General Milling Corporation vs. Ramos
FACTS:
Petitioner GMC entered into a Growers Contract with spouses Ramos. Under the
contract, GMC was to supply broiler chickens for the spouses. To guarantee full
compliance, the Contract was accompanied by a Deed of Real Estate Mortgage
over a piece of real property.
However, eventually, spouses Ramos, were unable to settle their account with GMC.
As a result, the property subject of the foreclosure was subsequently sold by public
auction to GMC.
Thereafter, spouses Ramos filed a complaint, contending that the extrajudicial
foreclosure sale was null and void on the grounds that when the property was
foreclosed, GMC did not notify respondents at all of the foreclosure
On the other hand, GMC argued that it repeatedly reminded Spouses Ramos of their
liabilities.
ISSUE:
W/N the extrajudicial foreclosure was valid
RULING
The RTC eventually ruled in favor of the respondents on the grounds that the action
of GMC in moving for the foreclosure of the spouses’ properties was premature,
because the latter’s obligation under their contract was not yet due.
CA sustained the decision of the trial court but anchored its ruling on a different
ground. Specifically, according to the CA, GMC did not "demand" but only
request spouses Ramos to go to the office of GMC to "discuss" the settlement of
their account.
The case was then elevated to the Supreme Court, which affirmed the decision of the
CA.
Santos Ventura Hocorma Foundation vs. Santos.
FACTS:
Petitioner and respondent were involved in several civil cases filed in different courts
in the Philippines. To end all their pending litigations, both parties executed a
Compromise Agreement, wherein the foundation shall pay Santos P14.5 Million.
However, after paying the initial P1.5 Million, there was delay on the part of
petitioner in paying the remaining balance of P13 million, which was supposed to be
paid within a period of not more than two (2) years from the execution of the
agreement. As a result, respondent filed a Complaint for Declaratory Relief and
Damages.
ISSUE:
W/N respondents has the right to damages based on the delay in the payment of the
obligation?
RULING:
Requisites of delay by the debtor:
(1) That the obligation be demandable and already liquidated;
(2) That the debtor delays performance; and
(3) That the creditor requires the performance judicially or extrajudicially
In the case at bar, the obligation was already due and demandable after the lapse
of the two-year period. Petitioner was also delayed in the performance of its
obligation.
Furthermore, the obligation is also liquidated because the debtor knows precisely
how much he is to pay and when he is to pay it.
Therefore, petitioner is liable for damages for the delay in the performance of its
obligation.
Solar Harvest, Inc. vs. Davao Corrugated Carton Corporation
FACTS:
Petitioner entered into an agreement with respondent for the purchase of corrugated
carton boxes. The problem arises when, according to petitioner, despite full payment
and repeated follow-ups, it did not receive any boxes. Meanwhile, according to
respondent, it had already completed production of the boxes and that petitioner
failed to pick up the boxes at the factory as agreed upon.
ISSUE:
Whether or not the respondent is in default.
HELD:
RTC: No, respondent is not in default since it was able to produce the ordered boxes
but petitioner failed to obtain possession thereof.
CA: Affirmed the RTC Decision. It also added that even assuming that the
agreement was for respondent to deliver the boxes, respondent would not be liable
for breach of contract as petitioner had not yet demanded from it the delivery of
the boxes.
SC: In reciprocal obligations, as in a contract of sale, the general rule is that the
fulfillment of the parties' respective obligations should be simultaneous. Hence, no
demand is generally necessary because, once a party fulfills his obligation and the
other party does not fulfill his, the latter automatically incurs in delay.
Also, in this case, the Complaint only alleged that petitioner made a "follow-up"
upon respondent, which, however, would not qualify as a demand for the fulfillment
of the obligation.
Without a previous demand for the fulfillment of the obligation, petitioner would not
have a cause of action for rescission against respondent as the latter would not yet be
considered in breach of its contractual obligation.
SSS v Moonwalk Development Housing Corp.
FACTS:
SSS filed a complaint against Moonwalk Development, alleging that it failed to
compute the 12% interest due on delayed payments on the loan of Moonwalk,
resulting to an unpaid and delayed balance on the part of the latter.
The trial court dismissed the complaint because the obligation was already
extinguished by the payment by Moonwalk of its indebtedness to SSS, and by the
latter's act of cancelling the real estate mortgages executed in its favor by defendant
Moonwalk.
The CA affirmed CFI, holding that Moonwalk's obligation was extinguished, and
there was no more need for the penal clause.
Issue:
WoN there was a basis for demanding the penal clause since the obligation has been
extinguished.
Held:
No, the Supreme Court rules that there is no basis for demanding the penal clause
since the obligation has been extinguished.
The obligation of Moonwalk was fully complied with, that is, the amount loaned
together with the 12% interest has been fully paid. Hence, there is no basis for
demanding the penal clause since the obligation has been extinguished.
SSS has waived the penal clause as it did not demand the same before the full
obligation was fully paid and extinguished. In fact, SSS has not lost anything under
the contract since it got back in full the amount loan as well as the interest thereof.
The same thing would have happened if the obligation was paid on time, for then the
penal clause, under the terms of the contract would not apply. Payment of the penalty
does not mean gain or loss of SSS since it is merely for the purpose of enforcing the
performance of the main obligation, which has been fully complied with and
extinguished. Hence, the penal clause has lost its raison d' entre.

Cruz vs Gruspe
FACTS:
The mini-bus owned and operated by Cruz collided with the car of Gruspe. To
answer for the incident, Cruz went to Gruspe's office, apologized for the incident,
and executed a Joint Affidavit of Undertaking promising jointly and severally to
replace the Gruspe's damaged car in 20 days of the same model and of at least the
same quality; or, alternatively, they would pay the cost of Gruspe's car amounting to
P350,000.00, with interest at 12% per month for any delayed payment after
November 15, 1999, until fully paid. When Cruz and Leonardo failed to comply with
their undertaking, Gruspe filed a complaint for collection of sum of money against
them.
Cruz and Leonardo denied Gruspe's allegation, claiming that Gruspe, a lawyer,
prepared the Joint Affidavit of Undertaking and forced them to affix their signatures
thereon, without explaining and informing them of its contents; Cruz affixed his
signature so that his mini bus could be released as it was his only means of income;
Leonardo, a barangay official, accompanied Cruz to Gruspe's office for the release of
the mini bus, but was also deceived into signing the Joint Affidavit of Undertaking.
Leonardo died during the pendency of the case and was substituted by his widow,
Esperanza. Meanwhile, Gruspe sold the wrecked car for P130,000.00.
ISSUE:
Whether or not the Joint Affidavit of Undertaking is a contract and thus a source of
an obligation.
HELD:
Contracts are obligatory no matter what their forms may be, whenever the essential
requisites for their validity are present. In determining whether a document is an
affidavit or a contract, the Court looks beyond the title of the document, since the
denomination or title given by the parties in their document is not conclusive of the
nature of its contents. In the construction or interpretation of an instrument, the
intention of the parties is primordial and is to be pursued. If the terms of the
document are clear and leave no doubt on the intention of the contracting parties, the
literal meaning of its stipulations shall control. If the words appear to be contrary to
the parties' evident intention, the latter shall prevail over the former. A simple
reading of the terms of the Joint Affidavit of Undertaking readily discloses that it
contains stipulations characteristic of a contract. It contained a stipulation where
Cruz and Leonardo promised to replace the damaged car of Gruspe, 20 days from
October 25, 1999 or up to November 15, 1999, of the same model and of at least the
same quality. In the event that they cannot replace the car within the same period,
they would pay the cost of Gruspe's car in the total amount of P350,000.00, with
interest at 12% per month for any delayed payment after November 15, 1999, until
fully paid. These, as read by the CA, are very simple terms that both Cruz and
Leonardo could easily understand. There is also no merit to the argument of vitiated
consent. An allegation of vitiated consent must be proven by preponderance of
evidence; Cruz and Leonardo failed to support their allegation.
Rivera vs Chua
FACTS:
The parties were friends of long standing having known each other since 1973. In
February 1995, Rivera obtained a loan from the Spouses Chua, in the tune of
P120,000.00 embodied in a promissory note with stipulations that failure on the part
of Rivera to pay the amount on December 31, 1995, he agrees to pay 5% interest
monthly from the date of default (January 1, 1996). Three years have passed from
the maturity date, when Rivera issued two (2) checks in favor of Chua as payment
for the loan, which, upon presentment, were dishonored for the reason “account
closed.” In their collection suit, Spouses Chua alleged that they have repeatedly
demanded payment from Rivera to no avail. In his Answer, Rivera claimed forgery
of the subject Promissory Note and denied his indebtedness thereunder. From the
MeTC to the CA, the monetary claim of Spouses Chua was sustained.
ISSUE:
Whether or not a demand from Sps. Chua is needed to make Rivera liable.
RULING:
No, a demand from Sps. Chua is not needed to make Rivera liable.
Demand is no longer necessary because the law is explicit that when the debtor fails
to pay upon maturity date, when the obligation is due and demandable, he therefore
incurs delay. Art. 1169 of the NCC states, “Those obliged to deliver or to do
something incur in delay from the time the obligee judicially or extrajudicially
demands from them the fulfillment of their obligation. However, the demand by the
creditor shall not be necessary in order that delay may exist: 1) When the obligation
or the law expressly so declare xxx.”
There are four instances when demand is not necessary to constitute the debtor in
default: (1) when there is an express stipulation to that effect; (2) where the law so
provides; (3) when the period is the controlling motive or the principal inducement
for the creation of the obligation; and (4) where demand would be useless.
In the first two paragraphs, it is not sufficient that the law or obligation fixes a date
for performance; it must further state expressly that after the period lapses, default
will commence. The clause in the Promissory Note containing the stipulation of
interest which expressly requires Rivera to pay 5% monthly interest from the date of
default until the entire obligation is fully paid. It is evident that the maturity of the
obligation on a date certain, December 31, 1995, will give rise to the obligation to
pay interest. The date of default under the Promissory Note is 1 January 1996, the
day following 31 December 1995, the due date of the obligation. On that date, Rivera
became liable for the stipulated interest which the Promissory Note says is
equivalent to 5% a month.
In sum, until 31 December 1995, demand was not necessary before Rivera could be
held liable for the principal amount of P120,000.00. Thereafter, on 1 January 1996,
upon default, Rivera became liable to pay the Spouses Chua damages, in the form of
stipulated interest.
Lorenzo Shipping Corp. vs. BJ Marthel Int’l.
FACTS:
Petitioner Lorenzo Shipping Corporation is a domestic corporation engaged in
coastwise shipping. It used to own the cargo vessel M/V Dadiangas Express.
Upon the other hand, respondent BJ Marthel International, Inc. is a business entity
engaged in trading, marketing, and selling of various industrial commodities. It is
also an importer and distributor of different brands of engines and spare parts.
From 1987 onwards, respondent supplied petitioner with spare parts for the latter's
marine engines. Sometime in 1989, petitioner asked respondent for a quotation for
various machine parts. Acceding to this request, respondent furnished petitioner with
a formal quotation. It was stipulated in the contract that DELIVERY is within 2
months after receipt of firm order. The TERMS is 25% upon delivery, balance
payable in 5 bi-monthly equal and Installment[s] not to exceed 90 days.
Petitioner thereafter issued to respondent Purchase Order. For the procurement of
one set of cylinder liner, valued at P477,000, to be used for M/V Dadiangas Express.
Instead of paying the 25% down payment for the first cylinder liner, petitioner issued
in favor of respondent ten postdated checks to be drawn against the former's account
with Allied Banking Corporation. The checks were supposed to represent the full
payment of the aforementioned cylinder liner.
Subsequently, petitioner issued Purchase Order dated 15 January 1990, for yet
another unit of cylinder liner. This purchase order stated the term of payment to be
"25% upon delivery, balance payable in 5 bi-monthly equal installment[s]. On 26
January 1990, respondent deposited petitioner's check that was postdated 18 January
1990, however, the same was dishonored by the drawee bank due to insufficiency of
funds. The remaining nine postdated checks were eventually returned by respondent
to petitioner.
However, the parties presented disparate accounts of what happened to the check
which was previously dishonored. Petitioner claimed that it replaced said check with
a good one, the proceeds of which were applied to its other obligation to respondent.
For its part, respondent insisted that it returned said postdated check to petitioner.
On 20 April 1990, Pajarillo delivered the two cylinder liners at petitioner's
warehouse in North Harbor, Manila. The sales invoices evidencing the delivery of
the cylinder liners both contain the notation "subject to verification" under which the
signature of Eric Go, petitioner's warehouseman, appeared.
Due to the failure of the parties to settle the matter, respondent filed an action for
sum of money and damages before the Regional Trial Court (RTC) of Makati City.
In its complaint, respondent (plaintiff below) alleged that despite its repeated oral
and written demands, petitioner obstinately refused to settle its obligations.
Respondent prayed that petitioner be ordered to pay for the value of the cylinder
liners plus accrued interest of P111,300 as of May 1991 and additional interest of
14% per annum to be reckoned from June 1991 until the full payment of the
principal; attorney's fees; costs of suits; exemplary damages; actual damages; and
compensatory damages.
In an Order dated 25 July 1991, the court a quo granted respondent's prayer for the
issuance of a preliminary attachment. On 09 August 1991, petitioner filed an Urgent
Ex-Parte Motion to Discharge Writ of Attachment attaching thereto a counter-bond
as required by the Rules of Court. On even date, the trial court issued an Order lifting
the levy on petitioner's properties and the garnishment of its bank accounts.
Petitioner afterwards filed its Answer alleging therein that time was of the essence in
the delivery of the cylinder liners and that the delivery on 20 April 1990 of said
items was late as respondent committed to deliver said items "within two (2) months
after receipt of firm order" from petitioner. Petitioner likewise sought counterclaims
for moral damages, exemplary damages, attorney's fees plus appearance fees, and
expenses of litigation.
Subsequently, respondent filed a Second Amended Complaint with Preliminary
Attachment dated 25 October 1991. The amendment introduced dealt solely with the
number of postdated checks issued by petitioner as full payment for the first cylinder
liner it ordered from respondent. Whereas in the first amended complaint, only nine
postdated checks were involved.
insufficiency of evidence. Respondent moved for the reconsideration of the trial
court's Decision but the motion was denied for lack of merit.
The respondent filed an appeal with the Court of Appeals which reversed and set
aside the Decision of the court. The appellate court brushed aside petitioner's claim
that time was of the essence in the contract of sale between the parties herein
considering the fact that a significant period of time had lapsed between respondent's
offer and the issuance by petitioner of its purchase orders. The dispositive portion of
the Decision of the appellate court states: WHEREFORE, the decision of the lower
court is REVERSED and SET ASIDE. The appellee is hereby ORDERED to pay the
appellant the amount of P954,000.00, and accrued interest computed at 14% per
annum reckoned from May, 1991.
The Court of Appeals also held that respondent could not have incurred delay in the
delivery of cylinder liners as no demand, judicial or extrajudicial, was made by
respondent upon petitioner in contravention of the express provision of Article 1169
of the Civil Code which provides: Those obliged to deliver or to do something incur
in delay from the time the obligee judicially or extrajudicially demands from them
the fulfillment of their obligation.
On 22 May 2000, petitioner filed a motion for reconsideration of the Decision of the
Court of Appeals but this was denied through the resolution of 06 October 2000.
WHEREFORE, premises considered, the instant Petition for Review on Certiorari is
DENIED. The Decision of the Court of Appeals, dated 28 April 2000, and its
Resolution, dated 06 October 2000, are hereby AFFIRMED. No costs. SO
ORDERED.

Issue:

W/N significant the period of time which lapsed in the contract causing the delay in
the delivery of the cylinder liners is essential in the decision of the case at bar?

Held:

After trial, the court a quo dismissed the action, the decretal portion of the Decision
stating: WHEREFORE, the complaint is hereby dismissed, with costs against the
plaintiff, which is ordered to pay P50,000.00 to the defendant as and by way of
attorney's fees.

The trial court held respondent bound to the quotation it submitted to petitioner
particularly with respect to the terms of payment and delivery of the cylinder liners.
It also declared that respondent had agreed to the cancellation of the contract of sale
when it returned the postdated checks issued by petitioner. Respondent's
counterclaims for moral, exemplary, and compensatory damages were dismissed for