1256-1261
Far East Bank & Trust Company v. Diaz Realty willingness to pay. They requested that upon payment, their shares of stock should be
FACTS: Diaz & Co. got a loan from Pacific Bank in the amount of P 720,000. The loan was
secured by real estate mortgage over 2 parcels of land owned by Diaz Realty. Allied Bank
rented office space on the mortgaged property whereby the monthly rentals shall be paid
directly to Pacific Bank instead of Diaz & Co.
Eventually, Central Bank closed Pacific Bank and placed it under receivership. Far East Bank
(FEBTC) purchased the credit of Diaz & Co. from Pacific Bank.
Antonio Diaz, went to the office of FEBTC and was told that his loan was P 1,447,142. As such,
Diaz tendered to FEBTC the amount of P 1,450,000 through an Interbank check. However,
FEBTC did not accept it as payment and treated the amount as a deposit.
WON there was tender of payment. (YES)
FEBTC received a check in the amount of P 1,450,000 with the notation “Re: Full Payment of
Pacific Bank Account now FEBTC.” The check was cleared and honored by Interbank.
While jurisprudence holds that a check does not constitute legal tender and that a creditor
may validly refuse it. It must be emphasized that this does not prevent a creditor from
accepting a check as payment. The creditor has the option and discretion to refuse or accept
it.
In this case, FEBTC accepted the check which it treated as a deposit. However, as it turned
out, the check was actually fully funded and honored by Interbank. Diaz’s actions
demonstrate his intent, ability, and capability to fully settle and extinguish his obligation.
FEBTC argues that Diaz should have consigned the payment. However, for consignation to be
necessary, the creditor must have refused without just cause, to accept the debtor’s
payment. In this case, FEBTC accepted respondent’s check.
To reiterate, tender was made by Diaz to settle its obligation. It was up to FEBTC to refuse or
accept the payment. FEBTC did not have the right to treat the payment as a deposit. Thus, by
accepting the tendered check and converting it into money, petitioner is presumed to have
accepted it as a payment.
State Investment House v. CA, Tirona, Spouses Aquino
FACTS: Spouses Rafael and Refugio Aquino, as an accommodation party to Jose and
Marcelina Aquino, signed an agreement with State Investment House (State) for State’s
purchase of receivables amounting to P375k.
Subsequently Spouses Rafael and Refugio pledged shares of stock to State in order to secure
a loan of P120,000. When this loan became due, Spouses Aquino paid the loan partly with
their own funds and partly from the proceeds of another loan which they also obtained from
State.
When the new loan matured, State demanded payment and Spouses Aquino expressed their
released. However, State denied their request and argued that the loan which it extended to
Jose and Marcelina Aquino had remained unpaid.
State then sent a Notice of Sale to Spouses Aquino and informed them that the shares of
stock pledged to them will be sole at a public auction. As such, Spouses Aquino filed a case
with the RTC. Judge Fortun of the RTC, rendered a decision ordering State to release the
shares and deliver the same to Spouses Aquino upon payment fo the loan.
In the RTC, there was disagreement on the correct amount that the Spouses had to pay -
whether there should be interest or not. The RTC, through Judge Tirona, clarified that no
interest needed to be paid.
WON there is ambiguity or omission in the decision of Judge Fortun.
The ruling of Judge Fortun is clarified. He meant to rule favorably to spouses Aquino and
ruled that the spouses did not incur mora because their delay was due to State’s unjustified
refusal to relase the shares pledged. However, Judge Fortun did not specify which of the
interests he was deleting. There was ambiguity as to which interest was to be deleted
whether the interest on the principal loan, regular interest, or the penalty interest.
If Aquino spouses were not in delay, to what extent are they liable.
The SC held that respondent spouses were not in delay and hence must only pay the interest
on:
A. The principal of the P110,000 loan
B. Monetary interest in the amount of 17% per annum.
They were not liable for penalty or compensatory interest. The monetary interest continues
to accrue until the actual payment is effected.
Under Article 1256 which provides that “the debtor shall be released from responsibility by
the consignation of the sum due.” To be released from the obligation, a debtor must:
1. Tender of payment
2. Consignation the sum due
In this case, while Spouses Aquino tendered payment, they did not consign it in court when
the amount became due. As such, the monetary interest of their obligation was not
extinguished.
Legaspi v. CA, Salcedo
FACTS: Bernardo Legaspi is the registered owner of 2 parcels of land in Imus, Cavite which he
sold to his son-in-law, Leonardo Salcedo for the sum of P25,000 wherein Legaspi had the
right to repurchase the same within 5 years.
Before the expiry of the 5 years-period, Legaspi tendered to Salcedo the sum of P25,000 to
repurchase the land. However, Salcedo refused to accept the payment without justifiable
cause. As such, Legaspi consigned the amount of P25,125 with the CFI of Cavite. Legaspi also
alleged that despite his earnest efforts to enter into a compromise agreement after the
consignation, Salcedo still refused to reconvey the properties.
On the other hand, Salcedo counters that Legaspi never offered him money in order to
repurchase the land. Instead, Salcedo contends that Legaspi asked for an extension of 1 year
within which to buy the land which Salcedo refused. Salcedo claims that Legaspi was no
longer entitled to repurchase the properties for failure to exercise his right within the
stipulated period. Salcedo also refused the payment of P25,000 because he contends that the
repurchase price is P42,250 because of the extraordinary inflation.
WON the prior offer and tender of payment of the amount of Php25,000 is valid as to warrant
reconveyance of the parcels of land. (YES)
"Tender of payment is the manifestation made by the debtor to the creditor of his desire to
comply with his obligation, with the offer of immediate performance. Generally, it is an act
preparatory to consignation as an attempt to make a private settlement before proceeding
to the solemnities of consignation. Consignation is the act of depositing the thing due with
the court or judicial authorities whenever the creditor cannot accept or refuses to accept
payment and it generally requires a prior tender of payment. In instances where no debt is
due and owing, consignation is not proper."
Since the case at bar involves the exercise of the right to repurchase, a showing that
petitioner made a valid tender of payment is sufficient. It is enough that a sincere tender of
payment and not a deceptive one was made. The fact that he deposited the amount of the
repurchase money with the Clerk of Court was simply an additional security for the
petitioner. It was not an essential act that Legapsi had to perform although it proves his
veracity to comply with his obligation.
WON the tender of payment resulted in the exercise of the right to repurchase. (YES)
The SC ruled that the CA erred when it reversed the findings of the RTC. The CA reversed the
findings of the RTC because there was a discrepancy regarding the time the consignation was
made - whether it was made at 10 AM or 3 PM.
The SC held that this discrepancy is not substantial. Moreover, there is an official receipt
evidencing the transaction. The records therefore show that Legaspi was able to exercise his
right to repurchase on time. Legaspi offered and tendered the amount to Salcedo within the
5-year period that he is allowed to repurchase the property.
Hulganza v. CA, Gemarino
FACTS: Spouses Hulganza own the subject lot located in Calatrava, Negros Occidental.
Before Nicomedez Hulganza died, he and his wife sold the said property to respondent
Gemarino for P10,000. By virtue of the sale, a new title was issued. Since the sale, Gemarino
has been in possession of the property peacefully without interruption.
In 1972, Heirs of Hulganza filed a complaint seeking to repurchase the property from
Gemarino under the Sec. 119 of the Public Land Act. Petitioners argue that they have the
right of legal redemption under the Public Land Act. On the other hand, respondent argues
that the period of redemption has already lapsed and should the court order otherwise,
petitioners must pay the cost of improvement introduced on the land valued at P25,000.
RTC: The RTC ruled in favor of the Hulganzas declaring that they have the right of
redemption.
CA: The CA reversed the decision. The CA found that the Hulganzas failed to consign the
amount due when they filed the complaint 4 days after the 5-year period expired. In fact, it
was only on during trial 3 years later that the RTC informed the existence of the money
consigned. As such, the CA ruled that the act of merely filing the complaint without
consignation of the proper amount due within the period prescribed was an ineffective and
incomplete redemption.
WON a formal offer to redeem the land should be accompanied by a bona fide tender of the
redemption price. (NO)
The SC ruled that, based on jurisprudence, the formal offer to redeem, accompanied by a
bona fide tender of redemption price within the period of redemption, is only essential to
preserve the right of redemption for future enforcement beyond the period of redemption
and within the period prescribed by the statute of limitations.
The right to redeem is exercised through the filing of judicial action within the period of
redemption. The formal offer to redeem with the tender of payment might be proper but is
not essential. The filing of the action within the period of redemption is already equivalent to
a formal offer to redeem.
The Public Land Law was precisely enacted in order to give the homesteader or patentee
every chance to preserve the land that the state granted him as a reward for his labor.
From the foregoing, a bona fide tender of the redemption price or consignation of said price
in court is not essential where the filing of the action itself is equivalent to a formal offer to
redeem.
Heirs of Luis Bacus v. CA and Spouses Duray
FACTS: Luis Bacus leased to private respondent Faustino Duray a parcel of agricultural land
with an area of 3,002 sqm located in Talisay, Cebu. The lease was for 6 years and the contract
contained an option to buy clause. Under said option, the Duray (lessee) had the exclusive
and irrevocable right to buy 2,000 square meters of the property within 5 years after the
effectivity of the contract, at P200 per sqm. That rate shall be proportionately adjusted
depending on the peso rate against the US dollar, which at the time of the execution of the
contract was P14.00.
Close to the expiration of the contract, Luis Bacus died in 1989. Thereafter, Spouses Duray
informed the heirs of Luis Bacus that they were willing and ready to purchase the property
under the option to buy clause.
The heirs refused to sell the property, hence Duray's adverse claim was annotated at the
back of the TCT covering the subject 2000 sqm portion. Duray then filed a complaint for
specific performance against the heirs of Bacus with the Lupon. In the hearing, Duray
presented the manager of Standard Chartered Bank who testified that Duray is securing
P700,000 to enable him to buy the subject property.
When Spouses Duray opted to buy the property, were they already required to deliver the
money or consign it to court. (NO - it's a reciprocal obligation that must happen at the same
time)
Heirs of Luis Bacus contend that Spouses Duray filed to comply witht heir obligation because
there was no actual delivery or consignation of the purchase price.
The SC ruled that obligations under an option to buy are reciprocal obligations. The
performance of one obligation is conditioned on the simultaneous fulfillment of the other
obligation. As such, the payment of the purchase price is contingent on the delivery of the
deed of sale.
In this case, when Spouses Duray decided to buy the property, their only obligation was to
inform the Bacus's. They were not yet obligated to make the actual payment which will be
due only upon the delivery of the deed of sale by the Bacus's.
Consequently, since the obligation was not yet due, consignation of the purchase price is not
yet required. The Spouses Duray also did not incur in delay when they did not deliver the
payment before the contract expired. In reciprocal obligations, neither party incur in delay if
the other does not comply or is not ready to comply in a proper manner with what is
incumbent upon him.
In this case, the Duray's have communicated their intention to buy the property before the
contract expired. However, petitioners refused to execute the deed of sale unless the Duray's
tendered payment.
Dalton v. FGR Realty, Dayrit, Ng
FACTS: Flora Dayrit owned a 1811 sqm parcel of land in Cebu City. Petitioners Soledad Dalton
and Sasam et al, leased portions of the said property.
In 1985, Dayrit sold the property to respondent FGR Realty and Dev't Corporation. As such,
Dayrit and FGR stopped accepting rental payments because they wanted to terminate the
lease agreements with Dalton and Sasam, et al. Petitioners then consigned the rental
payments with the RTC without notifying Dayrit and FGR about the consignation. In motions,
Dayrit and FGR questioned the validity of the consignation. In several occasions, Dayrit and
FGR withdrew the rental payments but reserved the right to question the validity of the
consignation.
The RTC ruled in favor or Dayrit and FGR and ordered Dalton to vacate the property because
it failed to comply with the requisites of a valid consignation. CA affirmed the RTC's Decision.
Hence, this appeal.
WON the consignation made by petitioner is valid for lack of notice. (NO)
Dalton argues that because respondents withdrew the amount consigned, the issue is
already moot and academic.
The SC is not impressed.
1. First, when they withdrew the amounts consigned, FGR and Dayrit expressly reversed
the right to question the validity of the consignation
o When the creditor's acceptance of money consigned is conditional and with
reservations, he is not deemed to have waived his claims against the debtor.
As such, the creditor is not barred from raising his other claims.
o Furthermore, consignation is also deemed completed at the time the creditor
accepts the amount without objections
2. Second, compliance with the requisites of a valid consignation is mandatory. Failure
to comply with any of the requisites will render the consignation void. The requisites
are:
o A debt due;
o The creditor to whom tender of payment was made refused without just
cause to accept the payment, or the creditor was absent, unknown or
incapacitated, or several persons claimed the same right to collect, or the title
of the obligation was lost;
o The person interested in the performance of the obligation was given notice
before consignation was made;
o The amount was placed at the disposal of the court; and
o The person interested in the performance of the obligation was given notice
after the consignation was made.
Furthermore, Articles 1257 and 1258 mandate that notice must be given to persons
interested in the performance of the obligation. Failure to notify these persons
renders the consignation void.
In this case, since Dalton failed to notify the respondents of the consignation prior and after
the consignation (requisites 3 and 5), there was no valid consignation.
1262-1269
Naga Telephone Co. (NATELCO) v. CA and CASURECO II
FACTS: Petitioner Naga Telephone Co. (NATELCO) renders local and long distance services in
Camarines. On the other hand, respondent Camarines Sur II Electric Cooperative (CASURECO)
is a private corporation which operates electric power service in Naga.
The 2 companies entered into a contract wherein NATELCO will be using CASURECO electric
light posts in Naga in operating its telephone services. In return, former will install 10 phone
connections for the use of the latter free of charge. Term/period will be as long as former
needs to use the latter’s posts. Contract will be terminated if the latter will forced to stop,
abandon its operation as a public service & it becomes necessary to remove the posts.
Contract was prepared by Atty. Maggay, member of the CASURECO Board of Directors &
legal counsel of NATELCO.
1st cause of action: After 10 years of enforcing the contract, CASURECO filed for reformation
of the contract w/damages to abolish inequalities based on the following grounds:
1. it was too one-sided in favor of NATELCO
2. it was not in accordance w/the National Electrification Administration (NEA)
guidelines w/c provide that the reasonable compensation for the use of posts should
be P10/post/month.
 3. telephone cables strung on the posts have become much heavier & worsened by
linemen who bore holes thru the posts w/c resulted into posts broken during
typhoons w/c posts cost P2,630.00 each.
2nd cause of action: CASURECO likewise alleged that since 1981, NATELCO used 319 of their
posts outside Naga w/o any contract and latter company should pay P10.00/post amounting
to P267,960.00 w/c the latter refused to pay despite demands. 3rd cause of action: Former
also complained that the latter provided poor service causing great inconvenience &
damages amounting to not less than P100k.
NATELCO’s answer prayed for the dismissal of the 1st cause of action since it does not
sufficiently state a cause of action, and it’s barred by estoppel & prescription. They claim that
they could not have caused the deterioration of CASURECO’s posts since they’ve used them
for 11 yrs. Also, their expenses for the 10 free phones lines are far in excess of the amounts
claimed by CASURECO. They refused to pay the amount specified in the 2nd cause of action
because what is due to them from CASURECO is more than latter’s claim against them. WRT
the 3rd cause of action, they claim that the National Telecommunication Corporation (NTC)
classified their service as very high & of superior quality.
Both companies presented witnesses to support their allegation. Atty. Magay testified
supporting NATELCO’s claims
WON Art. 1267 is applicable. (YES)
• NATELCO claims it’s not since contract in this case doesn’t involve rendition of
service/personal prestation and it’s not for future service w/future unusual change. It
invokes Occena vs. Jabson. And the article was never raised by CASURECO.
• The provision speaks of service (meaning performance of the obligation) w/c has
become so difficult. It doesn’t require that the contract be for future service w/future
unusual change. Rather, it speaks of unforeseen events or the discredited theory of
rebus sic stantibus in public international law wherein parties stipulate in the light of
certain prevailing conditions & once these conditions cease to exist the contract also
ceases. Equity & good faith demand that when basis of the contract disappears, the
prejudiced party has a right to relief.
• Fact that this provision was not raised by the parties in their pleadings & was never
subject of trial is immaterial. Court has discretion to consider an unassigned error that
is closely related to an error properly assigned as long as the consideration is
necessary in arriving at a just decision. The material allegations of fact in the
complaint & not the legal conclusion made or the prayer that determines the relief to
w/c the plaintiff is entitled and plaintiff is entitled to as much relief as the facts
warrant although that relief is not specifically prayed for. NATELCO was given the
opportunity to present its evidence WRT this matter when they were given the
chance to answer the issue of WON the contract has become too one-sided in its
favor & too iniquitous, unfair & disadvantageous to CASURECO.
WON the ruling in Occena is applicable. (NO)
• Case provides that Art. 1267 doesn’t authorize the courts to remake, modify or revise
the contract or to fix the division of shares between the parties as contractually
stipulated w/the force of law between the parties. Complaint for the modification of
contract was dismissed for failure to state a cause of action.
RTC: contract has become disadvantageous to CASURECO due to increase in volume of
NATELCO’s subscribers. Contract should be reformed to abolish the inequities. NATELCO
should pay for the use of CASURECO’s posts at P10.00/post while the latter should pay the
monthly bills for the use of former’s phone lines in Naga. Amount should be computed from
the date of filing of the complaint. Same has been held for the 2nd cause of action. While the
3rd cause of action was not sufficiently proven.
CA: Affirmed the RTC decision based on the following grounds:
• New Civil Code Art. 1267. Although the contract was fair to both parties at the time of
its execution (then, NATELCO still had very limited capability), supervening
circumstances (NATELCO’s expansion) have made the contract too one-sided in favor
of NATELCO to the great disadvantage of CASURECO. Continued enforcement of the
contract has gone beyond the contemplation of the latter, thus it should be released
therefrom. Equity demands certain economic equilibrium between the prestation the
counter-prestation & does not permit the unlimited impoverishment of one party for
the benefit of the other by the excessive rigidity of the principle of the obligatory
force of contracts.
• Contract was subject to a potestative condition w/ rendered the condition void.
• In this case, CASURECO’s complaint & evidence it presented sufficiently made out a
cause of action under Art. 1267.
• Parties are released from their correlative obligations under the contract. But taking
into account the possible consequences of merely releasing the parties from the
contract, the SC decided to uphold the trial court ruling WRT payment for use of post
and the phone lines so as not disrupt the basic & essential services being rendered by
both companies and to avoid unjust enrichment by NATELCO at the expense of
CASURECO.
Cause of action has not yet prescribed since CC Art. 1144 provides that an action upon a
written contract must be brought w/in 10yrs from the time the rt of cause of action accrues.
In this case, cause of action arose when CASURECO asked its counsel to review the contract
w/c was in 1982/83. Case was filed in 1989, thus, 10 yrs has not lapsed.
Prestations are not purely potestative. Conditions do not depend solely on the will of either
party. CA, in ruling that the term/period (3rd bullet, Facts part) of the contract is potestaive,
overlooked the condition that the contract will be terminated when CASURECO will be forced
to stop, abandon its operation as a public service & it becomes necessary to remove the
electric light post. They are actually casual conditions w/c depend on chance, hazard or will
of a 3rd person. The contract is subject to mixed conditions w/c don’t invalidate the contract
stipulations.
PNCC v. CA
FACTS: In 1985, Philippine National Construction Corp. (PNCC) entered into a Contract of
Lease with private respondents Raymundos. The lease contract provided that:
 • "the lease shall be for a period of 5 years which shall commence upon the issuance of
the industrial clearance by the Ministry of Human Settlements."
• "the first annual rent of P240,000 shall be payable upon the execution of the
contract"

In 1986, PNCC obtained a Temporary Use Permit from the Ministry on Human Settlements
for the proposed rock crushing project. The permit is valid for 2 years unless sooner revoked
by the ministry. As such, the Raymundos requested for the payment of the first annual rental
in the amount of P240,000. However, PNCC refused to pay contending that the rental was
not yet due since what was issued by the ministry was not the industrial clearance but merely
a temporary-use permit. PNCC also expressed its intention to terminate the contract. The
Raymundos then filed a complaint for specific performance against the Raymundos.

WON the issuance of the temporary use permit is the same as the industrial clearance. (YES)
Petitioner is estopped from claiming that the Temporary Use Permit was not the industrial
clearance contemplated in the contract. Based on the letter of PNCC, it considers the
temporary use permit as the industrial clearance hence it recognized its obligation to pay the
rentals from the date the permit was issued.

The suspensive condition of the issuance of the industrial clearance has already been
fulfilled; thus, the lease contract has become operative. If PNCC really believed otherwise,
they would not have pre-terminated the contract for the simple reason that no juridical
relation was created.

WON petitioner can invoke Article 1266 and the principle of rebus sic stantibus. (NO)
Contracts have the force of law between parties and must be complied with good faith. One
exception to this is Article 1266 wherein a debtor in obligations to do shall be released when
the prestation becomes legally or physically impossible."

This article applies only in obligations to do. The obligation to pay rentals or deliver the thing
in a contract of lease is an obligation to give.

The principle of rebus sic stantibus also cannot be invoked. The principle of rebus sic
stantibus neither fits in with the facts of the case. Under this theory, the parties stipulate in
the light of certain prevailing conditions, and once these conditions cease to exist, the
contract also ceases to exist. In this case, petitioner averred that three (3) abrupt change in
the political climate of the country after the EDSA Revolution and its poor financial condition
rendered the performance of the lease contract impractical and inimical to the corporate
survival of the petitioner.

However, mere pecuniary inability to fulfill an obligation does not discharge a contractual
obligation nor does it constitute a defense for a specific performance.

WON the non-materialization of the rock crushing plant invalidates the contract. (NO)
The cause in a contract of lease is the enjoyment of a thing. As a general rule, the motive of a
party in entering a contract will not affect its validity unless the motive has been made a
condition upon which the contract is made to depend. The exception does not apply here.