the telephones also in Naga City. And
petitioners for as long as it wishes without paying anything therefor except for long taking into consideration the guidelines of the NEA on the rental of posts by telephone
distance calls through PLDT out of which the latter get only 10% of the charges.chanrobles companies and the increase in the costs of such posts, the trial court opined that a monthly
law library : red rental of P10.00 for each post of private respondent used by petitioners is reasonable,
which rental it should pay from the filing of the complaint in this case on January 2, 1989.
(b) In most cases, only drop wires and not telephone cables have been strung to the posts, And in like manner, private respondent should pay petitioners from the same date its
which posts have remained erect up to present; monthly bills for the use and transfers of its telephones in Naga City at the same rate that
the public are paying.chanroblesvirtualawlibrary
(c) Petitioners’ linemen have strung only small messenger wires to many of the posts and
they need only small holes to pass through; and On private respondent’s second cause of action, the trial court found that the contract does
not mention anything about the use by petitioners of private respondent’s posts outside
(d) Documents existing in the NTC show that the stringing of petitioners’ cables in Naga Naga City. Therefore, the trial court held that for reason of equity, the contract should be
City are according to standard and comparable to those of PLDT. The accidents mentioned reformed by including therein the provision that for the use of private respondent’s posts
by private respondent involved trucks that were either overloaded or had loads that outside Naga City, petitioners should pay a monthly rental of P10.00 per post, the payment
protruded upwards, causing them to hit the cables. to start on the date this case was filed, or on January 2, 1989, and private respondent should
also pay petitioners the monthly dues on its telephone connections located outside Naga
(3) Concerning the second cause of action, the intention of the parties when they entered City beginning January, 1989.
into the contract was that the coverage thereof would include the whole area serviced by
petitioners because at that time, they already had subscribers outside Naga City. Private And with respect to private respondent’s third cause of action, the trial court found the
respondent, in fact, had asked for telephone connections outside Naga City for its officers claim not sufficiently proved.
and employees residing there in addition to the ten (10) telephone units mentioned in the
contract. Petitioners have not been charging private respondent for the installation, Thus, the following decretal portion of the trial court’s decision dated July 20,
transfers and re-connections of said telephones so that naturally, they use the posts for 1990:jgc:chanrobles.com.ph
those telephone lines.
"WHEREFORE, in view of all the foregoing, decision is hereby rendered ordering the
(4) With respect to the third cause of action, the NTC has found petitioners’ cable reformation of the agreement (Exh. A); ordering the defendants to pay plaintiff’s electric
installations to be in accordance with engineering standards and practice and comparable to poles in Naga City and in the towns of Milaor, Canaman, Maragao and Pili, Camarines Sur
the best in the country. and in other places where defendant NATELCO uses plaintiff’s electric poles, the sum of
TEN (P10.00) PESOS per plaintiff’s pole, per month beginning January, 1989 and ordering
On the basis of the foregoing countervailing evidence of the parties, the trial court found, also the plaintiff to pay defendant NATELCO the monthly dues of all its telephones
as regards private respondent’s first cause of action, that while the contract appeared to be including those installed at the residence of its officers, namely; Engr. Joventino Cruz,
fair to both parties when it was entered into by them during the first year of private Engr. Antonio Borja, Engr. Antonio Macandog, Mr. Jesus Opiana and Atty. Luis General,
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 30

Jr. beginning January, 1989. Plaintiff’s claim for attorney’s fees and expenses of litigation the parties. The rigor of the legalistic rule that a written instrument should be the final and
and defendants’ counterclaim are both hereby ordered dismissed. Without pronouncement inflexible criterion and measure of the rights and obligations of the contracting parties is
as to costs." chanrobles lawlibrary : rednad thus tempered to forestall the effects of mistake, fraud, inequitable conduct, or accident.’
(pp. 55-56, Report of Code Commission)
Disagreeing with the foregoing judgment, petitioners appealed to respondent Court of
Appeals. In the decision dated May 28, 1992, respondent court affirmed the decision of the Thus, Articles 1359, 1361, 1362, 1363 and 1364 of the New Civil Code provide in essence
trial court, 5 but based on different grounds to wit: (1) that Article 1267 of the New Civil that where through mistake or accident on the part of either or both of the parties or
Code is applicable and (2) that the contract was subject to a potestative condition which mistake or fraud on the part of the clerk or typist who prepared the instrument, the true
rendered said condition void. The motion for reconsideration was denied in the resolution intention of the parties is not expressed therein, then the instrument may be reformed at the
dated September 10, 1992. 6 Hence, the present petition. instance of either party if there was mutual mistake on their part, or by the injured party if
only he was mistaken.chanrobles virtual lawlibrary
Petitioners assign the following pertinent errors committed by respondent court:chanrob1es
virtual 1aw library Here, plaintiff-appellee did not allege in its complaint, nor does its evidence prove, that
there was a mistake on its part or mutual mistake on the part of both parties when they
1) in making a contract for the parties by invoking Article 1267 of the New Civil Code; entered into the agreement Exh. "A", and that because of this mistake, said agreement
failed to express their true intention. Rather, plaintiff’s evidence shows that said agreement
2) in ruling that prescription of the action for reformation of the contract in this case was prepared by Atty. Luciano Maggay, then a member of plaintiff’s Board of Directors
commenced from the time it became disadvantageous to private respondent; and and its legal counsel at that time, who was also the legal counsel for defendant-appellant,
so that as legal counsel for both companies and presumably with the interests of both
3) in ruling that the contract was subject to a potestative condition in favor of petitioners. companies in mind when he prepared the aforesaid agreement, Atty. Maggay must have
considered the same fair and equitable to both sides, and this was affirmed by the lower
Petitioners assert earnestly that Article 1267 of the New Civil Code is not applicable court when it found said contract to have been fair to both parties at the time of its
primarily because the contract does not involve the rendition of service or a personal execution. In fact, there were no complaints on the part of both sides at the time of and
prestation and it is not for future service with future unusual change. Instead, the ruling in after the execution of said contract, and according to 73-year old Justino de Jesus, Vice
the case Occeña, Et. Al. v. Jabson, etc, Et Al., 7 which interpreted the article, should be President and General manager of appellant at the time who signed the agreement Exh. "A"
followed in resolving this case. Besides, said article was never raised by the parties in their in its behalf and who was one of the witnesses for the plaintiff (sic), both parties complied
pleadings and was never the subject of trial and evidence. with said contract ‘from the very beginning’ (p. 5, tsn, April 17, 1989).

In applying Article 1267, respondent court rationalized:jgc:chanrobles.com.ph That the aforesaid contract has become iniquitous or unfavorable or disadvantageous to the
plaintiff with the expansion of the business of appellant and the increase in the volume of
"We agree with appellant that in order that an action for reformation of contract would lie its subscribers in Naga City and environs through the years, necessitating the stringing of
and may prosper, there must be sufficient allegations as well as proof that the contract in more and bigger telephone cable wires by appellant to plaintiff’s electric posts without a
question failed to express the true intention of the parties due to error or mistake, accident, corresponding increase in the ten (10) telephone connections given by appellant to plaintiff
or fraud. Indeed, in embodying the equitable remedy of reformation of instruments in the free of charge in the agreement Exh. "A" as consideration for its use of the latter’s electric
New Civil Code, the Code Commission gave its reasons as follows:chanrob1es virtual 1aw posts in Naga City, appear, however, undisputed from the totality of the evidence on record
library and the lower court so found. And it was for this reason that in the later (sic) part of 1982
or 1983 (or five or six years after the subject agreement was entered into by the parties),
‘Equity dictates the reformation of an instrument in order that the true intention of the plaintiff’s Board of Directors already asked Atty. Luis General who had become their legal
contracting parties may be expressed. The courts by the reformation do not attempt to make counsel in 1982, to study said agreement which they believed had become disadvantageous
a new contract for the parties, but to make the instrument express their real agreement. The to their company and to make the proper recommendation, which study Atty. General did,
rationale of the doctrine is that it would be unjust and inequitable to allow the enforcement and thereafter, he already recommended to the Board the filing of a court action to reform
of a written instrument which does not reflect or disclose the real meeting of the minds of said contract, but no action was taken on Atty. General’s recommendation because the
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 31

former general managers of plaintiff wanted to adopt a soft approach in discussing the the number of plaintiff’s electric posts that appellant was using in 1989 had jumped to
matter with appellant, until, during the term of General Manager Henry Pascual, the latter, 1,403,192 of which are outside Naga City (Exh. "B"). Add to this the destruction of some
after failing to settle the problem with Atty. Luciano Maggay who had become the of plaintiff’s poles during typhoons like the strong typhoon Sisang in 1987 because of the
president and general manager of appellant, already agreed for Atty. General’s filing of the heavy telephone cables attached thereto, and the escalation of the costs of electric poles
present action. The fact that said contract has become iniquitous or disadvantageous to from 1977 to 1989, and the conclusion is indeed ineluctable that the agreement Exh. "A"
plaintiff as the years went by did not, however, give plaintiff a cause of action for has already become too one-sided in favor of appellant to the great disadvantage of
reformation of said contract, for the reasons already pointed out earlier. But this does not plaintiff, in short, the continued enforcement of said contract has manifestly gone far
mean that plaintiff is completely without a remedy, for we believe that the allegations of its beyond the contemplation of plaintiff, so much so that it should now be released therefrom
complaint herein and the evidence it has presented sufficiently make out a cause of action under Art. 1267 of the New Civil Code to avoid appellant’s unjust enrichment at its
under Art. 1267 of the New Civil Code for its release from the agreement in (plaintiff’s) expense. As stated by Tolentino in his commentaries on the Civil Code citing
question.chanrobles.com:cralaw:red foreign civilist Ruggiero, ‘equity demands a certain economic equilibrium between the
x x x prestation and the counter-prestation, and does not permit the unlimited impoverishment of
one party for the benefit of the other by the excessive rigidity of the principle of the
obligatory force of contracts (IV Tolentino, Civil Code of the Philippines, 1986 ed., pp.
The understanding of the parties when they entered into the Agreement Exh. "A" on 247-248).cralawnad
November 1, 1977 and the prevailing circumstances and conditions at the time, were
described by Dioscoro Ragragio, the President of plaintiff in 1977 and one of its two We therefore, find nothing wrong with the ruling of the trial court, although based on a
officials who signed said agreement in its behalf, as follows:chanrob1es virtual 1aw library different and wrong premise (i.e., reformation of contract), that from the date of the filing
of this case, appellant must pay for the use of plaintiff’s electric posts in Naga City at the
‘Our understanding at that time is that we will allow NATELCO to utilize the posts of reasonable monthly rental of P10.00 per post, while plaintiff should pay appellant for the
CASURECO II only in the City of Naga because at that time the capability of NATELCO telephones in the same City that it was formerly using free of charge under the terms of the
was very limited, as a matter of fact we do [sic] not expect to be able to expand because of agreement Exh. "A" at the same rate being paid by the general public. In affirming said
the legal squabbles going on in the NATELCO. So, even at that time there were so many ruling, we are not making a new contract for the parties herein, but we find it necessary to
subscribers in Naga City that cannot be served by the NATELCO, so as a matter of public do so in order not to disrupt the basic and essential services being rendered by both parties
service we allowed them to sue (sic) our posts within the Naga City.’ (p. 8, tsn April 3, herein to the public and to avoid unjust enrichment by appellant at the expense of plaintiff,
1989) said arrangement to continue only until such time as said parties can re-negotiate another
agreement over the same subject-matter covered by the agreement Exh. "A." Once said
Ragragio also declared that while the telephone wires strung to the electric posts of agreement is reached and executed by the parties, the aforesaid ruling of the lower court
plaintiff were very light and that very few telephone lines were attached to the posts of and affirmed by us shall cease to exist and shall be substituted and superseded by their new
CASURECO II in 1977, said posts have become ‘heavily loaded’ in 1989 (tsn, id.). agreement. . . ." 8

In truth, as also correctly found by the lower court, despite the increase in the volume of Article 1267 speaks of "service" which has become so difficult. Taking into consideration
appellant’s subscribers and the corresponding increase in the telephone cables and wires the rationale behind this provision, 9 the term "service" should be understood as referring
strung by it to plaintiff’s electric posts in Naga City for the more 10 years that the to the "performance" of the obligation. In the present case, the obligation of private
agreement Exh. "A" of the parties has been in effect, there has been no corresponding respondent consists in allowing petitioners to use its posts in Naga City, which is the
increase in the ten (10) telephone units connected by appellant free of charge to plaintiff’s service contemplated in said article. Furthermore, a bare reading of this article reveals that
offices and other places chosen by plaintiff’s general manager which was the only it is not a requirement thereunder that the contract be for future service with future unusual
consideration provided for in said agreement for appellant’s use of plaintiff’s electric posts. change. According to Senator Arturo M. Tolentino, 10 Article 1267 states in our law the
Not only that, appellant even started using plaintiff’s electric posts outside Naga City doctrine of unforeseen events. This is said to be based on the discredited theory of rebus sic
although this was not provided for in the agreement Exh. "A" as it extended and expanded stantibus in public international law; under this theory, the parties stipulate in the light of
its telephone services to towns outside said city. Hence, while very few of plaintiff’s certain prevailing conditions, and once these conditions cease to exist the contract also
electric posts were being used by appellant in 1977 and they were all in the City of Naga, ceases to exist. Considering practical needs and the demands of equity and good faith, the
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 32

disappearance of the basis of a contract gives rise to a right to relief in favor of the party ". . . In affirming said ruling, we are not making a new contract for the parties herein, but
prejudiced. we find it necessary to do so in order not to disrupt the basic and essential services being
rendered by both parties herein to the public and to avoid unjust enrichment by appellant at
In a nutshell, private respondent in the Occeña case filed a complaint against petitioner the expense of plaintiff . . . ." 14
before the trial court praying for modification of the terms and conditions of the contract
that they entered into by fixing the proper shares that should pertain to them out of the Petitioners’ assertion that Article 1267 was never raised by the parties in their pleadings
gross proceeds from the sales of subdivided lots. We ordered the dismissal of the complaint and was never the subject of trial and evidence has been passed upon by respondent court
therein for failure to state a sufficient cause of action. We rationalized that the Court of in its well reasoned resolution, which we hereunder quote as our
Appeals misapplied Article 1267 because:jgc:chanrobles.com.ph own:jgc:chanrobles.com.ph

". . . respondent’s complaint seeks not release from the subdivision contract but that the "First, we do not agree with defendant-appellant that in applying Art. 1267 of the New
court ‘render judgment modifying the terms and conditions of the contract . . . by fixing the Civil Code to this case, we have changed its theory and decided the same on an issue not
proper shares that should pertain to the herein parties out of the gross proceeds from the invoked by plaintiff in the lower court. For basically, the main and pivotal issue in this case
sales of subdivided lots of subject subdivision’. The cited article (Article 1267) does not is whether the continued enforcement of the contract Exh. "A" between the parties has,
grant the courts (the) authority to remake, modify or revise the contract or to fix the through the years (since 1977), become too iniquitous or disadvantageous to the plaintiff
division of shares between the parties as contractually stipulated with the force of law and too one-sided in favor of defendant-appellant, so that a solution must be found to
between the parties, so as to substitute its own terms for those covenanted by the parties relieve plaintiff from the continued operation of said agreement and to prevent defendant-
themselves. Respondent’s complaint for modification of contract manifestly has no basis in appellant from further unjustly enriching itself at plaintiff’s expense. It is indeed
law and therefore states no cause of action. Under the particular allegations of respondent’s unfortunate that defendant had turned deaf ears to plaintiff’s requests for renegotiation,
complaint and the circumstances therein averred, the courts cannot even in equity the relief constraining the latter to go to court. But although plaintiff cannot, as we have held,
sought." 11 correctly invoke reformation of contract as a proper remedy (there having been no showing
of a mistake or error in said contract on the part of any of the parties so as to result in its
The ruling in the Occeña case is not applicable because we agree with respondent court that failure to express their true intent), this does not mean that plaintiff is absolutely without a
the allegations in private respondent’s complaint and the evidence it has presented remedy in order to relieve itself from a contract that has gone far beyond its contemplation
sufficiently made out a cause of action under Article 1267. We, therefore, release the and has become highly iniquitous and disadvantageous to it through the years because of
parties from their correlative obligations under the contract. However, our disposition of the expansion of defendant-appellant’s business and the increase in the volume of its
the present controversy does not end here. We have to take into account the possible subscribers. And as it is the duty of the Court to administer justice, it must do so in this
consequences of merely releasing the parties therefrom: petitioners will remove the case in the best way and manner it can in the light of the proven facts and the law or laws
telephone wires/cables in the posts of private respondent, resulting in disruption of their applicable thereto.chanrobles virtual lawlibrary
essential service to the public; while private respondent, in consonance with the contract 12
will return all the telephone units to petitioners, causing prejudice to its business. We shall It is settled that when the trial court decides a case in favor of a party on a certain ground,
not allow such eventuality. Rather, we require, as ordered by the trial court: 1) petitioners the appellate court may uphold the decision below upon some other point which was
to pay private respondent for the use of its posts in Naga City and in the towns of Milaor, ignored or erroneously decided by the trial court (Garcia Valdez v. Tuazon, 40 Phil. 943;
Canaman, Magarao and Pili, Camarines Sur and in other places where petitioners use Relativo v. Castro, 76 Phil. 563; Carillo v. Salak de Paz, 18 SCRA 467). Furthermore, the
private respondent’s posts, the sum of ten (P10.00) pesos per post, per month, beginning appellate court has the discretion to consider an unassigned error that is closely related to
January, 1989; and 2) private respondent to pay petitioner the monthly dues of all its an error properly assigned (Paterno v. Jao Yan, 1 SCRA 631; Hernandez v. Andal, 78 Phil.
telephones at the same rate being paid by the public beginning January, 1989. The peculiar 196). It has also been held that the Supreme Court (and this Court as well) has the authority
circumstances of the present case, as distinguished further from the Occeña case, to review matters, even if they are not assigned as errors in the appeal, if it is found that
necessitates exercise of our equity jurisdiction. 13 By way of emphasis, we reiterate the their consideration is necessary in arriving at a just decision of the case (Saura Import &
rationalization of respondent court that:chanroblesvirtualawlibrary Export Co., Inc. v. Phil. International Surety Co. and PNB, 8 SCRA 143). For it is the
material allegations of fact in the complaint, not the legal conclusion made therein or the
prayer, that determines the relief to which the plaintiff is entitled, and the plaintiff is
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 33

entitled to as much relief as the facts warrant although that relief is not specifically prayed or not irrelevant to reformation and therefore, cannot be an element in the determination of
for in the complaint (Rosales v. Reyes and Ordoveza, 25 Phil. 495; Cabigao v. Lim, 50 the period for prescription of the action to reform.
Phil. 844; Baguioro v. Barrios, 77 Phil. 120). To quote an old but very illuminating
decision of our Supreme Court through the pen of American jurist Adam C. Article 1144 of the New Civil Code provides, inter alia, that an action upon a written
Carson:chanrob1es virtual 1aw library contract must be brought within ten (10) years from the time the right of the action accrues.
Clearly, the ten (10) year period is to be reckoned from the time the right of action accrues
‘Under our system of pleading it is the duty of the courts to grant the relief to which the which is not necessarily the date of execution of the contract. As correctly ruled by
parties are shown to be entitled by the allegations in their pleadings and the facts proven at respondent court, private respondent’s right of action arose "sometime during the latter part
the trial, and the mere fact that they themselves misconstrue the legal effects of the facts of 1982 or in 1983 when according to Atty. Luis General, Jr. . . ., he was asked by (private
thus alleged and proven will not prevent the court from placing the just construction respondent’s) Board of Directors to study said contract as it already appeared
thereon and adjudicating the issues accordingly.’ (Alzua v. Johnson, 21 Phil. 308) disadvantageous to (private respondent) (p. 31, tsn, May 8, 1989). (Private respondent’s)
cause of action to ask for reformation of said contract should thus be considered to have
And in the fairly recent case of Caltex Phil. Inc. v. IAC, 176 SCRA 741, the Honorable arisen only in 1982 or 1983, and from 1982 to January 2, 1989 when the complaint in this
Supreme Court also held:chanrob1es virtual 1aw library case was filed, ten (10) years had not yet elapsed." 17

‘We rule that the respondent court did not commit any error in taking cognizance of the Regarding the last issue, petitioners allege that there is nothing purely potestative about the
aforesaid issues, although not raised before the trial court. The presence of strong prestations of either party because petitioner’s permission for free use of telephones is not
consideration of substantial justice has led this Court to relax the well-entrenched rule that, made to depend purely on their will, neither is private respondent’s permission for free use
except questions on jurisdiction, no question will be entertained on appeal unless it has of its posts dependent purely on its will.chanrobles lawlibrary : rednad
been raised in the court below and it is within the issues made by the parties in their
pleadings (Cordero v. Cabral, L-36789, July 25, 1983, 123 SCRA 532). . . .’ Apart from applying Article 1267, respondent court cited another legal remedy available to
private respondent under the allegations of its complaint and the preponderant evidence
We believe that the above authorities suffice to show that this Court did not err in applying presented by it:jgc:chanrobles.com.ph
Art. 1267 of the New Civil Code to this case. Defendant-appellant stresses that the
applicability of said provision is a question of fact, and that it should have been given the ". . . we believe that the provision in said agreement —
opportunity to present evidence on said question. But defendant-appellant cannot honestly
and truthfully claim that it (did) not (have) the opportunity to present evidence on the issue ‘(a) That the term or period of this contract shall be as long as the party of the first part
of whether the continued operation of the contract Exh. "A" has now become too one-sided [herein appellant] has need for the electric light posts of the party of the second part [herein
in its favor and too iniquitous, unfair, and disadvantageous to plaintiff. As held in our plaintiff] it being understood that this contract shall terminate when for any reason
decision, the abundant and copious evidence presented by both parties in this case and whatsoever, the party of the second part is forced to stop, abandoned [sic] its operation as a
summarized in said decision established the following essential and vital facts which led us public service and it becomes necessary to remove the electric light post [sic]’; (Emphasis
to apply Art. 1267 of the New Civil Code to this case:chanrobles virtual lawlibrary supplied)

x x x." 15 is invalid for being purely potestative on the part of appellant as it leaves the continued
effectivity of the aforesaid agreement to the latter’s sole and exclusive will as long as
On the issue of prescription of private respondent’s action for reformation of contract, plaintiffs is in operation. A similar provision in a contract of lease wherein the parties
petitioners allege that respondent court’s ruling that the right of action "arose only after agreed that the lessee could stay on the leased premises ‘for as long as the defendant
said contract had already become disadvantageous and unfair to it due to subsequent events needed the premises and can meet and pay said increases’ was recently held by the
and conditions, which must be sometime during the latter part of 1982 or in 1983 . . ." 16 is Supreme Court in Lim v. C.A., 191 SCRA 150, citing the much earlier case of Encarnacion
erroneous. In reformation of contracts, what is reformed is not the contract itself, but the v. Baldomar, 77 Phil. 470, as invalid for being ‘a purely potestative condition because it
instrument embodying the contract. It follows that whether the contract is disadvantageous leaves the effectivity and enjoyment of leasehold rights to the sole and exclusive will of the
lessee.’ Further held the High Court in the Lim case:chanrobles lawlibrary : rednad
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 34

‘The continuance, effectivity and fulfillment of a contract of lease cannot be made to WHEREFORE, the petition is hereby DENIED. The decision of the Court of Appeals
depend exclusively upon the free and uncontrolled choice of the lessee between continuing dated May 28, 1992 and its resolution dated September 10, 1992 are AFFIRMED.
the payment of the rentals or not, completely depriving the owner of any say in the matter.
Mutuality does not obtain in such a contract of lease of no equality exists between the SO ORDERED.
lessor and the lessee since the life of the contract is dictated solely by the lessee.’
Narvasa, C.J., Padilla, Regalado and Puno, JJ., concur.
The above can also be said of the agreement Exh. "A" between the parties in this case.
There is no mutuality and equality between them under the afore-quoted provision thereof
since the life and continuity of said agreement is made to depend as long as appellant needs [G.R. No. 4437. September 9, 1909. ]
plaintiff’s electric posts. And this is precisely why, since 1977 when said agreement was
executed and up to 1989 when this case was finally filed by plaintiff, it could do nothing to TOMAS OSMEÑA, Plaintiff-Appellee, v. CENONA RAMA, Defendant-Appellant.
be released from or terminate said agreement notwithstanding that its continued effectivity
has become very disadvantageous and iniquitous to it due to the expansion and increase of Filemon Sotto for Appellant.
appellant’s telephone services within Naga City and even outside the same, without a
corresponding increase in the ten (10) telephone units being used by plaintiff free of J.H. Junquera for Appellee.
charge, as well as the bad and inefficient service of said telephones to the prejudice and
inconvenience of plaintiff and its customers. . . ." 18 SYLLABUS
1. CONTRACT; CONDITIONAL PROMISE TO PAY. — A condition imposed upon a
Petitioners’ allegations must be upheld in this regard. A potestative condition is a contract by the promisor, the performance of which depends upon his exclusive will, is
condition, the fulfillment of which depends upon the sole will of the debtor, in which case, void, in accordance with the provisions of article 1115 of the Civil Code.
the conditional obligation is void. 19 Based on this definition, respondent court’s finding
that the provision in the contract, to wit:jgc:chanrobles.com.ph
DECISION
"(a) That the term or period of this contract shall be as long as the party of the first part
(petitioner) has need for the electric light posts of the party of the second part (private JOHNSON, J. :
respondent) . . ." chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph It appears from the record that upon the 15th day of November, 1890, the defendant herein
executed and delivered to Victoriano Osmeña the following
is a potestative condition, is correct. However, it must have overlooked the other conditions contract:jgc:chanrobles.com.ph
in the same provision, to wit:jgc:chanrobles.com.ph
"EXHIBIT A.
". . . it being understood that this contract shall terminate when for any reason whatsoever,
the party of the second part (private respondent) is forced to stop, abandoned (sic) its P200.00.
operation as a public service and it becomes necessary to remove the electric light post
(sic);" "CEBU, November 15, 1890.

which are casual conditions since they depend on chance, hazard, or the will of a third "I, Doña Cenona Rama, a resident of this city, and of legal age, have received from Don
person. 20 In sum, the contract is subject to mixed conditions, that is, they depend partly on Victoriano Osmeña the sum of two hundred pesos in cash which I will pay in sugar in the
the will of the debtor and partly on chance, hazard or the will of a third person, which do month of January or February of the coming year, at the price ruling on the day of
not invalidate the aforementioned provision. 21 Nevertheless, in view of our discussions delivering the sugar into his warehouses, and I will pay him interest at the rate of half a
under the first and second issues raised by petitioners, there is no reason to set aside the cuartillo per month on each peso, beginning on this date until the day of the settlement; and
questioned decision and resolution of respondent court. if I can not pay in full, a balance shall be struck, showing the amount outstanding at the end
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 35

of each June, including interest, and such balance as may be outstanding against me shall contracts became the property of one of his heirs, Agustina Rafols. Later, the date does not
be considered as capital which I will always pay in sugar, together with the interest appear, the said Agustina Rafols ceded to the present plaintiff all of her right and interest in
mentioned above. I further promise that I will sell to the said Señor Osmeña all the sugar said contracts.
that I may harvest, and as a guarantee, pledge as security all of my present and future
property, and as special security the house with tile roof and ground floor of stone in which On the 15th day of March, 1902, the plaintiff presented the contracts to the defendant for
I live in Pagina; in proof whereof, I sign this document, and he shall be entitled to make payment and she acknowledged her responsibility upon said contracts by an indorsement
claim against me at the expiration of the term stated in this document. upon them in the following language:jgc:chanrobles.com.ph

(Signed) "CENONA RAMA. "EXHIBIT C.

"Witnesses:jgc:chanrobles.com.ph "CEBU, March 15, 1902.

"FAUSTO PEÑALOSA. "On this date I hereby promise, in the presence of two witnesses, that, if the house of strong
materials in which I live in Pagina is sold, I will pay my indebtedness to Don Tomas
"FRANCISCO MEDALLE."cralaw virtua1aw library Osmeña as set forth in this document.

On the 27th day of October, 1891, the defendant executed and delivered to the said (Signed) "CENONA RAMA."cralaw virtua1aw library
Victoriano Osmeña the following contract:jgc:chanrobles.com.ph
The defendant not having paid the amount due on said contracts; the plaintiff, upon the
"EXHIBIT B. 26th day of June, 1906, commenced the present action in the Court of First Instance of the
Province of Cebu. The complaint filed in said cause alleged the execution and delivery of
"CEBU, October 27, 1891. the above contracts, the demand for payment, and the failure to pay on the part of the
defendant, and the prayer for a judgment for the amount due on the said contracts. The
"On this date I have asked for a further loan and have received from Don Victoriano defendant answered by filing a general denial and setting up the special defense of
Osmeña the sum of seventy pesos in cash, fifty pesos of which I have loaned to Don prescription.
Evaristo Peñares, which we will pay in sugar in the month of January of the coming year
according to the former conditions. The case was finally brought on to trial in the Court of First Instance, and the only witness
produced during the trial was the plaintiff himself. The defendant did not offer any proof
(Signed) "CENONA RAMA. whatever in the lower court.

"FROM Don Evaristo Peñares P50 After hearing the evidence adduced during the trial, the lower court rendered a judgment in
favor of the plaintiff and against the defendant for the sum of P200 with interest at the rate
"Doña Cenona Rama 20 of 18 3/4 per cent per annum, from the 15th day of November, 1890, and for the sum of
P20, with interest at the rate of 18 3/4 per cent per annum, from the 27th day of October,
____ 1891, until the said sums were paid. From this judgment the defendant appealed.

P70 The lower court found that P50 of the P70 mentioned in Exhibit B had not been borrowed
by the defendant, but by one Evaristo Peñares; therefore the defendant had no
"Received — Evaristo Peñares."cralaw virtua1aw library responsibility for the payment of the said P50.

Some time after the execution and delivery of the above contracts, the said Victoriano The only questions raised by the appellant were questions of fact. The appellant alleges that
Osmeña died. In the settlement and division of the property of his estate the above the proof adduced during the trial of the cause was not sufficient to support the findings of
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 36

the lower court. It was suggested during the discussion of the case in this court that, in the within a reasonable time to be determined by the courts in accordance with the
acknowledgment above quoted of the indebtedness made by the defendant, she imposed the circumstances of the case.
condition that she would pay the obligation if she sold her house. If that statement found in
her acknowledgment of the indebtedness should be regarded as a condition, it was a 4. PRINCIPAL AND AGENT; THIRD PERSONS. — When an agent acts in his own
condition which depended upon her exclusive will, and is, therefore, void. (Art. 1115, Civil name, the principal has no right of action against the persons with whom the agent has
Code.) The acknowledgment, therefore, was an absolute acknowledgment of the obligation contracted, or such persons against the principal. In such case, the agent is directly liable to
and was sufficient to prevent the statute of limitation from barring the action upon the the person with whom he has contracted, as if the transaction were his own. (Art. 1717,
original contract. Civil Code.)

We are satisfied, from all of the evidence adduced during the trial, that the judgment of the
lower court should be affirmed. So ordered. DECISION

Arellano, C.J., Torres, Carson and Moreland, JJ., concur.

ROMUALDEZ, J. :
In August, 1918, the plaintiff corporation and the defendant, Mr. Vicente Sotelo, entered
[G.R. No. 16570. March 9, 1922. ] into contracts whereby the former obligated itself to sell, and the latter to purchase from it,
two steel tanks, for the total price of twenty-one thousand pesos (21,000), the same to be
SMITH, BELL & CO., LTD., Plaintiff-Appellant, v. VICENTE SOTELO MATTI, shipped from New York and delivered at Manila "within three or four months;" two
Defendant-Appellant. expellers at the price of twenty five thousand pesos (25,000) each, which were to be
shipped from San Francisco in the month of September, 1918, or as soon as possible; and
Ross & Lawrence and Ewald E. Selph, for Plaintiff-Appellant. two electric motors at the price of two thousand pesos (2,000) each, as to the delivery of
which stipulation was made, couched in these words: "Approximate delivery within ninety
Ramon Sotelo, for Defendant-Appellant. days. — This is not guaranteed."cralaw virtua1aw library

SYLLABUS The tanks arrived at Manila on the 27th of April, 1919; the expellers on the 26th of
1. CONTRACTS; PURCHASE AND SALE OF MERCHANDISE; UNCERTAINTY OF October, 1918; and the motors on the 27th of February, 1919.
TIME OF FULFILLMENT OF OBLIGATION. — As no definite date was fixed for the
delivery of the goods, which the plaintiff undertook to deliver, the term which the parties The plaintiff corporation notified the defendant, Mr. Sotelo, of the arrival of these goods,
attempted to establish being so uncertain that one cannot tell whether, as a matter of fact, but Mr. Sotelo refused to receive them and to pay the prices stipulated.
the aforesaid goods could, or could not, be imported into Manila, the obligation must be
regarded as conditional and not one with a term. The plaintiff brought suit against the defendant, based on four separate causes of action,
alleging, among other facts, that it immediately notified the defendant of the arrival of the
2. ID.; ID.; WHEN FULFILLMENT OF CONDITION NOT DEPENDENT ON THE goods, and asked instructions from him as to the delivery thereof, and that the defendant
WILL OF OBLIGOR. — Where the fulfillment of the condition does not depend on the refused to receive any of them and to pay their price. The plaintiff, further, alleged that the
will of the obligor, but on that of a third person who can in no way be compelled to carry it expellers and the motors were in good condition. (Amended complaint, pages 16-30, Bill
out, the obligor’s part of the contract is complied with, if he does all that is in his power, of Exceptions.)
and it then becomes incumbent upon the other contracting party to comply with the terms
of the contract. In their answer, the defendant, Mr. Sotelo, and the intervenor, the Manila Oil Refining and
By-Products Co., Inc., denied the plaintiff’s allegations as to the shipment of these goods
3. ID.; ID.; WHEN TIME NOT ESSENTIAL. — Where no date is fixed in the contract for and their arrival at Manila, the notification to the defendant, Mr. Sotelo, the latter’s refusal
the delivery of the thing sold, time is considered unessential, and delivery must be made to receive them and pay their price, and the good condition of the expellers and the motors,
alleging as special defense that Mr. Sotelo had made the contracts in question as Manager
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 37

of the intervenor, the Manila Oil Refining and By-Products Co., Inc., which fact was "The following articles, herein below more particularly described, to be shipped at San
known to the plaintiff, and that "it was only in May, 1919, that it notified the intervenor Francisco within the month of September /18, or as soon as possible. — Two Anderson oil
that said tanks had arrived, the motors and the expellers having arrived incomplete and expellers . . ."cralaw virtua1aw library
long after the date stipulated." As a counterclaim or set-off, they also allege that, as a
consequence of the plaintiff’s delay in making delivery of the goods, which the intervenor And in the contract relative to the motors (Exhibit D, page 64, rec.) the following
intended to use in the manufacture of coconut oil, the intervenor suffered damages in the appears:jgc:chanrobles.com.ph
sums of one hundred sixteen thousand seven hundred eighty-three pesos and ninety-one
centavos (116,788.91) for the nondelivery of the tanks, and twenty-one thousand two "Approximate delivery within ninety days. — This is not guaranteed. — This sale is
hundred and fifty pesos (21,250) on account of the expellers and the motors not having subject to our being able to obtain Priority Certificate, subject to the United States
arrived in due time. Government requirements and also subject to confirmation of manufactures."cralaw
virtua1aw library
The case having been tried, the court below absolved the defendants from the complaint
insofar as the tanks and the electric motors were concerned, but rendered judgment against In all these contracts, there is a final clause as follows:jgc:chanrobles.com.ph
them, ordering them to "receive the aforesaid expellers and pay the plaintiff the sum of
fifty thousand pesos (50,000), the price of the said goods, with legal interest thereon from "The sellers are not responsible for delays caused by fires, riots on land or on the sea,
July 26, 1919, and costs."cralaw virtua1aw library strikes or other cause known as ’Force Majeure’ entirely beyond the control of the sellers
or their representatives."cralaw virtua1aw library
Both parties appeal from this judgment, each assigning several errors in the findings of the
lower court. Under these stipulations, it cannot be said that any definite date was fixed for the delivery
of the goods. As to the tanks, the agreement was that the delivery was to be made "within 3
The principal point at issue in this case is whether or not, under the contracts entered into or 4 months," but that period was subject to the contingencies referred to in a subsequent
and the circumstances established in the record, the plaintiff has fulfilled, in due time, its clause. With regard to the expellers, the contract says "within the month of September,
obligation to bring the goods in question to Manila. If it has, then it is entitled to the relief 1918," but to this is added "or as soon as possible." And with reference to the motors, the
prayed for; otherwise, it must be held guilty of delay and liable for the consequences contract contains this expressions, "Approximate delivery within ninety days," but right
thereof. after this, it is noted that "this is not guaranteed."cralaw virtua1aw library

To solve this question, it is necessary to determine what period was fixed for the delivery The oral evidence falls short of fixing such period.
of the goods.
From the record it appears that these contracts were executed at the time of the world war
As regards the tanks, the contracts A and B (pages 61 and 62 of the record) are similar, and when there existed rigid restrictions on the export from the United States of articles like the
in both of them we find this clause:jgc:chanrobles.com.ph machinery in question, and maritime, as well as railroad, transportation was difficult,
which fact was known to the parties; hence clauses were inserted in the contracts, regarding
"To be delivered within 3 or 4 months — The promise or indication of shipment carries "Government regulations, railroad embargoes, lack of vessel space, the exigencies of the
with it absolutely no obligation on our part — Government regulations, railroad requirements of the United States Government," in connection with the tanks and "Priority
embargoes, lack of vessel space, the exigencies of the requirements of the United States Certificate, subject to the United States Government requirements," with respect to the
Government, or a number of causes may act to entirely vitiate the indication of shipment as motors. At the time of the execution of the contracts, the parties were not unmindful of the
stated. In other words, the order is accepted on the basis of shipment at Mill’s convenience, contingency of the United States Government not allowing the export of the goods, nor of
time of shipment being merely an indication of what we hope to accomplish."cralaw the fact that the other foreseen circumstances therein stated might prevent it.
virtua1aw library
Considering these contracts in the light of the civil law, we cannot but conclude that the
term which the parties attempted to fix is so uncertain that one cannot tell just whether, as a
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 38

matter of fact, those articles could be brought to Manila or not. If that is the case, as we lower court, no law or precedent is alleged to have been violate." (Jurisprudencia Civil
think it is, the obligation must be regarded as conditional. published by the directors of the Revista General de Legislacion y Jurisprudencia [1866],
vol. 14, page 656.)
"Obligations for the performance of which a day certain has been fixed shall be
demandable only when the day arrives. In the second decision, the following doctrine is laid down:jgc:chanrobles.com.ph

"A day certain is understood to be one which must necessarily arrive, even though its date "Second. That when the fulfillment of the condition does not depend on the will of the
be unknown. obligor, but on that of a third person, who can in no way be compelled to carry it out, the
obligor’s part of the contract is complied with if he does all that is in his power, and has the
"If the uncertainty should consist in the arrival or non arrival of the day, the obligation is right to demand performance of the contract by the other party, which is the doctrine laid
conditional and shall be governed by the rules of the next preceding section" (referring to down also by the supreme court."cralaw virtua1aw library
pure and conditional obligations). (Art. 1125, Civ. Code.)
(The same publication [1871]. vol. 23, page 492.)
And as the export of the machinery in question was as stated in the contract, contingent
upon the sellers obtaining certificate of priority and permission of the United States It is sufficiently proven in the record that the plaintiff has made all the efforts it could
Government, subject to the rules and regulations, as well as to railroad embargoes, then the possibly by expected to make under the circumstances, to bring the goods in question to
delivery was subject to a condition the fulfillment of which depended not only upon the Manila, as soon as possible. And, as a matter of fact, through such efforts, it succeeded in
effort of the herein plaintiff, but upon the will of third persons who could in no way be importing them and placing them at the disposal of the defendant, Mr. Sotelo, in April,
compelled to fulfill the condition. In cases like this, which are not expressly provided for, 1919. Under the doctrine just cited, which, as we have seen is of the same juridical origin
but impliedly covered, by the Civil Code, the obligor will be deemed to have sufficiently as our Civil Code, it is obvious that the plaintiff has complied with its obligation.
performed his part of the obligation, if he has done all that was in his power, even if the
condition has not been fulfilled in reality. In connection with this obligation to deliver, occurring in a contract of sale like those in
question, the rule in North America is that when the time of delivery is not fixed in the
"In such cases, the decisions prior to the Civil Code have held that the obligee having done contract, time is regarded unessential.
all that was in his power, was entitled to enforce performance of the obligation. This
performance, which is fictitious — not real — is not expressly authorized by the Code, "When the time of delivery is not fixed or is stated in general and indefinite terms, time is
which limits itself only to declare valid those conditions and the obligation thereby not of the essence of the contract." (35 Cyc., 179. And see Montgomery v. Thompson, 152
affected; but it is neither disallowed, and the Code being thus silent, the old view can be Cal., 319; 92 Pac., 866; O’Brien v. Higley, 162 Ind., 316; 70 N. E., 242; Pratt v. Lincoln
maintained as a doctrine." (Manresa’s commentaries on the Civil Code [1907], vol. 8, page [Me. 1888], 13 Atl., 689; White v. McMillan, 114 N. c., 349; 19 S. E., 234; Ballantyne v.
132.) Watson, 30 U. C. C. P., 529.)

The decisions referred to by Mr. Manresa are those rendered by the supreme court of Spain In such case, the delivery must be made within a reasonable time.
on November 19, 1866, and February 23, 1871.
"The law implies, however, that if no time is fixed, delivery shall be made within a
In the former it is held:jgc:chanrobles.com.ph reasonable time, in the absence of anything to show that an immediate delivery intended."
(35 Cyc., 179, 180.)
"First. That when the fulfillment of the condition does not depend on the will of the
obligor, but on that of a third person who can in no way be compelled to carry it out, and it "When the contract provides for delivery as soon as possible’ the seller is entitled to a
is found by the lower court that the obligor has done all in his power to comply with the reasonable time, in view of all the circumstances, such as the necessities of manufacture, or
obligation, the judgment of the said court, ordering the other party to comply with his part of putting the goods in condition for delivery. The term does not men immediately or that
of the contract, is not contrary to the law of contracts, or to law 1, Tit. I, Book 10, of the the seller must stop all his other work and devote himself to that particular order. But the
’Novisima Recopilacion,’ or Law 12, Tit. 11, of Partida 5, when in the said finding of the seller must nevertheless act with all reasonable diligence or without unreasonable delay. It
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 39

has been held that a requirement that the shipment of goods should be the earliest possible’ Besides, it does not appear that the intervenor, the Manila Oil Refining and By-Products
must be construed as meaning that the goods should be sent as soon as the seller could Co., Inc., has in any way taken part in these contracts. These contracts were signed by the
possibly send them, and that it signified rather more than that the goods should be sent defendant, Mr. Vicente Sotelo, in his individual capacity and own name. If he was then
within a reasonable time. acting as agent of the intervenor, the latter has no right of action against the herein plaintiff.

"Delivery ’Shortly.’ — In a contract for the sale of personal property to be delivered "When an agent acts in his own name, the principal shall have no right of action against the
’shortly,’ it is the duty of the seller to tender delivery within a reasonable time and if he persons with whom the agent has contracted, or such persons against the principal.
tenders delivery after such time the buyer may reject.
x x x "In such case, the agent is directly liable to the person with whom he has contracted, as if
the transaction were his own. Cases involving things belonging to the principal are
excepted.
"The question as to what is a reasonable time for the delivery of the goods by the seller is
to be determined by the circumstances attending the particular transaction, such as the "The provisions of this article shall be understood to be without prejudice to actions
character of the goods, and the purpose for which they are intended, the ability of the seller between principal and agent." (Civil Code, art. 1717.)
to produce the goods if they are to be manufactured, the facilities available for
transportation, and the distance the goods must be carried, and the usual course of business "When the agent transacts business in his own name, it shall not be necessary for him to
in the particular trade." (35 Cyc., 181-184.) state who is the principal and he shall be directly liable, as if the business were for his own
account, to the persons with whom he transacts the same, said persons not having any right
Whether or not the delivery of the machinery in litigation was offered to the defendant of action against the principal, nor the latter against the former, the liabilities of the
within a reasonable time, is a question to be determined by the court. principal and of the agent to each other always being reserved." (Code of Com., art, 246.)

"Applications of rule. — A contract for delivery ’about Nov. 1’ is complied with by "If the agent transacts business in the name of the principal, he must state that fact; and if
delivery on November 10 (White v. McMillan, 114 N. C., 349; 19 S. E., 234. And see the contract is in writing, he must state it therein or in the subscribing clause, giving the
O’Brien v. Higley, 162 Ind., 316; 70 N. E., 242); and a contract to deliver ’about the last of name, surname, and domicile of said principal.
May or June’ is complied with by delivery on the last days of June (New Bedford Copper
Co. v. Southard, 95 Me., 209; 49 Atl., 1062, holding also that if the goods were to be used "In the case prescribed in the foregoing paragraph, the contract and the actions arising
for a ship to arrive ’about April’ and the vessel was delayed, the seller might deliver within therefrom shall be effective between the principal and the persons or person who may have
a reasonable time after her arrival, although such reasonable time extended beyond the last transacted business with the agent; but the latter shall be liable to the persons with whom
of June); so under a contract to deliver goods sold ’about June, 1906,’ delivery may be he transacted business during the time he does not prove the commission, if the principal
made during the month of June, or in a reasonable time thereafter (Loomis v. Norman should deny it, without prejudice to the obligation and proper actions between the principal
Printers’ Supply Co., 81 Conn., 343; 71 Atl., 358)." (35 Cyc., 180, note 16.) and agent." (Code of Com., art. 247.)

The record shows, as we have stated, that the plaintiff did all within its power to have the The foregoing provisions lead us to the conclusion that the plaintiff is entitled to the relief
machinery arrive at Manila as soon as possible, and immediately upon its arrival it notified prayed for in its complaint, and that the intervenor has no right of action, the damages
the purchaser of the fact and offered to deliver it to him. Taking these circumstances into alleged to have been sustained by it not being imputable t the plaintiff.
account, we hold that the said machinery was brought to Manila by the plaintiff within a
reasonable time. Wherefore, the judgment appealed from is modified, and the defendant, Mr. Vicente Sotelo
Matti, sentenced to accept and receive from the plaintiff the tanks, the expellers and the
Therefore, the plaintiff has not been guilty of any delay in the fulfillment of its obligation, motors is question, and to pay the plaintiff the sum of ninety-six thousand pesos (96,000),
and, consequently, it could not have incurred any of the liabilities mentioned by the with legal interest thereon from July 17, 1919, the date of the filing of the complaint, until
intervenor in its counterclaim or set-off. fully paid , and the costs of both instances. So ordered.
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 40

Araullo, C.J., Johnson, Street, Malcolm, Avanceña, Villamor, Ostrand, and Johns, JJ., obligation to pay is made dependent. And upon the happening of the condition, the debt
concur. became immediately due and demandable. (Article 1114, old Civil Code; 8 Manresa, 119.)

2. ID., EVIDENCE, PRESUMPTION OR INFERENCE FROM PRESERVATION AND

[G.R. No. L-5267. October 27, 1953.] POSSESSION OF EVIDENCE OF INDEBTEDNESS. — The sale was not affected in the
lifetime of the debter (the intestate), but after his death and by his administrator, the very
LUZ HERMOSA, as administratrix of the Intestate Estate of Fernando Hermosa, R., wife of the claimant. There was no evidence to show that the claim was the product of a
and FERNANDO HERMOSA, JR., Petitioners, v. EPIFANIO M. LONGARA, collusion or connivance between the administratrix and the claimant. The receipts of the
Respondent. advances were preserved. Held: That there was really a promise made by the intestate to
pay for the credit advances, may be implied from the fact that the receipts thereof had been
Manuel O. Chan, for Petitioners. preserved; had the advances been made without intention of demanding their payment
Jacinto R. Bohol for Respondents. later, said receipts would not have been preserved. Regularity of the advances and the close
relationship between the intestate and the claimant also support this contention.

SYLLABUS 3. ID.; SUSPENSIVE CONDITION WHICH TOOK PLACE AFTER OBLIGOR’S

DEATH; STATUTE OF LIMITATIONS. — The fact that the suspensive condition took
place after the death of the debtor, and that the advances were made more than ten years
1. OBLIGATIONS AND CONTRACTS; CONDITIONAL OBLIGATIONS; A before the sale are immaterial (4 Sanchez Roman, p. 122). The obligation retroacts to the
CONDITION THAT DOES NOT DEPEND UPON THE EXCLUSIVE WILL OF THE date when the contract was entered into, and all amounts advanced from the time of the
DEBTOR; SUSPENSIVE CONDITIONS. — The condition of the obligation was that agreement became due upon the happening of the suspensive condition. As the obligation
payment was to be made "as soon as he (obligor) receives funds derived from the sale of to pay became due and demandable only when the house was sold and the proceeds
his property in Spain." The will to sell on the part of the debtor (intestate) was present in received in the islands, the action to recover the same only accrued, within the meaning of
fact, or presumed legally to exist, although the price and other conditions thereof were still the statute of limitations, on the date the money became available here; hence, the action to
within his discretion and final approval. But in addition to this acceptability of the sale to recover the advances has not yet prescribed.
him (obligor), there were still other conditions that had to concur to effect the sale, mainly
that of the presence of a buyer, ready, able and willing to purchase the property under the 4. ID.; DESCENT AND DISTRIBUTION; GRANDSON’S ALLOWANCE, A
conditions demanded by the vendor. Without such a buyer the sale could not be carried out PERSONAL OBLIGATION. — Credits furnished the intestate’s grandson after his
or the proceeds thereof sent to the islands. Held: The condition does not depend exclusively (intestate’s) death should not be allowed. Even if authorization to furnish necessaries to his
upon the will of the debtor, but also upon other circumstances beyond his power or control. grandson may have been given, this authorization could not be made to extend after his
If the condition were "if he decides to sell his house," or "if he likes to pay the sums death, for two obvious reasons: (1) The obligation to furnish support is personal and is
advanced," or any other condition of similar import implying that upon him (the debtor) extinguished upon the death of the person obliged to give support (article 150, old Civil
alone payment would depend, the condition would be potestativa, dependent upon his will Code); and (2) upon the death of a principal (the intestate), his agent’s authority or
or discretion. The condition, as stated above, implies that the obligor had already decided authorization is deemed terminated (article 1732, old Civil Code).
to sell his house, or at least that he had made his creditors believe that he had done so, and
that all that was needed to make his obligation (to pay his indebtedness) demandable is that 5. ID.; STATUTE OF NONCLAIMS; APPEALS; QUESTIONS NOT RAISED IN
the sale be consummated and the price thereof remitted to the islands. The condition of the LOWER COURTS. — The question of whether or not the appellant’s claims are barred by
obligation was not a purely potestative one, depending exclusively upon the will of the the statute of non-claims cannot be passed upon on appeal where this question was never
obligor, but a mixed one, depending partly upon chance, i. e., the presence of a buyer of the raised in any of the courts below.
property for the price and under the conditions desired by the obligor. The obligation is
clearly governed by the second sentence of article 1115 of the old Civil Code (8 Manresa,
126). The condition is, besides, a suspensive condition, upon the happening of which the DECISION
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 41

LABRADOR, J.: complied with (article 1119, old Civil Code). The will to sell on the part of the intestate
This is an appeal by way of certiorari against a decision of the Court of Appeals, fourth was, therefore, present in fact, or presumed legally to exist, although the price and other
division, approving certain claims presented by Epifanio M. Longara against the intestate conditions thereof were still within his discretion and final approval. But in addition to this
estate of Fernando Hermosa, Sr. The claims are of three kinds, namely, P2,341.41 acceptability of the price and other conditions of the sale to him (the intestate-vendor),
representing credit advances made to the intestate from 1932 to 1944, P12,924.12 made to there were still other conditions that had to concur to effect the sale, mainly that of the
his son Francisco Hermosa, and P3,772 made to his grandson, Fernando Hermosa, Jr. from presence of a buyer, ready, able and willing to purchase the property under the conditions
1945 to 1947, after the death of the intestate, which occurred in December, 1944. The demanded by the intestate. Without such a buyer the sale could not be carried out or the
claimant presented evidence and the Court of Appeals found, in accordance therewith, that proceeds thereof sent to the islands. It is evident, therefore, that the condition of the
the intestate had asked for the said credit advances for himself and for the members of his obligation was not a purely potestative one, depending exclusively upon the will of the
family "on condition that their payment should be made by Fernando Hermosa, Sr. as soon intestate, but a mixed one, depending partly upon the will of the intestate and partly upon
as he receive funds derived from the sale of his property in Spain." Claimant had testified chance, i.e., the presence of a buyer of the property for the price and under the conditions
without opposition that the credit advances were to be "payable as soon as Fernando desired by the intestate. The obligation is clearly governed by the second sentence of article
Hermosa, Sr.’s property in Spain was sold and he received money derived from the sale." 1115 of the old Civil Code (8 Manresa, 126). The condition is, besides, a suspensive
The Court of Appeals held that payment of the advances did not become due until the condition, upon the happening of which the obligation to pay is made dependent. And upon
administratrix received the sum of P20,000 from the buyer of the property. Upon the happening of the condition, the debt became immediately due and demandable. (Article
authorization of the probate court in October, 1947, the administratrix sold the property in 1114, old Civil Code; 8 Manresa, 119.)
November, 1947, and the same was paid for subsequently. The claim was filed on October
2, 1948. One other point needs to be considered, and this is the fact that the sale was not effected in
the lifetime of the debtor (the intestate), but after his death and by his administrator, the
It is contended on this appeal that the obligation contracted by the intestate was subject to a very wife of the claimant. On this last circumstance we must bear in mind that the Court of
condition exclusively dependent upon the will of the debtor (a condicion potestativa) and Appeals found no evidence to show that the claim was the product of a collusion or
therefore null and void, in accordance with article 1115 of the old Civil Code. The case of connivance between the administratrix and the claimant. That there was really a promise
Osmeña v. Rama, (14 Phil. 99) is cited to support appellants contention. In this case, this made by the intestate to pay for the credit advances may be implied from the fact that the
court seems to have filed that a promise to pay an indebtedness "if a house of strong receipts thereof had been preserved. Had the advances been made without intention of
materials is sold" is an obligation the performance of which depended on the will of the demanding their payment later, said receipts would not have been preserved. Regularity of
debtor. We have examined this case and we find that the supposed ruling was merely an the advances and the close relationship between the intestate and the claimant also support
assumption and the same was not the actual ruling of the case. this conclusion.

A careful consideration of the condition upon which the payment of the sums advanced As to the fact that the suspensive condition took place after the death of the debtor, and that
was made to depend, i.e., "as soon as he (intestate) receive funds derived from the sale of advances were made more than ten years before the sale, we are supported in our
his property in Spain," discloses the fact that the condition in question does not depend conclusion that the same is immaterial by Sanchez Roman, who says, among other things,
exclusively upon the will of the debtor, but also upon other circumstances beyond his as to conditional obligations:chanrob1es virtual 1aw library
power or control. If the condition were "if he decides to sell his house," or "if he likes to
pay the sums advanced," or any other condition of similar important implying that upon 1.a La obligacion contractual afectada por condicion suspensiva, no es exigible hasta que
him (the debtor) alone payment would depend, the condition would be potestativa, se cumpla la condicion, . . .
dependent exclusively upon his will or discretion. In the form that the condition was found
by the Court of Appeals, however, the condition implies that the intestate had already 2.a El cumplimiento de la condicion suspensiva retrotrae los efectos del acto juridico
decided to sell his house, or at least that he had made his creditors believe that he had done originario de la obligacion a que aquella afecta, al tiempo de la celebracion de este; . . .
so, and that all that was needed to make his obligation (to pay his indebtedness)
demandable is that the sale be consummated and the price thereof remitted to the islands. 3.a La referida retroaccion, no solo tiene lugar cuando el cumplimiento de la condicion se
Note that if the intestate would prevent or would have prevented the consummation of the verifica en vida de los contrayentes, si que tambien se produce cuando aquel se realiza
sale voluntarily, the condition would be or would have been deemed or considered despues de la muerte de estos. (4 Sanchez Roman, p. 122) (Emphasis supplied.)
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 42

from the sale," is a condicion potestativa and therefore null and void in accordance with
As the obligation retroacts to the date when the contract was entered into, all amounts article 1115 of the old Civil Code. My answer is in the affirmative, because it is very
advanced from the time of the agreement became due, upon the happening of the obvious that the matter of the sale of the house rested on the sole will of the debtor,
suspensive condition. As the obligation to pay became due and demandable only when the unaffected by any outside consideration or influence. The majority admit that if the
house was sold and the proceeds received in the islands, the action to recover the same only condition were "if he decides to sell his house" or "if he likes to pay the sums advanced,"
accrued, within the meaning of the statute of limitations, on the date the money became the same would be potestative. I think a mere play of words is invoked, as I cannot see any
available here, hence the action to recover the advances has not yet prescribed. substantial difference. Under the condition imposed by Fernando Hermosa, Sr., it is
immaterial whether or not he had already decided to sell his house, since there is no
The above considerations dispose of the most important question raised on this appeal. It is pretence that acceptable conditions of the sale had been made the subject of an agreement,
also contended that the third group of claims, i.e., credits furnished the intestate’s grandson such that if such conditions presented themselves the debtor would be bound to proceed
after his (intestate’s) death in 1944, should not have been allowed. We find merit in this with the sale. In the case at bar, the terms are still subject to the sole judgment —if not
contention. Even if authorization to furnish necessaries to his grandson may have been whims and caprise — of Fernando Hermosa, Sr. In fact no sale was affected during his
given, this authorization could not be made to extend after his death, for two obvious lifetime. As the condition above referred to is null and void, the debt resulting from the
reasons. First because the obligation to furnish support is personal and is extinguished upon advances made to Fernando Hermosa, Sr. became either immediately demandable or
the death of the person obliged to give support (article 150, old Civil Code), and second payable within a term to be fixed by the court. In both cases the action has prescribed after
because upon the death of a principal (the intestate in this case), his agent’s authority or the lapse of ten years. In the case of Gonzales v. De Jose (66 Phil., 369, 371), this court
authorization is deemed terminated (article 1732, old Civil Code). That part of the decision already held as follows:jgc:chanrobles.com.ph
allowing this group of claims, amounting to P3,772, should be reversed.
"We hold that the two promissory notes are governed by article 1128 because under the
One last contention of the appellant is that the claims are barred by the stature of non- terms thereof the plaintiff intended to grant the defendant a period within which to pay his
claims. It does not appear from the record that this question was ever raised in any of the debts. As the promissory notes do not fix this period, it is for the court to fix the same.
courts below. We are, therefore, without authority under our rules to consider this issue at (Citing cases.) The action to ask the court to fix the period has already prescribed in
this stage of the proceedings. accordance with section 43 (1) of the Code of Civil Procedure. This period of prescription
is ten years, which has already elapsed from the execution of the promissory notes until the
The judgment appealed from is hereby affirmed in so far as it approves the claims of filing of the action on June 1, 1934. The action which should be brought in accordance
appellee in the amounts of P2,341 and P12,942.12, and reversed as to that of P3,772. with article 1128 is different from the action for the recovery of the amount of the notes,
Without costs. although the effects of both are the same, being, like other civil actions, subject to the rules
of prescription."cralaw virtua1aw library
Bengzon, Padilla, Tuason, Montemayor, Reyes, Jugo and Bautista Angelo, JJ., concur.
Separate Opinions The majority also contend that the condition in question depended on other factors than the
sole will of the debtor, and cite the presence of a buyer, ready, able and willing to purchase
the property. This is of no moment, because, as already stated, in the absence of any
PARAS, C.J., concurring and dissenting:chanrob1es virtual 1aw library contract setting forth the minimum or maximum terms which would be acceptable to the
debtor, nobody could legally compel Fernando Hermosa, Sr. to make any sale.
I concur in the majority decision insofar as it reverses the appealed judgment allowing the
claim for P3,772, but dissent therefrom insofar as it affirms the appealed judgment [G.R. No. 70789. October 19, 1992.]
approving appellee’s claims.
RUSTAN PULP & PAPER MILLS, INC., BIENVENIDO R. TANTOCO, SR., and
The principal question is whether the stipulation to pay the advances "on condition that ROMEO S. VERGARA,Petitioners, v. THE INTERMEDIATE APPELLATE
their payment should be made by Fernando Hermosa, Sr. as soon as he receives funds COURT AND ILIGAN DIVERSIFIED PROJECTS, INC., ROMEO A. LLUCH and
derived from the sale of his property in Spain", and making said advances "payable as soon ROBERTO G. BORROMEO, Respondents.
as Fernando Hermosa, Sr.’s property in Spain was sold and he received money derived
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 43

Napoleon J. Poblador for Petitioner. 3. ID.; ID.; FRUSTRATION OF COMMERCIAL OBJECT AS GROUND FOR
TERMINATION OF THE CONTRACT, NOT ACCEPTABLE; REASONS. — Neither
Pinito W. Mercado and Pablo S. Badong for Respondents. are We prepared to accept petitioners’ exculpation grounded on frustration of the
commercial object under Article 1267 of the New Civil Code, because petitioners
continued accepting deliveries from the suppliers. This conduct will estop petitioners from
SYLLABUS claiming that the breakdown of the machinery line was an extraordinary obstacle to their
compliance to the prestation. It was indeed incongruous for petitioners to have sent the
letters calling for suspension and yet, they in effect disregarded their own advice by
1. CIVIL LAW; OBLIGATIONS AND CONTRACT; POTESTATIVE CONDITION; accepting the deliveries from the suppliers. Knowing fully well that they will encounter
MAYBE OBLITERATED WITHOUT AFFECTING THE REST OF THE difficulty in producing output because of the defective machinery line, petitioners opted to
STIPULATIONS. — The matter of Tantoco’s and Vergara’s joint and several liability as a open the plant to greater loss, thus compounding the costs by accepting additional supply to
result of the alleged breach of the contract is dependent, first of all, on whether Rustan Pulp the stockpile. Verily, the Appellate Court emphasized the absurdity of petitioners’ action
and Paper Mills may legally exercise the right of stoppage should there be a glut of raw when they acknowledged that "if the plant could not be operated on a commercial scale, it
materials at its plant. would then be illogical for defendant Rustan to continue accepting deliveries of raw
materials."cralaw virtua1aw library
And insofar as the express discretion on the part of petitioners is concerned regarding the
right of stoppage, We feel that there is cogent basis for private respondents’ apprehension 4. ID.; AGENCY; OFFICERS OF CORPORATIONS NOT LIABLE INDIVIDUALLY
on the illusory resumption of deliveries inasmuch as the prerogative suggests a condition UNDER THE CONTRACT SIGNED BY THEM IN THEIR OFFICIAL CAPACITY;
solely dependent upon the will of petitioners. Petitioners can stop delivery of pulp wood EXCEPTION. — We have to agree with petitioners’ citation of authority to the effect that
from private respondents if the supply at the plant is sufficient as ascertained by petitioners, the President and Manager of a corporation who entered into and signed a contract in his
subject to re-delivery when the need arises as determined likewise by petitioners. This is official capacity, cannot be made liable thereunder in his individual capacity in the absence
Our simple understanding of the literal import of paragraph 7 of the obligation in question. of stipulation to that effect due to the personality of the corporation being separate and
A purely potestative imposition of this character must be obliterated from the face of the distinct from the persons composing it (Bangue Generale Belge v. Walter Bull and Co.,
contract without affecting the rest of the stipulations considering that the condition relates Inc., 84 Phil. 164). And because of this precept, Vergara’s supposed non-participation in
to the fulfillment of an already existing obligation and not to its inception. It is, a truism in the contract of sale although he signed the letter dated September 30, 1968 is completely
legal jurisprudence that a condition which is both potestative (or facultative) and resolutory immaterial. The two exceptions contemplated by Article 1897 of the New Civil Code
may be valid, even though the saving clause is left to the will of the obligor. where agents are directly responsible are absent and wanting.

2. ID.; ID.; ID.; RIGHT OF STOPPAGE GUARANTEED IN THE CONTRACT, HELD

INOPERATIVE; REASON. — Petitioners are of the impression that the letter dated DECISION
September 30, 1968 sent to private respondents is well within the right of stoppage
guaranteed to them by paragraph 7 of the contract of sale which was construed by
petitioners to be a temporary suspension of deliveries. There is no doubt that the contract MELO, J.:
speaks loudly about petitioners’ prerogative but what diminishes the legal efficacy of such When petitioners informed herein private respondents to stop the delivery of pulp wood
right is the condition attached to it which, as aforesaid, is dependent exclusively on their supplied by the latter pursuant to a contract of sale between them, private respondents sued
will for which reason, We have no alternative but to treat the controversial stipulation as for breach of their covenant. The court of origin dismissed the complaint but at the same
inoperative (Article 1306, New Civil Code). It is for this same reason that We are not time enjoined petitioners to respect the contract of sale if circumstances warrant the full
inclined to follow the interpretation of petitioners that the suspension of delivery was operation in a commercial scale of petitioners’ Baloi plant and to continue accepting and
merely temporary since the nature of the suspension itself is again conditioned upon paying for deliveries of pulp wood products from Romeo Lluch (page 14, Petition; page
petitioners’ determination of the sufficiency of supplies at the plant. 20, Rollo). On appeal to the then Intermediate Appellate Court, Presiding Justice Ramon G.
Gaviola, Jr., who spoke for the First Civil Cases Division, with Justices Caguioa, Quetulio-
Losa, and Luciano, concurring, modified the judgment by directing herein petitioners to
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 44

pay private respondents, jointly and severally, the sum of P30,000.00 as moral damages established to have emanated from the SELLER’S lumber and/or firewood
and P15,000.00 as attorney’s fees (pages 48-58, Rollo). concession. . . ."cralaw virtua1aw library

In the petition at bar, it is argued that the Appellate Court erred:jgc:chanrobles.com.ph And that SELLER has the priority to supply the pulp wood materials requirement of the
BUYER;
"A. . . . IN HOLDING PERSONALLY LIABLE UNDER THE CONTRACT OF SALE x x x
PETITIONER TANTOCO WHO SIGNED MERELY AS REPRESENTATIVE OF
PETITIONER RUSTAN, AND PETITIONER VERGARA WHO DID NOT SIGN AT
ALL; 7. That the BUYER shall have the right to stop delivery of the said raw materials by the
seller covered by this contract when supply of the same shall become sufficient until such
B. . . . IN HOLDING THAT PETITIONER RUSTAN’S DECISION TO SUSPEND time when need for said raw materials shall have become necessary provided, however,
TAKING DELIVERY OF PULP WOOD FROM RESPONDENT LLUCH, WHICH WAS that the SELLER is given sufficient notice." (pages 8-9, Petition; pages 14-15, Rollo)
PROMPTED BY SERIOUS AND UNFORESEEN DEFECTS IN THE MILL, WAS NOT
IN THE LAWFUL EXERCISE OF ITS RIGHT UNDER THE CONTRACT OF SALE; In the installation of the plant facilities, the technical staff of Rustan Pulp and Paper Mills,
and Inc. recommended the acceptance of deliveries from other suppliers of the pulp wood
materials for which the corresponding deliveries were made. But during the test run of the
C. . . . IN AWARDING MORAL DAMAGES AND ATTORNEY’S FEES IN THE pulp mill, the machinery line thereat had major defects while deliveries of the raw
ABSENCE OF FRAUD OR BAD FAITH." (page 18, Petition; page 24, Rollo) materials piled up, which prompted the Japanese supplier of the machinery to recommend
the stoppage of the deliveries. The suppliers were informed to stop deliveries and the letter
The generative facts of the controversy, as gathered from the pleadings, are fairly simple. of similar advice sent by petitioners to private respondents reads:jgc:chanrobles.com.ph

Sometime in 1966, petitioner Rustan established a pulp and paper mill in Baloi, Lanao del "September 30, 1968
Norte. On March 20, 1967, respondent Lluch, who is a holder of a forest products license,
transmitted a letter to petitioner Rustan for the supply of raw materials by the former to the Iligan Diversified Projects, Inc.
latter. In response thereto, petitioner Rustan proposed, among other things, in the letter-
reply:jgc:chanrobles.com.ph Iligan City

"2. That the contract to supply is not exclusive because Rustan shall have the option to buy Attention: Mr. Romeo A. Lluch.
from other suppliers who are qualified and holder of appropriate government authority or
license to sell and dispose pulp wood."cralaw virtua1aw library Dear Mr. Lluch:chanrob1es virtual 1aw library

These prefatory business proposals culminated in the execution, during the month of April, This is to inform you that the supply of raw materials to us has become sufficient and we
1968, of a contract of sale whereby Romeo a. Lluch agreed to sell, and Rustan Pulp and will not be needing further delivery from you. As per the terms of our contract, please stop
Paper Mill, Inc. undertook to pay the price of P30.00 per cubic meter of pulp wood raw delivery thirty (30) days from today.
materials to be delivered at the buyer’s plant in Baloi, Lanao del Norte. Of pertinent
significance to the issue at hand are the following stipulations in the bilateral Very truly yours,
undertaking:jgc:chanrobles.com.ph
RUSTAN PULP AND PAPER
"3. That BUYER shall have the option to buy from other SELLERS who are equally
qualified and holders of appropriate government authority or license to sell or dispose, that MILLS, INC.
BUYER shall not buy from any other seller whose pulp woods being sold shall have been
By:chanrob1es virtual 1aw library
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 45

that this would mean adequate losses to the company. More so, if We consider that
DR. ROMEO S. VERGARA appellee is a new company and could not therefore afford to absorb more losses than it
already allegedly incurred by the consequent defects in the machineries.chanrobles virtual
Resident Manager" lawlibrary

Private respondent Romeo Lluch sought to clarify the tenor of the letter as to whether Clearly therefore, this is a breach of the contract entered into by and between appellees and
stoppage of delivery or termination of the contract of sale was intended, but the query was appellants which warrants the intervention of this Court."cralaw virtua1aw library
not answered by petitioners. This alleged ambiguity notwithstanding, Lluch and the other x x x
suppliers resumed deliveries after the series of talks between Romeo S. Vergara and
Romeo Lluch.
. . . The letter of September 30, 1968, Exh. "D" shows that defendants were terminating the
On January 23, 1969, the complaint for contractual breach was filed which, as earlier contract of sale (Exh. "A"), and refusing any future or further delivery — whether on the
noted, was dismissed. In the process of discussing the merits of the appeal interposed ground that they had sufficient supply of pulp wood materials or that appellants cannot
therefrom, respondent Court clarified the eleven errors assigned below by herein meet the standard of quality of pulp wood materials that Rustan needs or that there were
petitioners and it seems that petitioners were quite satisfied with the Appellate Court’s in defects in appellees’ machineries resulting in an inability to continue full commercial
seriatim response since petitioners trimmed down their discourse before this Court to three operations.
basic matters, relative to the nature of liability, the propriety of the stoppage, and the
feasibility of awarding moral damages including attorney’s fees. Furthermore, there is evidence on record that appellees have been accepting deliveries of
pulp wood materials from other sources, i.e. Salem Usman, Fermin Villanueva and
Respondent Court found it ironic that petitioners had to exercise the prerogative regarding Pacasum even after September 30, 1968.
the stoppage of deliveries via the letter addressed to Iligan Diversified Projects, Inc. on
September 30, 1968 because petitioners never really stopped accepting deliveries from Lastly, it would be unjust for the court a quo to rule that the contract of sale be temporarily
private respondents until December 23, 1968. Petitioner’s paradoxical stance was portrayed suspended until Rustan, Et Al., are ready to accept deliveries from appellants. This would
in this manner:jgc:chanrobles.com.ph make the resumption of the contract purely dependent on the will of one party — the
appellees, and they could always claim, as they did in the instant case, that they have more
". . . We cannot accept the reasons given by appellees as to why they were stopping than sufficient supply of pulp wood when in fact they have been accepting the same from
deliveries of pulp wood materials. First, We find it preposterous for a business company other sources. Added to this, the court a quo was imposing a new condition in the contract,
like the appellee to accumulate stockpiles of cut wood even after its letter to appellants one that was not agreed upon by the parties." (Pages 8-10, Decision; Pages 55-57, Rollo)
dated September 30, 1968 stopping the deliveries because the supply of raw materials has
become sufficient. The fact that appellees were buying and accepting pulp wood materials The matter of Tantoco’s and Vergara’s joint and several liability as a result of the alleged
from other sources other than the appellants even after September 30, 1968 belies that they breach of the contract is dependent, first of all, on whether Rustan Pulp and Paper Mills
have more than sufficient supply of pulp wood materials, or that they are unable to go into may legally exercise the right of stoppage should there be a glut of raw materials at its
full commercial operation or that their machineries are defective or even that the pulp plant.
wood materials coming from appellants are sub-standard. Second, We likewise find the
court a quo’s finding that "even with one predicament in which defendant Rustan found And insofar as the express discretion on the part of petitioners is concerned regarding the
itself wherein commercial operation was delayed, it accommodated all its suppliers of raw right of stoppage, We feel that there is cogent basis for private respondents’ apprehension
materials, including plaintiff, Romeo Lluch, by allowing them to deliver all its stockpiles on the illusory resumption of deliveries inasmuch as the prerogative suggests a condition
of cut wood" (Decision, page 202, Record on Appeal) to be both illogical and inconsistent. solely dependent upon the will of petitioners. Petitioners can stop delivery of pulp wood
Illogical, because as appellee Rustan itself claimed "if the plant could not be operated on a from private respondents if the supply at the plant is sufficient as ascertained by petitioners,
commercial scale, it would then be illogical for defendant Rustan to continue accepting subject to re-delivery when the need arises as determined likewise by petitioners. This is
deliveries of raw materials." Inconsistent because this kind of "concern" or Our simple understanding of the literal import of paragraph 7 of the obligation in question.
"accommodation" is not usual or consistent with ordinary business practice considering A purely potestative imposition of this character must be obliterated from the face of the
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 46

contract without affecting the rest of the stipulations considering that the condition relates the stockpile. Verily, the Appellate Court emphasized the absurdity of petitioners’ action
to the fulfillment of an already existing obligation and not to its inception (Civil Code when they acknowledged that "if the plant could not be operated on a commercial scale, it
Annotated, by Padilla, 1987 Edition, Volume 4, Page 160). It is, of course, a truism in legal would then be illogical for defendant Rustan to continue accepting deliveries of raw
jurisprudence that a condition which is both potestative (or facultative) and resolutory may materials." (Page 202, Record on Appeal; Page 8, Decision; Page 55, Rollo).
be valid, even though the saving clause is left to the will of the obligor like what this Court,
through Justice Street, said in Taylor v. Uy Tieng Piao and Tan Liuan (43 Phil. 873; 879; Petitioners argue next that Tantoco and Vergara should not have been adjudged to pay
cited in Commentaries and Jurisprudence on the Civil Code, by Tolentino, Volume 4, 1991 moral damages and attorney’s fees because Tantoco merely represented the interest of
edition, page 152). But the conclusion drawn from the Taylor case, which allowed a Rustan Pulp and Paper Mills, Inc. while Romeo S. Vergara was not privy to the contract of
condition for unilateral cancellation of the contract when the machinery to be installed on sale. On this score, We have to agree with petitioners’ citation of authority to the effect that
the factory did not arrive in Manila, is certainly inappropriate for application to the case at the President and Manager of a corporation who entered into and signed a contract in his
hand because the factual milieu in the legal tussle dissected by Justice Street conveys that official capacity, cannot be made liable thereunder in his individual capacity in the absence
the proviso relates to the birth of the undertaking and not the fulfillment of an existing of stipulation to that effect due to the personality of the corporation being separate and
obligation.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph distinct from the persons composing it (Bangue Generale Belge v. Walter Bull and Co.,
Inc., 84 Phil. 164). And because of this precept, Vergara’s supposed non-participation in
In support of the second ground for allowance of the petition, petitioners are of the the contract of sale although he signed the letter dated September 30, 1968 is completely
impression that the letter dated September 30, 1968 sent to private respondents is well immaterial. The two exceptions contemplated by Article 1897 of the New Civil Code
within the right of stoppage guaranteed to them by paragraph 7 of the contract of sale where agents are directly responsible are absent and wanting.chanrobles virtualawlibrary
which was construed by petitioners to be a temporary suspension of deliveries. There is no chanrobles.com:chanrobles.com.ph
doubt that the contract speaks loudly about petitioners’ prerogative but what diminishes the
legal efficacy of such right is the condition attached to it which, as aforesaid, is dependent WHEREFORE, the decision appealed from is hereby MODIFIED in the sense that only
exclusively on their will for which reason, We have no alternative but to treat the petitioner Rustan Pulp and Paper Mills is ordered to pay moral damages and attorney’s fees
controversial stipulation as inoperative (Article 1306, New Civil Code). It is for this same as awarded by respondent Court.
reason that We are not inclined to follow the interpretation of petitioners that the
suspension of delivery was merely temporary since the nature of the suspension itself is SO ORDERED.
again conditioned upon petitioners’ determination of the sufficiency of supplies at the
plant. Gutierrez, Jr., Bidin, Davide, Jr. and Romero, JJ., concur.

Neither are We prepared to accept petitioners’ exculpation grounded on frustration of the [G.R. No. 107207. November 23, 1995.]
commercial object under Article 1267 of the New Civil Code, because petitioners
continued accepting deliveries from the suppliers. This conduct will estop petitioners from VIRGILIO R. ROMERO, Petitioner, v. HON. COURT OF APPEALS and
claiming that the breakdown of the machinery line was an extraordinary obstacle to their ENRIQUE CHUA VDA. DE ONGSIONG, Respondents.
compliance to the prestation. It was indeed incongruous for petitioners to have sent the
letters calling for suspension and yet, they in effect disregarded their own advice by Antonio C. Cabreros, Jr. & Peter M. Porras Law Offices and Yap, Apostol, Gumaru &
accepting the deliveries from the suppliers. The demeanor of petitioners along this line was Balgua forPetitioner.
sought to be justified as an act of generous accommodation, which entailed greater loss to
them and "was not motivated by the usual businessman’s obsession with profit" (Page 34, Joaquin "Bobby" Yuseco for Private Respondent.
Petition; Page 40, Rollo). Altruism may be a noble gesture but petitioners’ stance in this
respect hardly inspires belief for such an excuse is inconsistent with a normal business
enterprise which takes ordinary care of its concern in cutting down on expenses (Section 3, SYLLABUS
(d), Rule 131, Revised Rules of Court). Knowing fully well that they will encounter
difficulty in producing output because of the defective machinery line, petitioners opted to
open the plant to greater loss, thus compounding the costs by accepting additional supply to
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 47

1. CIVIL LAW; CONTRACTS; SALES; NATURE AND FORM; CONSTRUED. — A 6. ID.; ID.; ID.; ID.; RIGHT OF A VENDEE IN CASE OF NON-FULFILLMENT OF
perfected contract of sale may either be absolute or conditional depending on whether the CONDITION. — Private respondent’s failure "to remove the squatters from the property"
agreement is devoid of, or subject to, any condition imposed on the passing of title of the within the stipulated period gives petitioner the right to either refuse to proceed with the
thing to be conveyed or on the obligation of a party thereto. When ownership is retained agreement or waive that condition in consonance with Article 1545 of the Civil Code. This
until the fulfillment of a positive condition the breach of the condition will simply prevent option clearly belongs to petitioner and not to privateRespondent. In contracts of sale
the duty to convey title from acquiring an obligatory force. If the condition is imposed on particularly, Article 1545 of the Civil Code, aforementioned, allows the obligee to choose
an obligation of a party which is not complied with, the other party may either refuse to between proceeding with the agreement or waiving the performance of the condition. It is
proceed or waive said condition (Art. 1545, Civil Code). Where, of course, the condition is this provision which is the pertinent rule in the case at bench. Here, evidently, petitioner
imposed upon the perfection of the contract itself, the failure of such condition would has waived the performance of the condition imposed on private respondent to free the
prevent the juridical relation itself from coming into existence. property from squatters.

2. ID.; ID.; CHARACTER THEREOF; DETERMINED BY THE SUBSTANCE, NOT BY 7. ID.; ID.; ID.; ID.; CONDITION IN CASE AT BAR; NOT POTESTATIVE. — We
THE TITLE GIVEN BY THE PARTIES. — In determining the real character of the share the opinion of the appellate court that the undertaking required of private respondent
contract, the title given to it by the parties is not as much significant as its substance. For does not constitute a "potestative condition dependent solely on his will" that might,
example, a deed of sale, although denominated as a deed of conditional sale, may be otherwise, be void in accordance with Article 1182 of the Civil Code but a "mixed"
treated as absolute in nature, if title to the property sold is not reserved in the vendor or if condition "dependent not on the will of the vendor alone but also of third persons like the
the vendor is not granted the right to unilaterally rescind the contract predicated on the squatters and government agencies and personnel concerned." We must hasten to add,
fulfillment or non-fulfillment, as the case may be, of the prescribed condition. however, that where the so-called "potestative condition" is imposed not on the birth of the
obligation but on its fulfillment, only the condition is avoided, leaving unaffected the
3. ID.; ID.; ID.; TERM "CONDITION" IN THE CONTEXT OF A PERFECTED obligation itself.
CONTRACT OF SALE; CONSTRUED. — The term "condition" in the context of a
perfected contract of sale pertains, in reality, to the compliance by one party of an 8. ID.; ID.; ID.; ID.; ACTION FOR RESCISSION; NOT WARRANTED IN CASE AT
undertaking the fulfillment of which would beckon, in turn, the demandability of the BAR. — Private respondent’s action for rescission is not warranted. She is not the injured
reciprocal prestation of the other party. The reciprocal obligations referred to would party. The right of resolution of a party to an obligation under Article 1191 of the Civil
normally be, in the case of vendee, the payment of the agreed purchase price and, in the Code is predicated on a breach of faith by the other party that violates the reciprocity
case of the vendor, the fulfillment of certain express warranties (which, in the case at bench between them. It is private respondent who has failed in her obligation under the contract.
is the timely eviction of the squatters on the property). Petitioner did not breach the agreement. He has agreed, in fact, to shoulder the expenses of
the execution of the judgment in the ejectment case and to make arrangements with the
4. ID.; ID.; ID.; WHEN PERFECTED. — A sale is at once perfected when a person (the sheriff to effect such execution. In his letter of 23 June 1989, counsel for petitioner has
seller) obligates himself, for a price certain, to deliver and to transfer ownership of a tendered payment and demanded forthwith the execution of the deed of absolute sale.
specified thing or right to another (the buyer) over which the latter agrees. Parenthetically, this offer to pay, having been made prior to the demand for rescission,
assuming for the sake of argument that such a demand is proper under Article 1592 o the
5. ID.; ID.; ID.; CONDITIONAL SALE; FULFILLMENT OF CONDITION; Civil Code, would likewise suffice to defeat private respondent’s prerogative to rescind
OPERATIVE ACT SETTING INTO MOTION VENDEE’S OBLIGATION. — From the thereunder.
moment the contract is perfected, the parties are bound not only to the fulfillment of what
has been expressly stipulated but also to all the consequences which, according to their
nature, may be in keeping with good faith, usage and law. Under the agreement, private DECISION
respondent is obligated to evict the squatters on the property. The ejectment of the squatters
is a condition the operative act of which sets into motion the period of compliance by
petitioner of his own obligation, i.e., to pay the balance of the purchase price. VITUG, J.:
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 48

The parties pose this question: May the vendor demand the rescission of a contract for the "WHEREAS, the VENDOR is the owner of One (1) parcel of land with a total area of
sale of a parcel of land for a cause traceable to his own failure to have the squatters on the ONE THOUSAND NINE HUNDRED FIFTY TWO (1,952) SQUARE METERS, more or
subject property evicted within the contractually-stipulated period? less, located in Barrio San Dionisio, Municipality of Parañaque, Province of Rizal, covered
by TCT No. 361402 issued by the Registry of Deeds of Pasig and more particularly
Petitioner Virgilio R. Romero, a civil engineer, was engaged in the business of production, described as follows:chanrob1es virtual 1aw library
manufacture and exportation of perlite filter aids, permalite insulation and process perlite x x x
ore. In 1988, petitioner and his foreign partners decided to put up a central warehouse in
Metro Manila on a land area of approximately 2,000 square meters. The project was made
known to several freelance real estate brokers. "WHEREAS, the VENDEE, for (sic) has offered to buy a parcel of land as the VENDOR
has accepted the offer, subject to the terms and conditions hereinafter
A day or so after the announcement, Alfonso Flores and his wife, accompanied by a stipulated:jgc:chanrobles.com.ph
broker, offered a parcel of land measuring 1,952 square meters. Located in Barangay San
Dionisio, Parañaque, Metro Manila, the lot was covered by TCT No. 361402 in the name "NOW, THEREFORE, for and in consideration of the sum of ONE MILLION FIVE
of private respondent Enriqueta Chua Vda. de Ongsiong. Petitioner visited the property HUNDRED SIXTY ONE THOUSAND SIX HUNDRED PESOS (P1,561,600.00) ONLY,
and, except for the presence of squatters in the area, he found the place suitable for a Philippine Currency, payable by VENDEE to in (sic) manner set forth, the VENDOR
central warehouse.chanroblesvirtuallawlibrary agrees to sell to the VENDEE, their heirs, successors , administrators, executors, assign, all
her rights, titles and interest in and to the property mentioned in the FIRST WHEREAS
Later, the Flores spouses called on petitioner with a proposal that should he advance the CLAUSE, subject to the following terms and conditions:chanroblesvirtuallawlibrary
amount of P50,000.00 which could be used in taking up an ejectment case against the
squatters, private respondent would agree to sell the property for only P800.00 per square "1. That the sum of FIFTY THOUSAND PESOS (50,000.00) ONLY Philippine Currency,
meter. Petitioner expressed his concurrence. On 09 June 1988, a contract, denominated is to be paid upon signing and execution of this instrument.
"Deed of Conditional Sale," was executed between petitioner and private Respondent. The
simply-drawn contract read:jgc:chanrobles.com.ph "2. The balance of the purchase price in the amount of ONE MILLION FIVE HUNDRED
ELEVEN THOUSAND SIX HUNDRED PESOS (P1,511,600.00) ONLY shall be paid 45
"DEED OF CONDITIONAL SALE days after the removal of all squatters from the above described property.

"KNOW ALL MEN BY THESE PRESENTS:jgc:chanrobles.com.ph "3. Upon full payment of the overall purchase price as aforesaid, VENDOR without
necessity of demand shall immediately sign, execute, acknowledged (sic) and deliver the
"This Contract , made and executed in the Municipality of Makati, Philippines this 9th day corresponding deed of absolute sale in favor of the VENDEE free from all liens and
of June, 1988 by and between:jgc:chanrobles.com.ph encumbrances and all Real Estates taxes are all paid and updated.

"ENRIQUETA CHUA VDA. DE ONGSIONG, of legal age, widow, Filipino and residing "It is hereby agreed, covenanted and stipulated by and between the parties hereto that if
at 105 Simoun St. Quezon City, Metro Manila, hereinafter referred to as the VENDOR; after 60 days from the date of the signing of this contract the VENDOR shall not be able to
remove the squatters from the property being purchased, the downpayment made by the
— and — buyer shall be returned/reimbursed by the VENDOR to the VENDEE.chanrobles.com :
virtual lawlibrary
"VIRGILIO R. ROMERO, married to Severina L. Lat, of legal age, Filipino, and residing
at 110 San Miguel St., Plainview Subd., Mandaluyong Metro Manila, hereinafter referred "That in the event that the VENDEE shall not be able to pay the VENDOR the balance of
to as the VENDEE:chanroblesvirtual|awlibrary the purchase price of ONE MILLION FIVE HUNDRED ELEVEN THOUSAND SIX
HUNDRED PESOS (P1,511,600.00) ONLY after 45 days from written notification to the
"WITNESSETH: That VENDEE of the removal of the squatters from the property being purchased, FIFTY
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 49

THOUSAND PESOS (P50,000.00) previously paid as downpayment shall be forfeited in which shall be incurred by reason thereof shall be chargeable to the purchase price of the
favor of the VENDOR. land." 4

"Expenses for the registration such as registration fees, documentary stamp, transfer fee, Meanwhile, the Presidential Commission for the Urban Poor ("PCUD"), through its
assurance and such other fees and expenses as may be necessary to transfer the title to the Regional Director for Luzon, Farley O. Viloria, asked the Metropolitan Trial Court of
name of the VENDEE shall be for the account of the VENDEE while capital gains tax Parañaque for a grace period of 45 days from 21 April 1989 within which to relocate and
shall be paid by the VENDOR. transfer the squatter families. Acting favorably on the request, the court suspended the
enforcement of the writ of execution accordingly.
"IN WITNESS WHEREOF, parties hereunto signed those (sic) presents in the City of
Makati MM, Philippines on this 9th day of June, 1988. On 08 June 1989, Atty. Apostol reminded private respondent on the expiry of the 45-day
grace period and his client’s willingness to "underwrite the expenses for the execution of
(Sgd.) (Sgd.) the judgment and ejectment of the occupants." 5

VIRGILIO R. ROMERO ENREQUETA CHUA VDA. In his letter of 19 June 1989, Atty. Joaquin Yuseco, Jr., counsel for private respondent,
advised Atty. Apostol that the Deed of Conditional Sale had been rendered null and void
DE ONGSIONG by virtue of his client’s failure to evict the squatters from the premises within the agreed
60-day period. He added that private respondent had "decided to retain the property." 6
Vendee Vendor
"SIGNED IN THE PRESENCE OF:chanrob1es virtual 1aw library On 23 June 1989, Atty. Apostol wrote back to explain:jgc:chanrobles.com.ph

(Sgd.) (Sgd.) "The contract of sale between the parties was perfected from, the very moment that there
was a meeting of the minds of the parties upon the subject lot and the price in the amount
Rowena C. Ongsiong Jack M. Cruz" 1 of P1,561,600.00. Moreover, the contract had already been partially fulfilled and executed
Alfonso Flores, in behalf of private respondent, forthwith received and acknowledge a upon receipt of the downpayment of your client. Ms. Ongsiong is precluded from rejecting
check for P50,000.00 2 from petitioner. 3chanrobles.com : virtual lawlibrary its binding effects relying upon her inability to eject the squatters from the premises of
subject property during the agreed period. Suffice it to state that, the provision of the Deed
Pursuant to this agreement, private respondent filed a complaint for ejectment (Civil Case of Conditional Sale do not grant her the option or prerogative to rescind the contract and to
No. 7579) against Melchor Musa and 29 other squatter families with the Metropolitan Trial retain the property should she fail to comply with the obligation she had assumed under the
Court of Parañaque. A few months later, or on 21 February 1989, judgment was rendered contract. In fact, a perusal of the terms and conditions of the contract clearly shows that the
ordering the defendants to vacate the premises. The decision was handed down beyond the right to rescind the contract and to demand return/reimbursement of the downpayment is
60-day period (expiring 09 August 1988) stipulated in the contract. The writ of execution granted to our client for his protection.chanroblesvirtual|awlibrary
of the judgment was issued, still later, on 30 March 1989.
"Instead, however, of availing himself of the power to rescind the contract and demand the
In a letter, dated 07 April 1989, private respondent sought to return the P50,000.00 she return, reimbursement of the downpayment, our client had opted to take it upon himself to
received from petitioner since, she said, she could not "get rid of the squatters" on the lot. eject the squatters from the premises. Precisely, we refer you to our letters addressed to
Atty. Sergio A.F. Apostol, counsel for petitioner, in his reply of 17 April 1989, refused the your client dated April 17, 1989 and June 8, 1989.
tender and stated:jgc:chanrobles.com.ph
"Moreover, it is basic under the law on contracts that the power to rescind is given to the
"Our client believes that with the exercise of reasonable diligence considering the favorable injured party. Undoubtedly, under the circumstances, our client is the injured party.
decision rendered by the Court and the writ of execution issued pursuant thereto, it is now
possible to eject the squatters from the premises of the subject property, for which reason, "Furthermore, your client has not complied with her obligation under their contract in good
he proposes that he shall take it upon himself to eject the squatters, provided, that expenses faith. It is undeniable that Ms. Ongsiong deliberately refused to exert efforts to eject the
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 50

squatters from the premises of the subject property and her decision to retain the property Private respondent appealed to the Court of Appeals. On 29 May 1992, the appellate court
was brought about by the sudden increase in the value of realties in the surrounding areas. rendered its decision. 10 It opined that the contract entered into by the parties was subject
to a resolutory condition, i.e., the ejectment of the squatters from the land, the non-
"Please consider this letter as a tender of payment to your client and a demand to execute occurrence of which resulted in the failure of the object of the contract; that private
the absolute Deed of Sale." 7chanroblesvirtual|awlibrary respondent substantially complied with her obligation to evict the squatters; that it was
petitioner who was not ready to pay the purchase price and fulfill his part of the contract,
A few days later (or on 27 June 1989), private respondent prompted by petitioner’s and that the provision requiring a mandatory return/reimbursement of the P50,000.00 in
continued refusal to accept the return of the P50,000.00 advance payment, filed with the case private respondent would fail to eject the squatters within the 60-day period was not a
Regional Trial Court of Makati, Branch 133, Civil Case No. 89-4394 for a rescission of the penal clause. Thus, it concluded:jgc:chanrobles.com.ph
deed of "conditional" sale, plus damages, and for the consignation of P50,000.00 cash.
"WHEREFORE, the decision appealed from is REVERSED and SET ASIDE, and a new
Meanwhile, on 25 August 1989, the Metropolitan Trial Court issued an alias writ of one entered declaring the contract of conditional sale dated June 9, 1988 cancelled and
execution in Civil Case No. 7579 on motion of private respondent but the squatters ordering the defendant-appellee to accept the return of the downpayment in the amount of
apparently still stayed on. P50,000.00 which was deposited in the court below. No pronouncement as to costs."
11chanroblesvirtuallawlibrary
Back to Civil case No. 89-4394, on 26 June 1990, the Regional Trial Court of Makati 8
rendered decision holding that private respondent had no right to rescind the contract since Failing to obtain a reconsideration, petitioner filed his petition for review on certiorari
it was she who "violated her obligation to eject the squatters from the subject property" and raising issues that, in fine, center on the nature of the contract adverted to and the
that petitioner, being the injured party, was the party who could, under Article 1191 of the P50,000.00 remittance made by petitioner.
Civil Code, rescind the agreement. The court ruled that the provision in the contract
relating to (a) the return/reimbursement of the P50,000.00 if the vendor were to fail in her A perfected contract of sale may either be absolute or conditional 12 depending on whether
obligation to free the property from the squatters within the stipulated period or (b), upon the agreement is devoid of, or subject to, any condition imposed on the passing of title of
the other hand, the sum’s forfeiture by the vendor if the vendee were to fail in paying the the thing to be conveyed or on the obligation of party thereto. When ownership is retained
agreed purchase price, amounted to "penalty clauses." The court until the fulfillment of a positive condition the breach of the condition will simply prevent
added:jgc:chanrobles.com.ph the duty to convey title from acquiring an obligatory force. If the condition is imposed on
an obligation of a party which is not complied with, the other party may either refuse to
"This court is not convicted of the ground relied upon by the plaintiff in seeking the proceed or waive said condition (Art. 1545, Civil Code). Where, of course, the condition is
rescission, namely: (1) he (sic) is afraid of the squatters; and (2) she has spent so much to imposed upon the perfection of the contract itself, the failure of such condition would
eject them from the premises (p. 6, tsn, see. Jan. 3, 1990). Militating against her profession prevent the juridical relation itself from coming into existence. 13
of good faith is plaintiff’s conduct which is not in accord with the rules of fair play and
justice. Notably, she caused the issuance of an alias writ of execution on August 25, 1989 In determining the real character of the contract, the title given to it by the parties is not as
(Exh. 6) in the ejectment suit which was almost two months after she filed the complaint much as significant as its substance. For example, a deed of sale, although denominated as
before this Court on June 27, 1989. If she were really afraid of the squatters, then she a deed of conditional sale, may be treated as absolute in nature, if title to the property sold
should not have pursed the issuance of an alias writ of execution. Besides, she did not even is not reserved in the vendor or if the vendor is not granted the right to unilaterally rescind
report to the police the alleged phone threats from the squatters. To the mind of the Court, the contract predicated on the fulfillment or non-fulfillment, as the case may be, of the
the so-called factor is simply factuitous (sic)." 9chanroblesvirtuallawlibrary prescribed condition. 14chanrobles.com : virtual lawlibrary

The lower court, accordingly, dismissed the complaint and ordered, instead, private The term "condition" in the context of a perfected contract of sale pertains, in reality, to the
respondent to eject or cause the ejectment of the squatters from the property and to execute compliance by one party of an undertaking the fulfillment of which would beckon, in turn,
the absolute deed of conveyance upon payment of the full purchase price by petitioner. the demandability of the reciprocal prestation of the other party. The reciprocal obligations
referred to would normally be, in the case of vendee, the payment of the agreed purchase
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 51

price and, in the case of the vendor, the fulfillment of certain express warranties (which, in In any case, private respondent’s action for rescission is not warranted. She is not the
the case at bench is the timely eviction of the squatters on the property). injured party. 21 The right of resolution of a party to an obligation under Article 1191 of
the Civil Code is predicated on a breach of faith by the other party violates the reciprocity
It would be futile to challenge the agreement here in question as not being a duly perfected between them. 22 It is private respondent who has failed in her obligation under the
contract. A sale is at once perfected where a person (the seller) obligates himself, for a contract. Petitioner did not breach the agreement. He has agreed, in fact, to shoulder the
price certain, to deliver and to transfer ownership of a specified thing or right to another expenses of the execution of the judgment in the ejectment case and to make arrangement
(the buyer) over which the latter agrees. 15 with the sheriff to effect such execution. In his letter of 23 June 1989, counsel for petitioner
has tendered payment and demanded forthwith the execution of the deed of absolute sale.
The object of the sale, in case before us, was specifically identified to be as 1,952-square Parenthetically, this offer to pay, hiring been made prior to the demand for rescission,
meter lot in San Dionisio, Parañaque, Rizal, covered by Transfer Certificate of Title No. assuming for the sake of argument that such a demand is proper under Article 1592 23 of
361402 of the Registry of Deeds for Pasig and therein technically described. The purchase the Civil Code, would likewise suffice to defeat private respondent’s prerogative to rescind
price was fixed at P1,561,600.00, of which P50,000.00 was to be paid upon the payable thereunder.
"45 days after the removal of all squatters from the above described property."cralaw
virtua1aw library There is no need to still belabor the question of whether the P50,000.00 advance payment
is reimbursable to petitioner of forfeitable by private respondent, since, on the basis of our
From the moment the contract is perfected, the parties are bound not only to the fulfillment foregoing conclusions, the matter has ceased to be an issue. Suffice it to say that petitioner
of what has been expressly stipulated but also to all the consequences which, according to having opted to proceed with the sale, neither may petitioner demand its reimbursement
their nature, may be in keeping with good faith, usage and law. Under the agreement, from private respondent nor may private respondent subject it to forfeiture.
private respondent is obligated to evict the squatters on the property. The ejectment of the
squatters is a condition the operative act of which sets into motion the period of compliance WHEREFORE, the questioned decision of the Court of Appeals is hereby REVERSED
by petitioner of his own obligation, i.e., to pay the balance of the purchase price. Private AND SET ASIDE, and another is entered ordering petitioner to pay private respondent the
respondent’s failure to "remove the squatters from the property" within the stipulated balance of the purchase price and the latter to execute the deed of absolute sale in favor of
period gives petitioner the right to either refuse to proceed with the agreement or waive that petitioner. No costs.
condition in consonance with Article 1545 of the Civil Code. 16 This option clearly
belongs to petitioner and not to private Respondent. SO ORDERED.

We share the opinion of the appellate court that the undertaking required of private Feliciano, Romero, Melo and Panganiban, JJ., concur.
respondent does not constitute a "potestative condition dependent solely on his will" that
might, otherwise, be void in accordance with Article 1182 of the Civil Code 17 but a [G.R. No. 77425. June 19, 1991.]
"mixed" condition "dependent not on the will of the vendor alone but also of third persons
like the squatters and government agencies and personnel concerned." 18 We must hasten THE ROMAN CATHOLIC ARCHBISHOP OF MANILA, THE ROMAN
to add, however, that where the so-called "potestative condition" is imposed not on the CATHOLIC BISHOP OF IMUS, and the SPOUSES FLORENCIO IGNAO and
birth of the obligation but on its fulfillment, only the condition is avoided, leaving SOLEDAD C. IGNAO, Petitioners, v. HON. COURT OF APPEALS, THE ESTATE
unaffected obligation itself. 19 OF DECEASED SPOUSES EUSEBIO DE CASTRO and MARTINA RIETA,
represented by MARINA RIETA GRANADOS and THERESA RIETA
In contracts of sale particularly, Article 1545 of the Civil Code, aforementioned, allows the TOLENTINO, Respondents.
obligee to choose between proceeding with the agreement or waiving the performance of
the condition. It is this provision which is the pertinent rule in the case at bench. Here, [G.R. No. 77450. June 19, 1991.]
evidently, petitioner has waived the performance of the condition imposed on private
respondent to free the property from squatters. 20 THE ROMAN CATHOLIC ARCHBISHOP OF MANILA, THE ROMAN
CATHOLIC BISHOP OF IMUS, and the SPOUSES FLORENCIO IGNAO and
SOLEDAD C. IGNAO, Petitioners, v. HON. COURT OF APPEALS, THE ESTATE
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 52

OF DECEASED SPOUSES EUSEBIO DE CASTRO and MARTINA RIETA, recent case of De Luna, Et. Al. v. Abrigo, Et Al., 181 SCRA 150 (1990). It was held
represented by MARINA RIETA GRANADOS and THERESA RIETA therein that said stipulation is in the nature of an agreement granting a party the right to
TOLENTINO, Respondents. rescind a contract unilaterally in case of breach, without need of going to court, and that,
upon the happening of the resolutory condition or non-compliance with the conditions of
Severino C. Dominguez for petitioner Roman Catholic Bishop of Imus, Cavite. the contract, the donation is automatically revoked without need of a judicial declaration to
that effect. While what was the subject of that case was an onerous donation which, under
Dolorfino and Dominguez Law Offices for Sps. Ignao. Article 733 of the Civil Code is governed by the rules on contracts, since the donation in
the case at bar is also subject to the same rules because of its provision on automatic
Joselito R. Enriquez for Private Respondents. revocation upon the violation of a resolutory condition, from parity of reasons said
pronouncements in De Luna pertinently apply. The rationale for the foregoing is that in
contracts providing for automatic revocation, judicial intervention is necessary not for
SYLLABUS purposes of obtaining a judicial declaration rescinding a contract already deemed rescinded
by virtue of an agreement providing for rescission even without judicial intervention, but in
order to determine whether or not the rescission was proper.
1. CIVIL LAW; DEED OF DONATION; WHEN CONTENTS THEREOF PROVIDE
FOR AUTOMATIC REVERSION OF PROPERTY DONATED IN CASE OF 3. ID.; ID.; ID.; GENERAL RULES ON CONTRACT AND PRESCRIPTION SHOULD
VIOLATION OF CONDITIONS SET FORTH THEREIN, JUDICIAL ACTION FOR APPLY, NOT ART. 764 OF THE CODE. — When a deed of donation, as in this case,
RESCISSION, NOT NECESSARY. — The deed of donation involved herein expressly expressly provides for automatic revocation and reversion of the property donated, the
provides for automatic reversion of the property donated in case of violation of the rules on contract and the general rules on prescription should apply, and not Article 764 of
condition therein, hence a judicial declaration revoking the same is not necessary. As aptly the Civil Code. Since Article l306 of said Code authorizes the parties to a contract to
stated by the Court of Appeals: "By the very express provision in the deed of donation establish such stipulations, clauses, terms and conditions not contrary to law, morals, good
itself that the violation of the condition thereof would render ipso facto null and void the customs, public order or public policy, we are of the opinion that, at the very least, that
deed of donation, WE are of the opinion that there would be no legal necessity anymore to stipulation of the parties providing for automatic revocation of the deed of donation,
have the donation judicially declared null and void for the reason that the very deed of without prior judicial action for that purpose, is valid subject to the determination of the
donation itself declares it so. For where (sic) it otherwise and that the donors and the donee propriety of the rescission sought. Where such propriety is sustained, the decision of the
contemplated a court action during the execution of the deed of donation to have the court will be merely declaratory of the revocation, but it is not in itself the revocatory act.
donation judicially rescinded or declared null and void should the condition be violated,
then the phrase reading ‘would render ipso facto null and void’ would not appear in the 4. ID.; ID.; PROHIBITION AGAINST ALIENATION FOR AN UNREASONABLE
deed of donation." In support of its aforesaid position, respondent court relied on the rule LENGTH OF TIME; CONTRARY TO PUBLIC POLICY. — The cause of action of
that a judicial action for rescission of a contract is not necessary where the contract private respondents is based on the alleged breach by petitioners of the resolutory condition
provides that it may be revoked and cancelled for violation of any of its terms and in the deed of donation that the property donated should not be sold within a period of one
conditions. It called attention to the holding that there is nothing in the law that prohibits hundred (100) years from the date of execution of the deed of donation. Said condition, in
the parties from entering into an agreement that a violation of the terms of the contract our opinion, constitutes an undue restriction on the rights arising from ownership of
would cause its cancellation even without court intervention, and that it is not always petitioners and is, therefore, contrary to public policy. Donation, as a mode of acquiring
necessary for the injured party to resort to court for rescission of the contract. It reiterated ownership, results in an effective transfer of title over the property from the donor to the
the doctrine that a judicial action is proper only when there is absence of a special donee. Once a donation is accepted, the donee becomes the absolute owner of the property
provision granting the power of cancellation. donated. Although the donor may impose certain conditions in the deed of donation, the
same must not be contrary to law, morals, good customs, public order and public policy.
2. ID.; ID.; ID.; DE LUNA, ET AL., v. ABRIGO, ET AL. [181 SCRA 150], The condition imposed in the deed of donation in the case before us constitutes a patently
APPLICABLE IN CASE AT BAR; RATIONALE FOR THE RULE. — The validity of unreasonable and undue restriction on the right of the donee to dispose of the property
such a stipulation in the deed of donation providing for the automatic reversion of the donated, which right is an indispensable attribute of ownership. Such a prohibition against
donated property to the donor upon non-compliance of the condition was upheld in the alienation, in order to be valid, must not be perpetual or for an unreasonable period of time.
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 53

justice has resolved actions on the merits instead of remanding them to the trial court for
5. ID.; ID.; ID.; SHOULD BE DECLARED NULL AND VOID AS AN IMPOSSIBLE further proceedings, such as where the ends of justice, would not be subserved by the
CONDITION. — It is significant that the provisions therein regarding a testator also remand of the case. The aforestated considerations obtain in and apply to the present case
necessarily involve, in the main, the devolution of property by gratuitous title hence, as is with respect to the matter of the validity of the resolutory condition in question.
generally the case of donations, being an act of liberality, the imposition of an
unreasonable period of prohibition to alienate the property should be deemed anathema to
the basic and actual intent of either the donor or testator. For that reason, the regulatory DECISION
arm of the law is or must be interposed to prevent an unreasonable departure from the
normative policy expressed in the aforesaid Articles 494 and 870 of the Code. In the case at
bar, we hold that the prohibition in the deed of donation against the alienation of the REGALADO, J.:
property for an entire century, being an unreasonable emasculation and denial of an These two petitions for review on certiorari 1 seek to overturn the decision of the Court of
integral attribute of ownership, should be declared as an illegal or impossible condition Appeals in CA-G.R. CV No. 05456 2 which reversed and set aside the order of the
within the contemplation of Article 727 of the Civil Code. Consequently, as specifically Regional Trial Court of Imus, Cavite dismissing Civil Case No. 095-84, as well as the
stated in said statutory provision, such condition shall be considered as not imposed. No order of said respondent court denying petitioner’s motions for the reconsideration of its
reliance may accordingly be placed on said prohibitory paragraph in the deed of donation. aforesaid decision.
The net result is that, absent said proscription, the deed of sale supposedly constitutive of
the cause of action for the nullification of the deed of donation is not in truth violative of On November 29, 1984, private respondents as plaintiffs, filed a complaint for nullification
the latter hence, for lack of cause of action, the case for private respondents must fail. of deed of donation, rescission of contract and reconveyance of real property with damages
against petitioners Florencio and Soledad C. Ignao and the Roman Catholic Bishop of
6. SUPREME COURT; HAS AUTHORITY TO REVIEW MATTERS EVEN IF THEY Imus, Cavite, together with the Roman Catholic Archbishop of Manila, before the Regional
ARE NOT ASSIGNED AS ERRORS ON APPEAL; CASE AT BAR. — It will readily be Trial Court, Branch XX, Imus, Cavite and which was docketed as Civil Case No. 095-84
noted that the provision in the deed of donation against alienation of the land for one therein. 3
hundred (100) years was the very basis for the action to nullify the deed of donation. At the
same time, it was likewise the controverted fundament of the motion to dismiss the case a In their complaint, private respondents alleged that on August 23, 1930, the spouses
quo, which motion was sustained by the trial court and set aside by respondent court, both Eusebio de Castro and Martina Rieta, now both deceased, executed a deed of donation in
on the issue of prescription. That ruling of respondent court interpreting said provision was favor of therein defendant Roman Catholic Archbishop of Manila covering a parcel of land
assigned as an error in the present petition. While the issue of the validity of the same (Lot No. 626, Cadastral Survey of Kawit), located at Kawit, Cavite, containing an area of
provision was not squarely raised, it is ineluctably related to petitioner’s aforesaid 964 square meters, more or less. The deed of donation allegedly provides that the donee
assignment of error since both issues are grounded on and refer to the very same provision. shall not dispose or sell the property within a period of one hundred (100) years from the
This Court is clothed with ample authority to review matters, even if they are not assigned execution of the deed of donation, otherwise a violation of such condition would render
as errors on appeal, if it finds that their consideration is necessary in arriving at a just ipso facto null and void the deed of donation and the property would revert to the estate of
decision of the case. Thus, we have held that an unassigned error closely related to an error the donors.
properly assigned, or upon which the determination of the question properly assigned is
dependent, will be considered by the appellate court notwithstanding the failure to assign it It is further alleged that on or about June 30, 1980, and while still within the prohibitive
as error. period to dispose of the property, petitioner Roman Catholic Bishop of Imus, in whose
administration all properties within the province of Cavite owned by the Archdiocese of
7. ID.; ID.; FOR THE EXPEDITIOUS ADMINISTRATION OF SUBSTANTIAL Manila was allegedly transferred on April 26, 1962, executed a deed of absolute sale of the
JUSTICE, REMAND OF THE CASE TO THE LOWER COURT FOR FURTHER property subject of the donation in favor of petitioners Florencio and Soledad C. Ignao in
RECEPTION OF EVIDENCE, NOT NECESSARY. — We have laid down the rule that consideration of the sum of P114,000.00. As a consequence of the sale, Transfer Certificate
the remand of the case to the lower court for further reception of evidence is not necessary of Title No. 115990 was issued by the Register of Deeds of Cavite on November 15, 1980
where the Court is in a position to resolve the dispute based on the records before it. On in the name of said petitioner spouses.
many occasions, the Court, in the public interest and for the expeditious administration of
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 54

What transpired thereafter is narrated by respondent court in its assailed decision. 4 On transmitted to the heirs of the donor, and may be exercised against the donee’s
December 17, 1984, petitioners Florencio Ignao and Soledad C. Ignao filed a motion to heirs."cralaw virtua1aw library
dismiss based on the grounds that (1) herein private respondents, as plaintiffs therein, have
no legal capacity to sue; and (2) the complaint states no cause of action. We do not agree.

On December 19, 1984, petitioner Roman Catholic Bishop of Imus also filed a motion to Although it is true that under Article 764 of the Civil Code an action for the revocation of a
dismiss on three (3) grounds, the first two (2) grounds of which were identical to that of the donation must be brought within four (4) years from the non-compliance of the conditions
motion to dismiss filed by the Ignao spouses, and the third ground being that the cause of of the donation, the same is not applicable in the case at bar. The deed of donation involved
action has prescribed. herein expressly provides for automatic reversion of the property donated in case of
violation of the condition therein, hence a judicial declaration revoking the same is not
On January 9, 1985, the Roman Catholic Archbishop of Manila likewise filed a motion to necessary. As aptly stated by the Court of Appeals:jgc:chanrobles.com.ph
dismiss on the ground that he is not a real party in interest and, therefore, the complaint
does not state a cause of action against him. "By the very express provision in the deed of donation itself that the violation of the
condition thereof would render ipso facto null and void the deed of donation, WE are of the
After private respondents had filed their oppositions to the said motions to dismiss and the opinion that there would be no legal necessity anymore to have the donation judicially
petitioners had countered with their respective replies, with rejoinders thereto by private declared null and void for the reason that the very deed of donation itself declares it so. For
respondents, the trial court issued an order dated January 31, 1985, dismissing the where (sic) it otherwise and that the donors and the donee contemplated a court action
complaint on the ground that the cause of action has prescribed. 5 during the execution of the deed of donation to have the donation judicially rescinded or
declared null and void should the condition be violated, then the phrase reading ‘would
Private respondents thereafter appealed to the Court of Appeals raising the issues on (a) render ipso facto null and void’ would not appear in the deed of donation." 9
whether or not the action for rescission of contracts (deed of donation and deed of sale) has
prescribed; and (b) whether or not the dismissal of the action for rescission of contracts In support of its aforesaid position, respondent court relied on the rule that a judicial action
(deed of donation and deed of sale) on the ground of prescription carries with it the for rescission of a contract is not necessary where the contract provides that it may be
dismissal of the main action for reconveyance of real property. 6 revoked and cancelled for violation of any of its terms and conditions. 10 It called attention
to the holding that there is nothing in the law that prohibits the parties from entering into an
On December 23, 1986, respondent Court of Appeals, holding that the action has not yet agreement that a violation of the terms of the contract would cause its cancellation even
prescribed, rendered a decision in favor of private respondents, with the following without court intervention, and that it is not always necessary for the injured party to resort
dispositive portion:chanrobles virtual lawlibrary to court for rescission of the contract. 11 It reiterated the doctrine that a judicial action is
proper only when there is absence of a special provision granting the power of cancellation.
"WHEREFORE, the Order of January 31, 1985 dismissing appellants’ complaint is SET 12
ASIDE and Civil Case No. 095-84 is hereby ordered REINSTATED and REMANDED to
the lower court for further proceedings. No costs." 7 It is true that the aforesaid rules were applied to the contracts involved therein, but we see
no reason why the same should not apply to the donation in the present case. Article 732 of
Petitioners Ignao and the Roman Catholic Bishop of Imus then filed their separate motions the Civil Code provides that donations inter vivos shall be governed by the general
for reconsideration which were denied by respondent Court of Appeals in its resolution provisions on contracts and obligations in all that is not determined in Title III, Book III on
dated February 6, 1987, 8 a hence, the filing of these appeals by certiorari. donations. Now, said Title III does not have an explicit provision on the matter of a
donation with a resolutory condition and which is subject to an express provision that the
It is the contention of petitioners that the cause of action of herein private respondents has same shall be considered ipso facto revoked upon the breach of said resolutory condition
already prescribed, invoking Article 764 of the Civil Code which provides that" (t)he imposed in the deed therefor, as is the case of the deed presently in question. The
donation shall be revoked at the instance of the donor, when the donee fails to comply with suppletory application of the foregoing doctrinal rulings to the present controversy is
any of the conditions which the former imposed upon the latter," and that" (t)his action consequently justified.
shall prescribe after four years from the non-compliance with the condition, may be
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 55

The validity of such a stipulation in the deed of donation providing for the automatic The cause of action of private respondents is based on the alleged breach by petitioners of
reversion of the donated property to the donor upon non-compliance of the condition was the resolutory condition in the deed of donation that the property donated should not be
upheld in the recent case of De Luna, Et. Al. v. Abrigo, Et. Al. 13 It was held therein that sold within a period of one hundred (100) years from the date of execution of the deed of
said stipulation is in the nature of an agreement granting a party the right to rescind a donation. Said condition, in our opinion, constitutes an undue restriction on the rights
contract unilaterally m case of breach, without need of going to court, and that, upon the arising from ownership of petitioners and is, therefore, contrary to public policy.
happening of the resolutory condition or non-compliance with the conditions of the
contract, the donation is automatically revoked without need of a judicial declaration to Donation, as a mode of acquiring ownership, results in an effective transfer of title over the
that effect. While what was the subject of that case was an onerous donation which, under property from the donor to the donee. Once a donation is accepted, the donee becomes the
Article 733 of the Civil Code is governed by the rules on contracts, since the donation in absolute owner of the property donated. Although the donor may impose certain conditions
the case at bar is also subject to the same rules because of its provision on automatic in the deed of donation, the same must not be contrary to law, morals, good customs,
revocation upon the violation of a resolutory condition, from parity of reasons said public order and public policy. The condition imposed in the deed of donation in the case
pronouncements in De Luna pertinently apply.chanrobles.com : virtual law library before us constitutes a patently unreasonable and undue restriction on the right of the donee
to dispose of the property donated, which right is an indispensable attribute of ownership.
The rationale for the foregoing is that in contracts providing for automatic revocation, Such a prohibition against alienation, in order to be valid, must not be perpetual or for an
judical intervention is necessary not for purposes of obtaining a judicial declaration unreasonable period of time.
rescinding a contract already deemed rescinded by virtue of an agreement providing for
rescission even without judicial intervention, but in order to determine whether or not the Certain provisions of the Civil Code illustrative of the aforesaid policy may be considered
rescission was proper. 14 applicable by analogy. Under the third paragraph of Article 494, a donor or testator may
prohibit partition for a period which shall not exceed twenty (20) years. Article 870, on its
When a deed of donation, as in this case, expressly provides for automatic revocation and part, declares that the dispositions of the testator declaring all or part of the estate
reversion of the property donated, the rules on contract and the general rules on inalienable for more than twenty (20) years are void.chanrobles law library
prescription should apply, and not Article 764 of the Civil Code. Since Article 1306 of said
Code authorizes the parties to a contract to establish such stipulations, clauses, terms and It is significant that the provisions therein regarding a testator also necessarily involve, in
conditions not contrary to law, morals, good customs, public order or public policy, we are the main, the devolution of property by gratuitous title hence, as is generally the case of
of the opinion that, at the very least, that stipulation of the parties providing for automatic donations, being an act of liberality, the imposition of an unreasonable period of
revocation of the deed of donation, without prior judicial action for that purpose, is valid prohibition to alienate the property should be deemed anathema to the basic and actual
subject to the determination of the propriety of the rescission sought. Where such propriety intent of either the donor or testator. For that reason, the regulatory arm of the law is or
is sustained, the decision of the court will be merely declaratory of the revocation, but it is must be interposed to prevent an unreasonable departure from the normative policy
not in itself the revocatory act. expressed in the aforesaid Articles 494 and 870 of the Code.

On the foregoing ratiocinations, the Court of Appeals committed no error in holding that In the case at bar, we hold that the prohibition in the deed of donation against the alienation
the cause of action of herein private respondents has not yet prescribed since an action to of the property for an entire century, being an unreasonable emasculation and denial of an
enforce a written contract prescribes in ten (10) years. 15 It is our view that Article 764 integral attribute of ownership, should be declared as an illegal or impossible condition
was intended to provide a judicial remedy in case of non-fulfillment or contravention of within the contemplation of Article 727 of the Civil Code. Consequently, as specifically
conditions specified in the deed of donation if and when the parties have not agreed on the stated in said statutory provision, such condition shall be considered as not imposed. No
automatic revocation of such donation upon the occurrence of the contingency reliance may accordingly be placed on said prohibitory paragraph in the deed of donation.
contemplated therein. That is not the situation in the case at bar. The net result is that, absent said proscription, the deed of sale supposedly constitutive of
the cause of action for the nullification of the deed of donation is not in truth violative of
Nonetheless, we find that although the action filed by private respondents may not be the latter hence, for lack of cause of action, the case for private respondents must fail.
dismissed by reason of prescription, the same should be dismissed on the ground that
private respondents have no cause of action against petitioners. It may be argued that the validity of such prohibitory provision in the deed of donation was
not specifically put in issue in the pleadings of the parties. That may be true, but such
 O B L I C O N ( K i n d s o f C o n d i t i o n s ) | 56

oversight or inaction does not prevent this Court from passing upon and resolving the
same.

It will readily be noted that the provision in the deed of donation against alienation of the
land for one hundred (100) years was the very basis for the action to nullify the deed of
donation. At the same time, it was likewise the controverted fundament of the motion to
dismiss the case a quo, which motion was sustained by the trial court and set aside by
respondent court, both on the issue of prescription. That ruling of respondent court
interpreting said provision was assigned as an error in the present petition. While the issue
of the validity of the same provision was not squarely raised, it is ineluctably related to
petitioner’s aforesaid assignment of error since both issues are grounded on and refer to the
very same provision.chanrobles virtual lawlibrary

This Court is clothed with ample authority to review matters, even if they are not assigned
as errors on appeal, if it finds that their consideration is necessary in arriving at a just
decision of the cased: 16 Thus, we have held that an unassigned error closely related to an
error properly assigned, 17 or upon which the determination of the question properly
assigned is dependent, will be considered by the appellate court notwithstanding the failure
to assign it as error. 18

Additionally, we have laid down the rule that the remand of the case to the lower court for
further reception of evidence is not necessary where the Court is in a position to resolve the
dispute based on the records before it. On many occasions, the Court, in the public interest
and for the expeditious administration of justice, has resolved actions on the merits instead
of remanding them to the trial court for further proceedings, such as where the ends of
justice, would not be subserved by the remand of the cased. 19 The aforestated
considerations obtain in and apply to the present case with respect to the matter of the
validity of the resolutory condition in question.

WHEREFORE, the judgment of respondent court is SET ASIDE and another judgment is
hereby rendered DISMISSING Civil Case No. 095-84 of the Regional Trial Court, Branch
XX, Imus, Cavite.

SO ORDERED.

Melencio-Herrera and Paras, JJ., concur.

Padilla, J., took no part.

Sarmiento, J., is on leave.