Cetus Development Corp. v.

CA

FACTS:

Private respondents were the lessees of the premises originally owned by Susana
Realty. The payments of the rentals were paid by them to a collector of the Susana Realty who
went the premises monthly. Susana Realty, however, sold the property to petitioner Cetus
Development, Inc. The private respondents then continued to pay their monthly rentals to a
collector sent by the petitioner. In succeeding months, for three months, the private respondents
failed to pay their rentals because no collector came. They then contacted the petitioner over
the telephone as to where they should pay their rentals. The petitioner then told them that they
would send a collector to collect the rentals. Private respondents waited but no collector came.
Petitioner then sent a letter to each of the private respondents demanding that they vacate the
subject premises and to pay their arrearages within 15 days from the receipt thereof. With this,
private respondents immediately upon the receipt of such demand tendered their payments
which were accepted by the petitioner with the condition that the acceptance was without
prejudice to the filing of ejectment suit. For failure of the private respondents to vacate the
premises as demanded, petitioner filed an ejectment suit against them.

ISSUE:

Whether or not there was a delay of payment by the private respondents to the petitioner
considering that upon receipt of the demand letter, they immediately tendered their payments.

HELD:

No. There was no failure yet on the part of private respondents to pay rents for three
consecutive months. As the terms of the individual verbal leases which were on a month-to-
month basis were not alleged and proved, the general rule on necessity of demand applies, to
wit: there is default in the fulfillment of an obligation when the creditor demands payment at the
maturity of the obligation or at anytime thereafter. This is explicit in Article 1169, New Civil Code
which provides that "those obliged to deliver or to do something incur in delay from the time the
obligee judicially or extrajudicially demands from them the fulfillment of their obligation."
Petitioner has not shown that its case falls on any of the following exceptions where demand is
not required: (a) when the obligation or the law so declares; (b) when from the nature and
circumstances of the obligation it can be inferred that time is of the essence of the contract; and
(c) when demand would be useless, as when the obligor has rendered it beyond his power to
perform. The demand required in Article 1169 of the Civil Code may be in any form, provided
that it can be proved. The proof of this demand lies upon the creditor. Without such demand,
oral or written, the effects of default do not arise.
 The facts on record fail to show proof that petitioner demanded the payment of the
rentals when the obligation matured. Coupled with the fact that no collector was sent as
previously done in the past, the private respondents cannot be held guilty of mora solvendi or
delay in the payment of rentals.

Aerospace Chemical Industries v. CA

Facts:

On June 27, 1986, petitioner Aerospace Industries, Inc. purchased five hundred
(500) metric tons of sulfuric acid from private respondent Philippine Phosphate Fertilizer
Corporation. Petitioner as buyer committed to secure the means of transport to pick-up the
purchases from private respondents loadports.

On October 3, 1986, petitioner paid the purchase price of 500 MT of sulfuric acid.
Then, it chartered M/T Sultan Kayumanggi to carry the agreed volumes of freight from
designated loading areas but the vessel was able to withdraw a partial amount of sulfuric
acid from Basay and Sangi because it tilted. Later, it sank with a total amount of 227.51 MT
of sulfuric acid on board.

Petitioner sent a demand letter to private respondent for delivery of the 272.49 MT
of sulfuric acid. Petitioner then filed a complaint against private respondent for specific
performance and/or damages before the Regional Trial Court of Pasig. The private
respondent filed an answer with counterclaim and alleged that it was the petitioner which
was remiss in the performance of its obligation in arranging the shipping requirements of its
purchases and, hence, should pay damages. Petitioner prevailed in the trail court. However
on appeal, the Court of Appeals reversed the decision of the trial court and instead found
petitioner guilty of delay and therefore, liable for damages. Hence, this petition.

Issue:

Whether or not the petitioner incurred delay in the performance of its obligation
under the contract.

Ruling:

Yes. Delay begins from the time the obligee judicially or extrajudicially demands
from the obligor the performance of the obligation. Art. 1169 of the Civil Code provides that
those obliged to deliver or to do something incur in delay from the time the obligee
judicially or extrajudicially demands from them the fulfillment of their obligation. Thus, in
order that the debtor may be in default, it is necessary that the following requisites be
present: (1) that the obligation be demandable and already liquidated; (2) that the debtor
delays performance; and (3) that the creditor requires the performance judicially or
extrajudicially.
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 In the present case, the demand made by the private respondent through a letter,
which was unheeded, justifies the finding of delay.

Santos Ventura Hocorma Foundation, Inc. vs. Ernesto V. Santos

FACTS:

On October 26, 1990, the parties executed a Compromise Agreement wherein

Foundation shall pay Santos P14.5 Million in the following manner: (a) P1.5 Million immediately
upon the execution of this agreement; and (b) the balance of P13 Million shall be paid, whether
in lump sum or in installments, at the discretion of the Foundation, within a period of not more
than two (2) years from the execution of this agreement. In compliance with the Compromise
Agreement, respondent Santos moved for the dismissal of the aforesaid civil cases. He also
caused the lifting of the notices of lis pendens on the real properties involved. For its part,
petitioner SVHFI, paid P1.5 million to respondent Santos, leaving a balance of P13 million.
Subsequently, petitioner SVHFI sold to Development Exchange Livelihood Corporation two real
properties, which were previously subjects of lis pendens. Discovering the disposition made by
the petitioner, respondent Santos sent a letter to the petitioner demanding the payment of the
remaining P13 million, which was ignored by the latter. Respondent Santos sent another letter
to petitioner inquiring when it would pay the balance of P13 million. There was no response from
petitioner. Consequently, respondent Santos applied with the Regional Trial Court of Makati City
for the issuance of a writ of execution. On June 2, 1995, Santos and Riverland Inc. filed a
Complaint for Declaratory Relief and Damages alleging delay on the part of SVHFI in paying the
balance. They further alleged that under the Compromise Agreement, the obligation became
due on October 26, 1992, but payment of the remaining balance was effected only on
November 22, 1994. Thus, respondents prayed that petitioner be ordered to pay legal interest
on the obligation, penalty, attorney’s fees and costs of litigation. SVHFI alleged that the legal
interest on account of fault or delay was not due and payable, considering that the obligation
had been superseded by the compromise agreement.Moreover, SVHFI argued that absent a
stipulation, Santos must ask for judicial intervention for purposes of fixing the period.

ISSUE:

Whether or not SVHFI incurred in delay based on the compromise agreement and
thereby liable for legal interest.

RULING:

Yes. SVHFI is liable for legal interest as penalty on account of delay.

In the case at bar, the obligation was already due and demandable after the lapse of the
two-year period from the execution of the contract. The two-year period ended on October 26,
1992. When the respondents gave a demand letter on October 28, 1992, to the petitioner, the
obligation was already due and demandable. Furthermore, the obligation is liquidated because
the debtor knows precisely how much he is to pay and when he is to pay it. The second
requisite is also present. Petitioner delayed in the performance. It was able to fully settle its
outstanding balance only on February 8, 1995, which is more than two years after the extra-
judicial demand. Moreover, it filed several motions and elevated adverse resolutions to the
appellate court to hinder the execution of a final and executory judgment, and further delay the
fulfillment of its obligation. Third, the demand letter sent to the petitioner on October 28, 1992,
was in accordance with an extra-judicial demand contemplated by law. Verily, the petitioner is
liable for damages for the delay in the performance of its obligation. This is provided for in
Article 1170 of the New Civil Code.

Vazquez v. Ayala Corp.

FACTS:

On April 23, 1981, spouses Vasquez entered into a MOA with Ayala Corp. with Ayala
buying from the Vazquez spouses all of the latter's shares of stock in Conduit Development, Inc.
The main asset was a property in Ayala Alabang which was then being developed by Conduit
under a development plan where the land was divided into Villages 1, 2 and 3. The
development was then being undertaken by G.P. Construction and Development Corp. Under
the MOA, Ayala was to develop the entire property, less what was defined as the "Retained
Area". This "Retained Area" was to be retained by the Vazquez spouses. The area to be
developed by Ayala was called the "Remaining Area". In this "Remaining Area" were 4 lots
adjacent to the "Retained Area" and Ayala agreed to offer these lots for sale to the spouses at
the prevailing price at the time of purchase. After the execution of the MOA, Ayala caused the
suspension of work on Village 1 of the project. Ayala then received a letter from Lancer General
Builder Corp. in which the latter was claiming a certain amount as subcontractor. G.P.
Construction not being able to reach an amicable settlement with Lancer, Lancer sued G.P.
Construction, Conduit and Ayala in the court. G.P. Construction and Lancer both tried to enjoin
Ayala from undertaking the development of the property. The suit was terminated only on 1987.
Taking the position that Ayala was obligated to sell the 4 lots adjacent to the "Retained Area"
within 3 years from the date of the MOA, the Vasquez spouses sent several "reminder" letters of
the approaching so-called deadline. However, no demand after 1984, was ever made by the
Vasquez spouses for Ayala to sell the 4 lots. On the contrary, one of the letters signed by their
authorized agent categorically stated that they expected development of Phase 1 to be
completed 3 years from the settlement of the legal problems with the previous contractor. By
early 1990, Ayala finished the development of the vicinity. The 4 lots were then offered to be
sold to the Vasquez spouses at the prevailing price in 1990. This was rejected by the Vasquez
spouses who wanted to pay at 1984 prices, thereby leading to the suit below.

ISSUE:

Whether or not respondent incurred default or delay in the fulfillment of its obligation.
HELD:

No. In order that the debtor may be in default it is necessary that the following requisites
be present: (1) that the obligation be demandable and already liquidated; (2) that the debtor
delays performance; and (3) that the creditor requires the performance judicially or
extrajudicially. Under Article 1193 of the Civil Code, obligations for whose fulfillment a day
certain has been fixed shall be demandable only when that day comes. However, no such day
certain was fixed in the MOA. Petitioners, therefore, cannot demand performance after the 3
year period fixed by the MOA for the development of the first phase of the property since this is
not the same period contemplated for the development of the subject lots. Since the MOA does
not specify a period for the development of the subject lots, petitioners should have petitioned
the court to fix the period in accordance with Article 1197 of the Civil Code. As no such action
was filed by petitioners, their complaint for specific performance was premature, the obligation
not being demandable at that point. Accordingly, Ayala Corp. cannot likewise be said to have
delayed performance of the obligation. Even assuming that the MOA imposes an obligation on
Ayala Corp. to develop the subject lots, within 3 years from date thereof, Ayala Corp. could still
not be held to have been in delay since no demand was made by petitioners for the
performance of its obligation. Moreover, the letters were mere reminders and not categorical
demands to perform. These letters were sent before the obligation could become legally
demandable. More importantly, petitioners waived the 3 year period as evidenced by their
agent's letter to the effect that petitioners agreed that the 3 year period should be counted from
the termination of the case filed by Lancer.

ABELLA V. FRANCISCO

FACTS:

Defendant Guillermo B. Francisco purchased from the Government on installments, lots

937 to 945 of the Tala Estate in Novaliches, Caloocan, Rizal. He was in arrears for some of
these installments. On the 31st of October, 1928, he signed a document acknowledging
payment of P500 and the balance to be paid on or before December 15, 1928, extendible fifteen
days thereafter. On December 27th of the same year, the defendant, being in the Province of
Cebu, wrote to Roman Mabanta of this City of Manila, attaching a power of attorney authorizing
him to sign in behalf of the defendant all the documents required by the Bureau of Lands for the
transfer of the lots to the plaintiff. Mabanta, as attorney-in-fact, did what was instructed to him.
The plaintiff, asked for an extension until January 9, 1929. However, Mabanta, only extended it
until January 5, 1929. When Abella was not able to pay of the said date, Mabanta refused to
accept the full payment on January 9, 1929 and already considered the contract rescinded. On
the same day, Mabanta returned by check the sum of P915.31 which the plaintiff had paid.

ISSUE:

Whether or not the defendant be compelled to accept the payment and the plaintiff be
judicially declared as owner of the land.
RULING:

NO. The court relied on the fact that the plaintiff had failed to pay the price of the lots
within the stipulated time; and that since the contract between plaintiff and defendant was an
option for the purchase of the lots, time was an essential element in it. It is to be noted that in
the document signed by the defendant, the 15th of December was fixed as the date, extendible
for fifteen days, for the payment by the plaintiff of the balance of the selling price. It has been
admitted that the plaintiff did not offer to complete the payment until January 9, 1929. He
contends that Mabanta, as attorney-in-fact for the defendant in this transaction, granted him an
extension of time until the 9th of January. But Mabanta has stated that he only extended the
time until the 5th of that month. Mabanta’s testimony on this point is corroborated by that of Paz
Vicente and by the plaintiff’s own admission to Narciso Javier that his option to purchase those
lots expired on January 5, 1929. The defendant wanted to sell those lots to the plaintiff in order
to pay off certain obligations which fell due in the month of December, 1928. The time fixed for
the payment of the price was therefore essential for the defendant, and this view is borne out by
his letter to his representative Mabanta instructing him to consider the contract rescinded if the
price was not completed in time. In accordance with article 1124 of the Civil Code, the
defendant is entitled to resolve the contract for failure to pay the price within the
time specified.