Contract To Sell Is Not Rescissible

In Cordero, et al. v. F.S. Management & Dev. Corp., G.R. No. 167213, October 31, 2006, the contract
states that “title will be transferred by the owner to the buyer upon complete payment of the purchase
price. For failure to pay, an action for rescission was filed. Is the action proper? Explain.

 Held: No. Under a contract to sell, the seller retains title to the thing to be sold until the
purchaser fully pays the agreed purchase price. The full payment is a positive suspensive
condition, the non-fulfillment of which is not a breach of contract but merely an event that
prevents the seller from conveying title to the purchaser. The non-payment of the purchase
price renders the contract to sell ineffective and without force and effect. (Ayala Life Assurance,
Inc. v. Ray Burton Dev. Corp., G.R. No. 163075, January 23, 2006, 479 SCRA 462).     

            Since the obligation of seller did not arise because of the failure of buyer to fully pay the
purchase price, Article 1191 of the Civil Code would have no application, where rescission is not
available.

             Rayos v. Court of Appeals, G.R. No. 135528, July 14, 2004, 434 SCRA 365 explained the
rule thus:

             “Construing the contracts together, it is evidence that the parties executed a

contract to sell and not a contract of sale. The petitioner retained ownership without
further remedies by the respondents until the payment of the purchase price of the
property in full. Such payment is a positive suspensive condition, failure of which
is not really a breach, serious or otherwise, but an event that prevents the
obligations of the petitioner to convey title from arising, in accordance with
Article 1184 of the Civil Code. x x x
             The non-fulfillment by the respondent of his obligation to pay, which is a
suspensive condition to the obligation of the petitioners to sell and deliver the
title to the property, rendered the contract to sell ineffective and without force
and effect. The parties stand as if the conditional obligation had never existed. Article
1191 of the New Civil Code will not apply because it presupposes an obligation
already extant. There can be no rescission of an obligation that is still non-
existing, the suspensive condition not having happened.”
             The subject contract to sell clearly states that “title will be transferred by the owner
(petitioners) to the buyer (respondent) upon complete payment of the agreed purchase price.” Since
respondent failed to fully pay the purchase price, petitioners’ obligation to convey title to the
properties did not arise. While rescission does not apply in this case, the seller may nevertheless
cancel the contract to sell, their obligation not having arisen. This brings us to Republic Ac No. 6552
(THE REALTY INSTALLMENT BUYER PROTECTION ACT). In Ramos v. Heruela, G.R. No. 145330,
October 14, 2005, 473 SCRA 79, it was ruled:
              “Articles 1191 and 1592 of the Civil Code are applicable to contracts of sale. In
contracts to sell, RA 6552 applies. In Rillo v. Court of Appeals, the Court declared:
             x x x Known as the Maceda Law, R.A. No. 6552 recognizes in
conditional sales of all kinds of real estate (industrial, commercial,
residential) the right of the seller to cancel the contract upon non-
payment of an installment by the buyer, which is simply an event that
prevents the obligation of the vendor to convey title from acquiring
binding force. It also provides the right of the buyer on installments in
case he defaults in the payment of succeeding installments x x x.” (G.R.
No. 125347, June 19, 1992, 274 SCRA 467).
             The properties subject of the contract having been intended for commercial, and not for
residential, purposes, petitioners are entitled to retain the payments already made by the buyer. RA
6552 expressly recognizes the vendor’s right to cancel contracts to sell on installment basis industrial
and commercial properties with full retention of previous payments. But even assuming that the
properties were not intended for commercial or industrial purpose, since respondent paid less than
two years of installments, it is not entitled to any refund.

NO INTEREST IF THERE IS NO
WRITTEN AGREEMENT TO PAY IT;
EXCEPTION
Liability For Interest Even Without Agreement
Is a person liable for interest even if there is no agreement? No as a rule, because no interest shall be due
unless it has been expressly stipulated in writing. (Art. 1956, NCC).

             Be that as it may, while there can be no stipulated interest, there can be legal interest pursuant to Article 2209 of
the Civil Code. It is well-settled:

             When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan
or forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e.,
from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil
Code. (Eusebio-Calderon v. People, G.R. No. 158495, October 21, 2004, 441 SCRA 137; Eastern
 Shipping Lines, Inc. v. CA, G.R. No. 97412, July 12, 1994, 234 SCRA 78; Garcia v. Thio, G.R. No.
154878, March 16, 2007).
             Hence, the debtor is liable for the payment of legal interest per annum to be computed from the date when she
received the demand letter. From the finality of the decision until it is fully paid, the amount due shall earn interest at
12% per annum, the interim period being deemed equivalent to a forbearance of credit. (Cabrera v. People, G.R.
150618, July 24, 2003, 407 SCRA 247; Garcia v. Rica Marie Thio, G.R. No. 154878, March 16, 2007).

 On the payment of interest, the 12% rate is applied only when the obligation breached consists in the payment
of a sum of money, i.e., forbearance of money, in the absence of a stipulation. Otherwise the applicable rate is 6% per
annum. Upon the finality of this ruling, the rate of interest shall be 12% per annum for the entire judgment, until its
satisfaction. (United Planters Sugar Milling, Inc. v. CA, et al., G.R. No. 126890, November 28, 2006).

REQUISITES OF ESTOPPEL IN PAIS

Category: Sales

Requisites Of Estoppel In Pais

The essential elements of estoppel in pais. It said that the essential elements of estoppel in pais are considered in relation to the party
to be estopped, and to the party invoking the estoppel in his favor. For the party to be estopped, such party (1) commits conduct
amounting to false representation or concealment of material facts or at least calculated to convey the impression that the facts are
inconsistent with those which the party subsequently attempts to assert; (2) has the intent, or at least expectation that his conduct
shall at least influence the other party; and (3) has knowledge, actual or constructive, of the real facts. On the party claiming the
estoppel, such party (1) has lack of knowledge and of the means of knowledge of the truth on the facts in question; ((2) has relied, in
good faith, on the conduct or statements of the party to be estopped; (3) has acted or refrained from acting based on such conduct or
statements as to change the position or status of the party claiming the estoppel, to his injury, detriment or prejudice. (PNB vs. CA,
308 SCRA 229; Kalalo vs. Luz, 34 SCRA 337; PBC vs. CA, 289 SCRA 178; Republic Glass Corp., et al., vs. Qua, G.R. No.
144413, July 30, 2004).

WHAT IS THE DIFFERENCE

BETWEEN LACHES AND
PRESCRIPTION?
Category: Obligations and Contracts
In the case of Sps. Aboitiz v. Sps. Po (G.R. No. 208450 and 208497, June 5, 2017), the Supreme Court held that:
  

"There is laches when a party was negligent or has failed "to assert a right within a reasonable time," thus giving rise to the
presumption that he or she has abandoned it. Laches has set in when it is already inequitable or unfair to allow the party to assert the
right. The elements of laches were enumerated in Ignacio v. Basilio:

 
There is laches when: (1) the conduct of the defendant or one under whom he claims, gave rise to the situation complained of; (2)
there was delay in asserting a right after knowledge of the defendant's conduct and after an opportunity to sue; (3) defendant had no
knowledge or notice that the complainant would assert his right; (4) there is injury or prejudice to the defendant in the event relief is
accorded to the complainant.
 
"Laches is different from prescription." Prescription deals with delay itself and thus is an issue of how much time has passed. The
time period when prescription is deemed to have set in is fixed by law. Laches, on the other hand, concerns itself with the effect of
delay and not the period of time that has lapsed. It asks the question whether the delay has changed "the condition of the property or
the relation of the parties" such that it is no longer equitable to insist on the original right.  In Nielson & Co., Inc. v. Lepanto
Consolidated Mining Co. (125 Phil. 204 (1966) [Per J. Zaldivar, En Banc]):

 
Appellee is correct in its contention that the defense of laches applies independently of prescription. Laches is different from the
statute of limitations. Prescription is concerned with the fact of delay. Whereas laches is concerned with the effect of delay.
Prescription is a matter of time; laches is principally a question of inequity of permitting a claim to be enforced, this inequity being
founded on some change in the condition of the property or the relation of the parties. Prescription is statutory; laches is not. Laches
applies in equity, whereas prescription applies at law. Prescription is based on fixed time, Laches is not.
 
The defense of laches is based on equity. It is not based on the title of the party invoking it, but on the right holder's "long inaction or
inexcusable neglect" to assert his claim. (Citations omitted)

When may the court fix the period?

1. If the obligation does not fix a period, but from its nature and circumstances it can be inferred that a period
was intended by the parties

2. If the duration of the period depends upon the will of the debtor

3. In case of reciprocal obligations, when there is a just cause for fixing the period

4. If the debtor binds himself when his means permit him to do so

When may a debtor lose his right to make use of the period?
 

1. Insolvency of the debtor, unless security is provided

2. Did not deliver security promised

3. Impaired security through his own acts or through fortuitous event, unless he gives a new security equally
satisfactory (if impairment is without the fault of DR, he shall retain the right)

4. Violates undertaking in consideration of extension of period

5. Debtor attempts to abscond (Art. 1198, NCC)

What are the requisites of a fortuitous event?

 

1. Cause is independent of the will of the debtor;

2. The event is unforeseeable or unavoidable;

3. Occurrence renders it absolutely impossible for the debtor to fulfill his obligation in a normal manner;
impossibility must be absolute not partial, otherwise not force majeure; and

4. Debtor is free from any participation in the aggravation of the injury to the creditor.

Note: The fortuitous event must not only be the proximate cause but it must also be the only and sole cause.
Contributory negligence of the debtor renders him liable despite the fortuitous event. (Pineda, Obligations and
Contracts, 2000 ed, p. 62)

Is there liability for loss due to fortuitous event?

 

General Rule:

There is no liability for loss in case of fortuitous event.

Exceptions:

1. Law

2. Nature of the obligation requires the assumption of risk

3. Stipulation

4. The debtor is guilty of dolo, malice or bad faith, has Promised the same thing to two or more persons who
does not have the same interest

5. The debtor Contributed to the loss (Tan v. Inchausti & Co., G.R. No. L-6472, Mar. 7, 1912)

6. The possessor is in Bad faith (Art. 552)

7. The obligor is Guilty of fraud, negligence or delay or if he contravened the tenor of the obligation (Juan
Nakpil v. United Construction Co., Inc. v. CA, G.R. No. L-47851, Apr. 15, 1988)

When does delay or default arise?

 

Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extra-
judicially demands from them the fulfilment of their obligation. In reciprocal obligations, neither party incurs in
delay if the other does not comply in a proper manner with what is incumbent upon him. From the moment one
of the parties fulfills his obligations, delay by the other begins. (Art. 1169, NCC)

What are the requisites of delay?

 

1. Obligation must be due, demandable and liquidated;

2. Debtor fails to perform his positive obligation on the date agreed upon;

3. A judicial or extra-‐judicial demand made by the creditor upon the debtor to fulfill, perform or comply with
his obligation; and

4. Failure of the debtor to comply with such demand. Note: In reciprocal obligations, the moment one party is
ready to comply with his obligation, delay by the other begins. There is no need for demand from either party.

JOINT OR SOLIDARY CHARACTER

OF AN OBLIGATION
Category: Obligations and Contracts

What is the rule as regards the joint or solidary character of an

obligation?
 

General Rule:

When two or more creditors or two or more debtors concur in one and the same obligation, the presumption is that the obligation is
joint.

Exceptions:

The obligation shall be solidary when:

1. Expressly stipulated that there is solidarity;

2. Law requires solidarity;

3. Nature of the obligation requires solidarity;

4. Charge or condition is imposed upon heirs or legatees and the will expressly makes the charge or condition in solidum (Manresa);
or
5. solidary responsibility is imputed by a final Judgment upon several defendants.(Gutierrez v. Gutierrez, 56 Phil 177)

FULFILMENT OF A RESOLUTORY
CONDITION
Category: Obligations and Contracts

What are the effects of the fulfilment of a resolutory condition?

 

1. Real obligations:

a. obligation is extinguished

b. Parties shall return to each other what they have received.

2. Personal obligations-the court determines the retroactive effect of the condition fulfilled.

FULFILLMENT OF A SUSPENSIVE
CONDITION
Category: Obligations and Contracts

What are the effects of the fulfillment of a suspensive condition?

 

1. Real obligations:

General Rule:

Effects retroact to the day of constitution of the obligation.

Exception:

No retroactivity as to;

a. fruits

b. interests

Exception to the exception:

There may be retroactivity as to the fruits and interests in unilateral obligations if such intention appears

2. Personal obligations

-the court determines the retroactive effect of the condition fulfilled.

SOLIDARY OBLIGATION
Category: Obligations and Contracts

When there is solidarity in an obligation

The Undertaking or contract to secure a loan agreement uses the word “sureties” althroughout the document in describing the parties.
It is further contended that the principal objective of the parties in executing the Undertaking cannot be attained unless they are
solidarily liable “because the total loan obligation can not be paid or settled to free or release the Obligors if one or any of the
Sureties default from their obligation in the Undertaking.”

The contention is not correct. In case there is a concurrence of two or more creditors or of two or more debtors in one and the same
obligation, Article 1207 of the Civil Code states that among them, there is a solidary liability only when the obligation expressly so
states, or when the law or the nature of the obligation requires solidarity. Article 1210 supplies further caution against the broad
interpretation of solidarity by providing: “The indivisibility of an obligation does not necessarily give rise to solidarity. Nor does
solidarity of itself imply indivisibility.”

These Civil Code provisions establish that in case of concurrence of two or more creditors or of two or more debtors in one and the
same obligation, and in the absence of express and indubitable terms characterizing the obligation as solidary, the presumption is
that the obligation is only joint. It thus becomes incumbent upon the party alleging that the obligation is indeed solidary in character
to prove such fact with a preponderance of evidence.

The Undertaking does not contain any express stipulation that the parties agreed “to bind themselves jointly and severally” in their
obligations, or any such terms to that effect. hence, such obligation established in the Undertaking is presumed only to be joint.
(Escaño, et al. v. Ortigas, Jr., G.R. No. 151953, June 29, 2007, Tinga, J).

DISTINCTION BETWEEN A JOINT

AND SEVERAL DEBTOR AND A
SURETY
Category: Obligations and Contracts
 Distinction Between A Joint And Several Debtor And A Surety
In the case of joint and several debtors, Article 1217 makes plain that the solidary debtor who effected the payment to the creditor
“may claim from his co-debtors only the share which corresponds to each, with the interest for the payment already made.” Such
solidary debtor will not be able to recover from the co-debtors the full amount already paid to the creditor, because the right to
recovery extends only to the proportional share of the other co-debtors, and not as to the particular proportional share of the solidary
debtor who already paid. In contrast, even as the surety is solidarily bound with the principal debtor to the creditor, the surety who
does pay the creditor has the right to recover the full amount paid, and not just any proportional share, from the principal debtor or
debtors. Such right to full reimbursement falls within the other rights, actions and benefits which pertain to the surety by reason of
the subsidiary obligation assumed by the surety. (Escaño, et al. v. Ortigas, Jr., G.R. No. 151953, June 29, 2007, Tinga, J).

Article 2047 itself specifically calls for the application of the provisions on solidary obligations to suretyship contracts. Article 1217
of the Civil Code thus comes into play, recognizing the right of reimbursement from a co-debtor (the principal debtor, in case of
suretyship) in favor of the one who paid (i.e., the surety). However, a significant distinction still lies between a joint and several
debtor, on one hand, and a surety on the other. Solidarity signifies that the creditor can compel any one of the joint and several
debtors or the surety alone to answer for the entirety of the principal debt. The difference lies in the respective faculties of the joint
and several debtor and the surety to seek reimbursement for the sums they paid out to the creditor.

A guarantor who binds himself in solidum with the principal debtor under the provisions of the second paragraph does not become a
solidary co-debtor to all intents and purposes. There is a difference between a solidary co-debtor and a fiador in solidum (surety).
The latter, outside of the liability he assumed to pay the debt before the property of the principal debtor has been exhausted, retains
all the other rights, actions and benefits which pertain to him by reason of the fiansa; while a solidary so-debtor has no other rights
than those bestowed upon him in Section 4, Chapter 3, Title I, Book IV of the Civil Code.

The second paragraph of [Article 2047] is practically equivalent to the contract of suretyship. The civil law suretyship is,
accordingly, nearly synonymous with the common law guaranty; and the civil law relationship existing between the co-debtors liable
in solidum is similar to the common law suretyship. (Tolentino, Civil Code of the Phils. (1992 ed.).

Death Not An Escape To Liability

Death is not a defense that he or his estate can set up to wipe out the obligations under the performance bond.
Consequently, petitioner as surety cannot use his death to escape its monetary obligation under its performance
bond. (Stronghold Insurance Company, Inc. vs. Republic – Asahi Glass Corp., G.R. No. 147561, June 22,
2006).

OBLIGATIONS AND CONTRACTS-

FORTUITOUS EVENT, ROBBERY
Category: Obligations and Contracts

OBLIGATIONS AND CONTRACTS- FORTUITOUS EVENT, 

Robbery
Robbery per se is not a fortuitous event.
In Sicam, et al. v. Jorge, et al., G.R. No. 159617, August 8, 2007, Lulu Jorge pawned several pieces of jewelry with Agencia de R.C.
Sicam to secure a loan in the amount of P59,500.00. It was alleged that two armed men entered the pawnshop and took away
whatever cash and jewelry found inside the pawnshop vault. It was reported to the police. She sued for damages but Sicam
interposed the defense of fortuitous event, alleging that there was robbery. The SC brushed aside the contention and said:

Robbery per se, just like carnapping, is not a fortuitous event. It does not foreclose the possibility of negligence on his part.

In a case similarly situated, it was ruled that:

“It is not a defense for a repaid shop of motor vehicles to escape liability simply because the damage or loss of a thing lawfully
placed in its possession was due to carnapping. Carnapping per se cannot be considered as a fortuitous event. The fact that a thing
was unlawfully and forcefully taken from another’s rightful possession, as in cases of carnapping, does not automatically give rise to
a fortuitous event. To be considered as such, carnapping entails more than the mere forceful taking of another’s property. It must be
proved and established that the event was an act of God or was done solely by third parties and that neither the claimant nor the
person alleged to be negligent has any participation. In accordance with the Rules of Evidence, the burden of proving that the loss
was due to a fortuitous event rests on him who invokes it – which in this case is the private respondent. However, other than the
police report of the alleged carnapping incident, no other evidence was presented by private respondent to the effect that the incident
was not due to its fault. A police report of an alleged crime, to which only private respondent is privy, does not suffice to establish
the carnapping. Neither does it prove that there was no fault on the party of private respondent notwithstanding the parties’
agreement at the pre-trial that the car was carnapped. Carnapping does not foreclose the possibility of fault or negligence on the part
of private respondent. (Co. v. CA, 353 Phil. 305 (1998); Sicam, et al. v. Jorge, et al., G.R. No. 159617, August 8, 2007).

In another case, it was held that to be relieved from civil liability of returning the pendant under Article 1174 of the Civil Code, it
would only be sufficient that the unforeseen event, the robbery, took place without any concurrent fault on the debtor’s part, and this
can be done by preponderance of evidence; that o be free from liability for reason of fortuitous event, the debtor must, in addition to
the case itself, be free from any concurrent or contributory fault or negligence. (Sicam, et al. v. Jorge, et al., supra.).