Obligations (18 34)

7/18/2019 Obligations (18 34)

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USURIOUS TRANSACTIONS

Solidbank Corp. v. Permanent Homes, Inc.

G. R. No. 17192, !"l# 2$, 2%1%

Permanent Homes, Inc. (PHI/Permament) entered into a loan agreement with SolidbankCorp. (Solidbank) to finance the former’s proect, !"#ena $ida %ownhomes.& %he loan

was for total amo#nt of P' million. f the entire loan, P* million is a time loan for aterm of #p to three h#ndred si+t (-') das, with interest thereon at preailing marketrates, and s#bect to monthl repricing. %he remaining P million was aailable for domestic bills p#rchase. %he loan was sec#red thro#gh a 0eal 1state 2ortgage, initiall,oer three of the townho#se #nits from the proect b#t the same was increased to -'townho#ses b the time the complaint was filed. f the ' million aailable to PHI, itaailed of a total of 3.* million pesos, coered b three (-) promissor notes. %he threepromissor notes between Solidbank and Permanent all contain the followingproisions4

*.5e/I irreocabl a#thori6e Solidbank to increase or decrease at an timethe interest rate agreed in this 7ote or 8oan on the basis of, among

others, preailing rates in the local or international capital markets. 9or this p#rpose, 5e/I a#thori6e Solidbank to debit an deposit or placementacco#nt with Solidbank belonging to an one of #s. %he ad#stment of theinterest rate shall be effectie from the date indicated in the written noticesent to #s b the bank, or if no date is indicated, from the time the noticewas sent.

'. Sho#ld 5e/I disagree to the interest rate ad#stment, 5e/I shall prepaall amo#nts d#e #nder this 7ote or 8oan within thirt (-) das from thereceipt b anone of #s of the written notice. therwise, 5e/I shall bedeemed to hae gien o#r consent to the interest rate ad#stment.

%here were seeral instances that the interest rates were increased. PHI,

contending that the increase was #nilateral and arbitrar filed an action with the 0%C to

) ann#l the increases on the interest rate, :) to fi+ the interest rate at the applicable

rate, and -) for the co#rt to order Solidbank to render an acco#nting in order for the

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amo#nt of ref#nd b the latter to PHI to be determined. %he 0%C decided in faor of

Solidbank. %he C; set aside the 0%C’s r#ling. Hence, this petition.

ISSUE:

Whether the Honorable Court of Appeals was correct in ruling that theincreases in the interest rates on PHI’s loans are void for having been unilaterally

imposed without basis.

7o. %he irt#al repeal of the <s#r 8aw is within the range of #dicial notice which

co#rts are bo#nd to take into acco#nt. ;ltho#gh interest rates are no longer s#bect to a

ceiling, the lender still does not hae an #nbridled license to impose increased interest

rates. %he lender and the borrower sho#ld agree on the imposed rate, and s#ch

imposed rate sho#ld be in writing. %he stip#lations on interest rate repricing are alidbeca#se () the parties m#t#all agreed on said stip#lations= (:) repricing takes effect

onl #pon Solidbank’s written notice to Permanent of the new interest rate= and (-)

Permanent has the option to prepa its loan if Permanent and Solidbank do not agree

on the new interest rate. %he phrases !irreocabl a#thori6e,& !at an time&

and !ad#stment of the interest rate shall be effectie from the date indicated in the

written notice sent to #s b the bank, or if no date is indicated, from the time the notice

was sent,& emphasi6e that Permanent sho#ld receie a written notice from Solidbank as

a condition for the ad#stment of the interest rates.

In order that obligations arising from contracts ma hae the force of lawbetween the parties, there m#st be m#t#alit between the parties based on their essential e>#alit. ; contract containing a condition which makes its f#lfillmentdependent e+cl#siel #pon the #ncontrolled will of one of the contracting parties isoid. %here was no showing that either Solidbank or Permanent coerced each other toenter into the loan agreements. %he terms of the mnib#s 8ine ;greement and thepromissor notes were m#t#all and freel agreed #pon b the parties.

2oreoer, Solidbank’s range of lending rates were consistent with !preailingrates in the local or international capital markets& as the were able to s#fficientl proe.

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&illan"eva v. Co"rt o' (ppeals

G. R. No. 1)$*$$, ("+"st 22, 2%11

Petitioners applied for separate loans amo#nting to P,. and

P:*,., which were granted b herein respondent Proident 0#ral "ank of Sta.

Cr#6, 8ag#na, Inc. (respondent "ank), sec#red b two promissor notes and twoseparate 0eal 1state mortgages oer some parcel of lands in 8ag#na. 0espondent

"ank moed to foreclose the mortgages e+tra#diciall b#t it s#bse>#entl reapplied for

#dicial foreclos#re. Petitioners? mortgage debt rose to P@-,3'*.-*, pl#s interests,

charges and e+penses. Petitioners then wrote a letterAre>#est addressed to the fficerA

inACharge of the ffice of the Clerk of Co#rt of the 0%C, Santa Cr#6, 8ag#na

>#estioning the amo#nt of its o#tstanding obligations to respondent "ank and

re>#esting that the p#blic a#ction sched#led on ;#g#st :*, : be s#spended #ntil

after its obection to the amo#nt being so#ght b respondent "ank is resoled b the

co#rt b#t the same was denied. ;ggrieed, petitioners filed, on ;#g#st :, :, a

Petition for Beclarator 0elief, ;cco#nting and Bamages praing that the stip#latedinterests, charges and e+penses on its loans be declared n#ll and oid for being

contrar to law, morals, good c#stoms, p#blic order or p#blic polic as the are

e+orbitant, #s#rio#s, ini>#ito#s and #nconscionable. %he 0%C dismissed the petition on

the gro#nd of res #dicata, giing credence to respondent "ank’s claim that the iss#es

raised b petitioners hae alread been decided in a prior case. %he C; affirmed the

0%C. Hence, this petition.

ISSUES: 1Whether the issue on the alleged e!istence of e!orbitant charges made

by respondent ban" has already been ruled in the previous case and is thus barred

by res #udicata. $ Whether $%& interest rate and '& penalty charge per annum is

e!orbitant

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) es. In the instant case, the ca#se of action in both Ciil Case 7os. SCA-3:: and 3-:

is the act of respondent "ank in imposing what petitioners alleged as e+orbitant,

#nconscionable and #s#rio#s interest rates, penalties and other charges. %here is, th#s,

no do#bt that the same eidence is re>#ired to establish the ca#se of action in both of

these cases. In fact, the iss#es (whether or not the interest rates, penalties and charges

imposed b respondent "ank are #s#rio#s and #nconscionable) and the reliefs so#ght

(red#ction of the said interest rates, penalties and s#rcharges to an amo#nt not

e+ceeding :D per ann#m) in both cases are essentiall the same. 7either is the Co#rt

pers#aded b petitioners? contention that, in an case, the Co#rt sho#ld not appl the

principle of res #udicata beca#se to do so wo#ld be tantamo#nt to allowing respondent

"ank to #n#stifiabl and illegall enrich itself at the e+pense of petitioners b imposing

interests, penalties and other charges beond what the law and e>#it allows.

It is tr#e that res #udicata is to be disregarded if its rigid application wo#ld inole

the sacrifice of #stice to technicalit. Howeer, the present case does not fall #nder this

e+ception.

:) 7o. In (pouses )acarias *acolor and Catherine *acolor v. *anco +ilipino (avings and

,ortgage *an"- agupan City *ranch- this Co#rt held that the interest rate of :3D per

annum on a loan ofP:33,., agreed #pon b the parties, ma not be considered as

#nconscionable and e+cessie. ;s s#ch, the Co#rt r#led that the borrowers cannot

renege on their obligation to compl with what is inc#mbent #pon them #nder the

contract of loan as the said contract is the law between the parties and the are bo#ndb its stip#lations. ;lso, in /arcia v. Court of Appeals, this Co#rt s#stained the

agreement of the parties to a :3D per annum interest on an PE,'3F,:*. loan finding

the same to be reasonable and clearl eidenced b the amended credit line agreement

entered into b the parties as well as two promissor notes e+ec#ted b the borrower in

faor of the lender. "ased on the aboe #rispr#dence, the Co#rt finds that the :3D per

annum interest rate, proided for in the s#bect mortgage contracts for a loan

of P::*,., ma not be considered #nconscionable. 2oreoer, considering that the

mortgage agreement was freel entered into b both parties, the same is the law

between them and the are bo#nd to compl with the proisions contained therein.

;s to the penalt charges, the Co#rt also r#led that the same is alid. Petitioners

bo#nd themseles to pa the stip#lated penalt charge of 'D per ann#m !of the

principal amo#nt of loan as penalt for ine+c#sable neglect to pa an amo#nt of tGhe

loan when d#e.& Since petitioners failed to present eidence that their fail#re to perform

their obligation was d#e to either force ma#eure or the acts of respondent "ank or to an

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#stifiable or e+c#sable ca#se, the are obliged to pa the penalt charge as agreed

#pon.

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RG Ind"stries, Inc. v. -nited Paci'ic Capital Corporation

G. R. No. 19*71, !"ne 27, 2%12

0espondent, in the b#siness of lending, granted a thirt million peso shortAterm

credit facilit in faor of the petitioner. %he loan amo#nt was so#rced from indiid#al

f#nders on the basis of a directAmatch facilit for which a series of promissor noteswere iss#ed b the petitioner for the pament of the loan. %he petitioner failed to satisf

the said promissor notes as the fell d#e and the loan had to be ass#med in f#ll b the

respondent which thereb stepped into the shoes of the indiid#al f#nders.

Conse>#entl, on ;pril 3, FFE, the petitioner iss#ed in faor of the respondent a

consolidated promissor note in the principal amo#nt of P:@,E*:,@*.FE for a term of

fo#rteen (3) das and mat#ring on ;pril :E, FFE. %he stip#lated interest on the

consolidated promissor note was -:D per ann#m. In case of defa#lt, a penalt chargewas imposed in an amo#nt e>#ialent to ED per month of the o#tstanding amo#nt d#e

and #npaid comp#ted from the date of defa#lt. %he petitioner failed to satisf the

consolidated promissor note, the principal balance of which as of ;pril :E, FFE

was P:@,''E,'@.E@. Haing failed to meet its loan obligations, respondent filed a

collection s#it against petitioner. %he petitioner did not disp#te the loan it owes b#t

claimed that the agreed interest rate was fi+ed at *.*D per ann#m and not the aring

interest rates imposed b the respondent which reached as high as 3D per ann#m.

%he petitioner asserted that the respondent #nilaterall imposed the increased interest

rates in iolation of the principle of m#t#alit of contracts.

%he 0%C r#led in fao#r of respondent. n appeal, the C; affirmed the 0%C?s

#dgment b#t modified the interest rates and penalt charges imposed. %he C; held that

the interest rates leied b the respondent were e+cessie and #nconscionable hence,

m#st be red#ced to :D per ann#m. %he C; likewise lowered the penalt charges to

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:D per month considering that the P@,*3,*::.:@ paid b the petitioner was alread

applied thereto and the nat#re of the contract between the parties was a shortAterm

credit facilit. %he attorne?s fees were red#ced from :*D to D of the o#tstanding

obligation.

ISSUE: Whether the modified interest rates and penalty charges decreed by the CA are

still e!orbitant and that the CA failed to appreciate the partial payments already made

when it upheld the amount of P$0-''-1'0.0 as petitioner2s outstanding balance.

7o. %he iss#e on partial paments and their application to the o#tstandingbalance inoles a calibration of the eidence presented, hence, fact#al in nat#re and

not reiewable in the petition at bar. ftArepeated is the r#le that petitions for reiew#nder 0#le 3* of the 0#les of Co#rt ma be bro#ght onl on >#estions of law, not on>#estions of fact.

7eertheless, we are coninced that the co#rts a 3uo- in concl#ding theo#tstanding balance of the petitioner, hae both caref#ll considered and appreciatedthe eidence of partial paments add#ced. ;s fo#nd b the C;, the paments made bthe petitioner before the complaint was filed were d#l ded#cted from the o#tstandingbalance= while the paments made d#ring the pendenc of the case were applied to thed#e and o#tstanding penalt charges.

5e affirm the interest rate decreed b the C;. Stip#lated interest rates are illegal

if the are #nconscionable and co#rts are allowed to temper interest rates whennecessar. In e+ercising this ested power to determine what is ini>#ito#s and#nconscionable, the Co#rt m#st consider the circ#mstances of each case. 5hat ma beini>#ito#s and #nconscionable in one case, ma be #st in another.

Howeer, p#rs#ant to *an" of the Philippine Islands- Inc. v. 4u, we deem itproper to f#rther red#ce the penalt charge decreed b the C; from :D per month toD per month or :D per ann#m in iew of the following factors4 () respondent hasalread receied P@,*3,*::.:@ in penalt charges, and (:) the loan e+tended torespondent was a shortAterm credit facilit.

n the basis of the same precedent, the attorne?s fees m#st likewise bee>#itabl red#ced considering that4 () the petitioner has alread made partialpaments= (:) the attorne?s fees are not an integral part of the cost of borrowing b#t amere incident of collection= and (-) the attorne?s fees were intended as penal cla#se toanswer for li>#idated damages, hence, the rate of D of the #npaid obligation is tooonero#s. <nder the premises, attorne’s fees e>#ialent to one percent (D) of theo#tstanding balance is reasonable.

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/avid v. isamis 0ccidental II lectric Cooperative, Inc.

G. R. No. 19*7, !"l# 11, 2%12

Petitioner $irgilio S. Baid (Baid) was the owner or proprietor of $SB 1lectric

Sales, a compan engaged in the b#siness of s#ppling electrical hardware incl#ding

transformers for r#ral electric cooperaties like respondent 2isamis ccidental II1lectric Cooperatie, Inc. (218CI), with principal office located in 6amis Cit.

218CI e+pressed its intention to p#rchase a 2$; power transformer from Baid.

9or this reason, its eneral 2anager, 1ngr. 0enaldo 0ada (1ngr. 0ada), went to meet

Baid in the latter’s office in J#e6on Cit. Baid agreed to s#ppl the power transformer

proided that 218CI wo#ld sec#re a board resol#tion beca#se the item wo#ld still

hae to be imported. Baid was later presented with the board resol#tion a#thori6ing the

p#rchase of one 2$; power transformer to which Baid likewise presented his proposal

for the ac>#isition. 1ngr. 0ada and Birector Kimene6 (in charge of the proc#rement)

signed the proposal. ;s per "oard 0esol#tion, the transformer was to be paid thro#gh a

loan from the 7ational 1lectrification ;dministration (71;). Howeer, since the loan wasnot immediatel acted #pon, 1ngr. 0ada re>#ested that Baid to delier the transformer

een witho#t the downpament agreed #pon in the proposal. Baid agreed on the

condition that the interest wo#ld be pegged at :3D per ann#m to which 1ngr. 0ada

agreed. n Becember @, FF:, the goods were shipped to 6ami6 Cit ia 5illiam

8ines. In the "ill of 8ading, a sales inoice was incl#ded which stated the agreed

interest rate of :3D per ann#m. 5hen 218CI failed to comm#nicate with Baid after

the shipment and when no pament was made despite seeral demands, Baid filed a

complaint with the 0%C.

%he 0%C dismissed the complaint. n appeal, the C; affirmed the 0%C’s r#ling.

Hence, this petition.

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ISSUE: Was the $%& per annum interest rate unconscionable5

es. ;ltho#gh the Co#rt agrees that 218CI sho#ld pa interest, the stip#lated

rate is, howeer, #nconscionable and sho#ld be e>#itabl red#ced. 5hile there is no>#estion that parties to a loan agreement hae wide latit#de to stip#late on an interest

rate in iew of the Central "ank Circ#lar 7o. F* s. FE: which s#spended the <s#r

8aw ceiling on interest effectie Kan#ar , FE-, it is also worth stressing that interest

rates wheneer #nconscionable ma still be red#ced to a reasonable and fair leel.

%here is nothing in the said circ#lar which grants lenders carte blanche a#thorit to raise

interest rates to leels which will either enslae their borrowers or lead to a

hemorrhaging of their assets. ;ccordingl, the e+cessie interest of :3D per ann#m

stip#lated in the sales inoice sho#ld be red#ced to :D per ann#m.

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PURE OBLIGATION

Hon+kon+ and San+ai 3ankin+ Corp. v. 3ro4"e5a

G. R. No. 17)1%, November 17, 2%1%

Petitioners erong and 1ditha "ro>#e6a are emploees of Hongkong and

Shanghai "anking Corp. (HS"C) and members of respondent Hongkong Shanghai

"anking Corporation, 8td. Staff 0etirement Plan (HS"C8AS0P), a retirement planestablished b HS"C thro#gh its "oard of %r#stees for the benefit of the emploees.

1ditha and erong obtained loans which were paid thro#gh a#tomatic ded#ction.

<nfort#natel, howeer, 1ditha and erong were terminated following a labor disp#te

between HS"C and its emploees. G7ote4 ; labor disp#te was filed and was pending

with the 8abor ;rbiter at the time this decision was penned. ;s a res#lt, 1ditha and

erong were not able to pa the monthl amorti6ations of their respectie loans. %h#s,

respondent HS"C8AS0P considered the acco#nts of petitioners delin>#ent. Bemands to

pa the respectie obligations were made #pon petitioners, b#t the failed to pa.

HS"C8AS0P then filed a collection s#it against 1ditha and erong. %he 2%C, in fao#r

of HS"C8AS0P, r#led that that the loans were in the nat#re of #nsec#red and p#reobligations. Hence, the loans are immediatel demandable. %he 0%C affirmed the

2%C’s r#ling. %he C; reersed the 0%C. Hence, this petition.

ISSUE: Whether the loans were in the nature of pure obligations.

es. %he loans were coered b Promissor 7otes. 5e affirm the findings of the2e%C and the 0%C that there is no date of pament indicated in the Promissor 7otes.

%he 0%C is correct in r#ling that since the Promissor 7otes do not contain a period,

HS"C8AS0P has the right to demand immediate pament. ;rticle @F of the Ciil Code

applies. %he spo#ses "ro>#e6a’s obligation to pa HS"C8AS0P is a p#re obligation.

%he fact that HS"C8AS0P was content with the prior monthl checkAoff from 1ditha

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"ro>#e6a’s salar is of no moment. nce 1ditha "ro>#e6a defa#lted in her monthl

pament, HS"C8AS0P made a demand to enforce a p#re obligation.

%he paroll ded#ction is merel a conenient mode of pament and not the soleso#rce of pament for the loans. HS"C8AS0P neer agreed that the loans will be paid

onl thro#gh salar ded#ctions. 7either did HS"C8AS0P agree that if 1ditha "ro>#e6aceases to be an emploee of HS"C, her obligation to pa the loans will be s#spended.HS"C8AS0P can immediatel demand pament of the loans at antime beca#se theobligation to pa has no period. 2oreoer, the spo#ses "ro>#e6a hae alread inc#rredin defa#lt in paing the monthl installments.

9inall, the enforcement of a loan agreement inoles LdebtorAcreditor relationsfo#nded on contract and does not in an wa concern emploee relations. ;s s#ch itsho#ld be enforced thro#gh a separate ciil action in the reg#lar co#rts and not beforethe 8abor ;rbiter.L

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CONDITIONAL OBLIGATION

3onrostro v. Sps. !"an and Constacia 6"na

G. R. No. 172$*), !"l# 2*, 2%1$

In FF:, respondent Constancia 8#na (Constancia), as b#er, entered into a

Contract to Sell with "liss Beelopment Corporation ("liss) inoling a ho#se and lot

located at 7ew Capitol 1states in Biliman, J#e6on Cit. "arel a ear after, Constancia,this time as the seller, entered into another Contract to Sell with petitioner 8o#rdes

"onrostro (8o#rdes) concerning the same propert. ; condition in the contract states4

:. + + + In the eent the $17B11 fails to pa the second installment on time, the$17B11 will pa starting 2a , FF- a :D interest on the P-,.monthl. 8ikewise, in the eent the $17B11 fails to pa the amo#ntof P'-,. on the stip#lated time, this C7%0;C% % S188 shall likewisebe deemed cancelled and rescinded and + + + *D of the total contract priceof P,:*,. shall be deemed forfeited in faor of the $17B0. <npaidmonthl amorti6ation shall likewise be ded#cted from the initial down pament in

faor of the $17B0.@

Immediatel after the e+ec#tion of the said second contract, the spo#ses "onrostro tookpossession of the propert. Howeer, e+cept for the P:,. down pament,8o#rdes failed to pa an of the stip#lated s#bse>#ent amorti6ation paments. nKan#ar , FF3, Constancia and her h#sband, respondent K#an 8#na (spo#ses 8#na),filed before the 0%C a Complaint for 0escission of Contract and Bamages against thespo#ses "onrostro. %he 0%C r#led in faor of the spo#ses "onrostro. %he C;, amongother prono#ncements, affirmed the 0%C’s finding that 8o#rdes was read to pa her obligation on 7oember :3, FF-. Hence, this petition.

ISSUE: Whether there is correct reliance by on 6ourdes’ willingness to pay.

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7o. %he 0%C in resoling the Complaint foc#sed on the sole iss#e of whether the

fail#re of spo#ses "onrostro to pa the installments of P-,. on ;pril -, FF-

and P--,. on K#l -, FF- is a s#bstantial breach of their obligation #nder the

contract as to warrant the rescission of the same. Clearl, the 0%C arried at its

concl#sion based on its mistaken premise that rescission is applicable to the case.

Hence, its determination of whether there was s#bstantial breach. ;s ma be recalled,

howeer, the C;, in its assailed Becision, fo#nd the contract between the parties as a

contract to sell, specificall of a real propert on installment basis, and as s#ch

categoricall declared rescission to be not the proper remed. %his is considering that in

a contract to sell, pament of the price is a positie s#spensie condition, fail#re of

which is not a breach of contract warranting rescission #nder ;rticle F of the Ciil

Code b#t rather #st an eent that preents the s#pposed seller from being bo#nd to

cone title to the s#pposed b#er. ;lso, and as correctl r#led b the C;, ;rticle F

cannot be applied to sales of real propert on installment since the are goerned b

the 2aceda 8aw.

%here being no breach to speak of in case of nonApament of the p#rchase price

in a contract to sell, as in this case, the 0%C’s fact#al finding that 8o#rdes was willing

and able to pa her obligation M a concl#sion arried at in connection with the said

co#rt’s determination of whether the nonApament of the p#rchase price in accordance

with the terms of the contract was a s#bstantial breach warranting rescission M therefore

loses significance. %he spo#ses "onrostro’s reliance on the said fact#al finding is th#s

misplaced. %he cannot inoke their readiness and willingness to pa their obligation on7oember :3, FF- as an e+c#se from being made liable for interest beond the said

date.

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CONDITIONAL OBLIGATION

6im v. /evelopment 3ank o' te Pilippines

G. R. No. 177%%, !"l# 1, 2%1$

Petitioners (the 8ims) obtained a loan from Beelopment "ank of the Philippines

(B"P) to finance their cattle raising b#siness. %he loans were coered b Promissor

7otes. ; second loan was obtained b the 8ims along with seeral other indiid#als#nder another acco#nt (Biamond 8 0anch acco#nt) with the same bank, also coered

b Promissor 7otes. ; mortgage oer seeral real properties was also e+ec#ted in

faor B"P. B#e to iolent confrontations between goernment troops and 2#slim rebels

in 2indanao from F@: to F@@, petitioners were forced to abandon their cattle ranch.

;s a res#lt, their b#siness collapsed and the failed to pa the loan amorti6ations. <pon

fail#re to pa despite demand, B"P s#bse>#entl moed to foreclose the mortgage b#t,

at one time, was preented from doing so beca#se of a %0 sec#red b the petitioners.

%here were also seeral disc#ssion on loan restr#ct#ring b#t none were s#ccessf#l. In

the end, B"P was able to foreclose the properties and sold the same on a#ction sale

with itself as the sole bidder. ;t one time, B"P agreed to restr#ct#re the loan rather thanforeclosing the mortgage b#t petitioners still failed to pa their obligations, prompting

B"P to cancel the 8oan 0estr#ct#ring ;greement. ;fter m#ch ado, the petitioners filed a

complaint for the n#llification of the foreclos#re sale with the 0%C. %he 0%C r#led in

faor of the petitioners. %he C; reersed the 0%C. Hence, this petition.

ISSUE: Whether the obligation was e!tinguished due to fulfilment of the condition.

7o. %he Promissor 7otes s#bect of the instant case became d#e and

demandable as earl as F@: and F@'. %he onl reason the mortgaged properties

were not foreclosed in F@@ was beca#se of the restraining order from the co#rt. In

F@E, petitioners made a partial pament of PF:,E.. 7o s#bse>#ent paments

were made. It was onl in FEF that petitioners tried to negotiate the settlement of their

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loan obligations. ;nd altho#gh B"P co#ld hae foreclosed the mortgaged properties, it

instead agreed to restr#ct#re the loan. In fact, from FEF to FF3, B"P gae seeral

e+tensions for petitioners to settle their loans, b#t the neer did, th#s, prompting B"P

to cancel the 0estr#ct#ring ;greement.

Petitioners insist that B"P’s cancellation of the 0estr#ct#ring ;greement #stifies

the e+ting#ishment of their loan obligation #nder the Principle of Constr#ctie 9#lfillment

fo#nd in ;rticle E' of the Ciil Code b#t the Co#rt does not agree. ;s aptl pointed o#t

b the C;, ;rticle E' of the Ciil Code, which states that !the condition shall be

deemed f#lfilled when the obligor ol#ntaril preents its f#lfillment,& does not appl in

this case4

;rticle E' en#nciates the doctrine of constr#ctie f#lfillment of s#spensie

conditions, which applies when the following three (-) re>#isites conc#r, i64 ()

%he condition is s#spensie= (:) %he obligor act#all preents the f#lfillment of

the condition= and (-) He acts ol#ntaril. S#spensie condition is one the

happening of which gies rise to the obligation. It will be irrational for an "ank to

proide a s#spensie condition in the Promissor 7ote or the 0estr#ct#ring

;greement that will allow the debtorApromissor to be freed from the d#t to pa

the loan witho#t paing it.

"esides, petitioners hae no one to blame b#t themseles for the cancellation of

the 0estr#ct#ring ;greement. It is significant to point o#t that when the 0egional Credit

Committee reconsidered petitioners’ proposal to restr#ct#re the loan, it imposed

additional conditions. In fact, when B"P’s eneral Santos "ranch forwarded the

0estr#ct#ring ;greement to the 8egal Serices Bepartment of B"P in 2akati,

petitioners were re>#ired to pa the amo#nt of P,-,'@:.@*, pl#s a dail interest of

P'-:.* starting 7oember ', FF- #p to the date of act#al pament of the said

amo#nt. %his, petitioners failed to do. B"P therefore had reason to cancel the0estr#ct#ring ;greement. 2oreoer, since the 0estr#ct#ring ;greement was cancelled,

it co#ld not hae noated or e+ting#ished petitioners’ loan obligation. ;nd in the

absence of a perfected 0estr#ct#ring ;greement, there was no impediment for B"P to

e+ercise its right to foreclose the mortgaged properties.

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G7ote4 ;ltho#gh the Co#rt r#led that the obligation is not e+ting#ished, it howeer

n#llified the foreclos#re sale, vi78 9 "#t while B"P had a right to foreclose the mortgage,

we are constrained to n#llif the foreclos#re sale d#e to the bank’s fail#re to send a

notice of foreclos#re to petitioners.&

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RECIPROCAL OBLIGATIONS

G.G. Sportsear '+. Corp. v. 8orld Class Properties, Inc.

G. R. No. 1272%, arc 2, 2%1%

Sportswear, a domestic corporation, offered to p#rchase the -Eth floor

pentho#se #nit and ' parking slots for -: cars in 5orld Class?s condomini#m proect

for the disco#nted, preAselling price of PEF,':3,:@:.E:. ;fter Sportswear paidthe P*,. reseration fee, the parties, on 2a *, FF', signed a 0eseration

;greement ( Agreement ) that proides for the sched#le of paments, incl#ding the

stip#lated monthl installments on the down pament and the balance on the p#rchase

price. "ased on the ;greement, the contract to sell pertaining to the entire -Eth floor

Pentho#se #nit and the parking slots wo#ld be e+ec#ted "pon te pa#ment o' tirt#

percent $%:; o' te total p"rcase price. It also stip#lated that all its proisions

wo#ld be deemed incorporated in the contract to sell and other doc#ments to be

e+ec#ted b the parties thereafter. %he ;greement also specified that the fail#re of the

b#er to pa an of the installments on the stip#lated date wo#ld gie the deeloper the

right either to4 () charge -D interest per month on all #npaid receiables, or (:) rescindand cancel the ;greement witho#t the need of an co#rt action and, #pon cancellation,

a#tomaticall forfeit the reseration fee and other paments made b the b#er.

Somewhere along the f#lfilment of the obligation, Sportswear re>#ested to replace

some of the o#tstanding checks with 5orld Class to which the latter agreed with the

s#ggestion that a new 0eseration ;greement will be e+ec#ted. 5hen Sportswear

indeed deliered the replacement checks and paid its oerd#e balance, 5orld Class

handed Sportswear a new 0eseration ;greement, which the latter ref#sed to sign.

Instead, it sent a letterto 5orld Class, re>#esting that its check dated ;pril :3,

FF@ be deposited on 2a *, FF@ beca#se it was e+periencing financial diffic#lties.

5hen 5orld Class reected Sportswear’s re>#est, Sportswear sent another

letter informing 5orld Class that te second Reservation (+reement as incomplete

beca"se it did not e<pressl# provide te time of completion o' te condomini"m

"nit. 5orld Class co#ntered that the proisional Contract to Sell it preio#sl s#bmitted

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to Sportswear e+pressl proided for the completion date (Becember *, FFE) and

insisted that Sportswear pa its oerd#e acco#nt.

n K#ne , FF@, Sportswear filed a Complaint with the Ho#sing and 8and

<se 0eg#lator "oard (H6:;*) claiming a ref#nd of the installment paments made to

5orld Class beca#se it was dissatis'ied it te completion date fo#nd in theContract to Sell. %he H8<0" rescinded the ;greement. n appeal to the HLURBBoard of Commissioners (Board), the Board modifed the Arbiter’sdecision by ruling that the Agreement could no longer berescinded or lack o a CR/LS because World Class had already been issued a License to Sell on August 1, 1!, or beore thecom"laint #as fled. ot!ithstanding this "ronouncement, theBoard still a!arded a reund in ## $"orts!ear’s fa%or.

&he 'ce of the resident ($%) denied *orld Class’s a""ealby +uoting etensi%ely from the Arbiter’s decision. &he 'subse+uently denied *orld Class’s motion for reconsideration. %he

C;, howeer, reersed the P’s decision. Hence, this petition.

ISSUE: .Whether the obligation is a reciprocal one where <under Art. 11=1 the

power to rescind is implied.

7o. %he ;greement e+pressl proides that Sportswear shall be entitled to a

Contract to Sell onl #pon its pament of at least -D of the total contract price.

(ince // (portswear had only paid $1& of the total contract price- World Class’s

obligation to e!ecute a Contract to (ell had not yet arisen. ;ccordingl, Sportswear

had no basis to claim that 5orld Class breached this obligation.

1en if we appl ;rticle F of the Ciil Code, which proides4

(rt. 1191. %he power to rescind obligations is implied in reciprocal ones,in case one of the obligors sho#ld not compl with what is inc#mbent #ponhim. + + + +.

no reason still e+ists to rescind the contract. <nder the ;greement, World Class’s

obligation was to finish the pro#ect and turn over the purchased units to // (portswear

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on or before the completion date. 7otabl, at the time Sportswear filed its complaint

on >une 1?- 1==0 , the agreed completion date of ecember 1@- 1== , or een August

1== , the date appearing on 5orld Class’s first 8icense to Sell, was still a long wa

o#t. In other words, en GG Sportsear 'iled its complaint, 8orld Class ad not

#et breaced its obli+ation, and rescission "nder tis provision o' te Civil Code

as premat"re.

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Solar Harvest Incorporated v. /avao Corr"+ated Carton, Corp.

G. R. No. 17))), !"l# 2), 2%1%

; erbal agreement between Solar Harest, Inc. (Solar Harest) and Baao

Corr#gated Carton Corp. (BCCC) was entered into for the latter to s#ppl the former

with corr#gated carton bo+es at N. each. Solar Harest deposited on 2arch -,FFE N3,*. to respondent’s <S Bollar Saings ;cco#nt with 5estmont "ank as

f#ll pament for the bo+es it ordered.

Bespite s#ch pament, petitioner did not receie an bo+es from respondent.

n Kan#ar -, :, petitioner wrote a demand letter for reimb#rsement of the

amo#nt paid. n 9ebr#ar F, :, respondent replied that the bo+es had been

completed as earl as ;pril -, FFE and that petitioner failed to pick them #p from

the former’s wareho#se - das from completion, as agreed #pon. 0espondentmentioned that petitioner een placed an additional order of :3, bo+es, o#t of

which, 3, had been man#fact#red witho#t an adanced pament from

petitioner. 0espondent then demanded petitioner to remoe the bo+es from the

factor and to pa the balance of <SN*,3. for the additional bo+es

and P-:,. as storage fee.

Solar Harest filed a complaint for s#m of mone with damages against

BCCC. %he 0%C r#led that respondent did not commit an breach of faith thatwo#ld #stif rescission of the contract and the conse>#ent reimb#rsement of the

amo#nt paid b petitioner. %he C; dismissed Solar Harests’ appeal. Hence, this

petition.

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ISSUE: Whether CCC failed to perform its obligation- #ustifying recission.

7o. In reciprocal obligations, as in a contract of sale, the general r#le is that the

f#lfillment of the parties’ respectie obligations sho#ld be sim#ltaneo#s. Hence, nodemand is generall necessar beca#se, once a part f#lfills his obligation and the other

part does not f#lfill his, the latter a#tomaticall inc#rs in dela. "#t when different dates

for performance of the obligations are fi+ed, the defa#lt for each obligation m#st be

determined b the r#les gien in the first paragraph of the present article, that is, the

other part wo#ld inc#r in dela onl from the moment the other part demands

f#lfillment of the former’s obligation. %h#s, een in reciprocal obligations, if the period for

the f#lfillment of the obligation is fi+ed, demand #pon the obligee is still necessar

before the obligor can be considered in defa#lt and before a ca#se of action for

rescission will accr#e.

1ident from the records and een from the allegations in the complaint was the

lack of demand b petitioner #pon respondent to f#lfill its obligation to man#fact#re and

delier the bo+es. %he Complaint onl alleged that petitioner made a !followA#p& #pon

respondent, which, howeer, wo#ld not >#alif as a demand for the f#lfillment of the

obligation. Petitioner’s witness also testified that the made a followA#p of the bo+es, b#t

not a demand. 7ote is taken of the fact that, with respect to their claim for

reimb#rsement, the Complaint alleged and the witness testified that a demand letter was sent to respondent. 5itho#t a preio#s demand for the f#lfillment of the obligation,

petitioner wo#ld not hae a ca#se of action for rescission against respondent as the

latter wo#ld not et be considered in breach of its contract#al obligation.

1en ass#ming that a demand had been preio#sl made before filing the

present case, petitioner’s claim for reimb#rsement wo#ld still fail, as the circ#mstances

wo#ld show that respondent was not g#ilt of breach of contract.

In s#m, the Co#rt finds that petitioner failed to establish a ca#se of action for rescission, the eidence haing shown that respondent did not commit an breach of itscontract#al obligation. ;s preio#sl stated, the s#bect bo+es are still withinrespondent’s premises. %o p#t a rest to this disp#te, we therefore reliee respondentfrom the b#rden of haing to keep the bo+es within its premises and, conse>#entl, gie

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it the right to dispose of them, after petitioner is gien a period of time within which toremoe them from the premises.

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aceda v. /evelopment 3ank o' te Pilippines

G. R. No. 17*979, ("+"st 11, 2%1%

"onifacio 2aceda, Kr. (2aceda) obtained a loan from the defendant B"P in the

amo#nt of [email protected] million to finance the e+pansion of the ld ran Hotel in 8ete. <pon

approal of said loan, plaintiff 2aceda e+ec#ted a promissor note and a real estatemortgage. %he B"P oernor at that time, 0ecio arcia, inAcharge of loans for hotels,

allegedl imposed the condition that B"P wo#ld choose the b#ilding contractor,

namel, 2oreman "#ilders Co. (2oreman). %he contractor wo#ld directl receie the

loan releases from B"P, after erification b B"P of the constr#ction progress. %he

period of loan aailment was -' das from date of initial release of the loan. Similarl,

s#ppliers of e>#ipment and f#rnishings for the hotel were also to be paid directl b

B"P. %he constr#ction deadline was set for Becember ::, F@@.

2aceda filed a complaint for 0escission of the b#ilding contract with Bamages

against the contractor 2oreman with the C9I. %he C9I rescinded the b#ilding contract,

s#spended the period of aailment, allowed 2aceda to himself take oer constr#ction,

and directed B"P to release to 2aceda the s#m of P.-2, which had preio#sl

been approed for release in Kan#ar F@E. %he B"P was f#rther ordered to gie

plaintiff 2aceda s#ch other amo#nts still pending release. 2oreman filed an appeal

which was s#bse>#entl dismissed in FF b the S#preme Co#rt. 1ntr of #dgment on

this case was iss#ed on ;pril :-, FF.

In the meantime, 2aceda also instit#ted the case a 3uo for Specific Performance

with Bamages against defendant B"P before the 2akati 0%C in FE3. %he 2anila C9I’s

7oember :E, F@E Becision and the fact#al findings therein contained became part of

the eidence s#bmitted before the 2akati 0%C as 1+h. !B.& %he 0%C r#led in faor of

2aceda and re>#ired B"P to pa 2aceda P@,*3@,*.F to finish the constr#ction of

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the hotel b#t later modified its decision regarding the awarded damages. Said modified

decision was affirmed b the C;. Hence, this petition.

ISSUE: Whether the ;C and CA were correct in re>#iring B"P topa 2aceda P@,*3@,*.F to finish the constr#ction of the hotel..

7o. 2aceda filed the present complaint for specific performance so he co#ldfinish the constr#ction of the hotel. In an action for specific performance, the part atfa#lt will be re>#ired to perform its #ndertaking #nder the contract. In this case, the trialco#rt and the appellate co#rt sho#ld hae re>#ired B"P, as creditor #nder the loanagreement, to lend (and not to pa)2aceda the amo#nt needed to finish the

constr#ction of the hotel. %he trial co#rt and the appellate co#rt th#s erred in re>#iringB"P to pa 2aceda P@,*3@,*.F to finish the constr#ction of the hotel.

2aceda p#t in cash e>#it worth P',*-,-FE.* as of - K#l FE. <nder ;rticleF of the Ciil Code, the aggrieed part has a choice between specific performanceand rescission with damages in either case. Howeer, we hae r#led that if specificperformance becomes impractical or impossible, the co#rt ma order rescission withdamages to the in#red part. ;fter the lapse of more than - ears, it is nowimpossible to implement the loan agreement as it was written, considering the absenceof eidence as to the rising costs of constr#ction, as well as the obio#s changes inmarket conditions on the iabilit of the operations of the hotel. 5e deem it e>#itableand practicable to rescind the obligation of B"P to delier the balance of the loan

proceeds to 2aceda. In e+change, we order B"P to pa 2aceda theal#e of 2aceda’s cash e>#it of P',*-,-FE.* b wa of act#al damages, pl#s theapplicable interest rate. %he present r#ling comes within the p#riew of 2aceda’s andB"P’s praers for !other reliefs, #st or e>#itable #nder the premises.&

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Heirs o' Gaite v. =e Pla5a, Inc.

G. R. No. 177), !an"ar# 2), 2%11

%he Pla6a, Inc. (%he Pla6a), a corporation engaged in the resta#rant b#siness,

thro#gh its President, Kose C. 0ees, entered into a contract with 0hogen "#ilders

(0hogen), represented b 0amon C. aite, for the constr#ction of a resta#rant b#ildingin reenbelt, 2akati, 2etro 2anila for the price of P@,',.. n K#l E, FE, to

sec#re 0hogen’s compliance with its obligation #nder the contract, aite and 9<

Ins#rance Corporation (9<) e+ec#ted a s#ret bond in the amo#nt of P,**,. in

faor of %he Pla6a. nK#l :E, FE, %he Pla6a paid P,**,. less withholding

ta+es as down pament to aite. %hereafter, 0hogen commenced constr#ction of the

resta#rant b#ilding. Seeral instances concerning the constr#ction occ#rred which led to

aite terminating the contract based on the Contractor’s 0ight to Stop 5ork or

%erminate Contracts as proided for in the eneral Conditions of the Contract. In a

letter, aite acc#sed 0ees of not cooperating with 0hogen in soling the problem

concerning the reocation of the b#ilding permits, which he described as a !minor problem.& ;dditionall, aite demanded the pament of P'-,*E.* from %he Pla6a

representing the work that has alread been completed b 0hogen. %his #ltimatel led to

a laws#it for breach of contract, s#m of mone and damages against aite and 9< in

the Co#rt of 9irst Instance (C9I) of 0i6al. %he 0%C r#led in faor of %he Pla6a. %he C;

affirmed the Becision of the trial co#rt b#t modified the award of damages. Hence, this

petition.

ISSUE: Whether there were valid and legal grounds for ;hogen to terminate the

contract pursuant to Article 11=1 of the Civil Code and Article 1$B of the /eneral

Conditions of the Construction Contract.

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7o. Petitioners claim that 0hogen sent Progress "illing 7o. dated September

, FE and demanded pament from %he Pla6a in the net amo#nt of P3@-,**3.' for

the work it had accomplished from K#l :E, FE #ntil September @, FE. %he Pla6a,

howeer, failed to pa the said amo#nt. ;ccording to petitioners, ;rticle :- of the

eneral Conditions of the Constr#ction Contract gies %he Pla6a seen das from

notice within which to pa the Progress "illing= otherwise, 0hogen ma terminate the

contract. Petitioners also inoke ;rticle F of the Ciil Code, which states that the

power to rescind obligations is implied in reciprocal ones, in case one of the obligors

sho#ld not compl with what is inc#mbent #pon him.

0eciprocal obligations are those which arise from the same ca#se, and in which

each part is a debtor and a creditor of the other, s#ch that the obligation of one is

dependent #pon the obligation of the other. %he are to be performed sim#ltaneo#sl

s#ch that the performance of one is conditioned #pon the sim#ltaneo#s f#lfillment of the

other. 0espondent %he Pla6a predicated its action on ;rticle Fof the Ciil Code,

which proides for the remed of !rescission& or more properl resolution- a principal

action based on breach of faith b the other part who iolates the reciprocit between

them. %he breach contemplated in the proision is the obligor’s fail#re to compl with

an e+isting obligation. %h#s, the power to rescind is gien onl to the in#red part. %he

in#red part is the part who has faithf#ll f#lfilled his obligation or is read and willing

to perform his obligation.

%he constr#ction contract between 0hogen and %he Pla6a proides for reciprocal

obligations whereb the latter’s obligation to pa the contract price or progress billing is

conditioned on the former’s performance of its #ndertaking to complete the works within

the stip#lated period and in accordance with approed plans and other specifications b

the owner. P#rs#ant to its contract#al obligation, %he Pla6a f#rnished materials and

paid the agreed down pament. It also e+ercised the option of f#rnishing and deliering

constr#ction materials at the obsite p#rs#ant to ;rticle III of the Constr#ction

Contract. Howeer, #st two months after commencement of the proect, constr#ction

works were ordered stopped b the local b#ilding official and the b#ilding permits#bse>#entl reoked on acco#nt of seeral iolations of the 7ational "#ilding

Code and other reg#lations of the m#nicipal a#thorities.

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Petitioners ma not #stif 0hogen’s termination of the contract #pon gro#nds of

nonApament of progress billing and #ncooperatie attit#de of respondent %he Pla6a

and its emploees in rectifing the iolations which were the basis for iss#ance of the

stoppage order. Haing breached the contract#al obligation it had e+pressl

ass#med, i.e.- to compl with all laws, r#les and reg#lations of the local a#thorities,

0hogen was alread at fa#lt. 0espondent %he Pla6a, on the other hand, was #stified

in withholding pament on 0hogen’s first progress billing, on acco#nt of the stoppage

order and additionall d#e to disappearance of ownerAf#rnished materials at the obsite.

In failing to hae the stoppage and reocation orders lifted or recalled, 0hogen sho#ld

take f#ll responsibilit in accordance with its contract#al #ndertaking

S#ch nonAobserance of laws and reg#lations of the local a#thorities affecting the

constr#ction proect constit#tes a s#bstantial iolation of the Constr#ction Contract

which entitles %he Pla6a to terminate the same, witho#t obligation to make f#rther

pament to 0hogen #ntil the work is finished or s#bect to ref#nd of pament e+ceeding

the e+penses of completing the works.

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Re#es v. ="paran

G. R. No. 1%)*, !"ne 1, 2%11

0ees owned a b#ilding where she leased a space to %#paran. ; close friendship

deeloped between the two which led to the respondent inesting tho#sands of pesos in

petitioner’s financing/lending b#siness from 9ebr#ar @, FF to 2a :@, FF, withinterest at the rate of 'D a month. n K#ne :, FEE, petitioner mortgaged the s#bect

real properties to the 9armers Saings "ank and 8oan "ank, Inc. <+(6 *an" to sec#re

a loan of :,,. paable in installments. n₱ 7oember *, FF, petitioner’s

o#tstanding acco#nt on the mortgage reached :,:@E,@E.-. Petitioner then decided₱

to sell her real properties for at least ',*,. so she co#ld li>#idate her bank loan₱

and finance her b#sinesses. ;s a gest#re of friendship, respondent erball offered to

conditionall b# petitioner’s real properties for 3,:,. paable on installment₱

basis witho#t interest and to ass#me the bank loan.

%he parties then proceeded to obtain a Beed of Conditional Sale of 0eal

Properties with ;ss#mption of 2ortgage from 9S8 "ank. ;n other agreements between

the 0ees and %#paran were merel done erball.

<nder the Beed of Conditional Sale of 0eal Properties with ;ss#mption of

2ortgage, respondent was bo#nd to pa the petitioner a l#mp s#m of .: million pesos₱

witho#t interest as part of the p#rchase price in three (-) fi+ed installments. 0espondent,howeer, defa#lted in the pament of her obligations on their d#e dates. Instead of

paing the amo#nts d#e in l#mp s#m on their respectie mat#rit dates, respondent

paid petitioner in small amo#nts from time to time. %o compensate for her delaed

paments, respondent agreed to pa petitioner an interest of 'D a month. ;s of ;#g#st

-, FF:, respondent had onl paid -F*,., leaing a balance of E*,. as₱ ₱

principal on the #npaid installments and 3'',EF-.:* as #npaid acc#m#lated interest.₱

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%he b#ilding was s#bse>#entl g#tted b fire and the respondent failed to renew

the fire ins#rance polic coering the properties. n September :, FF:, respondent

offered the amo#nt of @*,. onl paable on₱ September @, FF:, as f#ll pament

of the p#rchase price of the s#bect real properties and demanded the sim#ltaneo#se+ec#tion of the corresponding deed of absol#te sale.

n September , FF:, 2ila ;. 0ees <petitioner filed a complaint for

0escission of Contract with Bamages against $ictoria %. %#paran <respondent before

the 0%C. %he 0%C also considered the Beed of Conditional Sale of 0eal Propert with

;ss#mption of 2ortgage e+ec#ted b and among the two parties and 9S8 "ank a

contract to sell, and not a contract of sale. %he C; rendered its decision affirming with

modification the 0%C Becision. %he C; agreed with the 0%C that the contract entered

into b the parties is a contract to sell b#t r#led that the remed of rescission co#ld not

appl beca#se the respondent’s fail#re to pa the petitioner the balance of the p#rchase

price in the total amo#nt of E*,. was not a breach of contract, b#t merel an₱

eent that preented the seller (petitioner) from coneing title to the p#rchaser

(respondent). Hence, this petition.

ISSUE: Whether or not the CA was correct in ruling that there was no legal basis for the

rescission of the eed of Conditional (ale with Assumption of ,ortgage.

es.

%he Co#rt agrees with the r#ling of the co#rts below that the s#bect Beed of Conditional Sale with ;ss#mption of 2ortgage entered into b and among the twoparties and 9S8 "ank on 7oember :', FF is a contract to sell and not a contract of sale. %he s#bect contract was correctl classified as a contract to sell based on thefollowing pertinent stip#lations4

E. %hat the title and ownership of the s#bect real properties shall remain withthe 9irst Part #ntil the f#ll pament of the Second Part of the balance of thep#rchase price and li>#idation of the mortgage obligation of :,,..₱

Pending pament of the balance of the p#rchase price and li>#idation of themortgage obligation that was ass#med b the Second Part, the SecondPart shall not sell, transfer and cone and otherwise enc#mber the s#bectreal properties witho#t the written consent of the 9irst and %hird Part.

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F. %hat #pon f#ll pament b the Second Part of the f#ll balance of thep#rchase price and the ass#med mortgage obligation herein mentioned the%hird Part shall iss#e the corresponding Beed of Cancellation of 2ortgageand the 9irst Part shall e+ec#te the corresponding Beed of ;bsol#te Sale infaor of the Second Part.

"ased on the aboe proisions, the title and ownership of the s#bect propertiesremains with the petitioner #ntil the respondent f#ll pas the balance of the p#rchaseprice and the ass#med mortgage obligation. %hereafter, 9S8 "ank shall then iss#e thecorresponding deed of cancellation of mortgage and the petitioner shall e+ec#te thecorresponding deed of absol#te sale in faor of the respondent.

;ccordingl, the petitioner’s obligation to sell the s#bect properties becomesdemandable onl #pon the happening of the positie s#spensie condition, which is therespondent’s f#ll pament of the p#rchase price. 5itho#t respondent’s f#ll pament,there can be no breach of contract to speak of beca#se petitioner has no obligation et

to t#rn oer the title. 0espondent’s fail#re to pa in f#ll the p#rchase price is not thebreach of contract contemplated #nder ;rticle F of the 7ew Ciil Code b#t rather #stan eent that preents the petitioner from being bo#nd to cone title to the respondent.

GNote4 the fulfillment of the suspensive condition which is the full payment of the purchase price- the prospective seller’s obligation to sell the sub#ect property by entering into a contract of sale with the prospective buyer becomes demandable as

provided in Article 1%0= of the Civil Code which states8 Art. 1%0=. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable .

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6alicon v. National Ho"sin+ ("torit#

G. R. No. 1**%, !"l# 1$, 2%11

n 7oember :*, FE the 7ational Ho#sing ;#thorit (7H;) e+ec#ted a Beed

of Sale with 2ortgage oer a J#e6on Cit lot in faor of the spo#ses Isidro and 9laiana

;lfaro (the ;lfaros). In d#e time, the J#e6on Cit 0egistr of Beeds iss#ed %ransfer Certificate of %itle (%C%) :@@-: in the name of the ;lfaros. %he deed of sale proided,

among others, that the ;lfaros co#ld sell the land within fie ears from the date of its

release from mortgage witho#t 7H;’s prior written consent, which was annotated on the

;lfaros’ title ;pril 3, FE. ;bo#t nine ears later while the mortgage still s#bsisted, the

;lfaros sold the propert to their son $ictor who had a commonAlaw wife, Cecilia, and

two da#ghters with her, $icelet and $icelen 8alicon (the 8alicons). ;fter the mortgage

obligation has been f#ll settled b Cecilia and si+ das after 7H; has released the

mortgage, $ictor transferred the title to his da#ghters $icelet and $icelen. 9o#r ears

later, $ictor registered the sale, res#lting in the cancellation of his parents’ title. %he

propert was s#bse>#entl sold to 2arcela 8ao Ch#a, the title being transferred to thelatter.

%he 7H; instit#ted an action with the 0%C. for the ann#lment of the 7H;’s FE

sale of the land to the ;lfaros, the latter’s FF sale of the land to their son $ictor, and

the s#bse>#ent sale of the same to Ch#a, made in iolation of 7H; r#les and

reg#lations. %he 0%C r#led that altho#gh the ;lfaros clearl iolated the fieAear

prohibition, the 7H; co#ld no longer rescind its sale to them since its right to do so had

alread prescribed, appling ;rticle -EF of the 7ew Ciil Code. %he C; reersed the

0%C. Hence, this petition.

ISSUE: Whether or not the HA’s right to rescind has prescribed.

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7o. ;n action for rescission can proceed from either ;rticle F or ;rticle -E. It has

been held that ;rticle F speaks of rescission in reciprocal obligations within the conte+t of

;rticle :3 of the ld Ciil Code which #ses the term !resol#tion.& 0esol#tion applies onl to

reciprocal obligations s#ch that a breach on the part of one part constit#tes an impliedresol#tor condition which entitles the other part to rescission. 0esol#tion grants the in#red

part the option to p#rs#e, as principal actions, either a rescission or specific performance of the

obligation, with pament of damages in either case. 0escission #nder ;rticle -E, on the other

hand, was taken from ;rticle :F of the ld Ciil Code, which is a s#bsidiar action, not based

on a part’s breach of obligation. %he fo#rAear prescriptie period proided in ;rticle -EF

applies to rescissions #nder ;rticle -E.

Here, the 7H; so#ght ann#lment of the ;lfaros’ sale to $ictor beca#se the iolated thefieAear restriction against s#ch sale proided in their contract. %h#s, the C; correctl r#led

that s#ch iolation comes #nder ;rticle F where the applicable prescriptie period is that

proided in ;rticle 33 which is ears from the time the right of action accr#es. %he 7H;’s

right of action accr#ed on 9ebr#ar E, FF: when it learned of the ;lfaros’ forbidden sale of the

propert to $ictor. Since the 7H; filed its action for ann#lment of sale on ;pril , FFE, it did

so well within the Aear prescriptie period.

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>.>. Cr"5 ? co., Inc. v. HR Consr"ction Corp.

G. R. No. 1721, arc 1*, 2%12

99CCI entered into a contract with the Bepartment of P#blic 5orks and

Highwas (BP5H) for the constr#ction of the 2agsasa $iad#ct, known as the 8ower

;g#san Beelopment Proect. 99CCI, in t#rn, entered into a S#bcontract ;greementwith H0 Constr#ction Corporation (H0CC) for the s#ppl of materials, labor, e>#ipment,

tools and s#perision for the constr#ction of a portion of the said proect called the 1ast

"ank 8eee and C#tAff Channel in accordance with the specifications of the main

contract. %he s#bcontract price agreed #pon b the parties amo#nted

to P-,:F-,*-:.@:. P#rs#ant to the S#bcontract ;greement, H0CC wo#ld s#bmit to

99CCI a monthl progress billing which the latter wo#ld then pa, s#bect to stip#lated

ded#ctions, within - das from receipt thereof. Problems arose, howeer, when H0CC

s#bmitted its first billing to 99CCI and the latter ref#sed to pa in f#ll beca#se BP5H

has not inspected the some of the work completed on the period billed. ; oint

inspection b 99CCI and BP5H was s#bse>#entl cond#cted and some of the billedamo#nts were paid. %he H0CC s#bse>#entl demanded paments for its s#bcontracted

works to 9CCI which the latter ref#sed to pa in f#ll, the latter arg#ing that some of the

amo#nts hae alread been settled. H0CC completel halted all works. H0CC to file

with the Constr#ction Ind#str ;rbitration Commission (CI;C) a Complaint against

99CCI.

%he CI;C r#led in faor of H0CC. %he CI;C held that 99CCI’s nonApament of

the progress billings s#bmitted b H0CC gae the latter the right to rescind the

S#bcontract ;greement and, accordingl, H0CC’s work stoppage was #stified. %he C;

agreed with the CI;C that 99CCI had waied its right #nder the S#bcontract ;greement

to re>#ire a oint >#antification of H0CC’s completed works. Hence, this petition.

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ISSUE: Whether there was a valid rescission of the (ubcontract Agreement by

H;CC.

7o. %he right of rescission is stat#toril recogni6ed in reciprocal obligations. ;rticle F of the Ciil Code. %he rescission referred to in this article, more

appropriatel referred to as resol#tion is on the breach of faith b the defendant which is

iolatie of the reciprocit between the parties. %he right to rescind, howeer, ma be

waied, e+pressl or impliedl. 5hile the right to rescind reciprocal obligations is

implied, that is, that s#ch right need not be e+pressl proided in the contract,

neertheless the contracting parties ma waie the same. Contrar to the respectie

dispositions of the CI;C and the C;, we find that H0CC had no right to rescind the

S#bcontract ;greement in the g#ise of a work stoppage, the latter haing waied s#ch

right. Apropos is ;rticle .: of the S#bcontract ;greement, which reads4

.: 1ffects of Bisp#tes and Contin#ing bligations

Notitstandin+ an# disp"te, controvers#, di''erences or arbitration proceedin+s relatin+ directl# or indirectl# to tisS-3C0N=R(C= (+reement and witho#t pre#dice to the eent#alo#tcome thereof, @HRCCA sall at all times proceed it teprompt per'ormance o' te 8orks in accordance it tedirectives o' >>CCI and tis S-3C0N=R(C= (+reement.

Hence, in spite of the e+istence of disp#te or controers between the partiesd#ring the co#rse of the S#bcontract ;greement, H0CC had agreed to contin#e theperformance of its obligations p#rs#ant to the S#bcontract ;greement. In iew of theproision of the S#bcontract ;greement >#oted aboe, H0CC is deemed to haeeffectiel waied its right to effect e+tra#dicial rescission of its contract with 99CCI.

;ccordingl, H0CC, in the g#ise of rescinding the S#bcontract ;greement, was not #stified in implementing a work stoppage.

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S"bic 3a# etropolitan ("torit# v. C(

G. R. No. 192, !"l# *, 2%12

S#bic "a 2etropolitan ;#thorit (S"2;) and S#bic International Hotel, Corp.

(SIHC) entered into two separate lease agreements whereb SIHC #ndertook to help

S"2; in the deelopment and rehabilitation of the S#bic 7aal "ase b taking oer abandoned barracks and constr#cting hotel and resta#rant facilities that will

accommodate the needs of the growing n#mber of b#sinessmen and to#rists in the

9reeport Oone, which was red#ced into a 8ease and Beelopment ;greement. Section

'. of the said ;greement stip#lated for the pament of serice fees, which pertain to

the proportionate share of the priate respondent in the costs that the petitioner ma

inc#r in the proision of serices, maintenance and operation of common facilities

comp#ted at N. per s>#are meter of the gross land area of the leased propert. %he

controers arose when S"2; charged SIHC serice fees on the gro#nd that it has the

right to do so #nder 0.;. @::@ for other serices s#ch as fire protection, maintenance of

common areas, police protection, and other serices of similar nat#re. 1ent#all, SIHCfiled for a Petition for Beclarator 0elief with the 0%C. %he 0%C r#led in SIHC’s faor.

%he C; affirmed the 0%C. ;ccording to the C;, the records show that petitioner did not

act#all proide most of the serices en#merated in the 8ease and Beelopment

;greement and that the obligation inoled in the agreement was reciprocal in nat#re=

therefore, priate respondent?s obligation to pa was dependent #pon petitioner?s

performance of its reciprocal d#t to proide the agreed serice, and since petitioner

failed to perform its part of the deal, it cannot e+act compliance from priate respondent

of its d#t to pa. Hence, this petition.

ISSUE: Whether (*,A is entitled to the service fees.

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7o. %he C; was correct in r#ling that serice fees pertain to the proportionate

share of the tenant in the costs of the en#merated serices which incl#de the

maintenance and operation of facilities which directl or indirectl benefit or sere the

leased propert or the tenant, or an of its s#bsidiaries, assignees, transferees or

operators. Clearl, if the intention is the contrar, there wo#ld hae been no need to

en#merate what wo#ld constit#te serices coered b the !serice fees.& 1en logic

dictates that before anone is entitled to collect serice fees, one m#st hae act#all

rendered a serice. %he >#estioned proisions of the contract are reciprocal in nat#re.

0eciprocal obligations are those which arise from the same ca#se, and in which each

part is a debtor and a creditor of the other, s#ch that the obligation of one is dependent

#pon the obligation of the other. %he are to be performed sim#ltaneo#sl s#ch that the

performance of one is conditioned #pon the sim#ltaneo#s f#lfillment of the other. 9or

one part to demand the performance of the obligation of the other part, the former

m#st also perform its own obligation. ;ccordingl, petitioner, not haing proided the

serices that wo#ld re>#ire the pament of serice fees as stip#lated in the 8easeBeelopment ;greement, is not entitled to collect the same.

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=on+son v. mer+enc# Pansop 3"la, Inc.

G. R. No. 1)77*, !an"ar# 1 2%1%

Banilo 7apala offered to b# a propert owned b Spo#ses Kose and Carmen

%ongson (the %ongsons) for P- million. ; 2emorand#m of ;greement was e+ec#ted to

this effect. S#bse>#entl, a Beed of ;bsol#te sale was prepared b 7apala’s lawer.5hen Carmen noticed that the consideration in the Beed was onl P3, , 7apala

said that he (7apala) will be paing for the ta+es and that the %ongsons will receie the

P- million as promised. ;nother 2emorand#m of ;greement was prepared to conform

to the consideration in the Beed. <pon signing the Beed of ;bsol#te Sale, 7apala

paid P:, in cash to the Spo#ses %ongson and iss#ed a postdated Philippine

7ational "ank (P7") check in the amo#nt ofP:,E,, representing the remaining

balance of the p#rchase price of the s#bect propert. %hereafter, the %ongson’s title was

cancelled and a new was iss#ed in the name of 1mergenc Pawnshop "#la, Inc.

(1P"I). 5hen presented for pament, the P7" check was dishonored for the reason

!Brawn ;gainst Ins#fficient 9#nds.& Bespite the Spo#ses %ongson?s repeated demandsto either pa the f#ll al#e of the check or to ret#rn the s#bect parcel of land, 7apala

failed to do either. %he %ongsons were left with no reco#rse b#t to file a complaint with

the 0%C. %he 0%C r#led in faor of the %ongsons. %he C; affirmed the 0%C. Hence, this

petition.

ISSUE: Whether rescission is proper in this case.

Indisp#tabl, the Spo#ses %ongson as the sellers had alread performed their obligation of e+ec#ting the Beed of Sale, which led to the cancellation of their title infaor of 1P"I. 0espondents as the b#ers, on the other hand, failed to perform their correlatie obligation of paing the f#ll amo#nt of the contract price. 5hile 7apalapaid P:, cash to the Spo#ses %ongson as partial pament, 7apala iss#ed an

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ins#fficientl f#nded P7" check to pa the remaining balance of P:.E million. Bespiterepeated demands and the filing of the complaint, 7apala failed to pa the P:.E million#ntil the present. Clearl, respondents committed a s#bstantial breach of their reciprocalobligation, entitling the Spo#ses %ongson to the rescission of the sales contract. %he lawgrants this relief to the aggrieed part th#s4

;rticle F of the Ciil Code proides4

;rticle F. %he power to rescind obligations is implied inreciprocal ones, in case one of the obligors sho#ld not compl with what isinc#mbent #pon him.

%he in#red part ma choose between the f#lfillment and the rescission of theobligation, with pament of damages in either case. He ma also seek rescission, eenafter he has chosen f#lfillment, if the latter sho#ld become impossible.

;rticle -E* of the Ciil Code proides the effects of rescission, vi7 4

;0%. -E*. 0escission creates the obligation to ret#rn the thingswhich were the obect of the contract, together with their fr#its, and theprice with its interest= conse>#entl, it can be carried o#t onl when he whodemands rescission can ret#rn whateer he ma be obliged to restore. 7either shall rescission take place when the things which are the obect of the

contract are legall in the possession of third persons who did not act in bad faith.

While they did not file n ction fo! the !e"ci""ion of the "le" cont!ct# theSpo$"e" Ton%"on "pecificlly p!yed in thei! complint fo! the nn$lment of the"le" cont!ct# fo! the immedite e&ec$tion of deed of !econ'eynce# nd fo!

the !et$!n of the "$()ect p!ope!ty to them* %he Spo#ses %ongson likewise praed!for s#ch other reliefs which ma be deemed #st and e>#itable in the premises.& In iewof s#ch praer, and considering respondents’ s#bstantial breach of their obligation #nder the sales contract, the !e"ci""ion of the "le" cont!ct i" ($t p!ope! nd )$"tified .

;ccordingl, respondents m#st recone the s#bect propert to the Spo#ses %ongson,who in t#rn shall ref#nd the initial pament of P:, less the costs of s#it.

7apala’s claims that rescission is not proper and that he sho#ld be gien moretime to pa for the #npaid remaining balance of P:,E, cannot be co#ntenanced.Haing acted fra#d#lentl in performing his obligation, 7apala is not entitled to moretime to pa the remaining balance of P:,E,, and thereb erase the defa#lt or

breach that he had deliberatel inc#rred. %o do otherwise wo#ld be to sanction adeliberate and reiterated infringement of the contract#al obligations inc#rred b 7apala,an attit#de rep#gnant to the stabilit and obligator force of contracts.

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>ilBstate Properties, Inc. v. Ron4"illo

G. R. No. 179, !an"ar# 1$, 2%1*

9ilA1state Properties, Inc. is the owner and deeloper of the Central Park Place

%ower while coApetitioner 9ilA1state 7etwork, Inc. is its a#thori6ed marketing agent.

0espondent Spo#ses Conrado and 2aria $ictoria 0on>#illo (Sps. 0on>#illo) p#rchasedfrom petitioners an E:As>#are meter condomini#m #nit at Central Park Place %ower in

2andal#ong Cit. 0espondents e+ec#ted and signed a 0eseration ;pplication

;greement wherein the deposited P:,. as reseration fee. ;s agreed #pon,

respondents paid the f#ll downpament of P,**:,:. and had been paing

the P'-,-'-.-- monthl amorti6ations #ntil September FFE. S#bse>#entl, howeer,

#pon learning that constr#ction works had stopped, respondents likewise stopped

paing their monthl amorti6ation. Claiming to hae paid a total of P:,FE,F3F.F' to

petitioners, respondents thro#gh two (:) s#ccessie letters, demanded a f#ll ref#nd of

their pament with interest. 5hen their demands went #nheeded, respondents were

constrained to file a Complaint for 0ef#nd and Bamages before the Ho#sing and 8and<se 0eg#lator "oard (H8<0"). %he H8<0" iss#ed an rder of Befa#lt against

petitioners for failing to file their ;nswer within the reglementar period despite serice

of s#mmons. Petitioners filed a motion to lift order of defa#lt and attached their position

paper attrib#ting the dela in constr#ction to the FF@ ;sian financial crisis. Petitioners

denied committing fra#d or misrepresentation which co#ld entitle respondents to an

award of moral damages.

%he H8<0" f#led in faor of the Sps. 0on>#illo. n petition for reiew, the "oard

of Commissioners of the H8<0" denied the petition and affirmed the ;rbiter’s Becision.

%he ffice of the President likewise dismissed petitioner’s appeal. n a 0#le 3- petition

for reiew, the C; likewise denied the same. Hence, this petition.

ISSUE: Whether the nonDperformance of petitioners’ obligation entitles respondents

to rescission under Article 11=1 of the ew Civil Code.

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es. Indeed, the nonAperformance of petitioners’ obligation entitles respondents to

rescission #nder ;rticle F of the 7ew Ciil Code which states4

;rticle F. %he power to rescind obligations is implied in reciprocal ones, in case oneof the obligors sho#ld not compl with what is inc#mbent #pon him.

%he in#red part ma choose between the f#lfillment and the rescission of the

obligation, with pament of damages in either case. He ma also seek rescission, een

after he has chosen f#lfillment, if the latter sho#ld become impossible. 2ore in point is

Section :- of Presidential Becree 7o. F*@, the r#le goerning the sale of

condomini#ms, which proides4

Section +,* Non-.o!feit$!e of Pyment"* o installment payment made by a buyer in

a subdivision or condominium pro#ect for the lot or unit he contracted to buy shall beforfeited in favor of the owner or developer when the buyer- after due notice to theowner or developer- desists from further payment due to the failure of the owner or developer to develop the subdivision or condominium pro#ect according to the approved

plans and within the time limit for complying with the same. (uch buyer may- at hisoption- be reimbursed the total amount paid including amorti7ation interests but e!cluding delin3uency interests- with interest thereon at the legal rate.

Conformabl with these proisions of law, respondents are entitled to rescind thecontract and demand reimb#rsement for the paments the had made to petitioners.

7otabl, the iss#es had alread been settled b the Co#rt in the case of 9ilA1stateProperties, Inc. . Spo#ses o prom#lgated on @ ;#g#st :@, where the Co#rt statedthat the ;sian financial crisis is not an instance of caso fort#ito. "earing the samefact#al milie# as the instant case, .0. 7o. '*'3 inoles the same compan, 9ilA1state, albeit abo#t a different condomini#m propert. %he compan likewise renegedon its obligation to respondents therein b failing to deelop the condomini#m proectdespite s#bstantial pament of the contract price. 9ilA1state adanced the samearg#ment that the FF@ ;sian financial crisis is a fort#ito#s eent which #stifies thedela of the constr#ction proect. 9irst off, the Co#rt classified the iss#e as a >#estion of fact which ma not be raised in a petition for reiew considering that there was noariance in the fact#al findings of the H8<0", the ffice of the President and the Co#rt

of ;ppeals. Second, the Co#rt cited the preio#s r#lings of ;sian Constr#ction andBeelopment Corporation . Philippine Commercial International "ank3 and 2ondragon8eis#re and 0esorts Corporation . Co#rt of ;ppeals holding that the FF@ ;sianfinancial crisis did not constit#te a alid #stification to renege on obligations. %he Co#rte+po#nded4

;lso, we cannot generali6e that the ;sian financial crisis in FF@ was #nforeseeable andbeond the control of a b#siness corporation. It is #nfort#nate that petitioner apparentl

http://www.lawphil.net/judjuris/juri2014/jan2014/gr_185798_2014.html#fnt14

http://www.lawphil.net/judjuris/juri2014/jan2014/gr_185798_2014.html#fnt14

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met with considerable diffic#lt e.g. increase cost of materials and labor, een beforethe sched#led commencement of its real estate proect as earl as FF*. Howeer, areal estate enterprise engaged in the preAselling of condomini#m #nits is concededl amaster in proections on commodities and c#rrenc moements and b#siness risks. %hefl#ct#ating moement of the Philippine peso in the foreign e+change market is an

eerda occ#rrence, and fl#ct#ations in c#rrenc e+change rates happen eerda,th#s, not an instance of caso fort#ito.

Obligations (18 34)

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