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ERNESTO DEIPARINE, JR., petitioner, vs. THE HON. The CA affirmed the decision in toto. Hence, this petition.

COURT OF APPEALS, CESARIO CARUNGAY and Deiparine insisted that the construction agreement does
ENGR. NICANOR TRINIDAD, respondents. G.R. No. not specify any compressive strength for the structure nor
96643. April 23, 1993. does it require that the same be subjected to any kind of
stress test. Therefore, since he did not breach any of his
Under the law on contracts, there are what are called covenants under the agreement, the court erred in
"rescissible contracts" which are enumerated in Article rescinding the contract. The petitioner challenges the
1381 . . . There is also a right of rescission under the law application by the lower court of Article 1191 of the Civil
on obligations as granted in Article 1191. Code in rescinding the construction agreement. His
position is that the applicable rules are Articles 1385 and
FACTS: The spouses Cesario and Teresita Carungay 1725 of the Civil Code.
entered into an agreement with Ernesto Deiparine, Jr. on
August 13, 1982, for the construction of a three-story ISSUES: 1.) Whether the RTC has jurisdiction over the
dormitory in Cebu City. The Carungays agreed to pay case. 2.) Whether the rescission of the construction
P970,000.00, inclusive of contractor's fee, and Deiparine contract was valid.
bound himself to erect the building "in strict accordance to
plans and specifications." Nicanor Trinidad, Jr., a civil RULING: 1.) YES. The wording of P.D. 1746 is clear. The
engineer, was designated as the representative of the adjudicatory powers of the Philippine Domestic
Carungay spouses, with powers of inspection and Construction Board are meant to apply only to public
coordination with the contractor. Deiparine started the construction contracts. Its power over private construction
construction on September 1, 1982. On November 6, contracts is limited to the formulation and
1982, Trinidad sent him a document entitled General recommendation of rules and procedures for the
Conditions and Specifications which inter alia prescribed adjudication and settlement of disputes involving such
3,000 psi (pounds per square inch) as the minimum (private) contracts. It therefore has no jurisdiction over
acceptable compressive strength of the building. cases like the one at bar which remain cognizable by the
regular courts of justice.
In the course of the construction, Trinidad
reported to Cesario Carungay that Deiparine had been 2.) YES. The record shows that Deiparine commenced
deviating from the plans and specifications, thus impairing the construction soon after the signing of the contract,
the strength and safety of the building. On September 25, even before Trinidad had submitted the contract
1982, Carungay ordered Deiparine to first secure documents, including the General Conditions and
approval from him before pouring cement. This order was Specifications.
not heeded, prompting Carungay to send Deiparine
another memorandum complaining that the "construction Article 1385 states that rescission creates the
works are faulty and done haphazardly, mainly due to lax obligation to return the things which were the object of the
supervision coupled with, inexperienced and unqualified contract, together with their fruits, and the price with its
staff." This memorandum was also ignored. interest; consequently, it can be carried out only when he
who demands rescission can return whatever he may be
After several conferences, the parties agreed to obliged to restore.
conduct cylinder tests to ascertain if the structure thus far
built complied with safety standards. Carungay suggested Article 1725 provides that in a contract for a piece
core testing. Deiparine was reluctant at first but in the end of work:
agreed. He even promised that if the tests should show
total failure, or if the failure should exceed 10%, he would
The owner may withdraw at will from the construction of
shoulder all expenses; otherwise, the tests should be for the work, although it may have been commenced,
the account of Carungay. The core testing was conducted
indemnifying the contractor for all the latter's expenses,
on twenty-four core samples. On the basis of 3,000 psi
work, and the usefulness which the owner may obtain
(pounds per square inch), all the samples failed; on the
therefrom, and damages.
basis of 2,500 psi, only three samples passed; and on the
basis of 2,000 psi, nineteen samples failed. This meant
that the building was structurally defective. Deiparine seems to be confused over the right
of rescission, which is used in two different contexts
in the Civil Code.
In view of this finding, the spouses Carungay filed
complaint with the Regional Trial Court of Cebu for the
rescission of the construction contract and for damages. Under the law on contracts, there are what are
Deiparine moved to dismiss, alleging that the court had called "rescissible contracts" which are enumerated in
no jurisdiction over construction contracts, which were Article 1381 thus:
now cognizable by the Philippine Construction
Development Board pursuant to Presidential Decree No. (1) Those which are entered into by guardians
1746. The motion was denied. After trial on the merits, the whenever the wards who they represent suffer
RTC Judge declared a.) the construction agreement lesion by more than one-fourth of the value of the
rescinded; b) condemned Deiparine to have forfeited his things which are the object thereof;
expenses in the construction in the same of P244,253.70; (2) Those agreed upon in representation of
c) ordered Deiparine to reimburse to the spouses absentees, if the latter suffer the lesion stated in
Carungay the sum of P15,104.33 for the core testing; d) the preceding number:
ordered Deiparine to demolish and remove all the existing (3) Those undertaken in fraud of creditors when
structures and restore the premises to their former the later cannot in any other manner collect the
condition before the construction began, being allowed at claims due them:
the same time to take back with him all the construction (4) Those which refer to things under litigation if
materials belonging to him; and e) ordered Deiparine to they have been entered into by the defendants
pay the Carungay spouses attorney's fees in the amount without the knowledge and approval of the litigants
of P10,000.00 as well as the costs of the suit. or of competent judicial authority;
(5) All other contracts specially declared by law to
be subject to rescission.
Article 1385, upon which Deiparine relies, deals obligation, the employer may have the defect removed or
with the rescission of the contracts enumerated above, another work executed, at the contractor's cost.
which do not include the construction agreement in
question. Article 1727. The contractor is responsible for the work
done by persons employed by him.
There is also a right of rescission under the law
on obligations as granted in Article 1191, providing as While it is true that the stress test was not
follows: required in any of the contract documents, conducting the
test was the only manner by which the owner could
"Art. 1191. The power to rescind obligations is implied in determine if the contractor had been faithfully complying
reciprocal ones, in case one of the obligors should not with his presentations under their agreement.
comply with what is incumbent upon him. Furthermore, both parties later agreed in writing that the
core test should be conducted. When the structure failed
The injured party may choose between the fulfillment and under this test the Carungay spouses were left with no
the rescission of the obligation, with the payment of other recourse than to rescind their contract.
damages in either case. He may also seek rescission,
even after he has chosen fulfillment, if the latter should It is a basic principle in human relations,
become impossible. acknowledged in Article 19 of the Civil Code, that "every
person must, in the performance of his duties, act with
The court shall decree the rescission claimed, unless justice, give everyone his due, and observe honesty and
there be just cause authorizing the fixing of a period. good faith." This admonition is reiterated in Article 1159,
which states that "obligations arising from contracts have
This is understood to be without prejudice to the rights of the force of law between the contracting parties and
third persons who have acquired the thing, in accordance should be complied with in good faith." The petitioner has
with articles 1385 and 1388 and the Mortgage Law.” ignored these exhortations and is therefore not entitled to
the relief he seeks.
This was the provision the trial court and the
respondent court correctly applied because it relates to
contracts involving reciprocal obligations like the subject
construction contract. The construction contract fails ROWENA R. SALONTE, Petitioner, vs. COMMISSION
squarely under the coverage of Article 1191 because it ON AUDIT, CHAIRPERSON MA. GRACIA PULIDO-
imposes upon Deiparine the obligation to build the TAN, COMMISSIONER JUANITO G. ESPINO, JR.,
structure and upon the Carungays the obligation to pay COMMISSIONER HEIDI L. MENDOZA, and
for the project upon its completion. FORTUNATA M. RUBICO, DIRECTOR IV, COA
COMMISSION SECRETARIAT, in their official
Article 1191, unlike Article 1385, is not predicated capacities, Respondents. G.R. No.
on economic prejudice to one of the, parties but on breach 207348 August 19, 2014
of faith by one of them that violates the reciprocity
between them. The violation of reciprocity between Article 1193. Obligations for whose fulfillment a day
Deiparine and the Carungay spouses, to wit, the breach certain has been fixed, shall be demandable only when
caused by Deiparine's failure to follow the stipulated plans that day comes.
and specifications, has given the Carungay spouses the
right to rescind or cancel the contract.
Obligations with a resolutory period take effect at once,
but terminate upon arrival of the day certain.
Article 1725 cannot support the petitioner's
position either, for this contemplates a voluntary
A day certain is understood to be that which must
withdrawal by the owner without fault on the part of the
necessarily come, although it may not be known when.
contractor, who is therefore entitled to indemnity, and
even damages, for the work he has already commenced.
there is no such voluntary withdrawal in the case at bar. If the uncertainty consists in whether the day will come or
On the contrary, the Carungays have been constrained to not, the obligation is conditional, and it shall be regulated
ask for judicial rescission because of the petitioner's by the rules of the preceding Section. (emphasis supplied)
failure to comply with the terms and conditions of their
contract. A plain reading of the Contract of Reclamation reveals
that the six (6)-year period provided for project
The other applicable provisions are: completion, or, with like effect, termination of the contract
was a mere estimate and cannot be considered a period
or a "day certain" in the context of the aforequoted Art.
Article 1714. If the contractor agrees to produce the work
1193. To be clear, par. 15 of the Contract of Reclamation
from material furnished by him, he shall deliver the thing
states: "[T]he project is estimated to be completed in six
produced to the employer and transfer dominion over the
(6) years." As such, the lapse of six (6) years from the
thing. This contract shall be governed by the following
perfection of the contract did not, by itself, make the
articles as well as by the pertinent provisions on warranty
obligation to finish the reclamation project demandable,
of title and against hidden defects and the payment of
such as to put the obligor in a state of actionable delay for
price in a contract of sale.
its inability to finish. Thus, F.F. Cruz cannot be deemed to
be in delay.
Article 1715. The contractor shall execute the work in
such a manner that it has the qualities agreed upon and
FACTS: On April 26, 1989, the City of Mandaue and F.F.
has no defects which destroy or lessen its value or fitness
Cruz and Co., Inc. (F.F. Cruz) entered into a Contract of
for its ordinary or stipulated use. Should the work be not
Reclamation4 in which F.F. Cruz, in consideration of a
of such quality, the employer may require that the
defined land sharing formula thus stipulated, agreed to
contractor remove the defect or execute another work. If
undertake, at its own expense, the reclamation of 180
the contractor fails or refuses to comply with this
hectares, more or less, of foreshore and submerged lands
from the Cabahug Causeway in that city. The timetables, Extension, Mandaue Causeway. However, under Section
i.e., commencement of the contract and project 5 of its MOA with Mandaue City, the former was no longer
completion, are provided in paragraphs 2 and 15 of the the lawful owner of the properties at the time the payment
Contract which state: was made. Based on the above findings, the COA
disallowed the payment of PhP 1,084,836.42 to F.F. Cruz
2. COMMENCEMENT. Work on the reclamation and naming that company, Darza and Solante liable for
shall commence not later than [July 1989], after this the transaction. F.F. Cruz in time appealed to COA
contract shall be ratified by the Sanggunian Central.
Panlungsod;
The COA affirmed the disallowance of the payment to FF
xxxx Cruz and ruled that from the provision of the MOA, it is
clear that the improvements introduced by F.F. Cruz x x x
15. CONTRACT DURATION. The project is would be owned by the City upon completion of the
estimated to be completed in six (6) years: (3 years project which under the Contract of reclamation should
have been in 1995. However, the project was not
for the dredge-filling and seawall construction and
completed in 1995 and even in 1997 when MDCP paid for
3 years for the infrastructures completion).
these improvements. The fact that the reclamation project
However, if all the infrastructures within the
had not yet been completed or turned over to the City of
OWNERS’ share of the project are already
completed within the six (6) year period agreed Mandaue by F.F. Cruz in 1997 or two years after it should
upon, any extension of time for works to be done have been completed, does not negate the right over such
improvements by the City x x x. Clearly, the intention of
within the share of the DEVELOPERS, shall be at
the stipulation is for F.F. Cruz x x x to compensate the
the discretion of the DEVELOPERS, as a growing
government for the use of the land on which the office,
city, changes in requirements of the lot buyers are
pavement, canteen, extension shed, house and septic
inevitable. xxx
tank were erected. Thus, to make the government pay for
the cost of the demolished improvements will defeat the
Subsequently, the parties executed, in relation to intention of parties as regards compensation due from the
the above project, a Memorandum of Agreement (MOA) contractor for its use of [the] subject land. Under Article
dated October 24, 19895 whereby the City of Mandaue 1315 of the Civil Code, from the moment a contract is
allowed F.F. Cruz to put up structures on a portion of a perfected, the parties are bound to the fulfillment to what
parcel of land owned by the city for the use of and to has been expressly stipulated and all the consequences
house F.F. Cruz personnel assigned at the project site which according to their nature, may be in keeping with
and that upon completion of the Mandaue City good faith, usage and law. Thus, even if the contractual
Reclamation Project, all improvements introduced by stipulations may turn out to be financially
[F.F. Cruz] to the portion of the parcel of land owned by disadvantageous to any party, such will not relieve any or
the [City of Mandaue] existing upon the completion of the both parties from their contractual
said Mandaue City Reclamation Project shall ipso facto obligations.12 (emphasis supplied). Hence, the instant
belong to the [City of Mandaue] in ownership as petition.
compensation for the use of said parcel of land by [F.F.
Cruz] without any rental subject to terms particularly
ISSUE: Who between the City of Mandaue and F.F. Cruz
provided in paragraphs 3, 4 and 5 of the MOA.
owned during the period material the properties that were
demolished?
Pursuant to the MOA, F.F. Cruz proceeded to
construct the contemplated housing units and other
RULING: F.F. CRUZ owned the properties that were
facilities which included a canteen and a septic tank.
demolished.
Later developments saw the City of Mandaue
The COA and its audit team obviously misread
undertaking the Metro Cebu Development Project II
the relevant stipulations of the MOA in relation to the
(MCDP II), part of which required the widening of the
provisions on project completion and termination of
Plaridel Extension Mandaue Causeway. However, the
structures and facilities built by F.F. Cruz subject of the contract of the Mandaue-F.F. Cruz reclamation contract.
MOA stood in the direct path of the road widening project.
Thus, the Department of Public Works and Highways Essentially, the COA is alleging that the Contract
(DPWH) and Samuel B. Darza, MCDP II project director, of Reclamation establishes an obligation on the part of
entered into an Agreement to Demolish, Remove and F.F. Cruz to finish the project within the allotted period of
Reconstruct Improvement dated July 23, 19976 with six (6) years from contract execution in August 1989.
F.F. Cruz whereby the latter would demolish the Prescinding from this premise, the COA would conclude
improvements outside of the boundary of the road that after the six (6)-year period, F.F. Cruz is automatically
widening project and, in return, receive the total amount deemed to be in delay, the contract considered as
of PhP 1,084,836.42 in compensation. completed, and the ownership of the structures built in
accordance with the MOA transferred to the City of
Accordingly, petitioner Solante, the Human Mandaue. COA’s basic position and the arguments
Resource Management Officer III, prepared and, with the holding it together is untenable.
approval of Samuel B. Darza (Darza), then issued
Disbursement Voucher (DV) No. 102-07-88-97 for PhP On this point, the Civil Code provision on
1,084,836.42 in favor of F.F. Cruz. In the voucher, Solante obligations with a period is relevant. Article 1193 thereof
certified that the expense covered by it was "necessary, provides:
lawful and incurred under my direct supervision."
Thereafter, Darza addressed a letter-complaint to the Article 1193. Obligations for whose fulfillment a day
Office of the Ombudsman, inviting attention to several certain has been fixed, shall be demandable only when
irregularities regarding the implementation of MCDP II. that day comes.
The letter was referred to the COA and it found that F.F.
Cruz and Company, Inc. was paid ₱1,084,836.42 for the Obligations with a resolutory period take effect at once,
cost of the property affected by the widening of Plaridel but terminate upon arrival of the day certain.
A day certain is understood to be that which must creditor requires the performance judicially or
necessarily come, although it may not be known when. extrajudicially. (emphasis supplied)

If the uncertainty consists in whether the day will come or In the instant case, the records are bereft of any
not, the obligation is conditional, and it shall be regulated document whence to deduce that the City of Mandaue
by the rules of the preceding Section. (emphasis supplied) exacted from F.F. Cruz the fulfillment of its obligation
under the reclamation contract. And to be sure, not one of
A plain reading of the Contract of Reclamation the exceptions to the requisite demand under Art. 1169 is
reveals that the six (6)-year period provided for established, let alone asserted. On the contrary, the then
project completion, or, with like effect, termination of city mayor of Mandaue, no less, absolved F.F. Cruz from
the contract was a mere estimate and cannot be incurring under the premises in delay. In his affidavit
considered a period or a "day certain" in the context dated July 9, 2004,18 then Mayor Ouano stated:
of the aforequoted Art. 1193. To be clear, par. 15 of
the Contract of Reclamation states: "[T]he project is That although x x x the reclamation was estimated to be
estimated to be completed in six (6) years." As such, completed in six years ending in 1995, the said project
the lapse of six (6) years from the perfection of the however, was not fully completed when the demolition of
contract did not, by itself, make the obligation to the mentioned improvements of [F.F. Cruz] was made x x
finish the reclamation project demandable, such as to x [and in fact] up to now the said Mandaue Reclamation
put the obligor in a state of actionable delay for its Project has not yet been fully completed and turned over
inability to finish. Thus, F.F. Cruz cannot be deemed to to the City of Mandaue.
be in delay.
x x x [S]ince at the time of the demolition the said
Put a bit differently, the lapse of six (6) years from improvements actually belonged to [F.F. Cruz] and the
the perfection of the subject reclamation contract, without City of Mandaue has no claim whatsoever on the said
more, could not have automatically vested Mandaue City, payment x x x for the demolished improvements.
under the MOA, with ownership of the structures. (emphasis supplied)

Moreover, even if we consider the allotted six (6) As it were, the Mandaue-F.F.Cruz MOA states that the
years within which F.F. Cruz was supposed to complete structures built by F .F. Cruz on the property of the
the reclamation project, the lapse thereof does not city will belong to the latter only upon the completion
automatically mean that F.F. Cruz was in delay. As may of the project. Clearly, the completion of the project
be noted, the City of Mandaue never made a demand for is a suspensive condition that has yet to be
the fulfillment of its obligation under the Contract of fulfilled.1âwphi1 Until the condition arises,
Reclamation. Article 1169 of the Civil Code on the ownership of the structures properly pertains to F .F.
interaction of demand and delay and the exceptions to the Cruz.
requirement of demand relevantly states:
To be clear, the MOA does not state that the
Article 1169. Those obliged to deliver or to do something structures shall inure in ownership to the City of
incur in delay from the time the obligee judicially or Mandaue after the lapse of six ( 6) years from the
extrajudicially demands from them the fulfillment of their execution of the Contract of Reclamation. What the
obligation. MOA does provide is that ownership of the structures
shall vest upon, or ipso facto belong to, the City of
However, the demand by the creditor shall not be Mandaue when the Contract of Reclamation shall
necessary in order that delay may exist: have been completed. Logically, before such time, or
until the agreed reclamation project is actually
finished, F.F. Cruz owns the structures. The payment
(1) When the obligation or the law expressly so
of compensation for the demolition thereof is
declares; or
justified. The disallowance of the payment is without
factual and legal basis. COA then gravely abused its
(2) When from the nature and the circumstances discretion when it decreed the disallowance.
of the obligation it appears that the designation of
the time when the thing is to be delivered or the
service is to be rendered was a controlling motive
for the establishment of the contract; or
MARIA LACHICA VS. GREGORIO ARANETA, INC.
47 OG 5699 August 19, 1949
(3) When demand would be useless, as when the
obligor has rendered it beyond his power to
perform. A term is fixed and “it is presumed to have been
established for the benefit of the creditor as well as that of
the debtor, unless from its tenor or from other
In reciprocal obligations, neither party incurs in
circumstances it should appear that the terms as
delay if the other does not comply or is not ready to
established for the benefit of one or the other.”
comply in a proper manner with what is incumbent upon
him. From the moment one of the parties fulfills his
obligation, delay by the other begins. FACTS: Gregorio Araneta, Inc. (through President Jose
Araneta) offered for sale a parcel of land with the
improvements thereon. This property was bought by
Thus, in J Plus Asia Development Corporation v.
Investment Corporation through Maria Lachica, the wife
Utility Assurance Corporation,17 the Court has held:
of the Esteban Sadang who was sales agent of defendant
Corporation.
In this jurisdiction, the following requisites must
be present in order that the debtor may be in default: (1)
The terms of the contract stated that the price
that the obligation be demandable and already liquidated;
was P20,000, of which P8,000 was to be paid in cash and
(2) that the debtor delays performance; and (3) that the
the balance of P12,000 in installments of –
one contained in most mortgage deeds where the
P 1,000 on or before December 31, 1943 mortgage loan is payable in several installments, still we
P 1,000 on or before December 31, 1944 cannot escape the conclusion, derived from the clause
P 10,000 on or before December 31, 1945. itself, that payments may be made by the vendee before
the dates stated in the contract .
What the parties signed was a contract of exact
content as stated, which however omitted the words “or PONCE DE LEON VS SYJUCO INC. and PHILIPPINE
before.” Thus, it would appear that the payment of the NATIONAL BANK
installments would be “on” and not “on or before” the 90 PHIL. 311 G.R. No. L-3316 October 31, 1951
dates as specified.
A monetary obligation contracted with a period, the
The contract further added that “this same presumption is that the same is deemed constituted in
property will be mortgaged to us to guarantee the unpaid favor of both the creditor and the debtor unless from its
balance, and the same will bear an interest of 8 percent tenor or from other circumstances it appears that the
per annum; said interest to be paid monthly in advance.” period has been established for the benefit of either one
of them (Art. 1196). Here no such exception or
circumstance exists.
The terms were complied with, together with
some resolved differences, until on Sept. 5, 1944, plaintiff
It may be argued that the creditor has nothing to lose but
Sadang went to see Araneta to pay the entire balance,
everything to gain by the acceleration of payment of the
including the interest thereon and ask for the cancellation
obligation because the debtor has offered to pay all the
of the mortgage, but Araneta refused to accept the tender
interests up to the date it would become due, but this
of payment. Araneta gave as his reason for his non-
argument loses force if we consider that the payment of
acceptance that such payment was not in accordance
interests is not the only reason why a creditor cannot be
with the terms of the deed of sale with mortgage.
forced to accept payment contrary to the stipulation.
There are other reasons why this cannot be done. One of
Plaintiff, through counsel, deposited the sum them is that the creditor may want to keep his money
(balance) supposed to be paid to Araneta with the CFI of invested safely instead of having it in his hands. Another
Manila by way of consignation, and at the same time reason is that the creditor by fixing a period protects
presented the complaint. himself against sudden decline in the purchasing power
of the currency loaned specially at a time when there are
The defendant alleges that payment should be many factors that influence the fluctuation of the currency.
on the date specified, not before; the plaintiffs claim that And all available authorities on the matter are agreed that,
such payment may be made on or before the date unless the creditor consents, the debtor has no right to
specified. accelerate the time of payment even if the premature
tender "included an offer to pay principal and interest in
ISSUE: Should Araneta be compelled to accept the full."
payment?
FACTS: The appellee, Philippine National Bank, was the
RULING: YES. The contract does not prohibit if it is done owner of two parcels of land in Negros Occidental. On
before (p.5706, no. 2). March 9, 1936, the Bank executed a contract to sell the
said properties to Jose Ponce de Leon for the total price
A term is fixed and “it is presumed to have been of P26,300.
established for the benefit of the creditor as well as that of
the debtor, unless from its tenor or from other Subsequently, Ponce de Leon obtained a loan
circumstances it should appear that the terms as from Santiago Syjuco, Inc in the amount of P200,000 in
established for the benefit of one or the other.” (Art. 1127, Japanese Military Notes, payable within one (1) year from
now 1196 Civil Code). And the contract specifically May 5, 1948. It was also provided that in the promissory
provides that “these periods of payment have been note that Ponce de Leon could not pay, and Syjuco could
agreed for the benefit of the vendor and the vendee.” not demand, the payment of said note except within the
Such mutual benefit has been interpreted to consist of the aforementioned period. To secure the payment of said
time granted a debtor to find means to comply with his obligation, Ponce de Leon mortgaged the parcels of land
obligation, and the fruits, such as interest, accruing to the which he agreed to purchase from the Bank. Using the
creditor. loan, Ponce de Leon was able to pay the Bank and a deed
of absolute sale was executed in his name.
From the SC decision in Villaseñor vs.
Javellana, the only impediment to a debtor making The deed of sale executed by the Bank in favor
payment before the term fixed, is the denial to the creditor of Ponce de Leon and the deed of mortgage executed by
of the benefits, such as interests, accruing to the later by Ponce de Leon in favor of Syjuco were registered in the
reason of the fixed term. This, coupled with the fact that Office of the Register of Deeds and, as a consequence of
the contract did not prohibit payment before the fixed such registration, the Transfer Certificates of Title in the
date, justifies the conclusion that under the terms signed, name of the Bank were cancelled and a new Transfer
plaintiffs could do so. To hold otherwise, would be virtually Certificates of Title were issued in the name of Ponce de
compelling an obligor to assume an obligation later when Leon. The mortgage in favor of Syjuco was annotated on
he offers to, and could very well, discharge it earlier. The the back of said certificates.
law should not be interpreted as to compel a debtor to
remain so, when he is in a position to release himself.
On July 31, 1944, Ponce de Leon obtained an
additional loan from Syjuco in the amount of P16,000 in
Further, the acceleration clause in the contract Japanese Military notes and executed in the latter's favor
signed by the parties state that “in the event of defaults in of promissory note of the same tenor as the one had
payment of any amount due, either for capital or interest, previously executed.
the whole balance shall automatically become due and
payable, and the vendor shall have the right to foreclose
the mortgage in its entirety.” While the clause is standard
On several occasions in October, 1944, Ponce de 1176); (3) that previous notice of the consignation have
Leon tendered to Syjuco the amount of P254,880 in been given to the person interested in the performance of
Japanese military notes in full payment of his the obligation (Art. 1177); (4) that the amount due was
indebtedness to Syjuco. The amount tendered included placed at the disposal of the court (Art 1178); and (5) that
not only the interest up to the time of the tender, but also after the consignation had been made the person
all the interest up to May 5, 1948. Ponce de Leon also interested was notified thereof (Art. 1178).
wrote to Syjuco a letter tendering the payment of his
indebtedness, including interests up to May 5, 1948, In the instant case, while it is admitted a debt
Syjuco, however, refused to accept such repeated existed, that the consignation was made because of the
tenders. During the trial, Ponce de Leon explained that he refusal of the creditor to accept it, and the filing of the
wanted to settle his obligations because as a member of complaint to compel its acceptance on the part of the
the guerilla forces he was being hunted by the Japanese creditor can be considered sufficient notice of the
and he was afraid of getting caught and killed. consignation to the creditor, nevertheless, it appears that
at least two of the above requirements have not been
In view of Syjuco's refusal to accept the payment complied with. Thus, it appears that plaintiff, before
tendered by Ponce de Leon, the latter deposited with the making the consignation with the clerk of the court, failed
Clerk of Court, of First Instance of Manila the amount of to give previous notice thereof to the person interested in
P254,880 and, on November 4, 1944, he filed a complaint the performance of the obligation. It also appears that the
consigning the amount so deposited to Syjuco. To this obligation was not yet due and demandable when the
complaint Syjuco filed his answer. money was consigned, because, as already stated, by the
very express provisions of the document evidencing the
On May 15, 1946, Ponce de Leon filed a petition same, the obligation was to be paid within one year after
in the Court of First Instance of Negros Occidental for the May 5, 1948, and the consignation was made before this
reconstitution of transfer Certificates of Titles in the name period matured. The failure of these two requirements is
of the Bank and, in an order dated June 4, 1946, the Court enough ground to render the consignation ineffective. And
ordered the reconstitution of said titles. it cannot be contended that plaintiff is justified in
accelerating the payment of the obligation because he
was willing to pay the interests due up to the date of its
On August 16, 1946, Ponce de Leon obtained an
maturity, because, under the law, in a monetary
overdraft account from the Bank in an amount not
obligation contracted with a period, the presumption
exceeding P135,000 and, on the same date, he executed
is that the same is deemed constituted in favor of
a mortgage of the two parcels of land covered by the
both the creditor and the debtor unless from its tenor
reconstituted Transfer Certificates of Title in favor of the
or from other circumstances it appears that the
said Bank to secure the payment of any amount which he
period has been established for the benefit of either
may obtain from the Bank under aforementioned overdraft
one of them (Art. 1127). Here no such exception or
account. The overdraft account was granted by the Bank
circumstance exists.
to Ponce de Leon in good faith, said Bank not being aware
of the mortgage which Ponce de Leon had executed in
favor of Syjuco during the Japanese occupation, and said It may be argued that the creditor has nothing
Bank believing that the said properties had no lien or to lose but everything to gain by the acceleration of
encumbrance appeared annotated on the reconstituted payment of the obligation because the debtor has
certificates of Title in the name of Ponce de Leon. offered to pay all the interests up to the date it would
become due, but this argument loses force if we
consider that the payment of interests is not the only
On September 28, 1946, Syjuco filed a second
reason why a creditor cannot be forced to accept
amended answer to Ponce de Leon's complaint and, in its
payment contrary to the stipulation. There are other
"Tercera Reconvention", it claimed that Ponce de Leon,
reasons why this cannot be done. One of them is that
by reconstituting the titles in the name of the Bank, by
the creditor may want to keep his money invested
causing the Register of Deeds to have the said titles
safely instead of having it in his hands. Another
transferred in his (Ponce de Leon's name, and by
reason is that the creditor by fixing a period protects
subsequently mortgaging the said properties to the Bank
himself against sudden decline in the purchasing
as a guaranty for his overdraft account, had violated the
power of the currency loaned specially at a time when
conditions of the morgage which Ponce de Leon has
there are many factors that influence the fluctuation
executed in its favor during the Japanese occupation.
of the currency. And all available authorities on the
Syjuco then prayed that the mortgage executed by Ponce
matter are agreed that, unless the creditor consents,
de Leon in favor of the Bank be declared null and void.
the debtor has no right to accelerate the time of
payment even if the premature tender "included an
On June 24, 1949, the lower court rendered a offer to pay principal and interest in full."
decision absolving Syjuco from Ponce de Leon's
complaint and condemning Ponce de Leon to pay Syjuco
Thus, the conclusion is inescapable that the
the total amount of P23,130 with interest at the legal rate
consignation made by the plaintiff is invalid and, therefore,
from May 6, 1949, until fully paid. Both Ponce de Leon
did not have the effect of relieving him of his obligation.
and Syjuco file their appeal from this decision.

ISSUE : Is the consignation made by PONCE DE LEON


valid?

RULING: NO. In order that consignation may be effective,


the debtor must first comply with certain requirements
prescribed by law. The debtor must show (1) that there
was a debt due; (2) that the consignation of the obligation
had been made bacause the creditor to whom tender of
payment was made refused to accept it, or because he
was absent for incapacitated, or because several persons
claimed to be entitled to receive the amount due (Art.

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