HENRICK YSON

CIVIL LAW 2

ABPS 3A

Chapter 1 – General Provisions of Obligations

Article 1156: ASJ Corporation and Antonio San Juan vs Spouses Efren and Maura Evangelista G.R. No.
158086 Feb. 14, 2008

FACTS

This case is a petition for review on certiorari on the decision of the Court of Appeals affirming the
decision of the Regional Trial Court of Malolos, Bulacan Branch 9 in Civil Case No. 745-M-93.

Respondents Efren and Maura Evangelista are owners of R.M. Sy Chicks, a business engaged in selling
chicks and egg by-products. For hatching and incubation of eggs, they availed the services of ASJ Corp.,
owned by San Juan and his family.

After years of doing business with the ASJ Corp., the respondents delayed payments for the services of
ASJ Corp, prompting owner San Juan to refuse the release of the hatched egg. The respondents
tendered Php 15,000 to San Juan for partial payment which San Juan accepted but he still insisted on
the full settlement of respondents’ accounts before releasing the chicks and by-products. He also
threated the respondents that he would impound their vehicle and detain them at the hatchery
compound if they should come back unprepared to fully settle their accounts with him.

The parties tried to settle amicably before police authorities but failed. The respondents then filed with
the RTC an action for damages based on the retention of the chicks and by-products by the petitioners.

The RTC held ASJ Corp. and San Juan solidarily liable for the actual and moral damages and attorney’s
fees. On appeal, the Court of Appeals affirmed the decision and added exemplary damages. Hence, this
petition.

ISSUE

Whether or not the petitioner’s retention of the chicks and by-products on account of respondents’
failure to pay the corresponding fees justified.

HELD

Yes. The retention has legal basis, although the threats had none. Under Article 1248 of the Civil Code,
the creditor cannot be compelled to accept partial payments from the debtor, unless there is an express
stipulation to that effect. It was the respondents who violated the reciprocity in contracts, hence, the
petitioners have the right of retention. This case is a case on non-performance of reciprocal obligation.

Reciprocal obligations are those which arise from the same cause, wherein each party is a debtor and a
creditor of the other such that the performance of one is conditioned upon the simultaneous fulfillment
of the other.
Since respondents are guilty of delay in the performance of their obligations, they are liable to pay
petitioners actual damages.

The petition was partly granted. The respondents were ordered to pay petitioners for actual damages.
The actual, exemplary and moral damages laid down by the Court of Appeals were retained.

Article 1158: Jaravata vs. Sandiganbayan (127 SCRA 363)

FACTS

On or about the period from April 30, 1979 to May 25, 1979, in the Municipality of Tubao, Province of La
Union, Philippines, and within the jurisdiction of this Honorable Court, Hilario Jaravata, being then the
Assistant Principal of the Leones Tubao, La Union Barangay High School and with the use of his influence
as such public official and taking advantage of his moral and official ascendancy over his classroom
teachers, with deliberate intent did then and there wilfully, unlawfully and feloniously made demand
and actually received payments from other classroom teachers, ROMEO DACAYANAN, DOMINGO
LOPEZ, MARCELA BAUTISTA, and FRANCISCO DULAY various sums of money, namely: P118.00, P100.00,
P50.00 and P70.00 out of their salary differentials, in consideration of accused having officially
intervened in the release of the salary differentials of the six classroom teachers, to the prejudice and
damage of the said classroom teachers, in the total amount of THREE HUNDRED THIRTY EIGHT (P338.00)
PESOS, Philippine Currency. (Decision, p.1-2.)

After trial, the Sandiganbayan rendered the following judgment:

WHEREFORE, accused is hereby found guilty beyond reasonable doubt for Violation of Section 3(b),
Republic Act No. 3019, as amended, and he is hereby sentenced to suffer an indeterminate
imprisonment ranging from ONE (1) YEAR, is minimum, to FOUR (4) YEARS, as maximum, to further
suffer perpetual special disqualification from public office and to pay the costs.

No pronouncement as to the civil liability it appearing that the money given to the accused was already
refunded by him. (Id. pp, 16-17.)

Republic Act No. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act provides, inter alia
the following:

Sec. 3. Corrupt practices of public officers. — In addition to acts or omissions of public officers already
penalized by existing law, the following shall constitute corrupt practices of any public officer and are
hereby declared to be unlawful:

(b) Directly or indirectly requesting or receiving any gift, present, share, percentage, or benefit, for
himself or for any other person in connection with any contract or transaction between the Government
and any other party, wherein the public officer in his official capacity has to intervene under the law.

ISSUE

The legal issue is whether or not, under the facts stated, petitioner Jaravata violated the above-quoted
provision of the statute.

HELD

A simple reading of the provision has to yield a negative answer.

There is no question that Jaravata at the time material to the case was a “public officer” as defined by
Section 2 of R.A. No. 3019, i.e. “elective and appointive officials and employees, permanent or
temporary, whether in the classified or unclassified or exempt service receiving compensation, even
normal from the government.” It may also be said that any amount which Jaravata received in excess of
P36.00 from each of the complainants was in the concept of a gift or benefit. The pivotal question,
however, is whether Jaravata, an assistant principal of a high school in the boondocks of Tubao, La
Union, “in his official capacity has to intervene under the law” in the payment of the salary differentials
for 1978 of the complainants. It should be noted that the arrangement was “to facilitate its [salary
differential] payment accused and the classroom teachers agreed that accused follow-up the papers in
Manila with the obligation on the part of the classroom teachers to reimburse the accused of his
expenses.

There is no law which invests the petitioner with the power to intervene in the payment of the salary
differentials of the complainants or anyone for that matter. Far from exercising any power, the
petitioner played the humble role of a supplicant whose mission was to expedite payment of the salary
differentials. In his official capacity as assistant principal he is not required by law to intervene in the
payment of the salary differentials. Accordingly, he cannot be said to have violated the law afore-cited
although he exerted efforts to facilitate the payment of the salary differentials.

Article 1160: Perez vs Pomar 2 Phil. 682 (1903)

FACTS

Perez filed in the Court of First Instance of Laguna a complaint asking the Court to determine the
amount due him for services rendered as an interpreter for Pomar and for judgement to be rendered in
his favor.

Pomar, on his part, denied having sought the services of Perez, contending that, Perez being his friend,
he only accepted the services for they were rendered in a spontaneous, voluntary and officious manner.

ISSUE

Whether or not consent has been given by the other party.

HELD

Yes. It does not appear that any written contract was entered into between the parties for the
employment of the plaintiff as interpreter, or that any other innominate contract was entered into, but
whether the plaintiff’s services were solicited or whether they were offered to the defendant for his
assistance, inasmuch as these services were accepted and made use of by the latter, there was a tacit
and mutual consent as to the rendition of services. This gives rise to the delegation upon the person
benefited by the services to make compensation thereof, since the bilateral obligation to render services
as interpreter, on the one hand, and on the other to pay for the services rendered is thereby incurred.

As was held in the Supreme Court of Spain in its decision of February 12, 1889, it stated that “not only is
there an express and tacit consent which produces real contract but there is also a presumptive consent
which is the basis of quasi-contracts this giving rise to the multiple judicial relations which result in
obligations for the delivery of a thing or the rendition of a service.
Article 1162: Gutierrez vs Gutierrez G.R. NO. 34840

FACTS

On February 2, 1930, a passenger truck and an automobile of private ownership collided while
attempting to pass each other on a bridge. The truck was driven by the chauffeur Abelardo Velasco, and
was owned by saturnine Cortez. The automobile was being operated by Bonifacio Gutierrez, a lad 18
years of age, and was owned by Bonifacio’s father and mother, Mr. and Mrs. Manuel Gutierrez. At the
time of the collision, the father was not in the car, but the mother, together with several other members
of the Gutierrez family were accommodated therein.

The collision between the bus and the automobile resulted in Narciso Gutierrez suffering a fractured
right leg which required medical attendance for a considerable period of time.

ISSUE

Whether or not both the driver of the truck and automobile are liable for damages and indemnification
due to their negligence. What are the legal obligations of the defendants?

HELD

Bonifacio Gutierrez’s obligation arises from culpa aquiliana. On the other hand, Saturnino Cortez’s and
his chauffeur Abelardo Velasco’s obligation rise from culpa contractual.

The youth Bonifacio was na incompetent chauffeur, that he was driving at an excessive rate of speed,
and that, on approaching the bridge and the truck, he lost his head and so contributed by his negligence
to the accident. The guaranty given by the father at the time the son was granted a license to operate
motor vehicles made the father responsible for the acts of his son. Based on these facts, pursuant to the
provisions of Art. 1903 of the Civil Code, the father alone and not the minor or the mother would be
liable for the damages caused by the minor. The liability of Saturnino Cortez, the owner of the truck, and
his chauffeur Abelardo Velasco rests on a different basis, namely, that of contract.

Chapter 2 – Nature and Effect of Obligations

Article 1163: The Roman Catholic Bishop of Jaro vs. Gregorio De La PeÑa G.R. No. L-6913
November 21, 1913

FACTS: In 1898 Fr. De la Peña assigned as trustee of the sum of P6,641, collected by him for the
charitable purposes he deposited in his personal account P19,000 in the Hongkong and Shanghai Bank at
Iloilo. During the war of the revolution, Father De la Peña was arrested by the military authorities as a
political prisoner. The arrest of Father De la Peña and the confiscation of the funds in the bank were the
result of the claim of the military authorities that he was an insurgent and that the funds deposited had
been collected by him is for revolutionary purposes. The money was taken from the bank by the military
authorities by virtue of such order, was confiscated and turned over to the Government.

ISSUES: Whether or not Father De la Peña is liable for the loss of the funds?

RULLING: No, he is not liable because there is no negligent act on the part of Fr. De la Peña. It was so
happened that during that time the money was taken from him by the U.S. military forces which is
unforeseen event. Although the Civil Code states that “a person obliged to give something is also bound
to preserve it with the diligence pertaining to a good father of a family”, it also provides, following the
principle of the Roman law that “no one shall be liable for events which could not be foreseen, or which
having been foreseen were inevitable, with the exception of the cases expressly mentioned in the law or
those in which the obligation so declares.”

Article 1164: Addison vs. Felix, 38 Phil 404 (August 3, 1918)

FACTS

Petitioner Addison sold four parcels of land to Defendant spouses Felix and Tioco located in LucenaCity.
Respondents paid P3,000.00 for the purchase price and promised to pay the remaining by installment.
The contract provides that the purchasers may rescind the contract within one year after the issuance of
title on their name.

The petitioner went to Lucena for the survey designaton and delivery of the land but only 2 parcels were
designated and 2/3 of it was in possession of a Juan Villafuerte.

The other parcels were not surveyed and designated by Addison.

Addison demanded from petitioner the payment of the first installment but the latter contends that
there was no delivery and as such, they are entitled to get back the 3K purchase price they gave upon
the execution of the contract.

ISSUE

WON there was a valid delivery.

HELD

The record shows that the plaintiff did not deliver the thing sold. With respect to two of the parcels of
land, he was not even able to show them to the purchaser; and as regards the other two, more than
two-thirds of their area was in the hostile and adverse possession of a third person.

It is true that the same article declares that the execution of a public instruments is equivalent to the
delivery of the thing which is the object of the contract, but, in order that this symbolic delivery may
produce the effect of tradition, it is necessary that the vendor shall have had such control over the thing
sold that, at the moment of the sale, its material delivery could have been made. It is not enough to
confer upon the purchaser the ownership and the right of possession. The thing sold must be placed in
his control. When there is no impediment whatever to prevent the thing sold passing into the tenancy of
the purchaser by the sole will of the vendor, symbolic delivery through the execution of a public
instrument is sufficient. But if there is an impediment, delivery cannot be deemed effected.

Article 1168: Perez vs CA G.R. No. 107737 (1999)

Facts:

Juan Perez et al is a usufructuary of a parcel of land. The usufructuaries entered into a contract leasing
the fishpond to Luis Keh . Paragraph 5 of the lease contract states that the lessee cannot sublease the
fishpond nor assign his rights to anyone.
Ming Cosim and Luis Crisostomo two persuaded private respondent to take over the operation of
Papaya Fishpond as petitioner Lee and his partner, petitioner Luis Keh, were allegedly losing money in its
operation. Private respondent having acceded to the proposal, he and petitioners Lee and Keh executed
a written agreement denominated as pakiao buwis whereby private respondent would take possession
of the Papaya Fishpond.

Issue:

Whether or not, Luis Keh is liable for breach of contract under Article 1168.

Ruling:

Article 1168 of the Civil Code provides that when an obligation consists in not doing and the obligor does
what has been forbidden him, it shall also be undone at his expense. The lease contract prohibited
petitioner Luis Keh, as lessee, from subleasing the fishpond. In entering into the agreement for pakiao-
buwis with private respondent, not to mention the apparent artifice that was his written agreement
with petitioner Lee on January 9, 1978, petitioner Keh did exactly what was prohibited of him under the
contract to sublease the fishpond to a third party.

That the agreement for pakiao-buwis was actually a sublease is borne out by the fact that private
respondent paid petitioners Luis Keh and Juan Perez, through petitioner Tansinsin the amount of annual
rental agreed upon in the lease contract between the usufructuaries and petitioner Keh. Petitioner Keh
led private respondent to unwittingly incur expenses to improve the operation of the fishpond. By
operation of law, therefore, petitioner Keh shall be liable to private respondent for the value of the
improvements he had made in the fishpond or for P486,562.65 with interest of six percent (6%) per
annum from the rendition of the decision of the trial court on September 6, 1989.

Article 1170: International Corporate Bank vs. Sps. Gueco G.R. No.141968 February 12, 2001

FACTS

Spouses Gueco obtained a loan from petitioner International Corporate Bank (now Union Bank of
Philippines) to purchase a car. Respondent spouses executed a promissory note in consideration, which
were payable in monthly installment and chattel mortgage over the car.

The spouses however, defaulted payment. The car was detained by the bank. When Dr. Gueco delivered
the manger’s check of P150,000, the car was not released because of his refusal to sign the Joint Motion
to Dismiss (JMD).

The bank insisted that the JMD is a standard operating procedure to effect a compromise and to
preclude future filing of claims or suits for damages. Gueco spouses filed an action against the bank for
fraud, failing to inform them regarding JMD during the meeting & for not releasing the car if they do not
sign the said motion.

ISSUE

Whether or not International Corporate Bank was guilty of fraud.

HELD
No. Fraud has been defined as the deliberate intention to cause damage or prejudice. It is the voluntary
execution of a wrongful act, or a willful omission, knowing and intending the effects which naturally and
necessarily arise from such act or omission. The fraud referred to in Article 1170 of the Civil Code is the
deliberate and intentional evasion of the normal fulfillment of obligation. The court fails to see how the
act of the petitioner bank in requiring the respondent to sign the joint motion to dismiss could
constitute as fraud.

The joint motion to dismiss cannot in any way have prejudiced Dr. Gueco. The motion to dismiss was in
fact also for the benefit of Dr. Gueco, as the case filed by petitioner against it before the lower court
would be dismissed with prejudice.

The joint motion to dismiss was but a natural consequence of the compromise agreement and simply
stated that Dr. Gueco had fully settled his obligation, hence, the dismissal of the case. Petitioner’s act of
requiring Dr. Gueco to sign the joint motion to dismiss cannot be said to be a deliberate attempt on the
part of petitioner to renege on the compromise agreement of the parties.

Article 1172: Cangco vs. Manila Road Company1181Parks vs Province of Tarlac GR. No. 12191, October
14, 1918

FACTS

Jose Cangco was an employee of Manila Railroad Company as clerk. He lived in San Mateo which is
located upon the line of the defendant railroad company. He used to travel by trade to the office located
in Manila for free. On January 21, 1915, on his way home by rail and when the train drew up to the
station in San Mateo, he rose from his seat, making his exit through the door. When he stepped off from
the train, one or both of his feet came in contact with a sack of watermelons causing him to slip off from
under him and he fell violently on the platform. He rolled and was drawn under the moving car. He was
badly crushed and lacerated. He was hospitalized which resulted to amputation of his hand. He filed the
civil suit for damages against defendant in CFI of Manila founding his action upon the negligence of the
employees of defendant in placing the watermelons upon the platform and in leaving them so placed as
to be a menace to the security of passengers alighting from the train. The trial court after having found
negligence on the part of defendant, adjudged saying that plaintiff failed to use due caution in alighting
from the coach and was therefore precluded from recovering, hence this appeal.

ISSUE

Is the negligence of the employees attributable to their employer whether the negligence is based on
contractual obligation or on torts?

HELD

YES. It cannot be doubted that the employees of defendant were guilty of negligence in piling these
sacks on the platform in the manner stated. It necessarily follows that the defendant company is liable
for the damage thereby occasioned unless recovery is barred by the plaintiff’s own contributory
negligence. It is to note that the foundation of the legal liability is the contract of carriage. However Art.
1903 relates only to culpa aquiliana and not to culpa contractual, as the Court cleared on the case of
Rakes v. Atlantic Gulf. It is not accurate to say that proof of diligence and care in the selection and
control of the servant relieves the master from liability fro the latter’s act. The fundamental distinction
between obligation of this character and those which arise from contract, rest upon the fact that in
cases of non-contractual obligations it is the wrongful or negligent act or omission itself which creates
the vinculum juris, whereas in contractual relations the vinculum exists independently of the breach of
the voluntary duty assumed by the parties when entering into the contractual relation. When the source
of obligation upon which plaintiff’s cause of action depends is a negligent act or omission, the burden of
proof rest upon the plaintiff to prove negligence. On the other hand, in contractual undertaking, proof
of the contract and of its nonperformance is suffient prima facie to warrant recovery. The negligence of
employee cannot be invoked to relieve the employer from liability as it will make juridical persons
completely immune from damages arising from breach of their contracts. Defendant was therefore
liable for the injury suffered by plaintiff, whether the breach of the duty were to be regarded as
constituting culpa aquiliana or contractual. As Manresa discussed, whether negligence occurs as an
incident in the course of the performance of a contractual undertaking or is itself the source of an extra-
contractual obligation, its essential characteristics are identical. There is always an act or omission
productive of damage due to carelessness or inattention on the part of the defendant. The contract of
defendant to transport plaintiff carried with it, by implication, the duty to carry him in safety and to
provide safe means of entering and leaving its trains. Contributory negligence on the part of petitioner
as invoked by defendant is untenable. In determining the question of contributory negligence in
performing such act- that is to say, whether the passenger acted prudently or recklessly- age, sex, and
physical condition of the passenger are circumstances necessarily affecting the safety of the passenger,
and should be considered. It is to be noted that the place was perfectly familiar to plaintiff as it was his
daily routine. Our conclusion is there is slightly underway characterized by imprudence and therefore
was not guilty of contributory negligence. The decision of the trial court is REVERSED.

Article 1175: Medel et. al. vs Court of Appeals 299 SCRA 481 (1998)

FACTS

Defendants obtained a loan from Plaintiff in the amount P50, 000.00, payable in 2 months and executed
a promissory note. Plaintiff gave only the amount of P47, 000.00 to the borrowers and retained P3,
000.00 as advance interest for 1 month at 6% per month.

Defendants obtained another loan from Defendant in the amount of P90, 000.00, payable in 2 months,
at 6% interest per month. They executed a promissory note to evidence the loan and received only P84,
000.00 out of the proceeds of the loan.

For the third time, Defendants secured from Plaintiff another loan in the amount of P300, 000.00,
maturing in 1 month, and secured by a real estate mortgage. They executed a promissory note in favor
of the Plaintiff. However, only the sum of P275, 000.00, was given to them out of the proceeds of the
loan.

Upon maturity of the three promissory notes, Defendants failed to pay the indebtedness.

Defendants consolidated all their previous unpaid loans totalling P440, 000.00, and sought from Plaintiff
another loan in the amount of P60, 000.00, bringing their indebtedness to a total of P50,000.00. They
executed another promissory note in favor of Plaintiff to pay the sum of P500, 000.00 with a 5.5%
interest per month plus 2% service charge per annum, with an additional amount of 1% per month as
penalty charges.
On maturity of the loan, the Defendants failed to pay the indebtedness which prompt the Plaintiffs to
file with the RTC a complaint for collection of the full amount of the loan including interests and other
charges.

Declaring that the due execution and genuineness of the four promissory notes has been duly proved,
the RTC ruled that although the Usury Law had been repealed, the interest charged on the loans was
unconscionable and “revolting to the conscience” and ordered the payment of the amount of the first 3
loans with a 12% interest per annum and 1% per month as penalty.

On appeal, Plaintiff-appellants argued that the promissory note, which consolidated all the unpaid loans
of the defendants, is the law that governs the parties.

The Court of Appeals ruled in favor of the Plaintiff-appellants on the ground that the Usury Law has
become legally inexistent with the promulgation by the Central Bank in 1982 of Circular No. 905, the
lender and the borrower could agree on any interest that may be charged on the loan, and ordered the
Defendants to pay the Plaintiffs the sum of P500,000, plus 5.5% per month interest and 2& service
charge per annum , and 1% per month as penalty charges.

Defendants filed the present case via petition for review on certiorari.

ISSUE

WON the stipulated 5.5% interest rate per month on the loan in the sum of P500, 000.00 is usurious.

HELD

No. A stipulated rate of interest at 5.5% per month on the P500, 000.00 loan is excessive, iniquitous,
unconscionable and exorbitant, but it cannot be considered “usurious” because Central Bank Circular
No. 905 has expressly removed the interest ceilings prescribed by the Usury Law and that the Usury Law
is now “legally inexistent.”

Jurisprudence provides that CB Circular did not repeal nor in a way amend the Usury Law but simply
suspended the latter’s effectivity (Security Bank and Trust Co vs RTC). Usury has been legally non-
existent in our country’s jurisdiction. Interest can now be charged as lender and borrower may agree
upon.

Hence, the decision of the Court of Appeals was reversed. The decision dated December 9, 1991, of the
Regional Trial Court of Bulacan, Branch 16, Malolos, Bulacan, in Civil Case No. 134-M-90, was revived
and affirmed.

Article 1178: Marcelino Galang, Guadalupe Galang vs. Court of Appeals, Ramon R. Buenaventura,
et.al. G.R. No. 80645 August 3, 1993

FACTS

On July 16, 1976, Ramon Buenaventura on his own behalf and as attorney-in-fact of Angeles, Corazon,
Amparo, and Maria Luisa, all surnamed Buenaventura, sold to Guadalupe Galang and Marcelino Galang
two (2) parcels of land situated in Tagaytay City. The agreement was embodied in a Deed of Sale which
stated the following:
“I, RAMON R. BUENAVENTURA, Filipino, of legal age, married, and residing at 2111 M. Adriatico, Malate,
Manila, in his own behalf and as attorney in fact of Angeles, Corazon, Amparo and Maria Luisa, all
surnamed Buenaventura as per the special powers of attorney already registered and annotated at the
back of the certificate of title, for and in consideration of the sum of One Hundred Ninety Two Thousand
Seven Hundred Ninety Five (P192,795.00) Pesos, Philippine Currency, hereby SELL, TRANSFER AND
CONVEY UNTO MARCELINO GALANG and GUADALUPE GALANG, Filipino, of legal age, spouses and
residents of 72 4th St., New Manila, Quezon City those parcels of land situated at Tagaytay City,
inherited by us from our parents and our exclusive paraphernal property, of which we are the absolute
owners xxx”

Under the following terms:

(a) 25% of the purchase price upon signing of this instrument;(b) 25% within three months, or upon
removal of the “encargado” from the premises, with the delivery of the owner’s duplicate certificate of
title;(c) 50% balance within one (1) year from date hereof upon which the title will be transferred to the
buyers but 12% interest per annum will be charged after said one year in the event full payment is not
made.

Petitioners (sps.) Marcelino and Guadalupe Galang, paid to the sellers the first 25% of the purchase price
as stated in the deed. Thereafter, they allegedly demanded from private respondents failed to do so
despite the willingness of petitioners to pay the second 25% of the purchase price. Consequently,
Marcelino and Guadalupe Galang filed on March 18, 1977 a complaint for specific performance with
damages.

They filed on July 21, 1978, a third-party complaint against the “encargado” for subrogation and
reimbursement in case of an adverse judgment against third-party plaintiff. Upon the “encargado’s”
motion, the complaint was dismissed on the ground that it did not state a cause of action for the
ejectment of the tenant — the “encargado.”

After trial, the lower court rendered a decision ordered the defendants to pay jointly and severally, the
plaintiffs P50,000.00 with interest at 12% per annum from July 16, 1976; P5,000.00 by way of nominal
damages; and P3,000.00 as attorney fees and the costs.

In rendering the decision, the trial court reasoned that:

There is no question that, because the defendants had not complied with their obligation to remove the
“encargado,” the plaintiffs, as injured parties, may choose between the fulfillment of the contract of sale
and its rescission, in accordance and (sic) Article 1191 of the Civil Code. They chose enforcement of the
contract which, however is legally impossible. The lands sold to the plaintiff are agricultural, planted to
coffee, among other plants, not only by the “encargado” but also by his deceased parents. The law
prohibits, under pain of damages, fine and imprisonment, and landlord from dispossessing his
agricultural tenant without the court’s approval and on grounds fixed by the law, not one of which is
shown to exist in respect defendants’ “encargado.” (Section 31 and 36, The Agricultural Land Reform
Code, RA 3844 as amended).

Impossible conditions, those contrary to good customs or public policy and those prohibited by law shall
annul the obligation which depends upon them. (Article 1183, Civil Code). Since the consummation of
the sale between the parties is dependent upon the ouster of an agricultural lessee, which cannot be
done because it is against good custom, public policy and the law, the sale is a nullity. . . .

Agreeing that the “encargado” was an agricultural tenant who could not be ejected without cause, the
Court of Appeals affirmed the decision.

In their petition, Marcelino and Guadalupe Galang argued that respondent Court erred in ordering; the
rescission instead of specific performance of the contract of sale on the ground that the ejectment of
the “encargado” -tenant was a legally impossible condition that prevented the fulfillment of the
contract. Contrary to the reason advanced by the Court of Appeals and the trial court, petitioners
averred that the removal of the “encargado” was not a condition precedent to the fulfillment of the
contract as paragraph two (2) thereof provides for an alternative period within which petitioners would
have to pay the second 25% of the purchase price and concomitantly, private respondents would deliver
the owner’s duplicate certificate of title. Thus, whether or not the “encargado” was removed, the
amount would still be due and private respondents would still have to deliver the duplicate title.

ISSUE

Was the removal of the “encargado” a condition precedent to the fulfillment of the contract of sale such
that finding that it was a legally impossible condition would entitle the buyers to the rescission of the
contract?

The trial court and the Court of Appeals based their decision on Art. 1183 of the Civil Code which
provides “Impossible conditions, those contrary to good customs or public policy and those prohibited
by law shall annul the obligation which depends upon them. . . .”

Both courts declared the “encargado” a tenant. This being the case, it follows that he may not be
removed from the subject land without just cause, as provided by Presidential Decree No. 1038. Since
the Galangs, then plaintiffs demanded the removal of the “encargado” which, being legally impossible,
could not be met, the contract of sale was rescinded by the courts.

Reviewing the terms of the Deed of Sale , it is clear that the parties had reached the stage of perfection
of the contract of sale, there being already “a meeting of the minds upon the thing which is the object of
the contract and upon the price,” and on the basis of which both parties had the personal right to
reciprocally demand from the other the fulfillment of their respective obligations. But contracts of sale
may either be absolute or conditional. One form of conditional sales, is what is now popularly termed as
a “Contract to Sell,” where ownership or title is retained until the fulfillment of a positive condition,
normally the payment of the purchase price in the manner agreed upon. The breach of that condition
can prevent the obligation to convey title from acquiring a binding force. Where the condition is
imposed, instead, upon the perfection of the contract, the failure of such condition would prevent such
perfection. What we have here is a contract to sell for it is the transfer of ownership, not the perfection
of the contract that was subjected to a condition. Ownership was not to vest in the buyers until full
payment of the purchase price and the transfer of the title to the buyers. Apart from full payment of the
purchase price, we find no other condition which would affect the obligations of the parties, i.e., to pay,
on the part of the buyer and to convey ownership, on the part of the seller.

The alleged condition precedent, the removal of the “encargado,” was simply an alternative period for
payment of the second 25% of the purchase price given by the seller to the buyer. Assuming that the
removal of the “encargado” could not be brought about, the buyers, petitioners herein, could have
nonetheless demanded the delivery of the owner’s duplicate certificate of title by paying the second
25% of the sale price within three months. In this case, the filing of the complaint for specific
performance of the seller’s obligation was the root of the errors committed first, by the trial court and
later, by the Court of Appeals. Both courts overlooked the obvious fact that only the time for paying the
second 25% of the purchase price was qualified and that the entire paragraph reads: “25% within three
months or upon removal of the “encargado” from the premises . . .” and not simply 25% upon removal
of the “encargado.”

SC discern no reversible error in the finding and conclusion of the trial court that the unnamed
“encargado” on the lands in question is actually a tenant or agricultural lessee. The bases of this
ineluctable conclusion are not hard to see. As succinctly pointed out by the court a quo, the “encargado”
is staying in his own existing house thereon, and subject agricultural land is planted to coffee and other
plants not only by the “encargado” but also his deceased parents. Indeed, if the “encargado’s” parents
were not tenants or agricultural lessees, the present “encargado” could not have continued occupying
and working thereon, without facing ejectment proceedings; considering that one of the landowners,
defendants-appellees here, is a lawyer himself. In fact, as can be gleaned from the decision under
scrutiny, defendants-appellees filed a third-party complaint against the “encargado” but they did not
pursue such a course of action because they did not have a clearance from the then Ministry, now the
Department of Agrarian Reform, to proceed against such “encargado.” Then, too, if the said
“encargado” did not have the status of a tenant or agricultural lessee entitled to protection under the
agrarian reform laws, he would not have been given the attention and importance as to be brought
before the court a quo twice, just for a possible amicable settlement, and he would not have had the
firmness to reject an offer for him to continue working half the area under controversy.

HELD

The petition is hereby GRANTED and the decision of the Court of Appeals is REVERSED and SET ASIDE.
Petitioners Marcelino and Guadalupe Galang are hereby ordered to pay the full 75% balance of the
purchase price (P144,596.25) within thirty (30) days from notice, with interest upon default. Private
respondents Ramon Buenaventura, Corazon Buenaventura and Maria Luisa Buenaventura are hereby
ordered to transfer the title to petitioners upon full payment of the purchase price.

There was no basis for rescinding the contract because the removal of the “encargado” was not a
condition precedent to the contract of sale. Rather, it was one of the alternative periods for the
payment of the second installment given by the seller himself to the buyers. Secondly, even granting
that it was indeed a condition precedent rendering necessary the determination of the legal status of
the “encargado,” the lower courts were rash in holding that the “encargado” was a tenant of the land in
question.

Specific performance by the parties of their respective obligations is proper. Accordingly, petitioners
Marcelino and Guadalupe Galang are ordered to pay private respondents the second 25% of the
purchase price. Considering, however, the time that has lapsed since the parties entered into the
contract, payment of the full balance, that is, 75% of the purchase price, P192,795.00 is in order.
However, the 12% interest per annum that was stipulated in paragraph 3 of the contract of sale should
not be assessed against petitioners. On the other hand, private respondents Ramon Buenaventura,
Angeles Buenaventura, Corazon Buenaventura, and Maria Luisa Buenaventura are obliged to deliver the
owner’s duplicate certificate of title and to transfer the title to the land in question upon payment of the
purchase price by petitioners.