GAITE vs.
FONACIER  On December 8, 1955 the second bond expired with respect to Far Eastern Surety
FACTS:
 Isabelo Fonacier is the owner of 11 iron lode mineral claims known as Dawahan
Group
 Through a Deed of Assignment, he appointed Fernando Gaite as his attorney-in-
fact and authorized him to enter into a contract with any individual or juridical person
for the exploration and development of the mining claims on a royalty basis (not less
than P0.50 per ton of ore to be extracted).
 Gaite executed a general assignment conveying the development and exploitation
of the mining claims into the Larap Iron Mines, which is a single proprietorship he
owned.
 He embarked on the development and exploitation:
1. he opened and paved roads in and outside the mining claims
2. made other improvements
3. installed facilities for use in the development of the mines
4. extracted 24,000 metric tons of iron ore
 Fonacier decided to revoke the authority he granted Gaite
 Gaite agreed, subject to certain conditions (Revocation of Power of Attorney and
Contract):
1. Gaite will receive P20,000 + 10% of the royalties Fonacier would receive from
the mining claims. In exchange, he will transfer to Fonacier:
 All rights and interests to the roads, improvements and facilities in or
outside the mining claims
 The right to use the name “Larap Iron Mines” and its goodwill
 All records and documents relative to the mines
2. Gaite will receive P75,000 in exchange for the 24,000 metric tons of iron ore he
had already extracted. Payment will be made as follows:
Fonacier will pay him P10,000 upon signing of the agreement

 The balance of P65,000 will be paid from and out of the first letter of
credit covering the first shipment of iron ores and of the first
amount derived from the local sale of iron ore made by Larap

Mines and Smelting Co.
The payment of the balance was secured with a surety bond signed by
Fonacier as principal and the Larap Mines and Smelting Co. and its
shareholders
 Gaite also insisted, before singing, that a second bond underwritten by a
bonding company be put up to secure the payment of P65,000
 This second bond was put up on the condition that the liability of the
underwriter (Far Eastern Surety and Insurance Co.) would attach only
when there has been an actual sale of iron ore for an amount not less than
P65,000 and, furthermore, such liability will automatically expire one year
after (on December 8, 1955)
 On the same day, Fonacier entered into a Contract of Mining Operation ceding,
transferring and conveying unto Larap Mines and Smelting Co. the right to
develop, exploit and explore the mining claims in question, together with the
improvements and right to use the name of Larap Iron Mines and its goodwill (in
consideration of certain royalties)
 He also transferred complete title to the more or less 24,000 metric tons he acquired
from Gaite (in exchange for their signing the bond to Gaite)
and Insurance Co., and no sale of the 24,000 metric tons of iron ore had been sold
 Neither has the,573 balance of P65,000 been paid, even when Gaite demanded it
from the respondents, thus prompting him to bring suit
 Their common defense: The obligation is subject to a condition (the sale of the
iron ore), which has not yet been fulfilled. Therefore, it is not yet due and
demandable.
 Fonacier also made a counterclaim of damages for P200,000 because, according to
him, only 7tons were delivered to him
ISSUES:
I. W/N the obligation is one subjected to a condition or one with a term
 The lower court held that the obligation was one with a term:
− that it would be pain upon sale of sufficient ore by defendants
− such sale to be effected within one year or before December 8, 1955
− that the giving of the second surety was a condition precedent to Gaite’s
giving of credit to the defendants
− And since the defendants failed to put up a good and sufficient security in lieu
of the one that expired, the obligation became due and demandable under
Article 11198 of the New Civil Code
 The SC agrees that the sale of the iron ore was not a suspensive condition to the
payment of the balance, but a suspensive period or term
 Conditional Obligation – one where the efficacy or obligatory force is subjected
to the happening of a future and uncertain event, such that if the event does not
take place, the parties would stand as if the conditional obligation had never
existed.
 Proof that this was not intended by the party:
1. The words of the contract express no contingency in the buyer’s obligation to
pay (“The balance of P65,000 will be paid…). There is no uncertainty that the
payment will have to be made sooner or later; what is undetermined is
merely the exact date.
2. It is a contract of sale, which is normally commutative and onerous (each
party assumes a correlative obligation, and each anticipates the performance
by the other from the very start). No evidence that Gaite desired or assumed
to run the risk of losing his right for the ore without getting paid for it. In
fact he asked for a second surety bond secured by an underwriter. Also, the
fact that appellants did put up the second bond indicates they admit the
definite existence of their obligation to pay the balance
3. To subordinate the payment of the obligation to the sale of the ore is
tantamount to leaving the payment at the discretion of the debtor
4. Assuming there is still doubt, rules of interpretation will still incline the scales
in favor of the “greater reciprocity of interests” since sale is onerous. Article
1378(1) of the Civil Code provides that if the contract is onerous, the
doubt shall be settled in favor of the greatest reciprocity of interests.
 The only rational interpretation is that the sale is on credit, and not and an
aleatory contract where transferor assumed the risk of not being paid at all
 The sale of the ore is not a suspensive condition but merely intended to fix a
future date of the payment
II. W/N Respondents still have the right to insist that Gaite should wait for
the sale of the ore before receiving payment.
 SC agrees with the lower court that they have forfeited this right because of their
failure to renew the expired surety bond or replace it with an equivalent guarantee
 The expiration of the bond substantially reduced the security of the vendor’s right
as creditor for the unpaid sum
 This security was considered by Gaite was essential, proven by his insistence that
it be executed
 Article 1198 of the Civil Code states that obligation becomes demandable
(2) when debtor does not furnish to the creditor the guarantee or
securities he promised and (3) when by his own acts he has impaired said
guarantees and sureties after their establishment, and when through
fortuitous event they disappear, unless he immediately gives new ones
equally satisfactory

 There is no merit in the argument that Gaite’s acceptance of the second surety
with full knowledge of its eventual expiration constitutes a waiver of its renewal.
Waiver could not have been intended because he stood to lose and had nothing to
gain.
III. W/N the 24,000 tons or iron ore were actually in existence in the
mining claims when the parties executed the “Revocation of Power of
Attorney and Contract”
 Lower court found that they were in existence
 The subject matter or the sale is a determinate object: the mass and not the
actual number of units or tons because there was no provision for the
measuring or weighing of the ore.
 Thus, all that was required of the seller was to deliver in good faith all of the ore
found in the mass
 There is no charge that Gaite did not deliver all the ore found in the stockpiles;
therefore, Gaite had complied with his promise to deliver
 Even using the most reliable approximation, the total is not very far from the
“more or less 24,000 metric tons” agreed upon
 Gonzales vs. Heir of Thomas and Paula Cruz
Facts:
 December 1, 1983 - Paula Año Cruz together with the plaintiffs heirs of Thomas
and Paula Cruz, namely Ricardo A. Cruz, Carmelita M. Cruz, Salome A Cruz,
Irenea C. Victoria, Leticia C. Salvador and Elena C. Talens, entered into a
Contract of Lease/Purchase with the defendant, Felix L. Gonzales, the sole
proprietor and manager of Felgon Farms, of a half-portion of a "parcel of land
containing an area 12 hectares, more or less, and an accretion of 2 hectares,
more or less, situated in Rodriguez Town, Province of Rizal" and covered by
Transfer Certificate of Title No. 12111. The relevant provisions of the
agreement are sections 1, 2 and 9.1
 Gonzales paid P15,000 annual rental for the half-portion of the property covered
by the Title. Gonzales did not exercise his option to purchase the property
immediately after the expiration of the one-year lease on November 30, 1984.
He continued with his possession without paying for the purchase price or the
required rentals. As a result of this a letter was sent by one of the plaintiffs-
heirs Ricardo Cruz to Gonzales informing him of the lessors' decision to rescind
the Contract of Lease/Purchase due to a breach thereof committed by Gonzales.
The letter also served as a demand to vacate the premises within 10 days from
the receipt. Gonzales refused to vacate the property and the issue was brought
before the barangay. The issue was subsequently brought to court. Paula Cruz
(lessor) subsequently died.
 A final demand letter was sent by the remaining lessors
 The property subject of the Contract of Lease/Purchase is currently the subject
of an Extra-Judicial Partition. Title to the property remains in the name of the
plaintiffs' predecessors-in-interest, Bernardina Calixto and Severo Cruz.
 The trial court ruled that before before a deed of Sale can be entered into
between the plaintiffs and the defendant, the plaintiffs have to obtain the
Transfer Certificate of Title in favor of the defendant. The court further stated
that: In conditional obligations, the acquisition of rights, as well as the
extinguishments or loss of those already acquired, shall depend upon the
happening of the event which constitutes the condition. When the obligation
assumed by a party to a contract is expressly subjected to a condition, the
obligation cannot be enforced against him unless the condition is complied with.
The failure to secure the Transfer Certificate of Title in favor of the defendant
1 3.
1. The terms of this Contract is for a period of one year upon the signing thereof. After the period of this
Contract, the LESSEE shall purchase the property on the agreeable price of One Million Pesos (P1,000,000.00)
payable within Two (2) years period with an interest of 12% per annum subject to the devalued amount of the
Philippine Peso, according to the following schedule of payment:
Upon the execution of the Deed of Sale 50% — and thereafter 25% every six (6) months thereafter, payable
within the first ten (10) days of the beginning of each period of six (6) months.
2. The LESSEE shall pay by way of annual rental an amount equivalent to Two Thousand Five Hundred
(P2,500.00) Pesos per hectare, upon the signing of this contract on Dec. 1, 1983.
9. The LESSORS hereby commit themselves and shall undertake to obtain a separate and distinct T.C.T. over the
herein leased portion to the LESSEE within a reasonable period of time which shall not in any case exceed four
(4) years, after which a new Contract shall be executed by the herein parties which shall be the same in all
respects with this Contract of Lease/Purchase insofar as the terms and conditions are concerned.
entitles not the plaintiffs but, rather, the defendant to either rescind or to ask
for specific performances.1âwphi1.nêt
 The Court of Appeals reversed the decision of the Trial Court.
Issues:
1. WON paragraph should be interpreted as a condition before the obligation can be
enforced? YES
 Basic rule in interpreting contracts: If some stipulation therein should admit several
meanings, it shall be understood as bearing the import most adequate to render it
effectual.
 At the time of the execution of the contract the land in question was still registered in
the name of Bernardina Calixto and Severo Cruz, respondents' predecessors-in-
interest. There is no showing whether respondents were the only heirs of Severo
Cruz or whether the other half of the land in the name of Bernardina Calixto was
adjudicated to them by any means. Hence, when the Contract of Lease/Purchase
was executed, there was no assurance that the respondents were indeed the owners
of the specific portion of the lot that petitioner wanted to buy, and if so, in what
concept and to what extent.
 The clear intent of the ninth paragraph was for respondents to obtain a separate and
distinct TCT in their names. This was necessary to enable them to show their
ownership of the stipulated portion of the land and their concomitant right to dispose
of it. Absent any title in their names, they could not have sold the disputed parcel of
land. The sellers were gicen a maximum of four years within which to acquire a
separate TCT in their names, preparatory to the execution of the deed of sale and
the payment of the agreed price in the manner described in paragraph 9.
2. WON the Ninth Clause is a condition precedent? YES
 Condition - every future and uncertain event upon which an obligation or provision is
made to depend. It is a future and uncertain event upon which the acquisition or
resolution of rights is made to depend by those who execute the juridical act
 When the consent of a party to a contract is given subject to the fulfillment of a
suspensive condition, the contract is not perfected unless that condition is first
complied with
 When the obligation assumed by a party to a contract is expressly subjected to a
condition, the obligation cannot be enforced against him unless the condition is
complied with. The obligatory force of a conditional obligation is subordinated to the
happening of a future and uncertain event, so that if that event does not take place,
the parties would stand as if the conditional obligation had never existed.
WON the Respondents can rescind the contract? NO
Respondents cannot rescind the contract, they have not caused the transfer of the TCT to
their names, which is a condition precedent to petitioner's obligation. There can be no
rescission of an obligation yet non-existent, because the suspensive condition has not
happened.
PARKS vs. PROVINCE OF TARLAC [1926]
Plaintiff & Appellant: George L. Parks
Defendants & Appellees: Province of Tarlac, Municipality of Tarlac, Concepcion Cirer &
husband James Hill
Facts:
 Oct. 18, 1910: Cirer & Hill donated their land (Land No. 2) perpetually to the
Municipality of Tarlac w/certain conditions stipulated in a public document.
Conditions were: 1) it will be used absolutely & exclusively for the erection of a
central school & public park and 2) work will commence 6mos from the date of the
ratification of the document. Donation was accepted by Mr. De Jesus, municipal
president. Land was registered in the name of the municipality.
 Jan. 15, 1921: Cirer & Hill sold the same parcel of land to Parks.
 Aug. 24, 1923: municipality transferred ownership of the land to the province of
Tarlac.
 Parks filed this case claiming that he was the lawful owner of the land. According to
him, the municipality failed to comply w/the conditions thus, Cirer & Hill sold the land
to him. He prayed for the annulment of the transfer of ownership.
 Lower court dismissed Parks’ complaint.
Issues & Ratio:
1. WON Parks has a right of action. – NO.
 Although the donation might have been revoked, such was not done when Cirer &
Hill sold the land to Parks.
 Revocation should either be consented to by the donee (municipality) or be judicially
decreed.
 When the spouses sold the land, they were no longer the owners of said land.
2. WON the conditions in the donation were conditions precedent
(suspensive). – NO.
 Condition Precedent: acquisition of the right is not effected while said condition is not
complied with or is not deemed complied with.
 A condition is not suspensive when compliance of w/c cannot be effected except
when the right is deemed acquired.
 In this case, donation was already in effect since the conditions could only be
complied with after giving effect to the donation. Otherwise, it would have been an
invasion of another’s property (donor). If the conditions were suspensive, the donor
would have continued to be the owner so long as the condition imposed was not
complied with.
3. WON non-compliance w/condition subsequent (resolutory) would be
sufficient cause to revoke the donation. – YES.
 However, period for bringing the action has already prescribed:
a. revocation by subsequent birth of children: 5yrs. (CC Art. 646)
b. revocation by reason of ingratitude: 1 yr.
c. Non-compliance of conditions of donation (considered as onerous thus there’s
no special period as per CC Art. 647), law of contracts & general rules of
prescription govern: 10 yrs. (Code of Civ. Procedure, Sec. 43)
 In this case, cause of action arose on April 19, 1911 (6mos after Oct. 18, 1910 or
when the donation was made as per the condition that work should begin w/in 6mos
after document’s ratified). Case was filed on July 5, 1924 w/c is more than 10 years
after the cause accrued.
Holding: Lower court decision affirmed.
CENTRAL PHILIPPINE UNIVERSITY, petitioner, vs. COURT OF APPEALS,
REMEDIOS FRANCO, FRANCISCO N. LOPEZ, CECILIA P. VDA. DE LOPEZ, REDAN
LOPEZ AND REMARENE LOPEZ, respondents [July 17, 1995]
Facts
• Iloilo, in 1939, Don Ramon Lopez by a deed of donation donated Lot No. 3174-B-1 of
the subdivision plan Psd-1144, then a portion of Lot No. 3174-B, for which Transfer
Certificate of Title No. T-3910A to CPU.
• The deed of donation came with 3 annotations on the land:
1. should be used for a medical college with all its buildings as part of the
curriculum;
2. shouldn’t be sold, transferred, conveyed to any third party, or encumbered.
3. should be called "RAMON LOPEZ CAMPUS” and it be written in a cornerstone.
Any net income from the land or its parks shall be in a fund to be known as
the "RAMON LOPEZ CAMPUS FUND" used for improvements of the campus
and its building/s.
 After 50 years(May 31,1989), the heirs of the donor, filed a suit, asking for
annulment of donation, reconveyance and damages against CPU alleging that since
1939 the donee allegedly didn’t comply with the conditions, and tried to exchange
the land for another land owned by the Nat’l Housing Authority.
 CPU answered that it didn’t try to use or exchange the land contrary to the
conditions, and any action after 50 years has already prescribed.
 RTC held that CPU failed to comply with the conditions so the donation is declared
null and void. The land is ordered to be reconveyed.
 CA affirmed that the conditions were resolutory(breach terminates rights making the
donations revocable) but declared that the conditions didn’t have time limits so the
case is remanded for time determination.
 SO, CPU petitioned the supreme court alleging that the CA erred the certificate title
to be onerous obligation, and resolutory condition, that prescription does not deserve
disquisition and remanding to the RTC the determination of time to fulfill the medical
college condition.
Issues
WON the obligation was onerous. YES
 Clearly, the annotations in the deed of donation from Don Ramon, proves that he
imposes these obligations. Therefore, these obligations are onerous
considerations(one executed for a valuable consideration which is considered to be
en equivalent of the donation itself).
 Under Art. 1181 of the Civil Code, on conditional obligations, the acquisition of
rights, as well as the extinguishment or loss of those already acquired, shall depend
upon the happening of the event which constitutes the condition.
 Thus, when a person donates land 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. Only after the donee didn’t fulfill the
conditions will the rights be revoked. which brings us to the prescription
WON there is prescription. NO
 The time from which the cause of action accrued for the revocation of the
donation and recovery of the property donated cannot be specifically
determined in the instant case. There being no stipulations in the deed, the
time for the fulfillment of the conditions lay in the will of the donee and
prevented the statute of limitations to affect in this case.
 And to compute for the time from which the cause of action accrued, it begins with
the expiration of a reasonable period and opportunity for petitioner to fulfill what has
been charged upon it by the donor.
 And in this case, no exact time can really be surely stipulated in the deed,
considering the laws on construction, educational institutions etc. beyond the control
of the donee.
 And yet, Art. 11972 can’t be applied because the courts think that 50 years
was enough time for them to fulfill the conditions. CPU has slept on its
obligations.
 What applies is Art. 1191, when an obligor can’t comply with what is
expected of him, the obligee may seek rescission unless the court fixes a
period for a just cause. In this case, there is no just cause, to fix a period
would be mere technicality and would only result to a multiplication of suits.
2
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 Code applies, which provides that the courts may fix the
duration thereof because the fulfillment of the obligation itself cannot be demanded until after the court has fixed the
period for compliance.
Then the court said that since this is a gratuitous donation(contradiction, see dissent) the
court affirms the decision of the RTC and modifies that of the CA, CPU is ordered to
reconvey the property to the heirs.
Davide, J. dissenting
 He agrees its an onerous obligation, but he sees the contradiction when the
ponente called it a gratuitous donation in the end.
 He makes a distinction between “conditions” on the laws of obligation and
donation as different(Tolentino). The conditions spoken does not refer to
uncertain events on which the birth or extinguishment of a juridical relation as
with conditional obligations. What we have in this case is modal condition,
which requires a prestation. The conditions Don Ramon made, are actually
obligations. They are not resolutory because the moment the
obligations are fulfilled, the rights are not extinguished(in fact
strengthened).
 The Parks(footnote in the original case) case do not apply here. Instead what
applies is the Barretto v City of Manila. Where the court said in cases where
there is no fixed period for the conditions, Art. 1197 applies. Don Ramon
wouldn’t have intended for his land to be idle.
 He also points out that Osmena v Rama doesn’t apply here because in that case
it is the debtor who made the promise to do, that’s why time was in his will to
comply. So here applying Parks and De Luna v Abrigo, even actions for
revocation of donations prescribe too. And the Art.1144 applies that the
prescription of an action upon a written contract which is what a deed of an
onerous donation is, is 10 years from the time the cause of action accrues. And
the time must be determined by the courts by virtue of Art. 1197.
 June 26, 1906: Tomas filed this case w/the CFI of Cebu alleging the aforementioned
incidents w/the prayer for a judgment for the amount due on said contracts.
 Rama’s defense: general denial & prescription
 CFI: decided in favor of Osmeña & ordered Rama to pay:
1. P200 + 18 ¾ percent interest per annum from Nov. 15, 1890 (for contract #1)
2. P20 + 18 ¾ percent interest per annum from Oct. 27, 1891 until sums were
paid (only P20 was demanded despite the P70 loan because it was proven that
P50 was borrowed by Peñares)
Issue: WON the condition imposed by Rama in her March 15, 1902 endorsement is valid.
– NO
Ratio:
1. If this can even be regarded as a condition, it’s a condition that depended upon the
debtor’s exclusive will & was therefore void (CC Art. 1115).
2. This endorsement is tantamount to an acknowledgement of her obligation & thus it
would be sufficient to prevent the statute of limitation from barring the action upon
the original contract. Meaning, action has not yet prescribed.
Holding: CFI affirmed.

Tomas OSMEÑA, plaintiff & appellee, vs. Cenona RAMA, defendant & appellant
[1909]
 Nov. 15, 1890: Rama executed & delivered a contract to Victoriano Osmeña, w/c
contained the ff: (contract #1)
1. that Rama received P200.00 from the Osmeña
2. said debt will be paid in sugar in Jan/Feb 1891 at the price of sugar upon
delivery in Osmeña’s warehouses + interest of half a cuartillo per month on
each peso beginning on this date until debt has been paid
3. if Rama can’t pay in full, a balance shall be struck, showing the amount
outstanding at the end of each June w/interest & balance as may be
outstanding against Rama shall be considered as capital w/c she’ll pay in sugar
+ interests
4. Rama will sell all the sugar that she may harvest to Osmeña
5. guarantee for the debt: all of Rama’s present & future property (pledge as
security) and house w/tile roof & stone floor where she lives in (special security)
6. Osmeña entitled to make claim against Rama upon the expiration of the term
stated in the contract
 Oct. 27, 1891: Rama asked for an additional loan from Osmeña amounting to P70.00
but she mentioned in the contract (contract #2) that P50.00 of said amount was
loaned to Don Evaristo Peñares and that said debt will be paid in sugar on Jan. 1892
according to the conditions of contract #1.
 Subsequently, Osmeña died and during the partition of his estate, said contracts
became the property of Agustina Rafols, one of his heirs. Rafols then claimed her
right & interest in the contracts.
 March 15, 1902: Tomas Osmeña presented the contracts to Rama who acknowledged
her responsibility by issuing an endorsement w/c provided that if the house that she
lived in is sold, she will pay her indebtedness to Tomas. However, Rama still failed to
pay.
 HERMOSA vs. LONGORA [1953]
 Fernando Hermosa, Sr. asked for 3 credit advances:
o P2,241.41 – made to the intestate
o P12,924.12 – made to his son Francisco
o P3,772 – made to his grandson Fernando Jr.
from Epifanio M. Longara for himself & for the members of his family “on condition
that their payment should be made by Fernando Hermosa, Sr. as soon as he
received funds derived from the sale of his property in Spain”
 Longara presented a claim against the intestate estate of Hermosa in the CA. CA
held that the payment of the advances did not become due until the administratrix
received the sum of P20K from the buyer of the prop.
Issue: WON the obligation contracted by the intestate was subject to a condition
exclusively dependent upon the will of the debtor (condicion potestativa) and
therefore null & void as per Art. 1115, old CC
 The condition in question does not depend exclusively upon the will of the debtor,
but also upon other circumstances beyond his power & control. If the condition were
“if he decides to sell the house,” or “if he likes to pay the sum advanced,” or any
other condition of similar import implying upon the debtor alone payment would
depend, the condition would be potestativa, dependent exclusively upon his will or
discretion
 But in the present form, all that was needed to make his obligation (to pay his
indebtedness) demandable is that sale be consummated and the price thereof
remitted to the islands
 The will to sell on the part of the intestate was, therefore, present in fact, or
presumed legally to exist, although the price and other conditions thereof were still
within his discretion & final approval
 There were still other conditions that had to concur to effect the sale, mainly that of
the presence of a buyer, ready, able & willing to purchase the property under the
conditions demanded by the intestate
 It is evident, therefore, that the condition of the obligation was not a purely
potestative one, depending exclusively upon the will of the intestate & partly upon
chance, i.e., the presence of a buyer of the property for the price & under the
conditions desired by the intestate. The obligation is clearly governed by the second
sentence of article 1115 of the old Civil Code.
 The condition is, besides, a suspensive condition, upon the happening of which the
obligation to pay is made dependent. And upon the happening of the condition, the
debt became immediately due and demandable. (Article 1114, old Civil Code)
 The sale was not effected in the lifetime of the debtor (the intestate), but after his
death and by his administrator, the very wife of the claimant. The CA found no
evidence to show that the claim was the product of a collusion or connivance
between the administratrix & the claimant. Had the advances been made without
intention of demanding their payment 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 conclusion.
 As to the fact that the suspensive condition took place after the death of the debtor,
and that advances were made more than ten years before the sale, the same is
immaterial.
 As the obligation retroacts to the date when the contract was entered into, all
amounts advanced from the time of the agreement became due, upon the
happening of the suspensive condition. The action to recover the same only
accrued, within the meaning of the statute of limitations, on the date the money
became available here, hence the action to recover the advances has not yet
prescribed.
 The court however found merit in the contention that the third group of claims, i.e.,
credits furnished the intestate's grandson after his (intestate's) death in 1944,
should not have been allowed. Even if authorization to furnish necessaries to his
grandson may have been given, this authorization could not be made to extend
after his death, because:
o the obligation to furnish support is personal & is extinguished upon the death
of the person obliged to give support (art. 150, old CC), &
o upon the death of a principal (the intestate in this case), his agent's authority
or authorization is deemed terminated (art. 1732, old CC).
 That part of the decision allowing this group of claims, amounting to P3,772, should
be reversed.
 It does not appear from the record that the last contention of the appellant that the
claims are barred by the stature of non-claims was ever raised in any of the courts
below. Hence SC has no authority to consider this issue
Holding: Affirmed in so far as it approves the claims of appellee in the amounts of P2,341
and P12,942.12, & reversed as to that of P3,772.
PARAS, C.J., concurring and dissenting:
 He concurs insofar as it reverses the appealed judgment allowing the claim for
P3,772, but dissent therefrom insofar as it affirms the appealed judgment approving
appellee's claims.
 The stipulation to pay the advances "on condition that their payment should be
made by Fernando Hermosa, Sr. as soon as he receives funds derived from the sale
of his property in Spain", & making said advances "payable as soon as Fernando
Hermosa, Sr.'s property in Spain was sold & he received money derived from the
sale," is a condicion potestativa and therefore null and void in accordance w/ art.
1115 of the old CC because it is very obvious that the matter of the sale of the
house rested on the sole will of the debtor, unaffected by any outside consideration
or influence.
 A mere play of words is invoked. It is immaterial whether or not he had already
decided to sell his house, since there is no pretence that acceptable conditions of
the sale had been made the subject of an agreement, such that if such conditions
presented themselves the debtor would be bound to proceed with the sale.
 As the condition above referred to is null & void, the debt resulting from the
advances made to Hermosa, Sr. became either immediately demandable or payable
w/in a term to be fixed by the court. In both cases, action has prescribed after the
lapse of 10 yrs
 The majority also contend that the condition in question depended on other factors
than the sole will of the debtor, & cite the presence of a buyer, ready, able & willing
to purchase the property. This is of no moment, because in the absence of any
contract setting forth the min. or max. terms w/c would be acceptable to the debtor,
nobody could legally compel Hermosa, Sr. to make any sale.
 TAYLOR vs. UY TIENG PIAO The Court also said that if the defendants were obligated to insure the arrival of the
machinery, then they could have been held liable, but the contract does not impose this
Plaintiff/Appellant: M.D. Taylor positive obligation upon the defendants.
Defendant: Tan Liuan
Defendant/Appellant: Uy Tieng Piao Held: Petition dismissed. Judgment modified, defendants shall pay the sum of
Php 360, instead of Php 300 only, to the plaintiff, in consideration of his salary and living
Appeal from a judgment of the CFI of Manila allowance (Php 60).
Street, J.

Facts:
On Dec. 12, 1918, the plaintiff contracted his services to Tan Liuan and Co. as a
superintendent of an oil factory, which the latter planned to establish. The contract was
for 2 yrs at Php 600/month for the 1st yr and Php 700/month for the 2nd yr. Also a
residence (complete with light and water) for the plaintiff would be provided or in lieu
thereof Php 60/month.

The machinery for the factory had still not been acquired, and part of the stipulations of
the contract included the ff:
“It is understood and agreed that should the machinery to be installed in the said factory
fail, FOR ANY REASON, to arrive in the city of Manila w/in …6 months from the date
hereof, this contract may be cancelled by the party of the second part at its option.

The machinery failed to arrive as stipulated, a preponderance of evidence shows that the
defendants either cancelled the order by choice or were unable to raise the capital
required to finance the project. This was perhaps due to the fact that the defendants
found out oil business no longer promised large returns. This caused the defendants to
cancel the contract

Taylor was informed of the cancellation of the contract, upon which he instituted this
present action. He asserts that the stipulation is only valid in cases where the non-arrival
of the machinery is due to causes not originating from the act or will of the defendants.
He cited Art 1256, which provides that the validity and fulfillment of contracts cannot be
left to the will of one of the contracting parties, in support of this. Also, the plaintiff
asserts that Art 1119, which provides that a condition shall be deemed fulfilled if the
obligor intentionally impedes its fulfillment, should also apply.

Issue:
WON the stipulation on issue is illegal? NO

Ratio:
The Court disagrees with the plaintiff.

The Court stated that the language of the contract stipulation is clear and broad enough
to cover ANY case of the non-arrival of the machinery; therefore the defendants had the
right to cancel the contract. The Court stated that this condition is legal because it does
not leave the validity and fulfillment of the contract to the will of one party because BOTH
THE CONTRACTING PARTIES AGREED THAT THIS OPTION SHALL EXIST, both equally
agreed to abide by it. The Court said the stipulation, though it leaves one party in a better
position to dominate the contingency, does not infringe upon Art 1256, nor any other law,
so is therefore legal.

The Court also stated that it could not warp the natural meaning of the stipulation as this
would violate the right to contract.

The Court also held that Art 1119 does not apply to an external contingency lawfully
within the control of the obligor. A condition at once facultative and resolutory may be
valid even thought the condition is made to depend upon the will of the obligor.
 SMITH BELL vs. SOTELO MATTI When the fulfillment of the condition does not depend on the will of the
FACTS: obligor, but on that of a third person who can in no way be compelled to
 On August 1918, Smith Bell and Sotelo Matti executed a contracted, whereby Smith carry it out, and it is found by the lower court that the obligor has done all
Bell obligates itself to sell to Sotelo the following: in his power to comply with the obligation, the obligor has the right to
Item Price Stipulation as to delivery Date of Arrival demand performance of the contract by the other party.
2 steel Total of Within 3 to 4 months. But promise April 27, 1919
tanks P21,000 carries with it absolutely no obligation  In this case:
on seller’s part.. a number of causes − Fulfillment by Smith Bell rests on may conditions, such as the will of the US
may act to entirely vitiate the Govenrment
indication of shipment as stated. − It has made all the efforts it could possible be expected to make, under the
Time of shipment merely an indication circumstances, to bring the foods to Manila as soon as possible
of what we hope to accomplish − In fact, it has succeeded
2 P25,000 Within the month of Septemer 1918 Oct. 26, 1918
expellers each or as soon as possible − ∴Plaintiff has complied with its obligation
2 electric P2,000 Approximately within 90 days – This is Feb. 27, 1919
motors each not guaranteed
Final clause: Sellers are not responsible for delays caused by fires, riots on land
 In North America, when the time of delivery is not fixed, time is regarded
unessential. This implies that the delivery shall be made within a reasonable time, in
or sea, strikes or other causes known as “Force Majeure” entirely
the absence of anything to show that an immediate delivery is intended
beyond the control of the sellers or their representatives.
 “As soon as possible” means that seller is entitled to a reasonable time, which does
not mean immediately or that the seller must stop all his other work and devote
 It appears that the contract was made during the world war when there were rigid
himself to that particular order.
restrictions on the export from the US of articles like the machinery in question, as
 “Reasonableness” is a question to be determined by the court taking into
well as when transportation was difficult. Such facts were known to the parties. In
consideration the attending circumstances of a particular transaction
fact, they were aware of the contingency that US government may not allow the
o character of the goods
export of goods.
o purpose for which they are intended
 When the goods finally arrived, Smith Bell informed Sotelo and inquired as to o ability of the seller to produce the goods if they are to be
instructions for delivery to him, but Sotelo refused to accept and pay for the goods. manufactured
It also alleges that the expellers and motors were in good condition. o facilities available for transportation
o distance
 Sotelo denied: o usual course of business in the particular trade
1. notification, says that he was only notified of the arrival of the tanks in May,
2. that he did not refuse, Holding:
3. that the expellers and motors were incomplete,  Machinery was brought to Manila within reasonable time
4. that he made the contract in behalf of intervening co. (Manila Oil Refining and  Plaintiff not guilty of any delay
By-Products Co)  Could not have incurred any of the liabilities mentioned by the intervenor
5. and said company makes a counterclaim for damages of P116,783.91 with  Plaintiff is entitled to relief prayed for
respect to the nondelivery of the tanks, and P21,250 with respect to the
expellers and motors delay in arrival
**Another issue is the fact that Sotelo is alleging that he was merely an agent. The Court
ISSUE: held that since he signed the contract in his own individual capacity and in his name,
W/N The Smith Bell has fulfilled, in due time, its obligation to bring the goods in Manila Oil has no right of action against plaintiff, nor the plaintiff against Manila Oil. But
question to Manila. YES this is without prejudice to actions between the principal and the agent.
 Given the facts, it cannot be said that there was a definite date fixed for the delivery:
− Stipulations
− The circumstances at the time: war, transportation difficulties, restrictions

 Court cannot but conclude that the term is so uncertain that one cannot tell whether,
as a matter of fact, those articles could be brought to Manila at all
 Thus, the obligation must be regarded as conditional

 Article 1125 of the CC: Obligations for the performance of which a day
certain (one which must necessarily arrive, even though date unknown) is
fixed shall be demandable only when the day arrives. If the uncertainty
should consist in the arrival or non-arrival of the day, the obligation is
conditional.
 According to past decisions of the Supreme Court of Spain:
 Rustan Pulp & Paper Mills, Inc. vs IAC 2. WON Tantoco and Vergara should be made to pay moral damages and
attorney’s fees? NO
Facts: ♦ The President and Manager of a corporation who entered into and signed a
 1968 - Rustan established a pulp and paper mill in Baloi, Lano del Norte contract in his official capacity, cannot be made liable thereunder in his
 March 20, 1967 – Lluch (holder of a forest products license) transmitted a letter individual capacity in the absence of stipulation to that effect due to the
to Rustan for the supply of raw material. Relevant sections of the agreement personality of the corporation being separate and distinct from the person
are sections 2, 3, 73. composing it.
 During the test run of the facilities of the pulp mill the machinery line had major
defects while deliveries of raw materials piled up, which prompted the Japanese
supplier of the machinery to recommend the stoppage of the deliveries. The ROMAN CATHOLIC ARCH OF MANILA vs. CA
suppliers were informed to stop deliveries and the letter (p.668) of similar
advice sent by petitioners
 Romeo Lluch sought to clarify the tenor of the letter as to whether stoppage of
delivery or termination of the contract of sale was intended, but the query was
not answered by petitioners.
TAYLOR vs. UY TIENG PIAO (supra)
 Even after September 30, 1968 the appellees were buying and accepting wood
materials from other suppliers.
 January 23, 1969 – complaint for contractual breach was filed which was
subsequently dismissed.

Issues:
1. WON Rustan Pulp and Paper Mills may legally exercise the right of stoppage?
NO
♦ A purely potestative imposition of this character must be obliterated from the
face of the contract without affecting the rest of the stipulations considering
that the condition relates to the fulfillment of an already existing obligation and
not to its inception
♦ There is no 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 exclusively on their will for which reason,
We have no alternative but to treat the controversial stipulation as inoperative
♦ Pulp and Paper Mills sent out letters calling for suspension and yet, they in
effect disregarded their own advice by accepting the deliveries from the
suppliers. They knew that they will encounter difficulty in producing output
because of the defective machinery line but they opted to open the plant to
greater loss, thus, compounding the costs by accepting additional supply to the
stockpile.
♦ As was emphasized by the Trial Court: if the plant could not be operated on a
commercial scale, it would then be illogical for defendant Rustan to continue
accepting deliveries of raw materials.

3
2. That the contract to supply is not exclusive because Rustan shall have the option to buy from other suppliers
who are qualified and holder of appropriate government authority or license to sell and dispose pulp wood.

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 BUYER shall not buy from any other seller
whose pulp woods being sold shall have been established to have emanated from the SELLER'S lumber and/or
firewood concession. . . .

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 time when need for said raw materials shall
have become necessarily provided, however, that the SELLER is given sufficient notice.
 Song Fo v Hawaiian
Plaintiff/Appellee: Song Fo & Co
Defendant/Appellant: Hawaiian-Philippine Co.
Appeal from a judgment of a Court of First Instance
Santamaria, J.
Facts:
Song Fo & Co., the plaintiff, sued Hawaiina-Philippines Co. for breach of contract for failing
to deliver, as agreed upon, 400,000 gallons of molasses.
The defendant countered by setting up the defense that the plaintiff defaulted in the
payment for the molasses delivered to it by the defendant under the contract thereby
compelling Hawaiian to cancel the contract.
The trial court found for the plaintiff and awarded damages amounting to Php 35, 317.93
with interest.
Issue: WON Hawaiian-Philippines Co. had proper cause to rescind the contract? No
The Court first determined from documents, that the actual agreed upon amount of
molasses to be delivered was 300,000 gallons and not 400,000. As given by the excerpts
letters between the parties:
(A letter of Hawaiian to Song Fo)
“ … He agreed to the delivery of 300,000 gallons of molasses … we … will do our best to
let you have these extra 100,000 gallons …”
(A letter of Song Fo to Hawaiian)
“ …we confirm all arrangements you have stated …a) Price at 2 cents per gallon …”
The Court stated that it was clear from the first letter that Hawaiian Co. agreed to deliver
300,000 gallons of molasses. But, as to the 100,000 extra gallons the language used did
not constitute a definite promise, therefore there was no obligation there.
Hawaiian Co. asserted that they were forced to rescind the contract due to Song Fo’s
failure to pay at the end of the month as stipulated in the contract. The Court said that, as
shown by the evidence, Song Fo did fail to pay upon receipt of accounts the amount it
owed Hawaiian for first delivery of molasses. But the evidence also showed that it was the
only time Song Fo failed to pay on time and that Hawaiian continued to deliver molasses
and receive payments for such deliveries from Song Fo after that incident.
The Court stated that rescission of a contract for a slight or casual breach of contract, will
not be permitted, only a substantial or fundamental breach as to defeat the object of the
parties making the arrangement will be considered as a proper ground for rescission. A
delay of 20 days payment is not such a violation therefore Hawaiians rescission of the
contract was not valid. Also, since Hawaiian continued to deliver molasses and receive
payments from Song Fo even after that delay in payment for the initial delivery, it was
deemed that Hawaiian waived such condition.
In measuring the damages to be awarded, the Court considered the first cause of action
of Song Fo: the greater expense incurred by Song Fo in obtaining molasses from other
sources. Song Fo was forced to obtain molasses for an additional 1 ½ cents per gallon
from Central Victorias Milling Co. for the remaining 144,994 gallons that was not delivered
by Hawaiian. This amounted to a loss of Php 2,174.91, considering transportation and
other incidental expenses this amount was rounded up to Php 3,000.
The Court could not consider Song Fo’s second cause of action: loss of profits as there
was no adequate evidence presented on this matter.
Held: The plaintiff shall have and recover from the defendant Php 3,000 with interest
from October 2, 1923 until payment.
Boysaw v Interphil Promotions
Appeal by Solomon Boysaw and Alfred Yulo Jr. from CFI ordering them to pay Manuel
Nieto Jr. P20k-moral damages, P5k-atty’s fees,; and to Interphil Promotions, Inc. and Lope
Sarreal Sr.(additional P20k for moral damages), P250k-unrealized profits, P33,369.72-
actual damages, P5k-atty’s fees. And costs.
Facts
• May 1, 1961, Solomon Boysaw is a boxer handled by Willie Ketchum(w/ partner
Ruskay). They signed a contract with Interphil (represented by Sarreal) for a match
with Gabriel “Flash” Elorde for the world junior lightweight championship.
• The stipulations of the contract were the venue in the Rizal Memorial stadium on
Sept. 30-61. In case of mutually-agreed postponement, it would be no more than 30
days later. And that Boysaw would not prior to the match, engage in any other such
contest without the written consent of Interphil. Days later, Elorde signed a similar
agreement with Interphil. A supplemental agreement b/w Ketchum & Sarreal took
place.
• Boysaw on June 9-61 fought Louis Avila in a ten-round non-title bout held in Las
Vegas. On July 2-61, he changed his manager to J. Amado Araneta. On July 31-61,
Boysaw arrived in the Philippines to get ready. On Sept. 1-61, Araneta assigned his
managerial rights to Yulo. On Sept 2-61, Boysaw finally informed Sarreal of his
presence in the country.
• Sept. 5-61 Yulo informed Sarreal of the managerial changes and readiness to comply
with the contract.
• On the same day, Sarreal wrote to the Games and Amusement Board(GAB) of the
lack of formal notification of the managerial rights switching and that Boysaw be
called for clarification.
• GAB did act upon it by calling for conferences, and decided to schedule the match for
Nov.4-61. The USA Nat’l Boxing Assoc. supervising all world-title fights approved the
date.
• Yulo disagreed, and Sarreal offered to change to Oct. 28, w/in the 30-day pd.
• Early Oct. Yulo contacted Mamerto Besa for promotion of the match. Oct.6-31 in one
of Yulo’s communication to Besa, he said that he was willing to allow the Nov.4 fight,
if Besa promotes it.
• The Boysaw-Elorde fight did push through but it wasn’t the contemplated fight in the
contract.
• Boysaw and Yulo petitioned CFI Rizal against Sarreal, Interphil and Manuel Nieto Jr.
(GAB chairman, resps claim to have acted arbitrarily) damages for non-fulfillment of
contract commitments.
• Trial dragged for 3 yrs because of appellants, until Boysaw could no longer return
here(taken as leaving w/out notice to court and counsel), CFI decided for the
respondents and denied a postponement & motion for new trial.
Issues(also from the assignment of errors of appellants)
WON there was a violation of the contract stipulations, and who was liable.
Yes, Yulo admitted the fact of Boysaw and Avila’s fight in Las Vegas and the assignment
of the managerial rights over Boysaw to different people(novation) without PRIOR
approval of Interphil. Even if Yulo sent a letter, there is no showing that Interphil acceded
to the substitution judging from the complaintin GAB. Our law recognizes actionable in
every contract breach.
 Art.1170”those who in the performance of their obligations are guilty of fraud,
negligence or delay, and those who in any manner contravene the terms thereof, are
liable for damages.”
Art1191”the power to rescind obligation is implied, in reciprocal ones, in case one of the
obligors should not comply with what is incumbent upon him.”
And using Tolentino’s definition of reciprocal obligation4, we find that this is indeed one.
Art. 1293”novation which consists in substituting a new debtor in the place of the
original one may be made even without the knowledge or against the will of the latter,
BUT NOT WITHOUT THE CONSENT OF THE CREDITOR.”
Substitution needs the consent of the creditor because the new debtor may cause delay
or prevent the fulfillment of the obligation due to insolvency or inability. Since the creditor
is at risk, then his consent must first be secured to be binding.
WON there was a legal ground for postponement/was Nieto/GAB reasonable?
Yes, when the contract was unlawfully novated, the aggrieved creditor is not bound to
deal with the substitute. He has a right to demand rescission or refusal to recognize the
substitute. In this case they chose to renegotiate the date.
Tolentino gave an example of “x as a creditor, y as the debtor, and y transfers his
obligations and rights to z without x’s consent. Then X CAN STILL BRING HIS ACTIONS
AGAINST Y FOR PERFORMANCE OF THE CONTRACT OR DAMAGES IN CASE OF BREACH.”
The GAB Board(not Nieto himself) did not act arbitrarily when it set it to Nov. 4
because indeed there is a novated contract(from evidence). Anyways, Interphil was willing
to set it to Oct. 28 to be w/in the 30 day pd.
WON the lower court was right in denying the postponement of the trial on July 23 and
the motion for a new trial.
As to the postponement, it is already moot. The issue can’t be resurrected.
NO, As to the motion for a new trial, the alleged new evidence(clearances from clerk of
court proving that he didn’t leave without notice) secured by Boysaw before he left the
country. It can’t be considered as such because they were already existing in the trial,
was only waiting to be elicited from questioning.
In any case, they contended that these would have allowed the postponement of the
case(that’s why needs a new trial), which is anyway moot.
WON the lower court erred in the awarding of damages and amounts thereof.
On actual damages P250k: none, because there is no rule supporting the contention
that one witness is not enough to establish facts. And the records show enough evidence
without being rebutted by the appellants(non-participation).
On all the atty’s fees: not excessive considering the nature of the 16 months of legal
work.
On the moral damages: The court is inclined to uphold that it is not sanctioned by law.
The award of moral damages is not based on any of the cases enumerated in Art.2219.
Moral damages can’t be imposed on a party litigant although such litigant exercises it
erroneously because if the action has been erroneously filed, such litigant may ALREADY
be penalized for COSTS.
The grant of moral damages is not subject to the whims and caprices of judges or
courts, instead governed by reason and justice. The adverse result of an action does not
per se make the act wrongful and subject ton the actor paying moral damages. The law
couldn’t have meant to impose a penalty on the right to litigate. Anyway, Costs is enough
penalty.
Art 2219, “moral damages may be obtained form these and analogous cases: a crim
offense causing physical offense; quasi-delict causing physical injuries; seduction,
abduction, rape, and other lascivious acts; adultery and concubinage; illegal or arbitrary
detention or arrest; illegal search; libel, slander or other forms of defamation; malicious
prosecution; acts in Art.309; acts and actions in Arts. 21, 26-30, 32 and 34-35.
4 from entering into an agreement that violation of the terms would cause cancellation
those which arise from the same cause, and which each party is both debtor and creditor, such that the obligation
depends upon the obligation of the other, they are to be performed simultaneously
Affirmed, but moral damages is deleted.
UNIVERSITY OF THE PHILIPPINES, petitioner, vs. WALFRIDO DE LOS ANGELES,
Quezon City CFI Judge, et al., respondents [1970]
 Act 3608: public land was given as a Land Grant to UP as endowment to raise
additional income for its support
 Nov. 2, 1960: UP & ALUMCO (Associated Lumber Mfg. Co. Inc.) entered into a
logging agreement granting ALUMCO exclusive authority to cut, collect & remove
timber from the land grant & payment to UP of royalties, forest fees, etc. until Dec.
31, 1965 & extendible for 5 yrs by mutual agreement.
 Dec. 8, 1964: ALUMCO incurred unpaid account of P219,362.94 w/c they failed to
pay despite several demands. UP sent ALUMCO a notice to rescind/terminate the
agreement. ALUMCO then executed an instrument, “Acknowledgement of Debt &
Proposed Manner of Payments” stipulating that outstanding balance shall be paid in
full no later than June 30, 1965 & if they fail to do so, UP has the power to
consider the agreement rescinded w/out need of any judicial suit & UP shall be
entitled to P50,000.00 for liquidated damages.
 Logging operations continued but ALUMCO incurred more unpaid accounts w/c
amounted to P61,133.74 (Dec. 9, 1964-July 15, 1965) on top of the outstanding
balance from Dec. 8, 1964.
 July 19, 1965: UP informed ALUMCO that it has considered as rescinded & of no
further legal effect the logging agreement. UP then instituted a complaint against
ALUMCO to collect aforementioned sums of money. Court granted an order
restraining ALUMCO from continuing its logging operations.
 Prior to the court’s order, UP advertised an invitation to bid to take in a new
concessionaire to replace ALUMCO w/c was subsequently awarded to Sta. Clara
Lumber Co. Contract was signed on Feb. 16, 1966.
 ALUMCO filed a petition enjoining UP from conducting the bidding w/c led to the
issuance of the following Court orders:
1. UP enjoined from awarding logging rights to any other party. Order was
received on Feb. 25, 1966, after contract w/Sta. Clara was signed.
2. UP was held in contempt of court & Sta. Clara Lumber was directed to refrain
from exercising logging rights.
3. UP’s motion for reconsideration was denied.
 ALUMCO’s defense/contentions:
1. It blamed former gen. manager Cesar Guy in not turning over management
thus rendering it unable to pay.
2. Failure to pursue the manner of payment was caused by rotten logs w/c could
not be sold to Sta. Clara Lumber Co. Inc. w/whom they had a contract to buy &
sell.
3. UP’s unilateral rescission w/o court order was invalid.
4. UP’s supervisor did not allow them to cut new logs unless the logs cut during
Guy’s management were sold.
5. UP’s supervisor stopped all logging operations on July 15, 1965.
6. It proposed several offers to resume operations but UP did not reply.
Issues & Ratio:
1. WON a final court decree is necessary before UP can rescind the contract. –
NO.
 ALUMCO specifically allowed UP to rescind the contract if it fails to pay not later than
June 30, 1965 in the “Acknowledgement of Debt & Proposed Manner of Payments” it
executed.
 CC Art. 1191 & Froilan v. Pan Oriental Shipping Co.: the law does not prohibit parties
 of the contract even w/o court intervention. Injured party need not always resort to
the court for rescission of contract.
 Of course, it should be made known to the other party & it is always subject to the
scrutiny & review by the proper court. Meaning, the party who deems the contract
violated may consider it rescinded & act w/o previous court action BUT IT
PROCEEDS AT ITS OWN RISK. Since only the final judgment of the corresponding
court will conclusively & finally settle whether the action taken was or was not
correct in law.
 This does not contradict previous SC rulings declaring that judicial action is
necessary for the resolution of a reciprocal obligation. As mentioned, only final
judgment of the court will finally settle whether rescission was proper or not. But
either party can consider the contract as rescinded if their agreement provides for
such, however it’s subject to judicial invalidation.
 Rule requiring judicial action won’t be rendered nugatory since the other party can
always resort to the courts in case the rescinder abuses its power or commits an
error.
 Supreme Court of Spain interpretation of Spanish Civil Code Art. 1124 (similar to CC
Art. 1191): resolution of reciprocal/synallagmatic contracts may be made
extrajudicially unless successfully impugned in court.

2. WON 1st court order enjoining UP from awarding logging rts to another
party was proper. – NO, there was grave abuse of discretion since it decided
w/out first receiving evidence on the issues & it subsequently refused to
dissolve the injunction.
 UP made out a prima facie case of breach of contract & defaults in payment by
ALUMCO as proven by a court order stopping ALUMCO’s logging operations.
 ALUMCO profited from its operations previous to the agreement.
 Excuses/defenses offered are not sufficient excuse for non-payment.
 Whatever prejudices ALUMCO may suffer is susceptible of compensation in damages.

3. Issue WRT contempt of court was not discussed since such was pending w/
the Court of Appeals.

Holding: 1st court order granting ALUMCO’s petition for injunction set aside. Remanded
for further proceedings.
 DE ERQUIAGA vs. CA
 Santiago de Erquiaga, owner of 100% or 3,100 paid-up shares of stock of the
Erquiaga Dev’t Corp. (EDC) w/c owns the Hacienda San Jose, sold to Jose L.
Reynoso his 3,100 shares of EDC for P900K payable in installments on definite dates
fixed in the contract but not later than Nov. 30, ‘68.
 Since Reynoso failed to pay the 2nd & 3rd installments on time, total price was later
increased (representing brokers' commission& interest) to P971,371.70 payable
on/before Dec. 17, ‘69
 As of Dec. 17, ‘68, Reynoso was able to pay the total sum of P410K to Erquiaga who
thereupon transferred all his shares in EDC to Reynoso, as well as the possession of
the Hacienda San Jose, the only asset of the corp.
 However, as stipulated in the contract to sell, Reynoso pledged 1,500 shares in
favor of Erquiaga as security for the balance of his obligation. Reynoso failed to pay
the balance of P561,321.70 on or before Dec. 17, 1969, as provided in the
promissory notes he delivered to Erquiaga.
 Thus, Erquiaga formally informed Reynoso that he was rescinding the sale of his
shares in the EDC. CFI granted decision ordering:
o Reynoso to return & reconvey to the plaintiff the 3,100 paid up shares of stock
of the EDC w/c now stand in his name in the books of the corp.;
o Reynoso to render a full accounting of the fruits he received by virtue of said
3,100 paid up shares of stock of the EDC, as well as to return said fruits
received by him to Erquiaga;
o Erquiaga to return to Reynoso the amount of P100K plus legal interest from
Nov. 4, ‘68, & the amount of P310K plus legal interest from Dec. 17, ‘68, until
paid;
o Reynoso to pay Erquiaga P12K as actual damages
o Reynoso to pay Erquiaga P50K as attorney's fees; &
o Reynoso to pay costs of this suit and expenses of litigation.
 Both parties having decided, not to appeal, decision has become final & executory.
Nevertheless, the Court finds merit in the contention of the plaintiff that the
payment to the defendant of the total sum of P410K plus the interest, as well as the
sums due for damages and attorney's fees should be held in abeyance pending
rendition of the accounting by the defendant of the fruits received by him on
account of the 3,100 shares of the capital stock of EDC.
 Court also appointed a receiver upon the filing of a bond because:
o the matter of accounting of the fruits received by Reynoso as directed in the
decision will take time;
o plaintiff has shown sufficient ground for appointment of a receiver to preserve
the Hacienda w/c has been mismanaged by Reynoso to a point where the
amortization of the loan w/ the Dev’t Bank of the Phil has been neglected & the
arrears in payments have risen & there is danger that DBP may institute
foreclosure proceedings to the damage & prejudice of plaintiff.
 When Reynoso died, he was substituted by his surviving spouse and children as
party defendants. They filed a petition for certiorari w/ a prayer for a writ of
preliminary injunction seeking the annulment of the aforementioned order. CA
dismissed the petition w/ costs against the petitioners. Petitioners brought the case
up to the SC on a petition for review on certiorari but was denied. MFR was likewise
denied by the SC
 [Feb. 12, 1975] Upon motion of Erquiaga, the CFI dissolved the receivership &
ordered the delivery of the possession of the Hacienda San Jose to Erquiaga, the
filing of P410K bond by said Erquiaga conditioned to the payment of whatever may
be due to the substituted heirs of deceased defendant after the approval of the
accounting report submitted by Reynoso. It also ordered herein petitioners to allow
counsel for Erquiaga to inspect, copy and photograph certain documents related to
the accounting report
 CFI approved the P410K bond submitted by Erquiaga & the possession,
management & control of the hacienda were turned over to Erquiaga. Petitioners
filed MFR but was denied
 In an Omnibus Motion filed by Erquiaga CFI directed defendants to deliver to the
plaintiff or his counsel w/in 5 days from receipt of this order the 1,600 shares of
stock of the EDC in their possession. If they refuse or delay in delivery, Plaintiff was
authorized:
o call & hold a special meeting of the stockholders of the EDC to elect the
members of the Board of Directors;
o In said meeting the plaintiff is authorized to vote both the 1,500 (his) and
1,600 (defendants’) shares of stock;
o who the elected members of the Board of Directors & officers of the board shall
be is left to plaintiff’s ; and
o Elected members of the board & the officers who are elected are authorized to
execute any and a contracts or agreements under such conditions as may be
required by the DBP for the purpose of restructuring the loan of the EDC with
said bank.
 The substituted defendants thus filed a petition for certiorari, prohibition &
mandamus against the CFI and Erquiaga in the CA.
 CA held that the respondent court had acted with grave abuse of discretion or in
excess of jurisdiction in issuing the assailed order of insofar only as that part of the
Order
(1) giving private respondent voting rights on the 3,100 shares of stock of the EDC
w/o first divesting petitioners of their title thereto & ordering the registration of
the same in the corp. books in the name of private respondent, pursuant to
Sec. 10, Rule 39, ROC;
(2) authorizing corporate meetings & election of members of the BOD of said corp.;
&
(3) refusing to order the reimbursement of the purchase price of the 3,100 shares
of stock in the amount of P410K plus interests awarded in said final decision of
Sep. 30, ‘72 & the setoff therewith of the amt of P62K as damages & attorney's
fees in favor of herein private respondent are concerned.
 As to all other matters involved in said Order, petition is denied. Lastly, CA issued a
writ of mandamus commanding the respondent Judge to order (1) the Clerk of
Court of the CFI to execute the necessary deed of conveyance to effect the transfer
of ownership of the 3,100 shares of stock to Erquiaga in case petitioners fail to
comply w/ the delivery of the 1,600 shares of stock; and (2) upon delivery by
petitioners or transfer by the Clerk of Court of said shares of stock to Erquiaga, as
the case may be, to issue a writ of execution ordering Erquiaga to pay petitioners
P410K plus interests set-off w/ the amount of P62K adjudged in favor of Erquiaga as
damages & attorney's fees.
 What has already been done by the parties:
o Hacienda San Jose was returned to Erquiaga upon approval of Erquiaga's
surety bond in favor of Reynoso;
o Reynoso has returned to Erquiaga only the pledged 1,500 shares of stock of
the EDC, instead of 3,100 shares
 What the parties have not done yet:
o Reynoso has not returned 1,600 shares of stock to Erquiaga;
o Reynoso has not rendered a full accounting of the fruits
o Erquiaga has not returned the sum of P100K paid by Reynoso on the sale, w/
legal interest from Nov. 4, ‘68 & P310K plus legal interest from Dec. 17,1968,
until paid (total: P410K);
o Reynoso has not paid judgment of P12K as actual damages
o Reynoso has not paid the sum of P50K as attorney's fees; and
o Reynoso has not paid the costs of suit & expenses of litigation
 Unsatisfied, petitioner filed present petition for review.
WON the CA erred in ordering entry of its judgment.  In all other respects, the decision of the CA is affirmed.
 YES. The court held that the CA's decision is not yet final. Without giving the parties
an ultimatum or setting a deadline for the submission of their compromise
agreement, the CA, out of the blue, issued a resolution ordering the Judgment
Section of that Court to enter final judgment in the case. The directive was
precipitate & premature. ANGELES vs. CALASANZ

WON the CA erroneously applied the Corporation Law.

 NO. The Court found no reversible error in the CA's decision directing the clerk of
court of the TC to execute a deed of conveyance to Erquiaga of the 1,600 shares of
stock of the EDC still in Reynoso's name &/or possession, in accordance w/ the
procedure in Sec. 10, Rule 39, ROC. ONG vs. CA
 Neither did it err in annulling the TC’s order:
(1) allowing Erquiaga to vote the 3,100 shares of Erquiaga Development
Corporation without having effected the transfer of those shares in his name in
the corporate books; and
(2) authorizing Erquiaga to call a special meeting of EDC’s stockholders & to vote
the 3,100 shares, w/o the pre-requisite registration of the shares in his name.
It is a fundamental rule in Corporation Law (Sec. 35) that a stockholder
acquires voting rights only when the shares of stock to be voted are registered
in his name in the corporate books.

WON CA decision requiring petitioner to pay the Reynosos P410K plus interest,
w/o first awaiting accounting of the fruits of the Hacienda San Jose, violates
case law & Art. 1385, CC, alters TC’s final order dated Feb. 12, 1975, & is
inequitous.
 YES. The order of CA directing Erquiaga to return the P410K minus P62K as the
price paid by Reynoso for the shares of stock, w/ legal rate of interest, & the return
by Reynoso of Erquiaga's 3,100 shares w/ the fruits (construed to mean not only
dividends but also fruits of the corp's Hacienda) is in full accord with Art. 1385, CC
 Pursuant to the rescission decreed in the final judgment, there should be
simultaneous mutual restitution of the principal object of the contract to sell (3,100
shares) & of the consideration paid (P410K). This should not await the mutual
restitution of the fruits, namely: the legal interest earned by Reynoso's P410K while
in the possession of Erquiaga, & its counterpart: fruits of the Hacienda w/c Reynoso
received from the time the hacienda was delivered to him until it was placed under
receivership by the court.
 However, since Reynoso has not yet given an accounting of those fruits, it is only
fair that Erquiaga's obligation to deliver to Reynosa the legal interest earned by his
money, should await the rendition & approval of his accounting. It would be
inequitable & oppressive to require Erquiaga to pay the legal interest earned by
Reynoso's P410K for the past 20 years w/o first requiring Reynoso to account for
the fruits of Erquiaga's hacienda w/c he allegedly squandered while it was in his
possession.

Holding: Petition for review is granted.

 Payment of legal interest by Erquiaga to Reynoso on the price of P410K paid by
Reynoso for Erquiaga's 3,100 shares of stock of the EDC should be computed from
Nov. 4, 1968 up to Sep. 30, ‘72, the date of said judgment.
 Since Reynoso's judgment liability to Erquiaga for attorney's fees & damages in the
total sum of P62K should be set off against the price of P410K that Erquiaga is
obligated to return to Reynoso, the balance of the judgment in favor of Reynoso
would be only P348K which should earn legal rate of interest after Sep. 30, ‘72, the
date of the judgment.
 However, the payment of said interest by Erquiaga should await Reynoso's
accounting of the fruits received by him from the Hacienda San Jose. Upon payment
of P348,000 by Erquiaga to Reynoso, Erquiaga's P410K surety bond shall be
deemed cancelled.
 Iringan vs. Court of Appeals
Facts:
 March 22, 1985 - Antonio Palao sold to petitioner Alfonso Iringan, an undivided
portion of Lot No. 992 of the Tuguegarao Cadastre, located at the Poblacion of
Tuguegarao and covered by Transfer Certificate of Title No. T-5790. In the deed
of sale the total purchase price is P295,000 payable as follows:
o P10,000 – execution of the instrument
o P140,000 – on or before April 30, 1985
o P145,000 – on or before December 31, 1985
 When the second payment was due only P40,000 was paid.
 July 18, 1985 – Palao sent a letter to Iringan stating that he considered the
contract as rescinded and that he would not accept any further payment
considering that Iringan failed to comply with his obligation to pay the full
amount of the second installment.
 August 20, 1985 – Iringan replied that they were not opposing the revocation of
the deed of sale but asked for the following reimbursements:
o P 50,000 – total cash payment
o P 3,200 – geodetic fees
o P 500 – attorney’s fees
o Current interest of P53,7000
 January 10, 1986 – Palao sent a letter that he was not amenable to the
reimbursements.
 February 21, 1989 – Iringan proposed that the P50,000 be reimbursed or Palao
could sell to Iringan an equivalent portion of the land. Palao instead wrote
Iringan that the latter's standing obligation had reached P61,600, representing
payment of arrears for rentals from October 1985 up to March 1989.
 July 1, 1001 – Palao filed a complaint for judicial confirmation of rescission of
Contract and Damages against Iringan.

Issue: WON the contract of sale was validly rescinded? NO

 Iringan asserts that a judicial or notarial act is necessary before one party can
unilaterally effect a rescission.
 Palao contends that the right to rescind is vested by law on the obligee and
since petitioner did not oppose the intent to rescind the contract, Iringan in
effect agreed to it and had the legal effect of a mutually agreed rescission
 Article 1592 (CC) - In the sale of immovable property, even though it may have
been stipulated that upon failure to pay the price at the time agreed upon the
rescission of the contract shall of right take place, the vendee may pay, even
after the expiration of the period, as long as no demand for rescission of the
contract has been made upon him either judicially or by a notarial act. After the
demand, the court may not grant him a new term.
 Art. 1592 requires the rescinding part to serve judicial or notarial notice of his
intent to resolve the contract
 The party entitled to rescind should apply to the court for a decree of rescission.
The right cannot be exercised solely on a party’s own judgment that the other
committed a breach of the obligation. Since a judicial or notarial act is required
by law for a valid rescission to take place, the letter written by respondent
declaring his intention to rescind did not operate to validly rescind the contract.
 When Palao filed an action for Judicial confirmation of rescission and damages
before the RTC, he complied with the requirement of the law for judicial decree
of rescission. The action was filed within the required time period. Art. 1144
provides that action upon a written contract should be brought within 10 years
from the time the right of action accrues.