Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 4410 August 27, 1908

URBANO FLORIANO, plaintiffs-appellee,

vs.
ESTEBAN DELGADO, ET AL., defendants-appellants.

A. E. Somersille for appellants.

R. Fernandez for appellee.

TORRES, J.:

On the 17th of February, 1907, the attorneys for Urbano Floriano filed a complaint against the married
couple Esteban Delgado and Regina Bertumen, residents of Ligao, Albay, alleging that the latter were
indebted to the plaintiff in the sum, of P1,352.80, duly admitted by the debtors, who engaged to pay it
together with interest thereon at the rate of 10 per cent per annum, as appears by a promissory note made
out on the 20th of January, 1907, and which reads:

We promise to pay to Sr. Urbano Floriano the sum of one thousand three hundred and fifty-two pesos and
eighty centavos (P1, 352.80), Conant, for balance standing against us on this date. Until said amount is
paid to Sr. Floriano we engaged to pay interest thereon at the rate of 10 per cent per annum, as agreed.
Ligao, January 20, 1907. — (Signed) Esteban Delgado. — (Signed) Regina Bertumen.

That the aforesaid amount has not been paid either in whole part, notwithstanding demand thereof, for
which reason the plaintiff asked the court to enter judgment against the defendants, sentencing them to
pay the said sum in Philippine currency, with interest thereon at the rate of 10 per cent per annum, from the
20th of January, 1907, until the date of payment, with costs, as well as any further remedy that the court
might consider just and equitable.

The defendants appeared within the time prescribed by the law, but they did not answer the complaint,
notwithstanding the fact that the time for answering had elapsed, nor did they present any answer, for which
reason the court below, on the 22d of March, 1907, held the said defendants, Delgado and Bertumen, to
be in default and ordered the plaintiff to proceed with his evidence; this aforesaid month and year, entered
judgment ordering the defendants to pay the amount claimed together with interest thereon from the 20th
of January, 1907, until such time as payment was made, with costs.

On April 9, following, the defendant Delgado, in his own name and on behalf of his wife, Bertumen, appealed
from said judgment. This appeal was admitted by the court below on the 13th of said month. A bill of
exception was submitted, and, after hearing the adverse party, it was brought to this court.

The subject in litigation is the fulfillment of an obligation contracted by the defendant spouses to pay a
certain sum stated in a document of indebtedness which is set out in the complaint, with the particularly
that no date was fixed therein for the payment of the debt.

Before proceed in further let us set forth the following facts; the defendant appellants did not ask for the
annulment of the judgment appealed from, nor for the holding of a new trial, but limited themselves simply
to excepting to said judgment, appealing to this court. hence, we are not called upon to review the findings
of the court below, and this decision will only dwell on the questions of law set up by the appellants in the
bill of errors which accompanies their brief.

Commencing with the second error in reference to the nature and character of the obligation continued in
the document of indebtedness, it is sufficient for the purposes of the decisions to say that, in accordance
with the old laws enforce in this country prior to the enactment of the present Civil Code, when an obligation
is pure, simple, and unconditional, and no particular day had been fixed for its fulfillment of the same may
be demanded ten days after it is contracted.

From the liquidation of accounts that took place between the plaintiff and the defendants, there resulted a
balance of P1,352.80 which the debtors bound themselves to pay, without fixing a day therefor, with interest
at the rate of 10 per cent per annum until paid, just as if they had received said sum on loan at the time of
the liquidation whereby they became indebted. Not having paid it at the time, they executed a document by
which they bound themselves to pay the creditor without fixing a date for payment, or any other condition.
Although in accordance with the old laws and the doctrine or precept of article 62 of the Code of Commerce,
the parties bound should have met their obligation at the expiration of ten days after the 20th of January,
1907, nevertheless, under the provisions of Civil Code, the payment of the obligation may be demanded at
once, unless from nature and circumstances of the creditor to grant the debtors some extension of time, in
which case the duration thereof should be fixed by the courts. (Art. 128, Civil Code.)

It can not be inferred from the language of the said document that it was the intention of Urbano Floriano
to grant the defendants any extension of time in the payment, the duration of should be fixed by judicial
authority; and inasmuch as a complaint was filed in court twenty-seven days after the obligation was
executed, after payment had been demanded from the debtors, the latter have no right at all to claim an
extension for the fulfillment of the obligation, the existence and legality of which they have expressly
recognized.

Article 113 of the Civil Code provides:

Every obligation, the fulfillment of which should not depend upon a future or uncertain event or
upon a past event, unknown to the parties in interest, shall be immediately demandable.

The document of indebtedness contains no term or condition whatever upon which depends the fulfillment
of obligation contracted by the debtors; therefore, there exists no motive or reason that would exempt them
from compliance therewith.

The judgment entered by the court below, sentencing the defendants to pay the plaintiff the sum that they
owe him together with interest thereon, must of course be understood as having been imposed upon them
jointly in accordance with the mutual character of the obligation contracted by the debtors, therefore the
decision of the court below is in accordance with the provisions of article 1137 and 1138 of the Civil Code,
and it can not be contended that each of them has been severally sentenced to pay the whole amount
stated in the document of indebtedness, and for said reason the fourth error attributed to the judgment
appealed from is not true.

As to the first and second errors imputed by the appellants to the said judgment, it is unquestionable that
the plaintiff has made a material error in his writing of the 21st of March, 1907, by charging only the husband,
one of the defendants, with default; such error is explicable however in that the husband is the natural
representative of his wife, but it was no importance in view of the fact that the complaint was filed against
both of them, and that they were both summoned. The judge below having discovered the mistake held
both defendants to be in default, thus amending, to a certain extent, the erroneous charge of the plaintiff.

The order of default of March 22 was complied with, and upon the necessary evidence being offered by the
plaintiff, the judge below, without further formalities, since section 128 of the Code of Civil Procedure does
not require any other than those observed into these proceedings, rendered judgment on the 30th of the
same month, after proceedings is due form of law.

For the foregoing reasons, and as the judgment appealed from is an accordance with the law, it is our
opinion that it should be affirmed, with the costs against the appellants. So ordered.

Arellano, C.J., Mapa, Carson, Willard and Tracey, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-29900 June 28, 1974

IN THE MATTER OF THE INTESTATE ESTATE OF JUSTO PALANCA, Deceased, GEORGE

PAY, petitioner-appellant,
vs.
SEGUNDINA CHUA VDA. DE PALANCA, oppositor-appellee.

Florentino B. del Rosario for petitioner-appellant.

Manuel V. San Jose for oppositor-appellee.

FERNANDO, J.:p

There is no difficulty attending the disposition of this appeal by petitioner on questions of law. While several
points were raised, the decisive issue is whether a creditor is barred by prescription in his attempt to collect
on a promissory note executed more than fifteen years earlier with the debtor sued promising to pay either
upon receipt by him of his share from a certain estate or upon demand, the basis for the action being the
latter alternative. The lower court held that the ten-year period of limitation of actions did apply, the note
being immediately due and demandable, the creditor admitting expressly that he was relying on the wording
"upon demand." On the above facts as found, and with the law being as it is, it cannot be said that its
decision is infected with error. We affirm.

From the appealed decision, the following appears: "The parties in this case agreed to submit the matter
for resolution on the basis of their pleadings and annexes and their respective memoranda submitted.
Petitioner George Pay is a creditor of the Late Justo Palanca who died in Manila on July 3, 1963. The claim
of the petitioner is based on a promissory note dated January 30, 1952, whereby the late Justo Palanca
and Rosa Gonzales Vda. de Carlos Palanca promised to pay George Pay the amount of P26,900.00, with
interest thereon at the rate of 12% per annum. George Pay is now before this Court, asking that Segundina
Chua vda. de Palanca, surviving spouse of the late Justo Palanca, he appointed as administratrix of a
certain piece of property which is a residential dwelling located at 2656 Taft Avenue, Manila, covered by
Tax Declaration No. 3114 in the name of Justo Palanca, assessed at P41,800.00. The idea is that once
said property is brought under administration, George Pay, as creditor, can file his claim against the
administratrix."1 It then stated that the petition could not prosper as there was a refusal on the part of
Segundina Chua Vda. de Palanca to be appointed as administratrix; that the property sought to be
administered no longer belonged to the debtor, the late Justo Palanca; and that the rights of petitioner-
creditor had already prescribed. The promissory note, dated January 30, 1962, is worded thus: " `For value
received from time to time since 1947, we [jointly and severally promise to] pay to Mr. [George Pay] at his
office at the China Banking Corporation the sum of [Twenty Six Thousand Nine Hundred Pesos]
(P26,900.00), with interest thereon at the rate of 12% per annum upon receipt by either of the undersigned
of cash payment from the Estate of the late Don Carlos Palanca or upon demand'. . . . As stated, this
promissory note is signed by Rosa Gonzales Vda. de Carlos Palanca and Justo Palanca."2 Then came this
paragraph: "The Court has inquired whether any cash payment has been received by either of the signers
of this promissory note from the Estate of the late Carlos Palanca. Petitioner informed that he does not
insist on this provision but that petitioner is only claiming on his right under the promissory note ." 3 After
which, came the ruling that the wording of the promissory note being "upon demand," the obligation was
immediately due. Since it was dated January 30, 1952, it was clear that more "than ten (10) years has
already transpired from that time until to date. The action, therefore, of the creditor has definitely
prescribed."4 The result, as above noted, was the dismissal of the petition.
In an exhaustive brief prepared by Attorney Florentino B. del Rosario, petitioner did assail the correctness
of the rulings of the lower court as to the effect of the refusal of the surviving spouse of the late Justo
Palanca to be appointed as administratrix, as to the property sought to be administered no longer belonging
to the debtor, the late Justo Palanca, and as to the rights of petitioner-creditor having already prescribed.
As noted at the outset, only the question of prescription need detain us in the disposition of this appeal.
Likewise, as intimated, the decision must be affirmed, considering the clear tenor of the promissory note.

From the manner in which the promissory note was executed, it would appear that petitioner was hopeful
that the satisfaction of his credit could he realized either through the debtor sued receiving cash payment
from the estate of the late Carlos Palanca presumptively as one of the heirs, or, as expressed therein, "upon
demand." There is nothing in the record that would indicate whether or not the first alternative was fulfilled.
What is undeniable is that on August 26, 1967, more than fifteen years after the execution of the promissory
note on January 30, 1952, this petition was filed. The defense interposed was prescription. Its merit is rather
obvious. Article 1179 of the Civil Code provides: "Every obligation whose performance does not depend
upon a future or uncertain event, or upon a past event unknown to the parties, is demandable at once."
This used to be Article 1113 of the Spanish Civil Code of 1889. As far back as Floriano v. Delgado,5 a 1908
decision, it has been applied according to its express language. The well-known Spanish commentator,
Manresa, on this point, states: "Dejando con acierto, el caracter mas teorico y grafico del acto, o sea la
perfeccion de este, se fija, para determinar el concepto de la obligacion pura, en el distinctive de esta, y
que es consecuencia de aquel: la exigibilidad immediata."6

The obligation being due and demandable, it would appear that the filing of the suit after fifteen years was
much too late. For again, according to the Civil Code, which is based on Section 43 of Act No. 190, the
prescriptive period for a written contract is that of ten years.7 This is another instance where this Court has
consistently adhered to the express language of the applicable norm. 8 There is no necessity therefore of
passing upon the other legal questions as to whether or not it did suffice for the petition to fail just because
the surviving spouse refuses to be made administratrix, or just because the estate was left with no other
property. The decision of the lower court cannot be overturned.

WHEREFORE, the lower court decision of July 24, 1968 is affirmed. Costs against George Pay.

Zaldivar (Chairman), Barredo, Antonio, Fernandez and Aquino, JJ., concur.

Footnotes

1 Decision, Record on Appeal, 46-47.

2 Ibid, 48-49.

3 Ibid, 49.

4 Ibid.

5 11 Phil. 154.

6 VIII Manresa, Codigo Civil Español, Quinta edicion, 305 (1950)..

7 Article 1144 of the Civil code provides: "The following actions must be brought within ten
years from the time the right of action accrues:(1) Upon a written contract; (2) Upon an
obligation created by law;(3) Upon a judgment."
8 Cf. Azarraga v. Rodriguez, 9 Phil. 637 (1908); Brillantes v. Margarejo, 36 Phil. 202 (1917);
Agoncillo v. Javier, 38 Phil. 424 (1918); Sarmiento v. Javellana, 43 Phil. 880 (1922); Ban
Kiat and Co. v. Atkins, Kroll and Co., 44 Phil. 4 (1922); F. M. Yap Tico and Co. v. Lopez
Vito, 49 Phil. 61 (1926); Parks v. Province of Tarlac, 49 Phil. 142 (1926); Hospicio de San
Jose v. Fidelity and Surety Co., 52 Phil. 926 (1929); Lutero Suiliong and Co., 54 Phil. 272
(1930); De Borja v. De Borja, 58 Phil. 811 (1933); International Banking Corp. v. Yared, 59
Phil. 72 (1933); Barretto v. Tuason, 59 Phil. 845 (1934); Hijos de F. Escano v. Nazareno,
60 Phil. 104 (1934); Matute v. Matute, 62 Phil. 676 (1935); Cunanan v. De Antepasado. L-
16169. Aug 31, 1962, 5 SCRA 1028; General Insurance and Surety Corp. v. Republic, L-
13873, Jan. 31, 1963, 7 SCRA 4.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 112127 July 17, 1995

CENTRAL PHILIPPINE UNIVERSITY, petitioner,

vs.
COURT OF APPEALS, REMEDIOS FRANCO, FRANCISCO N. LOPEZ, CECILIA P. VDA. DE LOPEZ,
REDAN LOPEZ AND REMARENE LOPEZ, respondents.

BELLOSILLO, J.:

CENTRAL PHILIPPINE UNIVERSITY filed this petition for review on certiorari of the decision of the Court
of Appeals which reversed that of the Regional Trial Court of Iloilo City directing petitioner to reconvey to
private respondents the property donated to it by their predecessor-in-interest.

Sometime in 1939, the late Don Ramon Lopez, Sr., who was then a member of the Board of Trustees of
the Central Philippine College (now Central Philippine University [CPU]), executed a deed of donation in
favor of the latter of a parcel of land identified as Lot No. 3174-B-1 of the subdivision plan Psd-1144, then
a portion of Lot No. 3174-B, for which Transfer Certificate of Title No. T-3910-A was issued in the name of
the donee CPU with the following annotations copied from the deed of donation —

1. The land described shall be utilized by the CPU exclusively for the establishment and
use of a medical college with all its buildings as part of the curriculum;

2. The said college shall not sell, transfer or convey to any third party nor in any way
encumber said land;

3. The said land shall be called "RAMON LOPEZ CAMPUS", and the said college shall be
under obligation to erect a cornerstone bearing that name. Any net income from the land
or any of its parks shall be put in a fund to be known as the "RAMON LOPEZ CAMPUS
FUND" to be used for improvements of said campus and erection of a building thereon. 1

On 31 May 1989, private respondents, who are the heirs of Don Ramon Lopez, Sr., filed an action for
annulment of donation, reconveyance and damages against CPU alleging that since 1939 up to the time
the action was filed the latter had not complied with the conditions of the donation. Private respondents also
argued that petitioner had in fact negotiated with the National Housing Authority (NHA) to exchange the
donated property with another land owned by the latter.

In its answer petitioner alleged that the right of private respondents to file the action had prescribed; that it
did not violate any of the conditions in the deed of donation because it never used the donated property for
any other purpose than that for which it was intended; and, that it did not sell, transfer or convey it to any
third party.

On 31 May 1991, the trial court held that petitioner failed to comply with the conditions of the donation and
declared it null and void. The court a quo further directed petitioner to execute a deed of the reconveyance
of the property in favor of the heirs of the donor, namely, private respondents herein.
Petitioner appealed to the Court of Appeals which on 18 June 1993 ruled that the annotations at the back
of petitioner's certificate of title were resolutory conditions breach of which should terminate the rights of
the donee thus making the donation revocable.

The appellate court also found that while the first condition mandated petitioner to utilize the donated
property for the establishment of a medical school, the donor did not fix a period within which the condition
must be fulfilled, hence, until a period was fixed for the fulfillment of the condition, petitioner could not be
considered as having failed to comply with its part of the bargain. Thus, the appellate court rendered its
decision reversing the appealed decision and remanding the case to the court of origin for the determination
of the time within which petitioner should comply with the first condition annotated in the certificate of title.

Petitioner now alleges that the Court of Appeals erred: (a) in holding that the quoted annotations in the
certificate of title of petitioner are onerous obligations and resolutory conditions of the donation which must
be fulfilled non-compliance of which would render the donation revocable; (b) in holding that the issue of
prescription does not deserve "disquisition;" and, (c) in remanding the case to the trial court for the fixing of
the period within which petitioner would establish a medical college.2

We find it difficult to sustain the petition. A clear perusal of the conditions set forth in the deed of donation
executed by Don Ramon Lopez, Sr., gives us no alternative but to conclude that his donation was onerous,
one executed for a valuable consideration which is considered the equivalent of the donation itself, e.g.,
when a donation imposes a burden equivalent to the value of the donation. A gift of land to the City of
Manila requiring the latter to erect schools, construct a children's playground and open streets on the land
was considered an onerous donation.3 Similarly, where Don Ramon Lopez donated the subject parcel of
land to petitioner but imposed an obligation upon the latter to establish a medical college thereon, the
donation must be for an onerous consideration.

Under Art. 1181 of the Civil Code, on conditional obligations, the acquisition of rights, as well as the
extinguishment or loss of those already acquired, shall depend upon the happening of the event which
constitutes the condition. Thus, when a person donates land to another on the condition that the latter would
build upon the land a school, the condition imposed was not a condition precedent or a suspensive condition
but a resolutory one.4 It is not correct to say that the schoolhouse had to be constructed before the donation
became effective, that is, before the donee could become the owner of the land, otherwise, it would be
invading the property rights of the donor. The donation had to be valid before the fulfillment of the
condition.5 If there was no fulfillment or compliance with the condition, such as what obtains in the instant
case, the donation may now be revoked and all rights which the donee may have acquired under it shall be
deemed lost and extinguished.

The claim of petitioner that prescription bars the instant action of private respondents is unavailing.

The condition imposed by the donor, i.e., the building of a medical school upon the land donated,
depended upon the exclusive will of the donee as to when this condition shall be fulfilled. When
petitioner accepted the donation, it bound itself to comply with the condition thereof. Since the time
within which the condition should be fulfilled depended upon the exclusive will of the petitioner, it
has been held that its absolute acceptance and the acknowledgment of its obligation provided in
the deed of donation were sufficient to prevent the statute of limitations from barring the action of
private respondents upon the original contract which was the deed of donation. 6

Moreover, the time from which the cause of action accrued for the revocation of the donation and recovery
of the property donated cannot be specifically determined in the instant case. A cause of action arises when
that which should have been done is not done, or that which should not have been done is done.7 In cases
where there is no special provision for such computation, recourse must be had to the rule that the period
must be counted from the day on which the corresponding action could have been instituted. It is the legal
possibility of bringing the action which determines the starting point for the computation of the period. In
this case, the starting point begins with the expiration of a reasonable period and opportunity for petitioner
to fulfill what has been charged upon it by the donor.

The period of time for the establishment of a medical college and the necessary buildings and
improvements on the property cannot be quantified in a specific number of years because of the presence
of several factors and circumstances involved in the erection of an educational institution, such as
government laws and regulations pertaining to education, building requirements and property restrictions
which are beyond the control of the donee.

Thus, when the obligation does not fix a period but from its nature and circumstances it can be inferred that
a period was intended, the general rule provided in Art. 1197 of the Civil Code applies, which provides that
the courts may fix the duration thereof because the fulfillment of the obligation itself cannot be demanded
until after the court has fixed the period for compliance therewith and such period has arrived. 8

This general rule however cannot be applied considering the different set of circumstances existing in the
instant case. More than a reasonable period of fifty (50) years has already been allowed petitioner to avail
of the opportunity to comply with the condition even if it be burdensome, to make the donation in its favor
forever valid. But, unfortunately, it failed to do so. Hence, there is no more need to fix the duration of a term
of the obligation when such procedure would be a mere technicality and formality and would serve no
purpose than to delay or lead to an unnecessary and expensive multiplication of suits. 9 Moreover, under
Art. 1191 of the Civil Code, when one of the obligors cannot comply with what is incumbent upon him, the
obligee may seek rescission and the court shall decree the same unless there is just cause authorizing the
fixing of a period. In the absence of any just cause for the court to determine the period of the compliance,
there is no more obstacle for the court to decree the rescission claimed.

Finally, since the questioned deed of donation herein is basically a gratuitous one, doubts referring to
incidental circumstances of a gratuitous contract should be resolved in favor of the least transmission of
rights and interests. 10 Records are clear and facts are undisputed that since the execution of the deed of
donation up to the time of filing of the instant action, petitioner has failed to comply with its obligation as
donee. Petitioner has slept on its obligation for an unreasonable length of time. Hence, it is only just and
equitable now to declare the subject donation already ineffective and, for all purposes, revoked so that
petitioner as donee should now return the donated property to the heirs of the donor, private respondents
herein, by means of reconveyance.

WHEREFORE, the decision of the Regional Trial Court of Iloilo, Br. 34, of 31 May 1991 is REINSTATED
and AFFIRMED, and the decision of the Court of Appeals of 18 June 1993 is accordingly MODIFIED.
Consequently, petitioner is directed to reconvey to private respondents Lot No. 3174-B-1 of the subdivision
plan Psd-1144 covered by Transfer Certificate of Title No. T-3910-A within thirty (30) days from the finality
of this judgment.

Costs against petitioner.

SO ORDERED.

Quiason and Kapunan, JJ., concur.

Separate Opinions

DAVIDE, JR., J., dissenting:

I agree with the view in the majority opinion that the donation in question is onerous considering the
conditions imposed by the donor on the donee which created reciprocal obligations upon both parties.
Beyond that, I beg to disagree.
First of all, may I point out an inconsistency in the majority opinion's description of the donation in question.
In one part, it says that the donation in question is onerous. Thus, on page 4 it states:

We find it difficult to sustain the petition. A clear perusal of the conditions set forth in the
deed of donation executed by Don Ramon Lopez, Sr., give us no alternative but to conclude
that his donation was onerous, one executed for a valuable consideration which is
considered the equivalent of the donation itself, e.g., when a donation imposes a burden
equivalent to the value of the donation . . . . (emphasis supplied)

Yet, in the last paragraph of page 8 it states that the donation is basically a gratuitous one. The
pertinent portion thereof reads:

Finally, since the questioned deed of donation herein is basically a gratuitous one, doubts
referring to incidental circumstances of a gratuitous contract should be resolved in favor of
the least transmission of rights and interest . . . (emphasis supplied)

Second, the discussion on conditional obligations is unnecessary. There is no conditional obligation to

speak of in this case. It seems that the "conditions" imposed by the donor and as the word is used in the
law of donations is confused with "conditions" as used in the law of obligations. In his annotation of Article
764 of the Civil Code on Donations, Arturo M. Tolentino, citing the well-known civilists such as Castan,
Perez Gonzalez and Alguer, and Colin & Capitant, states clearly the context within which the term
"conditions" is used in the law of donations, to wit:

The word "conditions" in this article does not refer to uncertain events on which the birth or
extinguishment of a juridical relation depends, but is used in the vulgar sense of obligations
or charges imposed by the donor on the donee. It is used, not in its technical or strict legal
sense, but in its broadest sense.1 (emphasis supplied)

Clearly then, when the law and the deed of donation speaks of "conditions" of a donation, what are referred
to are actually the obligations, charges or burdens imposed by the donor upon the donee and which would
characterize the donation as onerous. In the present case, the donation is, quite obviously, onerous, but it
is more properly called a "modal donation." A modal donation is one in which the donor imposes a prestation
upon the donee. The establishment of the medical college as the condition of the donation in the present
case is one such prestation.

The conditions imposed by the donor Don Ramon Lopez determines neither the existence nor the
extinguishment of the obligations of the donor and the donee with respect to the donation. In fact, the
conditions imposed by Don Ramon Lopez upon the donee are the very obligations of the donation — to
build the medical college and use the property for the purposes specified in the deed of donation. It is very
clear that those obligations are unconditional, the fulfillment, performance, existence or extinguishment of
which is not dependent on any future or uncertain event or past and unknown event, as the Civil Code
would define a conditional obligation.2

Reliance on the case of Parks vs. Province of Tarlac3 as cited on page 5 of the majority opinion is erroneous
in so far as the latter stated that the condition in Parks is a resolutory one and applied this to the present
case. A more careful reading of this Court's decision would reveal that nowhere did we say, whether
explicitly or impliedly, that the donation in that case, which also has a condition imposed to build a school
and a public park upon the property donated, is a resolutory condition. 4 It is incorrect to say that the
"conditions" of the donation there or in the present case are resolutory conditions because, applying Article
1181 of the Civil Code, that would mean that upon fulfillment of the conditions, the rights already acquired
will be extinguished. Obviously, that could not have been the intention of the parties.

What the majority opinion probably had in mind was that the conditions are resolutory because if they
are not complied with, the rights of the donee as such will be extinguished and the donation will be revoked.
To my mind, though, it is more accurate to state that the conditions here are not resolutory conditions but,
for the reasons stated above, are the obligations imposed by the donor.

Third, I cannot subscribe to the view that the provisions of Article 1197 cannot be applied here. The
conditions/obligations imposed by the donor herein are subject to a period. I draw this conclusion based on
our previous ruling which, although made almost 90 years ago, still finds application in the present case.
In Barretto vs. City of Manila,5 we said that when the contract of donation, as the one involved therein, has
no fixed period in which the condition should be fulfilled, the provisions of what is now Article 1197 (then
Article 1128) are applicable and it is the duty of the court to fix a suitable time for its fulfillment. Indeed, from
the nature and circumstances of the conditions/obligations of the present donation, it can be inferred that a
period was contemplated by the donor. Don Ramon Lopez could not have intended his property to remain
idle for a long period of time when in fact, he specifically burdened the donee with the obligation to set up
a medical college therein and thus put his property to good use. There is a need to fix the duration of the
time within which the conditions imposed are to be fulfilled.

It is also important to fix the duration or period for the performance of the conditions/obligations in the
donation in resolving the petitioner's claim that prescription has already barred the present action. I disagree
once more with the ruling of the majority that the action of the petitioners is not barred by the statute of
limitations. There is misplaced reliance again on a previous decision of this Court in Osmeña vs.
Rama.6 That case does not speak of a deed of donation as erroneously quoted and cited by the majority
opinion. It speaks of a contract for a sum of money where the debtor herself imposed a condition which will
determine when she will fulfill her obligation to pay the creditor, thus, making the fulfillment of her obligation
dependent upon her will. What we have here, however, is not a contract for a sum of money but a donation
where the donee has not imposed any conditions on the fulfillment of its obligations. Although it is admitted
that the fulfillment of the conditions/obligations of the present donation may be dependent on the will of the
donee as to when it will comply therewith, this did not arise out of a condition which the donee itself imposed.
It is believed that the donee was not meant to and does not have absolute control over the time within which
it will perform its obligations. It must still do so within a reasonable time. What that reasonable time is, under
the circumstances, for the courts to determine. Thus, the mere fact that there is no time fixed as to when
the conditions of the donation are to be fulfilled does not ipso facto mean that the statute of limitations will
not apply anymore and the action to revoke the donation becomes imprescriptible.

Admittedly, the donation now in question is an onerous donation and is governed by the law on contracts
(Article 733) and the case of Osmeña, being one involving a contract, may apply. But we must not lose
sight of the fact that it is still a donation for which this Court itself applied the pertinent law to resolve
situations such as this. That the action to revoke the donation can still prescribe has been the
pronouncement of this Court as early as 1926 in the case of Parks which, on this point, finds relevance in
this case. There, this Court said,

[that] this action [for the revocation of the donation] is prescriptible, there is no doubt. There
is no legal provision which excludes this class of action from the statute of limitations. And
not only this, the law itself recognizes the prescriptibility of the action for the revocation of
a donation, providing a special period of [four] years for the revocation by the subsequent
birth of children [Art. 646, now Art. 763], and . . . by reason of ingratitude. If no special
period is provided for the prescription of the action for revocation for noncompliance of the
conditions of the donation [Art. 647, now Art. 764], it is because in this respect the donation
is considered onerous and is governed by the law of contracts and the general rules of
prescription.7

More recently, in De Luna v. Abrigo,8 this Court reiterated the ruling in Parks and said that:

It is true that under Article 764 of the New Civil Code, actions for the revocation of a
donation must be brought within four (4) years from the non-compliance of the conditions
of the donation. However, it is Our opinion that said article does not apply to onerous
 donations in view of the specific provision of Article 733 providing that onerous donations
are governed by the rules on contracts.

In the light of the above, the rules on contracts and the general rules on prescription and
not the rules on donations are applicable in the case at bar.

The law applied in both cases is Article 1144(1). It refers to the prescription of an action upon a written
contract, which is what the deed of an onerous donation is. The prescriptive period is ten years from the
time the cause of action accrues, and that is, from the expiration of the time within which the donee must
comply with the conditions/obligations of the donation. As to when this exactly is remains to be determined,
and that is for the courts to do as reposed upon them by Article 1197.

For the reasons expressed above, I register my dissent. Accordingly, the decision of the Court of Appeals
must be upheld, except its ruling that the conditions of the donation are resolutory.

Padilla, J., dissents

Separate Opinions

DAVIDE, JR., J., dissenting:

I agree with the view in the majority opinion that the donation in question is onerous considering the
conditions imposed by the donor on the donee which created reciprocal obligations upon both parties.
Beyond that, I beg to disagree.

First of all, may I point out an inconsistency in the majority opinion's description of the donation in question.
In one part, it says that the donation in question is onerous. Thus, on page 4 it states:

We find it difficult to sustain the petition. A clear perusal of the conditions set forth in the
deed of donation executed by Don Ramon Lopez, Sr., give us no alternative but to conclude
that his donation was onerous, one executed for a valuable consideration which is
considered the equivalent of the donation itself, e.g., when a donation imposes a burden
equivalent to the value of the donation . . . . (emphasis supplied)

Yet, in the last paragraph of page 8 it states that the donation is basically a gratuitous one. The
pertinent portion thereof reads:

Finally, since the questioned deed of donation herein is basically a gratuitous one, doubts
referring to incidental circumstances of a gratuitous contract should be resolved in favor of
the least transmission of rights and interest . . . (emphasis supplied)

Second, the discussion on conditional obligations is unnecessary. There is no conditional obligation to

speak of in this case. It seems that the "conditions" imposed by the donor and as the word is used in the
law of donations is confused with "conditions" as used in the law of obligations. In his annotation of Article
764 of the Civil Code on Donations, Arturo M. Tolentino, citing the well-known civilists such as Castan,
Perez Gonzalez and Alguer, and Colin & Capitant, states clearly the context within which the term
"conditions" is used in the law of donations, to wit:

The word "conditions" in this article does not refer to uncertain events on which the birth or
extinguishment of a juridical relation depends, but is used in the vulgar sense of obligations
 or charges imposed by the donor on the donee. It is used, not in its technical or strict legal
sense, but in its broadest sense.1 (emphasis supplied)

Clearly then, when the law and the deed of donation speaks of "conditions" of a donation, what are referred
to are actually the obligations, charges or burdens imposed by the donor upon the donee and which would
characterize the donation as onerous. In the present case, the donation is, quite obviously, onerous, but it
is more properly called a "modal donation." A modal donation is one in which the donor imposes a prestation
upon the donee. The establishment of the medical college as the condition of the donation in the present
case is one such prestation.

The conditions imposed by the donor Don Ramon Lopez determines neither the existence nor the
extinguishment of the obligations of the donor and the donee with respect to the donation. In fact, the
conditions imposed by Don Ramon Lopez upon the donee are the very obligations of the donation — to
build the medical college and use the property for the purposes specified in the deed of donation. It is very
clear that those obligations are unconditional, the fulfillment, performance, existence or extinguishment of
which is not dependent on any future or uncertain event or past and unknown event, as the Civil Code
would define a conditional obligation.2

Reliance on the case of Parks vs. Province of Tarlac3 as cited on page 5 of the majority opinion is erroneous
in so far as the latter stated that the condition in Parks is a resolutory one and applied this to the present
case. A more careful reading of this Court's decision would reveal that nowhere did we say, whether
explicitly or impliedly, that the donation in that case, which also has a condition imposed to build a school
and a public park upon the property donated, is a resolutory condition. 4 It is incorrect to say that the
"conditions" of the donation there or in the present case are resolutory conditions because, applying Article
1181 of the Civil Code, that would mean that upon fulfillment of the conditions, the rights already acquired
will be extinguished. Obviously, that could not have been the intention of the parties.

What the majority opinion probably had in mind was that the conditions are resolutory because if they
are not complied with, the rights of the donee as such will be extinguished and the donation will be revoked.
To my mind, though, it is more accurate to state that the conditions here are not resolutory conditions but,
for the reasons stated above, are the obligations imposed by the donor.

Third, I cannot subscribe to the view that the provisions of Article 1197 cannot be applied here. The
conditions/obligations imposed by the donor herein are subject to a period. I draw this conclusion based on
our previous ruling which, although made almost 90 years ago, still finds application in the present case.
In Barretto vs. City of Manila,5 we said that when the contract of donation, as the one involved therein, has
no fixed period in which the condition should be fulfilled, the provisions of what is now Article 1197 (then
Article 1128) are applicable and it is the duty of the court to fix a suitable time for its fulfillment. Indeed, from
the nature and circumstances of the conditions/obligations of the present donation, it can be inferred that a
period was contemplated by the donor. Don Ramon Lopez could not have intended his property to remain
idle for a long period of time when in fact, he specifically burdened the donee with the obligation to set up
a medical college therein and thus put his property to good use. There is a need to fix the duration of the
time within which the conditions imposed are to be fulfilled.

It is also important to fix the duration or period for the performance of the conditions/obligations in the
donation in resolving the petitioner's claim that prescription has already barred the present action. I disagree
once more with the ruling of the majority that the action of the petitioners is not barred by the statute of
limitations. There is misplaced reliance again on a previous decision of this Court in Osmeña vs.
Rama.6 That case does not speak of a deed of donation as erroneously quoted and cited by the majority
opinion. It speaks of a contract for a sum of money where the debtor herself imposed a condition which will
determine when she will fulfill her obligation to pay the creditor, thus, making the fulfillment of her obligation
dependent upon her will. What we have here, however, is not a contract for a sum of money but a donation
where the donee has not imposed any conditions on the fulfillment of its obligations. Although it is admitted
that the fulfillment of the conditions/obligations of the present donation may be dependent on the will of the
donee as to when it will comply therewith, this did not arise out of a condition which the donee itself imposed.
It is believed that the donee was not meant to and does not have absolute control over the time within which
it will perform its obligations. It must still do so within a reasonable time. What that reasonable time is, under
the circumstances, for the courts to determine. Thus, the mere fact that there is no time fixed as to when
the conditions of the donation are to be fulfilled does not ipso facto mean that the statute of limitations will
not apply anymore and the action to revoke the donation becomes imprescriptible.

Admittedly, the donation now in question is an onerous donation and is governed by the law on contracts
(Article 733) and the case of Osmeña, being one involving a contract, may apply. But we must not lose
sight of the fact that it is still a donation for which this Court itself applied the pertinent law to resolve
situations such as this. That the action to revoke the donation can still prescribe has been the
pronouncement of this Court as early as 1926 in the case of Parks which, on this point, finds relevance in
this case. There, this Court said,

[that] this action [for the revocation of the donation] is prescriptible, there is no doubt. There
is no legal provision which excludes this class of action from the statute of limitations. And
not only this, the law itself recognizes the prescriptibility of the action for the revocation of
a donation, providing a special period of [four] years for the revocation by the subsequent
birth of children [Art. 646, now Art. 763], and . . . by reason of ingratitude. If no special
period is provided for the prescription of the action for revocation for noncompliance of the
conditions of the donation [Art. 647, now Art. 764], it is because in this respect the donation
is considered onerous and is governed by the law of contracts and the general rules of
prescription.7

More recently, in De Luna v. Abrigo,8 this Court reiterated the ruling in Parks and said that:

It is true that under Article 764 of the New Civil Code, actions for the revocation of a
donation must be brought within four (4) years from the non-compliance of the conditions
of the donation. However, it is Our opinion that said article does not apply to onerous
donations in view of the specific provision of Article 733 providing that onerous donations
are governed by the rules on contracts.

In the light of the above, the rules on contracts and the general rules on prescription and
not the rules on donations are applicable in the case at bar.

The law applied in both cases is Article 1144(1). It refers to the prescription of an action upon a written
contract, which is what the deed of an onerous donation is. The prescriptive period is ten years from the
time the cause of action accrues, and that is, from the expiration of the time within which the donee must
comply with the conditions/obligations of the donation. As to when this exactly is remains to be determined,
and that is for the courts to do as reposed upon them by Article 1197.

For the reasons expressed above, I register my dissent. Accordingly, the decision of the Court of Appeals
must be upheld, except its ruling that the conditions of the donation are resolutory.

Padilla, J., dissents

Footnotes

1 Rollo, p. 23.

2 Rollo, p. 8.

3 City of Manila v. Rizal Park Co., 53 Phil. 515 (1929).

4 Parks v. Province of Tarlac, 49 Phil. 142 (1926).

5 Ibid.

6 Osmeña v. Rama, 14 Phil. 99 (1909).

7 Arturo M. Tolentino, The Civil Code of the Philippines, 1986 Ed., Vol. IV, p. 42.

8 Concepcion v. People, 74 Phil. 63 (1942).

9 Tiglao v. Manila Railroad Co., 52 O.G., p. 179.

10 Art. 1378, Civil Code.

DAVIDE, JR. J., dissenting:

1 ARTURO M. TOLENTINO, Commentaries and Jurisprudence on the Civil Code of the

Philippines 535, vol. 2 [1983].

2 Article 1179.

3 49 Phil. 142 [1926].

4 Id. at 145-146.

5 7 Phil. 416 [1907].

6 14 Phil. 99 [1909].

7 Parks vs. Province of Tarlac, supra note 3, at 146.

8 181 SCRA 150 [1990].

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-5003 June 27, 1953

NAZARIO TRILLANA, administrator-appellee,

vs.
QUEZON COLLEGE, INC., claimant-appellant.

Singson, Barnes, Yap and Blanco for appellant.

Delgado, Flores & Macapagal for appellee.

PARAS, J.:

Damasa Crisostomo sent the following letter to the Board of Trustees of the Quezon College:

June 1, 1948

The BOARD OF TRUSTEES

Quezon College
Manila

Gentlemen:

Please enter my subscription to dalawang daan (200) shares of your capital stock with a par
value of P100 each. Enclosed you will find (Babayaran kong lahat pagkatapos na ako ay
makapag-pahuli ng isda) pesos as my initial payment and the balance payable in accordance
with law and the rules and regulations of the Quezon College. I hereby agree to shoulder the
expenses connected with said shares of stock. I further submit myself to all lawful demands,
decisions or directives of the Board of Trustees of the Quezon College and all its duly constituted
officers or authorities (ang nasa itaas ay binasa at ipinaliwanag sa akin sa wikang tagalog na
aking nalalaman).

Very respectfully,

(Sgd.) DAMASA CRISOSTOMO

Signature of subscriber

Nilagdaan sa aming harapan:

JOSE CRISOSTOMO
EDUARDO CRISOSTOMO

Damasa Crisostomo died on October 26, 1948. As no payment appears to have been made on the
subscription mentioned in the foregoing letter, the Quezon College, Inc. presented a claim before the Court
of First Instance of Bulacan in her testate proceeding, for the collection of the sum of P20,000, representing
the value of the subscription to the capital stock of the Quezon College, Inc. This claim was opposed by the
administrator of the estate, and the Court of First Instance of Bulacan, after hearing issued an order
dismissing the claim of the Quezon College, Inc. on the ground that the subscription in question was neither
registered in nor authorized by the Securities and Exchange Commission. From this order the Quezon
College, Inc. has appealed.

It is not necessary for us to discuss at length appellant's various assignments of error relating to the
propriety of the ground relief upon by the trial court, since, as pointed out in the brief for the administrator
and appellee, there are other decisive considerations which, though not touched by the lower court, amply
sustained the appealed order.

It appears that the application sent by Damasa Crisostomo to the Quezon College, Inc. was written on a
general form indicating that an applicant will enclose an amount as initial payment and will pay the balance
in accordance with law and the regulations of the College. On the other hand, in the letter actually sent by
Damasa Crisostomo, the latter (who requested that her subscription for 200 shares be entered) not only
did not enclose any initial payment but stated that "babayaran kong lahat pagkatapos na ako ay
makapagpahuli ng isda." There is nothing in the record to show that the Quezon College, Inc. accepted the
term of payment suggested by Damasa Crisostomo, or that if there was any acceptance the same came to
her knowledge during her lifetime. As the application of Damasa Crisostomo is obviously at variance with
the terms evidenced in the form letter issued by the Quezon College, Inc., there was absolute necessity on
the part of the College to express its agreement to Damasa's offer in order to bind the latter. Conversely,
said acceptance was essential, because it would be unfair to immediately obligate the Quezon College,
Inc. under Damasa's promise to pay the price of the subscription after she had caused fish to be caught. In
other words, the relation between Damasa Crisostomo and the Quezon College, Inc. had only thus reached
the preliminary stage whereby the latter offered its stock for subscription on the terms stated in the form
letter, and Damasa applied for subscription fixing her own plan of payment, — a relation, in the absence as
in the present case of acceptance by the Quezon College, Inc. of the counter offer of Damasa Crisostomo,
that had not ripened into an enforceable contract.

Indeed, the need for express acceptance on the part of the Quezon College, Inc. becomes the more
imperative, in view of the proposal of Damasa Crisostomo to pay the value of the subscription after she has
harvested fish, a condition obviously dependent upon her sole will and, therefore, facultative in nature,
rendering the obligation void, under article 1115 of the old Civil Code which provides as follows: "If the
fulfillment of the condition should depend upon the exclusive will of the debtor, the conditional obligation
shall be void. If it should depend upon chance, or upon the will of a third person, the obligation shall produce
all its effects in accordance with the provisions of this code." It cannot be argued that the condition solely
is void, because it would have served to create the obligation to pay, unlike a case, exemplified by Osmeña
vs. Rama (14 Phil., 99), wherein only the potestative condition was held void because it referred merely to
the fulfillment of an already existing indebtedness.

In the case of Taylor vs. Uy Tieng Piao, et al. (43 Phil., 873, 879), this Court already held that "a condition,
facultative as to the debtor, is obnoxious to the first sentence contained in article 1115 and renders the
whole obligation void."

Wherefore, the appealed order is affirmed, and it is so ordered with costs against appellant.

Tuason, Padilla and Reyes, JJ., concur in the result.

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-45273 April 10, 1939

LUNETA MOTOR CO., plaintiff-appellant,

vs.
FEDERICO ABAD, defendant-appellee.

Jose Agbulos for appellant.

Valle and Valle for appellee.

MORAN, J.:

Plaintiff sought recovery of the sum of P2,674.05 with accrued stipulated interest and attorney's fees for
balance due on four promissory notes executed by the defendant on March 12, 1931. The complaint sued
for a writ of attachment which was issued. Defendant, in his answer, petitioned, for reasons therein stated,
that the attachment be lifted, and to that effect a counterbond was tendered by the terms of which the
sureties "jointly and severally bind themselves in the sum of P2,600, under the condition that in case the
plaintiff recovered judgment in the action the defendant will on demand redeliver the attached property so
released to the other court to be applied to the payment of the judgment or in default thereof that the
defendant and sureties will on demand pay the plaintiff the full value of the property released." The lower
court granted this petition and issued an order for the dissolution of the writ. Thereafter, defendant died;
whereupon, his attorney moved for the dismissal of the case. The trial court acceded to this motion, and
plaintiff's motion for reconsideration thereof having been denied, the instant appeal was taken.

The case was rightly dismissed in accordance with section 119 of Act No. 190, the action being for money,
and pending when defendant died. It is contended by plaintiff-appellant that this provision is not applicable,
for a writ of attachment has been issued on property of the defendant, and the lien was transferred to the
counterbond filed for the dissolution of the writ. This contention is disposed of unfavorably to appellant by
the provision of section 700 of Act No. 190 which reads as follows:

All actions commenced against the deceased person, for the recovery of money, debt, or damages,
and pending at the time the committee are appointed, shall be discontinued, and the property, if
any, therein attached, shall be discharged from the attachment, and the claim embraced in such
action may be presented to the committee, . . . . (Emphasis supplied.)

Besides, the obligation of the sureties, under the counterbond, is subject to the condition that when the
plaintiff recovered judgment, they shall deliver the property so released to the officer of the court for the
payment of said judgment or in default thereof, pay its full value to the plaintiff. This condition has become
a legal impossibility, for no judgment can be recovered by the plaintiff in the case which should be dismissed
under section 119 aforementioned. Therefore, the obligation dependent upon this condition must be
deemed extinguished, according to article 1116 of our Civil Code.

Judgment is affirmed with costs against the appellant.

Avanceña, C. J., Villa-Real, Imperial, Diaz, Laurel, and Concepcion, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-16370 October 31, 1961

JOSE S. GALVEZ, Deceased (Represented by his widow and heir, GRACIA VDA. DE
GALVEZ), petitioner,
vs.
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY AND THE COURT OF INDUSTRIAL
RELATIONS, respondents.

Narciso E. Martin and Antonio N. Castro for petitioner.

Perkins, Ponce Enrile, Siguion Reyna, Montecillo and Belo for respondent Company.
F.A. Sambajon for respondent Court of Industrial Relations.

CONCEPCION, J.:

Appeal by certiorari from an order of the Court of Industrial Relations.

Petitioner herein, Gracia Vda. de Galvez, hereafter referred to as Mrs. Galvez, is the widow of the late
Jose S. Galvez, who during his lifetime was an employee of respondent Philippine Long Distance
Telephone Company, hereafter referred to as the Company. Mr. Galvez had worked therefor from
December 1, 1908 to December 31, 1941, when the operation of the Company was disrupted by the
Japanese invasion and occupation of the Philippines. As of the date last mentioned he had served the
Company for thirty-three (33) years and one (1) month. Upon the liberation of the Philippines, or on
April 1, 1945, Mr. Galvez was reinstated and continued under the employment of the Company for
another five (5) years, ten (10) months and six (6) days, or up to February 7, 1951, when he died.
Thus, his prewar and post-war services to the Company aggregated thirty-eight (38) years, eleven
(11) months and six (6) days. Sometime in 1951, Mrs. Galvez received from the Company P24,000,
as pension and death benefits due to the deceased under an Employees' Pension Plan adopted by
the Company on September 18, 1923.

Subsequently, or on December 22, 1951, Crispin Jeturian and about sixty-three (63) other persons,
who had served the Company as its prewar employees, instituted in the Court of Industrial Relations
a proceeding for the collection of their proportionate shares in said Employees' Pension Plan, which
had been discontinued by a resolution dated November 6, 1945, unilaterally taken by the Board of
Directors of the Company, to be effective retroactively as of January 1, 1942. In due course, a decision
was, on February 23, 1954, rendered in said proceeding, docketed as Case No. 639-V of the Court of
Industrial Relations, directing payment to the petitioners therein of their respective proportionate
shares in the aforementioned Employees' Pension Plan, as well as — to those who had not received
their 30-day notice of dismissal from the service of the Company before the resumption of its business
operations in 1946 — a severance pay equivalent to one month salary. With a slight modification,
immaterial to the case at bar, said decision was affirmed by the Supreme Court in Philippine Long
Distance Telephone Co. vs. Jeturian, et al., G.R. No. L-7756, decided on June 20, 1955.

Later on, the Court of Industrial Relations ordered its chief examiner to liquidate said prewar pension
plan. By an order dated May 12, 1956, the report thereon of said chief examiner was approved by the
Court of Industrial Relations. The report specified the names of all prewar employees entitled to
participate in the distribution of the Employees' Pension fund and the amount each was entitled to. It
included the name of several persons not petitioners in the case, whose aggregate share was said to
be P23,381.96. Among these persons was Jose S. Galvez whose share, forming part of the sum last
mentioned, amounted to P13,028.64. Thereafter, said non-petitioners, including Mrs. Galvez, on
behalf of her deceased spouse, asked the Court of Industrial Relations to order the payment of their
aforementioned shares, according to the examiner's report. Despite the opposition of the Company,
predicated upon the theory that these claimants were not parties to the proceeding and could not
invoke, therefore, the benefits of the aforementioned decisions (of the Court of Industrial Relations, of
February 23, 1954, and of the Supreme Court, promulgated on June 20, 1955), the Court of Industrial
Relations issued an order, dated January 8, 1959, granting said request and directing the Company
to deposit with the cashier of said Court, within a specified time, the aforementioned sum of
P23,381.96, exclusive of service fee. On motion for reconsideration filed by the company, said order
was affirmed by the Court of Industrial Relations, sitting en banc, in a resolution dated February 14,
1959. Thereupon, or on or about February 28, 1959, the Company filed with this Court a petition,
docketed as G.R. No. L-15120, for review by certiorari of said order and the aforementioned resolution
of the Court of Industrial Relations, dated January 8, and February 14, 1959, respectively, but the
petition was dismissed by resolution of this Court of March 17, 1959, for lack of merit.

Presently, or on April 14, 1959, the Company filed with the Court of Industrial Relations a petition
praying that it be no longer required to deposit the aforementioned share of Jose S. Galvez in the
amount of P13,028.64, because Mrs. Galvez had already been paid P24,000, as above stated,
inasmuch as, at the time of his death, Mr. Galvez was receiving a monthly compensation of P2,000
and, under the rules governing the Employees' Pension Plan, he would have received only the salary
for six (6) months, or P12,000, for his post liberation services, which were over five (5) years but less
than ten (10) years, but was given the benefit of a provision prescribing a 12-month pay for those who
had served ten (10) years or over, in view of his prewar services. By an order dated September 8,
1959, the Court of Industrial Relations held that amounts collectible by Jose S. Galvez under said
pension plan for his prewar and post-liberation services were P13,028.64 and P12,000, respectively,
or the aggregate sum of P25,028.64, and that since Mrs. Galvez had already received P24,000, the
sum now due her is only P1,028.64, which the Company was ordered to deposit in court.

A reconsideration having been denied by the Court of Industrial Relations sitting en banc, Mrs. Galvez
now seeks a review by certiorari of said order of September 8, 1959, upon the ground that it had in
effect amended unlawfully the aforementioned order of January 8, 1959, which was already final and
executory. By way of justification for the action complained of, lower court stated in its order of
September 8, 1959.

The order of this Court dated May 12, 1956, approving the Report of Examiner in which the
equities of all employees of the respondent company were determined in accordance with the
decision of this Court in Case No. 639-V, Crispin Jeturian, et al. vs. Philippine Long Distance
Telephone Co., as modified by the Supreme Court in G.R. No. L-7756, Philippine Long
Distance Telephone Company vs. Crispin Jeturian, et al., recognizes the equity in favor of
Jose S. Galvez in the pre-war pension plan, although his name was not specifically mentioned
as one of the petitioners in said Case No. 639-V, being one of the employees of said company.
The order of this Court of July 8, 1959 in the instant incidental case implements said Report of
Examiner, thus giving effectivity to the award in favor of Jose S. Galvez, We believe that this
Court may in its sound discretion, after discovering — through hearings as was done in this
case — a certain error which might do injustice to the aggrieved party if not corrected, alter or
modify its order to accord substantial justice to the party concerned during the effectivity of an
award, order or decision.

The lower court was thus aware of the fact that it was thereby altering or modifying its order of January
8, 1959. Regardless of the excellence of the motive for acting as it did, we are constrained to hold,
however, that the lower court had no authority to make said alteration or modification. The order of
January 8, 1959, awarding P13,028.64 to Jose S. Galvez, was affirmed by the Court of Industrial
Relations sitting en banc, and an appeal by certiorari from said order and from the confirmatory
resolution of said Court en banc was dismissed by this Court, for lack of merit. As a consequence,
said order of January 8, 1959 and the award of P13,028.64 in favor of Jose S. Galvez become
executory and are no longer subject to alteration or modification (Rattan Art & Decorations, Inc. vs.
Rattan Art & Decorations [Daily Workers] Union, G.R. No. L-6466, May 28, 1954; Pepsi-Cola Bottling
Co. of the P.I. vs. Philippine Labor Organization, G.R. No. L-3506, January 31, 1951).

The equitable considerations that led the lower court to take the action complained of cannot offset
the demands of public policy and public interest — which are also responsive to the tenets of equity
— requiring that all issues passed upon in decisions or final orders that have become executory, be
deemed conclusively disposed of and definitely closed, for, otherwise, there would be no end to
litigations, thus setting at naught the main role of courts of justice, which is to assist in the enforcement
of the rule of law and the maintenance of peace and order, by settling justiciable controversies with
finality.

WHEREFORE, the order appealed from is hereby set aside and another one shall be entered directing
that, within thirty (30) days from entry of judgment in this case, the sum of P13,028.64 exclusive of
service fee, be deposited by respondent Philippine Long Distance Telephone Co. with the Court of
Industrial Relations for the benefit of the heirs of Jose S. Galvez with costs against said respondent.
It is so ordered.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Paredes, Dizon and De Leon,
JJ., concur.
Barrera, J., took no part.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-28602 September 29, 1970

UNIVERSITY OF THE PHILIPPINES, petitioner,

vs.
WALFRIDO DE LOS ANGELES, in his capacity as JUDGE of the COURT OF FIRST INSTANCE
IN QUEZON CITY, et al., respondents.

Office of the Solicitor General Antonio P. Barredo, Solicitor Augusto M. Amores and Special Counsel
Perfecto V. Fernandez for petitioner.

Norberto J. Quisumbing for private respondents.

REYES, J.B.L., J.:

Three (3) orders of the Court of First Instance of Rizal (Quezon City), issued in its Civil Case No. 9435,
are sought to be annulled in this petition for certiorari and prohibition, filed by herein petitioner
University of the Philippines (or UP) against the above-named respondent judge and the Associated
Lumber Manufacturing Company, Inc. (or ALUMCO). The first order, dated 25 February 1966, enjoined
UP from awarding logging rights over its timber concession (or Land Grant), situated at the Lubayat
areas in the provinces of Laguna and Quezon; the second order, dated 14 January 1967, adjudged
UP in contempt of court, and directed Sta. Clara Lumber Company, Inc. to refrain from exercising
logging rights or conducting logging operations on the concession; and the third order, dated 12
December 1967, denied reconsideration of the order of contempt.

As prayed for in the petition, a writ of preliminary injunction against the enforcement or implementation
of the three (3) questioned orders was issued by this Court, per its resolution on 9 February 1968.

The petition alleged the following:

That the above-mentioned Land Grant was segregated from the public domain and given as an
endowment to UP, an institution of higher learning, to be operated and developed for the purpose of
raising additional income for its support, pursuant to Act 3608;

That on or about 2 November 1960, UP and ALUMCO entered into a logging agreement under which
the latter was granted exclusive authority, for a period starting from the date of the agreement to 31
December 1965, extendible for a further period of five (5) years by mutual agreement, to cut, collect
and remove timber from the Land Grant, in consideration of payment to UP of royalties, forest fees,
etc.; that ALUMCO cut and removed timber therefrom but, as of 8 December 1964, it had incurred an
unpaid account of P219,362.94, which, despite repeated demands, it had failed to pay; that after it
had received notice that UP would rescind or terminate the logging agreement, ALUMCO executed
an instrument, entitled "Acknowledgment of Debt and Proposed Manner of Payments," dated 9
December 1964, which was approved by the president of UP, and which stipulated the following:

3. In the event that the payments called for in Nos. 1 and 2 of this paragraph are not
sufficient to liquidate the foregoing indebtedness of the DEBTOR in favor of the
CREDITOR, the balance outstanding after the said payments have been applied shall
be paid by the DEBTOR in full no later than June 30, 1965;

xxx xxx xxx

5. In the event that the DEBTOR fails to comply with any of its promises or
undertakings in this document, the DEBTOR agrees without reservation that the
CREDITOR shall have the right and the power to consider the Logging Agreement
dated December 2, 1960 as rescinded without the necessity of any judicial suit, and
the CREDITOR shall be entitled as a matter of right to Fifty Thousand Pesos
(P50,000.00) by way of and for liquidated damages;

ALUMCO continued its logging operations, but again incurred an unpaid account, for the period from
9 December 1964 to 15 July 1965, in the amount of P61,133.74, in addition to the indebtedness that
it had previously acknowledged.

That on 19 July 1965, petitioner UP informed respondent ALUMCO that it had, as of that date,
considered as rescinded and of no further legal effect the logging agreement that they had entered in
1960; and on 7 September 1965, UP filed a complaint against ALUMCO, which was docketed as Civil
Case No. 9435 of the Court of First Instance of Rizal (Quezon City), for the collection or payment of
the herein before stated sums of money and alleging the facts hereinbefore specified, together with
other allegations; it prayed for and obtained an order, dated 30 September 1965, for preliminary
attachment and preliminary injunction restraining ALUMCO from continuing its logging operations in
the Land Grant.

That before the issuance of the aforesaid preliminary injunction UP had taken steps to have another
concessionaire take over the logging operation, by advertising an invitation to bid; that bidding was
conducted, and the concession was awarded to Sta. Clara Lumber Company, Inc.; the logging contract
was signed on 16 February 1966.

That, meantime, ALUMCO had filed several motions to discharge the writs of attachment and
preliminary injunction but were denied by the court;

That on 12 November 1965, ALUMCO filed a petition to enjoin petitioner University from conducting
the bidding; on 27 November 1965, it filed a second petition for preliminary injunction; and, on 25
February 1966, respondent judge issued the first of the questioned orders, enjoining UP from awarding
logging rights over the concession to any other party.

That UP received the order of 25 February 1966 after it had concluded its contract with Sta. Clara
Lumber Company, Inc., and said company had started logging operations.

That, on motion dated 12 April 1966 by ALUMCO and one Jose Rico, the court, in an order dated 14
January 1967, declared petitioner UP in contempt of court and, in the same order, directed Sta. Clara
Lumber Company, Inc., to refrain from exercising logging rights or conducting logging operations in
the concession.
The UP moved for reconsideration of the aforesaid order, but the motion was denied on 12 December
1967.

Except that it denied knowledge of the purpose of the Land Grant, which purpose, anyway, is
embodied in Act 3608 and, therefore, conclusively known, respondent ALUMCO did not deny the
foregoing allegations in the petition. In its answer, respondent corrected itself by stating that the period
of the logging agreement is five (5) years - not seven (7) years, as it had alleged in its second amended
answer to the complaint in Civil Case No. 9435. It reiterated, however, its defenses in the court below,
which maybe boiled down to: blaming its former general manager, Cesar Guy, in not turning over
management of ALUMCO, thereby rendering it unable to pay the sum of P219,382.94; that it failed to
pursue the manner of payments, as stipulated in the "Acknowledgment of Debt and Proposed Manner
of Payments" because the logs that it had cut turned out to be rotten and could not be sold to Sta.
Clara Lumber Company, Inc., under its contract "to buy and sell" with said firm, and which contract
was referred and annexed to the "Acknowledgment of Debt and Proposed Manner of Payments"; that
UP's unilateral rescission of the logging contract, without a court order, was invalid; that petitioner's
supervisor refused to allow respondent to cut new logs unless the logs previously cut during the
management of Cesar Guy be first sold; that respondent was permitted to cut logs in the middle of
June 1965 but petitioner's supervisor stopped all logging operations on 15 July 1965; that it had made
several offers to petitioner for respondent to resume logging operations but respondent received no
reply.

The basic issue in this case is whether petitioner U.P. can treat its contract with ALUMCO rescinded,
and may disregard the same before any judicial pronouncement to that effect. Respondent ALUMCO
contended, and the lower court, in issuing the injunction order of 25 February 1966, apparently
sustained it (although the order expresses no specific findings in this regard), that it is only after a final
court decree declaring the contract rescinded for violation of its terms that U.P. could disregard
ALUMCO's rights under the contract and treat the agreement as breached and of no force or effect.

We find that position untenable.

In the first place, UP and ALUMCO had expressly stipulated in the "Acknowledgment of Debt and
Proposed Manner of Payments" that, upon default by the debtor ALUMCO, the creditor (UP) has "the
right and the power to consider, the Logging Agreement dated 2 December 1960 as rescinded without
the necessity of any judicial suit." As to such special stipulation, and in connection with Article 1191 of
the Civil Code, this Court stated in Froilan vs. Pan Oriental Shipping Co., et al., L-11897, 31 October
1964, 12 SCRA 276:

there is nothing in the law that prohibits the parties from entering into agreement that
violation of the terms of the contract would cause cancellation thereof, even without
court intervention. In other words, it is not always necessary for the injured party to
resort to court for rescission of the contract.

Of course, it must be understood that the act of party in treating a contract as cancelled or resolved
on account of infractions by the other contracting party must be made known to the other and is always
provisional, being ever subject to scrutiny and review by the proper court. If the other party denies that
rescission is justified, it is free to resort to judicial action in its own behalf, and bring the matter to court.
Then, should the court, after due hearing, decide that the resolution of the contract was not warranted,
the responsible party will be sentenced to damages; in the contrary case, the resolution will be
affirmed, and the consequent indemnity awarded to the party prejudiced.

In other words, the party who deems the contract violated may consider it resolved or rescinded, and
act accordingly, without previous court action, but it proceeds at its own risk. For it is only the final
judgment of the corresponding court that will conclusively and finally settle whether the action taken
was or was not correct in law. But the law definitely does not require that the contracting party who
believes itself injured must first file suit and wait for a judgment before taking extrajudicial steps to
protect its interest. Otherwise, the party injured by the other's breach will have to passively sit and
watch its damages accumulate during the pendency of the suit until the final judgment of rescission is
rendered when the law itself requires that he should exercise due diligence to minimize its own
damages (Civil Code, Article 2203).

We see no conflict between this ruling and the previous jurisprudence of this Court invoked by
respondent declaring that judicial action is necessary for the resolution of a reciprocal obligation,1 since
in every case where the extrajudicial resolution is contested only the final award of the court of
competent jurisdiction can conclusively settle whether the resolution was proper or not. It is in this
sense that judicial action will be necessary, as without it, the extrajudicial resolution will remain
contestable and subject to judicial invalidation, unless attack thereon should become barred by
acquiescence, estoppel or prescription.

Fears have been expressed that a stipulation providing for a unilateral rescission in case of breach of
contract may render nugatory the general rule requiring judicial action (v. Footnote, Padilla, Civil Law,
Civil Code Anno., 1967 ed. Vol. IV, page 140) but, as already observed, in case of abuse or error by
the rescinder the other party is not barred from questioning in court such abuse or error, the practical
effect of the stipulation being merely to transfer to the defaulter the initiative of instituting suit, instead
of the rescinder.

In fact, even without express provision conferring the power of cancellation upon one contracting party,
the Supreme Court of Spain, in construing the effect of Article 1124 of the Spanish Civil Code (of which
Article 1191 of our own Civil; Code is practically a reproduction), has repeatedly held that, a resolution
of reciprocal or synallagmatic contracts may be made extrajudicially unless successfully impugned in
court.

El articulo 1124 del Codigo Civil establece la facultad de resolver las obligaciones
reciprocas para el caso de que uno de los obligados no cumpliese lo que le
incumbe, facultad que, segun jurisprudencia de este Tribunal, surge
immediatamente despuesque la otra parte incumplio su deber, sin necesidad de una
declaracion previa de los Tribunales. (Sent. of the Tr. Sup. of Spain, of 10 April 1929;
106 Jur. Civ. 897).

Segun reiterada doctrina de esta Sala, el Art. 1124 regula la resolucioncomo una
"facultad" atribuida a la parte perjudicada por el incumplimiento del contrato, la cual
tiene derecho do opcion entre exigir el cumplimientoo la resolucion de lo
convenido, que puede ejercitarse, ya en la via judicial, ya fuera de ella, por declaracion
del acreedor, a reserva, claro es, que si la declaracion de resolucion hecha por una
de las partes se impugna por la otra, queda aquella sometida el examen y sancion de
los Tribunale, que habran de declarar, en definitiva, bien hecha la resolucion o por el
contrario, no ajustada a Derecho. (Sent. TS of Spain, 16 November 1956; Jurisp.
Aranzadi, 3, 447).

La resolucion de los contratos sinalagmaticos, fundada en el incumplimiento por una

de las partes de su respectiva prestacion, puedetener lugar con eficacia" 1. o Por la
declaracion de voluntad de la otra hecha extraprocesalmente, si no es impugnada en juicio luego con exito. y 2. 0 Por la
demanda de la perjudicada, cuando no opta por el cumplimientocon la indemnizacion de danos y perjuicios realmente
causados, siempre quese acredite, ademas, una actitud o conducta persistente y rebelde de laadversa o la satisfaccion
de lo pactado, a un hecho obstativo que de un modoabsoluto, definitivo o irreformable lo impida, segun el art. 1.124,
interpretado por la jurisprudencia de esta Sala, contenida en las Ss. de 12 mayo 1955 y 16 Nov. 1956, entre otras,
 inspiradas por el principio del Derecho intermedio, recogido del Canonico, por el cual fragenti fidem, fides non est
servanda. (Ss. de 4 Nov. 1958 y 22 Jun. 1959.) (Emphasis supplied).

In the light of the foregoing principles, and considering that the complaint of petitioner University made
out a prima facie case of breach of contract and defaults in payment by respondent ALUMCO, to the
extent that the court below issued a writ of preliminary injunction stopping ALUMCO's logging
operations, and repeatedly denied its motions to lift the injunction; that it is not denied that the
respondent company had profited from its operations previous to the agreement of 5 December 1964
("Acknowledgment of Debt and Proposed Manner of Payment"); that the excuses offered in the second
amended answer, such as the misconduct of its former manager Cesar Guy, and the rotten condition
of the logs in private respondent's pond, which said respondent was in a better position to know when
it executed the acknowledgment of indebtedness, do not constitute on their face sufficient excuse for
non-payment; and considering that whatever prejudice may be suffered by respondent ALUMCO is
susceptibility of compensation in damages, it becomes plain that the acts of the court a quo in enjoining
petitioner's measures to protect its interest without first receiving evidence on the issues tendered by
the parties, and in subsequently refusing to dissolve the injunction, were in grave abuse of discretion,
correctible by certiorari, since appeal was not available or adequate. Such injunction, therefore, must
be set aside.

For the reason that the order finding the petitioner UP in contempt of court has open appealed to the
Court of Appeals, and the case is pending therein, this Court abstains from making any
pronouncement thereon.

WHEREFORE, the writ of certiorari applied for is granted, and the order of the respondent court of 25
February 1966, granting the Associated Lumber Company's petition for injunction, is hereby set aside.
Let the records be remanded for further proceedings conformably to this opinion.

Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee, Barredo, Villamor and Makasiar, JJ.,
concur.

Reyes, J.B.L., Actg. C.J., is on leave.

# Footnotes

1 Ocejo Perez & Co. vs. International Banking Corp., 37 Phil. 631; Republic vs.
Hospital de San Juan de Dios, et al., 84 Phil. 820.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-32811 March 31, 1980

FELIPE C. ROQUE, petitioner,

vs.
NICANOR LAPUZ and THE COURT OF APPEALS, respondents.

Tañada, Sanchez, Tañada, Tañada for petitioner.

N.M. Lapuz for respondent.

GUERRERO, J.:

Appeal by certiorari from the Resolution of the respondent court 1 dated October 12, 1970 in CA-G.R.
No. L-33998-R entitled "Felipe C. Roque, plaintiff-appellee, versus Nicanor Lapuz, defendant-
appellant" amending its original decision of April 23, 1970 which affirmed the decision of the Court of
First Instance of Rizal (Quezon City Branch) in Civil Case No. Q-4922 in favor of petitioner, and the
Resolution of the respondent court denying petitioner's motion for reconsideration.

The facts of this case are as recited in the decision of the Trial Court which was adopted and affirmed
by the Court of Appeals:

Sometime in 1964, prior to the approval by the National Planning Commission of the
consolidation and subdivision plan of plaintiff's property known as the Rockville
Subdivision, situated in Balintawak, Quezon City, plaintiff and defendant entered into
an agreement of sale covering Lots 1, 2 and 9, Block 1, of said property, with an
aggregate area of 1,200 square meters, payable in 120 equal monthly installments at
the rate of P16.00, P15.00 per square meter, respectively. In accordance with said
agreement, defendant paid to plaintiff the sum of P150.00 as deposit and the further
sum of P740.56 to complete the payment of four monthly installments covering the
months of July, August, September, and October, 1954. (Exhs. A and B). When the
document Exhibit "A" was executed on June 25, 1954, the plan covering plaintiff's
property was merely tentative, and the plaintiff referred to the proposed lots appearing
in the tentative plan.

After the approval of the subdivision plan by the Bureau of Lands on January 24, 1955,
defendant requested plaintiff that he be allowed to abandon and substitute Lots 1, 2
and 9, the subject matter of their previous agreement, with Lots 4 and 12, Block 2 of
the approved subdivision plan, of the Rockville Subdivision, with a total area of 725
square meters, which are corner lots, to which request plaintiff graciously acceded.

The evidence discloses that defendant proposed to plaintiff modification of their

previous contract to sell because he found it quite difficult to pay the monthly
installments on the three lots, and besides the two lots he had chosen were better lots,
 being corner lots. In addition, it was agreed that the purchase price of these two lots
would be at the uniform rate of P17.00 per square (meter) payable in 120 equal
monthly installments, with interest at 8% annually on the balance unpaid. Pursuant to
this new agreement, defendant occupied and possessed Lots 4 and 12, Block 2 of the
approved subdivision plan, and enclosed them, including the portion where his house
now stands, with barbed wires and adobe walls.

However, aside from the deposit of P150.00 and the amount of P740.56 which were
paid under their previous agreement, defendant failed to make any further payment on
account of the agreed monthly installments for the two lots in dispute, under the new
contract to sell. Plaintiff demanded upon defendant not only to pay the stipulated
monthly installments in arrears, but also to make up-to-date his payments, but
defendant, instead of complying with the demands, kept on asking for extensions,
promising at first that he would pay not only the installments in arrears but also make
up-to-date his payment, but later on refused altogether to comply with plaintiff's
demands.

Defendant was likewise requested by the plaintiff to sign the corresponding contract to
sell in accordance with his previous commitment. Again, defendant promised that he
would sign the required contract to sell when he shall have made up-to-date the
stipulated monthly installments on the lots in question, but subsequently backed out of
his promise and refused to sign any contract in noncompliance with what he had
represented on several occasions. And plaintiff relied on the good faith of defendant
to make good his promise because defendant is a professional and had been rather
good to him (plaintiff).

On or about November 3, 1957, in a formal letter, plaintiff demanded upon defendant

to vacate the lots in question and to pay the reasonable rentals thereon at the rate of
P60.00 per month from August, 1955. (Exh. "B"). Notwithstanding the receipt of said
letter, defendant did not deem it wise nor proper to answer the same.

In reference to the mode of payment, the Honorable Court of Appeals found —

Both parties are agreed that the period within which to pay the lots in question is ten
years. They however, disagree on the mode of payment. While the appellant claims
that he could pay the purchase price at any time within a period of ten years with a
gradual proportionate discount on the price, the appellee maintains that the appellant
was bound to pay monthly installments.

On this point, the trial court correctly held that —

It is further argued by defendant that under the agreement to sell in question, he has
the right or option to pay the purchase price at anytime within a period of ten years
from 1954, he being entitled, at the same time, to a graduated reduction of the price.
The Court is constrained to reject this version not only because it is contradicted by
the weight of evidence but also because it is not consistent with what is reasonable,
plausible and credible. It is highly improbable to expect plaintiff, or any real estate
subdivision owner for that matter, to agree to a sale of his land which would be payable
anytime in ten years at the exclusive option of the purchaser. There is no showing that
defendant is a friend, a relative, or someone to whom plaintiff had to be grateful, as
would justify an assumption that he would have agreed to extend to defendant such
an extra- ordinary concession. Furthermore, the context of the document, Exhibit "B",
 not to mention the other evidences on records is indicative that the real intention of the
parties is for the payment of the purchase price of the lot in question on an equal
monthly installment basis for a period of ten years (Exhibits "A", "II", "J" and "K").

On January 22, 1960, petitioner Felipe C, Roque (plaintiff below) filed the complaint against defendant
Nicanor Lapuz (private respondent herein) with the Court of First Instance of Rizal, Quezon City
Branch, for rescission and cancellation of the agreement of sale between them involving the two lots
in question and prayed that judgment be rendered ordering the rescission and cancellation of the
agreement of sale, the defendant to vacate the two parcels of land and remove his house therefrom
and to pay to the plaintiff the reasonable rental thereof at the rate of P60.00 a month from August 1955
until such time as he shall have vacated the premises, and to pay the sum of P2,000.00 as attorney's
fees, costs of the suit and award such other relief or remedy as may be deemed just and equitable in
the premises.

Defendant filed a Motion to Dismiss on the ground that the complaint states no cause of action, which
motion was denied by the court. Thereafter, defendant filed his Answer alleging that he bought three
lots from the plaintiff containing an aggregate area of 1,200 sq. meters and previously known as Lots
1, 2 and 9 of Block 1 of Rockville Subdivision at P16.00, P15.00 and P15.00, respectively, payable at
any time within ten years. Defendant admits having occupied the lots in question.

As affirmative and special defenses, defendant alleges that the complaint states no cause of action;
that the present action for rescission has prescribed; that no demand for payment of the balance was
ever made; and that the action being based on reciprocal obligations, before one party may compel
performance, he must first comply what is incumbent upon him.

As counterclaim, defendant alleges that because of the acts of the plaintiff, he lost two lots containing
an area of 800 sq. meters and as a consequence, he suffered moral damages in the amount of
P200.000.00; that due to the filing of the present action, he suffered moral damages amounting to
P100,000.00 and incurred expenses for attorney's fees in the sum of P5,000.00.

Plaintiff filed his Answer to the Counterclaim and denied the material averments thereof.

After due hearing, the trial court rendered judgment, the dispositive portion of which reads:

WHEREFORE, the Court renders judgment in favor of plain. plaintiff and against the
defendant, as follows:

(a) Declaring the agreement of sale between plaintiff and defendant involving the lots
in question (Lots 4 and 12, Block 2 of the approved subdivision plan of the Rockville
Subdivision) rescinded, resolved and cancelled;

(b) Ordering defendant to vacate the said lots and to remove his house therefrom and
also to pay plaintiff the reasonable rental thereof at the rate of P60.00 per month from
August, 1955 until he shall have actually vacated the premises; and

(c) Condemning defendant to pay plaintiff the sum of P2,000.00 as attorney's fees, as
well as the costs of the suit. (Record on Appeal, p. 118)

(a) Declaring the agreement of sale between plaintiff and defendant involving the lots
in question (Lots 4 and 12, Block 2 of the approved subdivision plan of the Rockville
Subdivision) rescinded, resolved and cancelled;
 (b) Ordering defendant to vacate the said lots and to remove his house therefrom and
also to pay plaintiff the reasonable rental thereof at the rate of P60.00 per month from
August, 1955 until he shall have actually vacated premises; and

(c) Condemning defendant to pay plaintiff the sum of P2,000.00 as attorney's fees, as
well as the costs of the suit. (Record on Appeal. p. 118)

Not satisfied with the decision of the trial court, defendant appealed to the Court of Appeals. The latter
court, finding the judgment appealed from being in accordance with law and evidence, affirmed the
same.

In its decision, the appellate court, after holding that the findings of fact of the trial court are fully
supported by the evidence, found and held that the real intention of the parties is for the payment of
the purchase price of the lots in question on an equal monthly installment basis for the period of ten
years; that there was modification of the original agreement when defendant actually occupied Lots
Nos. 4 and 12 of Block 2 which were corner lots that commanded a better price instead of the original
Lots Nos. 1, 2 and 9, Block I of the Rockville Subdivision; that appellant's bare assertion that the
agreement is not rescindable because the appellee did not comply with his obligation to put up the
requisite facilities in the subdivision was insufficient to overcome the presumption that the law has
been obeyed by the appellee; that the present action has not prescribed since Article 1191 of the New
Civil Code authorizing rescission in reciprocal obligations upon noncompliance by one of the obligors
is the applicable provision in relation to Article 1149 of the New Civil Code; and that the present action
was filed within five years from the time the right of action accrued.

Defendant filed a Motion for Reconsideration of the appellate court's decision on the following grounds:

First — Neither the pleadings nor the evidence, testimonial, documentary or

circumstantial, justify the conclusion as to the existence of an alleged subsequent
agreement novatory of the original contract admittedly entered into between the
parties:

Second — There is nothing so unusual or extraordinary, as would render improbable

the fixing of ten ears as the period within which payment of the stipulated price was to
be payable by appellant;

Third — Appellee has no right, under the circumstances on the case at bar, to demand
and be entitled to the rescission of the contract had with appellant;

Fourth — Assuming that any action for rescission is availability to appellee, the same,
contrary to the findings of the decision herein, has prescribed;

Fifth — Assumming further that appellee's action for rescission, if any, has not yet
prescribed, the same is at least barred by laches;

Sixth — Assuming furthermore that a cause of action for rescission exists, appellant
should nevertheless be entitled to tile fixing of a period within which to comply with his
obligation; and

Seventh — At all events, the affirmance of the judgment for the payment of rentals on
the premises from August, 1955 and he taxing of attorney's fees against appellant are
not warranted b the circumstances at bar. (Rollo, pp. 87-88)
Acting on the Motion for Reconsideration, the Court of Appeals sustained the sixth ground raised by
the appellant, that assuming that a cause of action for rescission exists, he should nevertheless be
entitled to the fixing of a period within which to comply with his obligation. The Court of Appeals,
therefore, amended its original decision in the following wise and manner:

WHEREFORE, our decision dated April 23, 1970 is hereby amended in the sense that
the defendant Nicanor Lapuz is hereby granted a period of ninety (90) days from entry
hereof within which to pay the balance of the purchase price in the amount of
P11,434,44 with interest thereon at the rate of 8% per annum from August 17, 1955
until fully paid. In the event that the defendant fails to comply with his obligation as
above stated within the period fixed herein, our original judgment stands.

Petitioner Roque, as plaintiff-appellee below, filed a Motion for Reconsideration; the Court of Appeals
denied it. He now comes and appeals to this Court on a writ of certiorari.

The respondent Court of Appeals rationalizes its amending decision by considering that the house
presently erected on the land subject of the contract is worth P45,000.00, which improvements
introduced by defendant on the lots subject of the contract are very substantial, and thus being the
case, "as a matter of justice and equity, considering that the removal of defendant's house would
amount to a virtual forfeiture of the value of the house, the defendant should be granted a period within
which to fulfill his obligations under the agreement." Cited as authorities are the cases of Kapisanan
Banahaw vs. Dejarme and Alvero, 55 Phil. 338, 344, where it is held that the discretionary power of
the court to allow a period within which a person in default may be permitted to perform the stipulation
upon which the claim for resolution of the contract is based should be exercised without hesitation in
a case where a virtual forfeiture of valuable rights is sought to be enforced as an act of mere reprisal
for a refusal of the debtor to submit to a usurious charge, and the case of Puerto vs. Go Ye Pin, 47
O.G. 264, holding that to oust the defendant from the lots without giving him a chance to recover what
his father and he himself had spent may amount to a virtual forfeiture of valuable rights.

As further reasons for allowing a period within which defendant could fulfill his obligation, the
respondent court held that there exists good reasons therefor, having in mind that which affords
greater reciprocity of rights (Ramos vs. Blas, 51 O.G. 1920); that after appellant had testified that
plaintiff failed to comply with his part of the contract to put up the requisite facilities in the subdivision,
plaintiff did not introduce any evidence to rebut defendant's testimony but simply relied. upon the
presumption that the law has been obeyed, thus said presumption had been successfully rebutted as
Exhibit "5-D" shows that the road therein shown is not paved The Court, however, concedes that
plaintiff's failure to comply with his obligation to put up the necessary facilities in the subdivision will
not deter him from asking f•r the rescission of the agreement since this obligation is not correlative
with defendant's obligation to buy the property.

Petitioner assails the decision of the Court of Appeals for the following alleged errors:

I. The Honorable Court of Appeals erred in applying paragraph 3, Article 1191 of the
Civil Code which refers to reciprocal obligations in general and, pursuant thereto, in
granting respondent Lapuz a period of ninety (90) days from entry of judgment within
which to pay the balance of the purchase price.

II. The Honorable Court of Appeals erred in not holding that Article 1592 of the same
Code, which specifically covers sales of immovable property and which constitutes an
exception to the third paragraph of Article 1191 of said Code, is applicable to the
present case.
 III. The Honorable Court of Appeals erred in not holding that respondent Lapuz cannot
avail of the provisions of Article 1191, paragraph 3 of the Civil Code aforesaid because
he did not raise in his answer or in any of the pleadings he filed in the trial court the
question of whether or not he is entitled, by reason of a just cause, to a fixing of a new
period.

IV. Assuming arguendo that the agreement entered into by and between petitioner and
respondent Lapuz was a mere promise to sell or contract to sell, under which title to
the lots in question did not pass from petitioner to respondent, still the Honorable Court
of Appeals erred in not holding that aforesaid respondent is not entitled to a new period
within which to pay petitioner the balance of P11,434.44 interest due on the purchase
price of P12.325.00 of the lots.

V. Assuming arguendo that paragraph 3, Article 1191 of the Civil Code is applicable
and may be availed of by respondent, the Honorable Court of Appeals nonetheless
erred in not declaring that aid respondent has not shown the existence of a just cause
which would authorize said Court to fix a new period within which to pay the balance
aforesaid.

VI. The Honorable Court of Appeals erred in reconsidering its original decision
promulgated on April 23, 1970 which affirmed the decision of the trial court.

The above errors may, however, be synthesized into one issue and that is, whether private respondent
is entitled to the Benefits of the third paragraph of Article 1191, New Civil Code, for the fixing of period
within which he should comply with what is incumbent upon him, and that is to pay the balance of
P11,434,44 with interest thereon at the rate of 8% 1et annum from August 17, 1955 until fully paid
since private respondent had paid only P150.00 as deposit and 4 months intallments amounting to
P740.46, or a total of P890.46, the total price of the two lots agreed upon being P12,325.00.

For his part, petitioner maintains that respondent is not entitled to the Benefits of paragraph 3, Article
1191, NCC and that instead, Article 1592 of the New Civil Code which specifically covers sales of
immovable property and which constitute an exception to the third paragraph of Art. 1191 of aid Code,
is the applicable law to the case at bar.

In resolving petitioner's assignment of errors, it is well that We lay clown the oda provisions and
pertinent rulings of the Supreme Court bearing on the crucial issue of whether Art. 1191, paragraph 3
of the New Civil Code applies to the case at Bar as held by the appellate court and supported by the
private respondent, or Art. 1592 of the same Code which petitioner strongly argues in view of the
peculiar facts and circumstances attending this case. Article 1191, New Civil Code, provides:

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one
at the obligors should not comply with hat is incumbent upon him

The injured partner may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek rescission,
even after he has chosen fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing
the fixing of a period.

This is understood to be without prejudice to the rights of third persons who have
acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law.
Article 1592 also provides:

Art. 1592. In the sale of immovable property, even though it may have been stipulated
that upon failure to pay the price at the time agreed upon the rescission of the contract
shall of right take place, the vendee may pay, even after the expiration of the period,
as long as no demand for rescission of the contract has been made upon him either
judicially or by a notarial act. After the demand, the court may not grant him a new
term.

The controlling and latest jurisprudence is established and settled in the celebrated case of Luzon
Brokerage Co., Inc. vs. Maritime Building Co., Inc. and Myers Building Co., G.R. No. L-25885, January
31, 1972, 43 SCRA 93, originally decided in 1972, reiterated in the Resolution on Motion to Reconsider
dated August 18, 1972, 46 SCRA 381 and emphatically repeated in the Resolution on Second Motion
for Reconsideration promulgated November 16, 1978, 86 SCRA 309, which once more denied
Maritimes Second Motion for Reconsideration of October 7, 1972. In the original decision, the
Supreme Court speaking thru Justice J.B.L. Reyes said:

Under the circumstances, the action of Maritime in suspending payments to Myers

Corporation was a breach of contract tainted with fraud or malice (dolo), as
distinguished from mere negligence (culpa), "dolo" being succinctly defined as a
"conscious and intention design to evade the normal fulfillment of existing obligations"
(Capistrano, Civil Code of the Philippines, Vol. 3, page 38), and therefore incompatible
with good faith (Castan, Derecho Civil, 7th Ed., Vol. 3, page 129; Diaz Pairo, Teoria
de Obligaciones, Vol. 1, page 116).

Maritime having acted in bad faith, it was not entitled to ask the court to give it further
time to make payment and thereby erase the default or breach that it had deliberately
incurred. Thus the lower court committed no error in refusing to extend the periods for
payment. To do otherwise would be to sanction a deliberate and reiterated
infringement of the contractual obligations incurred by Maritime, an attitude repugnant
to the stability and obligatory force of contracts.

The decision reiterated the rule pointed out by the Supreme Court in Manuel vs. Rodriguez, 109 Phil.
1, p. 10, that:

In contracts to sell, where ownership is retained by the seller and is not to pass until
the fun payment of the price, such payment, as we said is a positive suspensive
condition, the failure of which is not a breach, casual or serious, but simply an event
that prevented the obligation of the vendor to convey title from acquiring binding i force
in accordance with Article 1117 of the Old Civil Code. To argue that there was only a
casual breach is to proceed from the assumption that the contract is one of absolute
sale, where non-payment is a resolutory condition, which is not the case." Continuing,
the Supreme Court declared:

... appellant overlooks that its contract with appellee Myers s not the ordinary sale
envisaged by Article 1592, transferring ownership simultaneously with the delivery of
the real property sold, but one in which the vendor retained ownership of the
immovable object of the sale, merely undertaking to convey it provided the buyer
strictly complied with the terms of the contract (see paragraph [d], ante page 5). In
suing to recover possession of the building from Maritime appellee Myers is not after
the resolution or setting aside of the contract and the restoration of the parties to the
status quo ante as contemplated by Article 1592, but precisely enforcing the Provisions
 of the agreement that it is no longer obligated to part with the ownership or possession
of the property because Maritime failed to comply with the specific condition precedent,
which is to pay the installments as they fell due.

The distinction between contracts of sale and contracts to sell with reserved title has
been recognized by this Court in repeated decisions upholding the power of promisors
under contracts to sell in case of failure of the other party to complete payment, to
extrajudicially terminate the operation of the contract, refuse conveyance and retain
the sums or installments already received, where such rights are expressly provided
for, as in the case at bar.

In the Resolution denying the first Motion for Reconsideration, 46 SCRA 381, the Court again speaking
thru Justice J.B.L. Reyes, reiterated the rule that in a contract to sell, the full payment of the price
through the punctual performance of the monthly payments is a condition precedent to the execution
of the final sale 4nd to the transfer of the property from the owner to the proposed buyer; so that there
will be no actual sale until and unless full payment is made.

The Court further ruled that in seeking to oust Maritime for failure to pay the price as agreed upon,
Myers was not rescinding (or more properly, resolving) the contract but precisely enforcing it according
to its expressed terms. In its suit, Myers was not seeking restitution to it of the ownership of the thing
sold (since it was never disposed of), such restoration being the logical consequence of the fulfillment
of a resolutory condition, expressed or implied (Art. 1190); neither was it seeking a declaration that its
obligation to sell was extinguished. What is sought was a judicial declaration that because the
suspensive condition (full and punctual payment) had not been fulfilled, its obligation to sell to Maritime
never arose or never became effective and, therefore, it (Myers) was entitled to repossess the property
object of the contract, possession being a mere incident to its right of ownership.

The decision also stressed that "there can be no rescission or resolution of an obligation as yet non-
existent, because the suspensive condition did not happen. Article 1592 of the New Civil Code (Art.
1504 of Old Civil Code) requiring demand by suit or notarial act in case the vendor of realty wants to
rescind does not apply to a contract to sell or promise to sell, where title remains with the vendor until
fulfillment to a positive condition, such as full payment of the price." (Manuel vs, Rodriguez, 109 Phil.
9)

Maritime's Second Motion for Reconsideration was denied in the Resolution of the Court dated
November 16, 1978, 86 SCRA 305, where the governing law and precedents were briefly summarized
in the strong and emphatic language of Justice Teehankee, thus:

(a) The contract between the parties was a contract to sell or conditional sale with title
expressly reserved in the vendor Myers Building Co., Inc. Myers until the suspensive
condition of full and punctual payment of the full price shall have been met on pain of
automatic cancellation of the contract upon failure to pay any of the monthly
installments when due and retention of the sums theretofore paid as rentals. When the
vendee, appellant Maritime, willfully and in bad faith failed since March, 1961 to pay
the P5,000. — monthly installments notwithstanding that it was punctually collecting
P10,000. — monthly rentals from the lessee Luzon Brokerage Co., Myers was entitled,
as it did in law and fact, to enforce the terms of the contract to sell and to declare the
same terminated and cancelled.

(b) Article 1592 (formerly Article 1504) of the new Civil Code is not applicable to such
contracts to self or conditional sales and no error was committed by the trial court in
refusing to extend the periods for payment.
 (c) As stressed in the Court's decision, "it is irrelevant whether appellant Maritime's
infringement of its contract was casual or serious" for as pointed out in Manuel vs.
Rodriguez, '(I)n contracts to self. whether ownership is retained by the seller and is not
to pass until the full payment of the price, such payment, as we said, is a positive
suspensive condition, the failure of which is not a breach, casual or serious, but simply
an event that prevented the obligation of the vendor to convey title from acquiring
binding force ...

(d) It should be noted, however, that Maritimes breach was far from casual but a most
serious breach of contract ...

(e) Even if the contract were considered an unconditional sale so that Article 1592 of
the Civil Code could be deemed applicable, Myers' answer to the complaint for
interpleaded in the court below constituted a judicial demand for rescission of the
contract and by the very provision of the cited codal article, 'after the demand, the court
may not grant him a new term for payment; and

(f) Assumming further that Article 1191 of the new Civil Code governing rescission of
reciprocal obligations could be applied (although Article 1592 of the same Code is
controlling since it deals specifically with sales of real property), said article provides
that '(T)he court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period' and there exists to "just cause" as shown above for
the fixing of a further period. ...

Under the first and second assignments of error which petitioner jointly discusses, he argues that the
agreement entered into between him and the respondent is a perfected contract of purchase and sale
within the meaning of Article 1475 of the New Civil Code which provides that "the contract of sale is
perfected at the moment there is a meeting of minds upon the thing which is the object of the contract
and upon the price. From that moment, the parties may reciprocally demand performance, subject to
the provisions of the law governing the form of contract."

Petitioner contends that "(n)othing in the decision of the courts below would show that ownership of
the property remained with plaintiff for so long as the installments have not been fully paid. Which
yields the conclusion that, by the delivery of the lots to defendant, ownership likewise was transferred
to the latter." (Brief for the Petitioner, p. 15) And he concludes that the sale was consummated by the
delivery of the two lots, the subject thereof, by him to the respondent.

Under the findings of facts by the appellate court, it appears that the two lots subject of the agreement
between the parties herein were delivered by the petitioner to the private respondent who took
possession thereof and occupied the same and thereafter built his house thereon, enclosing the lots
with adobe stone walls and barbed wires. But the property being registered under the Land
Registration Act, it is the act of registration of the Deed of Sale which could legally effect the transfer
of title of ownership to the transferee, pursuant to Section 50 of Act 496. (Manuel vs. Rodriguez, et al.,
109 Phil. 1; Buzon vs. Lichauco, 13 Phil. 354; Tuazon vs. Raymundo, 28 Phil. 635: Worcestor vs.
Ocampo, 34 Phil. 646). Hence, We hold that the contract between the petitioner and the respondent
was a contract to sell where the ownership or title is retained by the seller and is not to pass until the
full payment of the price, such payment being a positive suspensive condition and failure of which is
not a breach, casual or serious, but simply an event that prevented the obligation of the vendor to
convey title from acquiring binding force.

In the case at bar, there is no writing or document evidencing the agreement originally entered into
between petitioner and private respondent except the receipt showing the initial deposit of P150.00 as
shown in Exh. "A" and the payment of the 4- months installment made by respondent corresponding
to July, 1954 to October, 1954 in the sum of P740.56 as shown in Exh. "B". Neither is there any writing
or document evidencing the modified agreement when the 3 lots were changed to Lots 4 and 12 with
a reduced area of 725 sq. meters, which are corner lots. This absence of a formal deed of conveyance
is a very strong indication that the parties did not intend immediate transfer of ownership and title, but
only a transfer after full payment of the price. Parenthetically, We must say that the standard printed
contracts for the sale of the lots in the Rockville Subdivision on a monthly installment basis showing
the terms and conditions thereof are immaterial to the case at bar since they have not been signed by
either of the parties to this case.

Upon the law and jurisprudence hereinabove cited and considering the nature of the transaction or
agreement between petitioner and respondent which We affirm and sustain to be a contract to sell,
the following resolutions of petitioner's assignment of errors necessarily arise, and so We hold that:

1. The first and second assignments of errors are without merit.

The overwhelming weight of authority culminating in the Luzon Brokerage vs. Maritime cases has laid
down the rule that Article 1592 of the New Civil Code does not apply to a contract to sell where title
remains with the vendor until full payment of the price as in the case at bar. This is the ruling in Caridad
Estates vs. Santero, 71 Phil. 120; Aldea vs. Inquimboy 86 Phil. 1601; Jocon vs. Capitol Subdivision,
Inc., L-6573, Feb. 28, 1955; Miranda vs. Caridad Estates, L-2077 and Aspuria vs. Caridad Estates, L-
2121 Oct. 3, 1950, all reiterated in Manuel vs. Rodriguez, et al. 109 Phil. 1, L-13435, July 27, 1960.
We agree with the respondent Court of Appeals that Art, 1191 of the New Civil Code is the applicable
provision where the obligee, like petitioner herein, elects to rescind or cancel his obligation to deliver
the ownership of the two lots in question for failure of the respondent to pay in fun the purchase price
on the basis of 120 monthly equal installments, promptly and punctually for a period of 10 years.

2. We hold that respondent as obligor is not entitled to the benefits of paragraph 3 of Art. 1191, NCC
Having been in default, he is not entitled to the new period of 90 days from entry of judgment within
which to pay petitioner the balance of P11,434.44 with interest due on the purchase price of
P12,325.00 for the two lots.

Respondent a paid P150.00 as deposit under Exh. "A" and P740.56 for the 4-months installments
corresponding to the months of July to October, 1954. The judgment of the lower court and the Court
of Appeals held that respondent was under the obligation to pay the purchase price of the lots m
question on an equal monthly installment basis for a period of ten years, or 120 equal monthly
installments. Beginning November, 1954, respondent began to default in complying with his obligation
and continued to do so for the remaining 116 monthly interest. His refusal to pay further installments
on the purchase price, his insistence that he had the option to pay the purchase price any time in ten
years inspire of the clearness and certainty of his agreement with the petitioner as evidenced further
by the receipt, Exh. "B", his dilatory tactic of refusing to sign the necessary contract of sale on the
pretext that he will sign later when he shall have updated his monthly payments in arrears but which
he never attempted to update, and his failure to deposit or make available any amount since the
execution of Exh "B" on June 28, 1954 up to the present or a period of 26 years, are all unreasonable
and unjustified which altogether manifest clear bad faith and malice on the part of respondent puzzle
making inapplicable and unwarranted the benefits of paragraph 3, Art. 1191, N.C.C. To allow and
grant respondent an additional period for him to pay the balance of the purchase price, which balance
is about 92% of the agreed price, would be tantamount to excusing his bad faith and sanctioning the
deliberate infringement of a contractual obligation that is repugnant and contrary to the stability,
security and obligatory force of contracts. Moreover, respondent's failure to pay the succeeding 116
monthly installments after paying only 4 monthly installments is a substantial and material breach on
his part, not merely casual, which takes the case out of the application of the benefits of pa paragraph
3, Art. 1191, N.C.C.

At any rate, the fact that respondent failed to comply with the suspensive condition which is the full
payment of the price through the punctual performance of the monthly payments rendered petitioner's
obligation to sell ineffective and, therefore, petitioner was entitled to repossess the property object of
the contract, possession being a mere incident to his right of ownership (Luzon Brokerage Co., Inc.
vs. Maritime Building Co., Inc., et al. 46 SCRA 381).

3. We further rule that there exists no just cause authorizing the fixing of a new period within which
private respondent may pay the balance of the purchase price. The equitable grounds or
considerations which are the basis of the respondent court in the fixing of an additional period because
respondent had constructed valuable improvements on the land, that he has built his house on the
property worth P45,000.00 and placed adobe stone walls with barbed wires around, do not warrant
the fixing of an additional period. We cannot sanction this claim for equity of the respondent for to
grant the same would place the vendor at the mercy of the vendee who can easily construct substantial
improvements on the land but beyond the capacity of the vendor to reimburse in case he elects to
rescind the contract by reason of the vendee's default or deliberate refusal to pay or continue paying
the purchase price of the land. Under this design, strategem or scheme, the vendee can cleverly and
easily "improve out" the vendor of his land.

More than that, respondent has not been honest, fair and reciprocal with the petitioner, hence it would
not be fair and reasonable to the petitioner to apply a solution that affords greater reciprocity of rights
which the appealed decision tried to effect between the parties. As matters stand, respondent has
been enjoying the possession and occupancy of the land without paying the other 116 monthly
installments as they fall due. The scales of justice are already tipped in respondent,s favor under the
amended decision of the respondent court. It is only right that We strive and search for the application
of the law whereby every person must, in the exercise of his rights and in the performance of his
duties, act with justice, give everyone his due, and observe honesty and good faith (Art. 19, New Civil
Code)

In the case at bar, respondent has not acted in good faith. With malice and deliberate intent, he has
twisted the clear import of his agreement with the petitioner in order to suit his ends and delay the
fulfillment of his obligation to pay the land he had enjoyed for the last 26 years, more than twice the
period of ten years that he obliged himself to complete payment of the price.

4. Respondent's contention that petitioner has not complied with his obligation to put up the necessary
facilities in the Rockville Subdivision is not sufficient nor does it constitute good reason to justify the
grant of an additional period of 90 days from entry of judgment within which respondent may pay the
balance of the purchase price agreed upon. The Judgment of the appellate court concedes that
petitioner's failure to comply with his obligation to put up the necessary facilities in the subdivision will
not deter him from asking for the rescission of the agreement since his obligation is not correlative
with respondent's obligation to buy the property. Since this is so conceded, then the right of the
petitioner to rescind the agreement upon the happening or in the event that respondent fails or defaults
in any of the monthly installments would be rendered nugatory and ineffective. The right of rescission
would then depend upon an extraneous consideration which the law does not contemplate.

Besides, at the rate the two lots were sold to respondent with a combined area of 725 sq. meters at
the uniform price of P17.00 per sq. meter making a total price of P12,325.00, it is highly doubtful if not
improbable that aside from his obligation to deliver title and transfer ownership to the respondent as a
reciprocal obligation to that of the respondent in paying the price in full and promptly as the installments
fall due, petitioner would have assumed the additional obligation "to provide the subdivision with
streets ... provide said streets with street pavements concrete curbs and gutters, fillings as required
by regulations, adequate drainage facilities, tree plantings, adequate water facilities" as required under
Ordinance No. 2969 of Quezon City approved on May 11, 1956 (Answer of Defendant, Record on
Appeal, pp. 35-36) which was two years after the agreement in question was entered into June, 1y54.

The fact remains, however, that respondent has not protested to the petitioner nor to the authorities
concerned the alleged failure of petitioner to put up and provide such facilities in the subdivision
because he knew too well that he has paid only the aggregate sum of P890.56 which represents more
or less 7% of the agreed price of P12,325.00 and that he has not paid the real estate taxes assessed
by the government on his house erected on the property under litigation. Neither has respondent made
any allegation in his Answer and in all his pleadings before the court up to the promulgation of the
Resolution dated October 12, 1970 by the Court of Appeals, to the effect that he was entitled to a new
period within which to comply with his obligation, hence the Court could not proceed to do so unless
the Answer is first amended. (Gregorio Araneta, Inc. vs. Philippine Sugar Estates Development Co.,
Ltd., G.R. No. L-22558, May 31, 1967, 20 SCRA 330, 335). It is quite clear that it is already too late in
the day for respondent to claim an additional period within which to comply with his obligation.

Precedents there are in Philippine jurisprudence where the Supreme Court granted the buyer of real
property additional period within which to complete payment of the purchase price on grounds of equity
and justice as in (1) J.M. Tuazon Co., Inc. vs. Javier, 31 SCRA 829 where the vendee religiously
satisfied the monthly installments for eight years and paid a total of P4,134.08 including interests on
the principal obligation of only P3,691.20, the price of the land; after default, the vendee was willing to
pay all arrears, in fact offered the same to the vendor; the court granted an additional period of 60
days -from receipt of judgment for the vendee to make all installment in arrears plus interest; (2)
in Legarda Hermanos vs. Saldaña, 55 SCRA 324, the Court ruled that where one purchase, from a
subdivision owner two lots and has paid more than the value of one lot, the former is entitled to a
certificate of title to one lot in case of default.

On the other hand there are also cases where rescission was not granted and no new or additional
period was authorized. Thus, in Caridad Estates vs. Santero, 71 Phil. 114, the vendee paid, totalling
P7,590.00 or about 25% of the purchase price of P30,000.00 for the three lots involved and when the
vendor demanded revocation upon the vendee's default two years after, the vendee offered to pay the
arears in check which the vendor refused; and the Court sustained the revocation and ordered the
vendee ousted from the possession of the land. In Ayala y Cia vs. Arcache, 98 Phil. 273, the total price
of the land was P457,404.00 payable in installments; the buyer initially paid P100,000.00 or about
25% of the agreed price; the Court ordered rescission in view of the substantial breach and granted
no extension to the vendee to comply with his obligation.

The doctrinal rulings that "a slight or casual breach of contract is not a ground for rescission. It must
be so substantial and fundamental to defeat the object of the parties" (Gregorio Araneta Inc. vs.
Tuazon de Paterno, L-2886, August 22, 1962; Villanueva vs. Yulo, L-12985, Dec. 29,1959); that
"where time is not of the essence of t agreement, a slight delay on the part of one party in the
performance of his obligation is not a sufficient ground for the rescission of the agreement"( Biando
vs. Embestro L-11919, July 27, 1959; cases cited in Notes appended to Universal Foods Corporation
vs. Court of Appeals, 33 SCRA 1), convince and persuade Us that in the case at bar where the breach,
delay or default was committed as early as in the payment of the fifth monthly installment for
November, 1954, that such failure continued and persisted the next month and every month thereafter
in 1955, 1956, 1957 and year after year to the end of the ten-year period in 1964 (10 years is
respondent's contention) and even to this time, now more than twice as long a time as the original
period without respondent adding, or even offering to add a single centavo to the sum he had originally
paid in 1954 which represents a mere 7% of the total price agreed upon, equity and justice may not
be invoked and applied. One who seeks equity and justice must come to court with clean hands, which
can hardly be said of the private respondent.
One final point, on the supposed substantial improvements erected on the land, respondent's house.
To grant the period to the respondent because of the substantial value of his house is to make the
land an accessory to the house. This is unjust and unconscionable since it is a rule in Our Law that
buildings and constructions are regarded as mere accessories to the land which is the principal,
following the Roman maxim "omne quod solo inadeficatur solo cedit" (Everything that is built on the
soil yields to the soil).

Pursuant to Art. 1191, New Civil Code, petitioner is entitled to rescission with payment of damages
which the trial court and the appellate court, in the latter's original decision, granted in the form of
rental at the rate of P60.00 per month from August, 1955 until respondent shall have actually vacated
the premises, plus P2,000.00 as attorney's fees. We affirm the same to be fair and reasonable. We
also sustain the right of the petitioner to the possession of the land, ordering thereby respondent to
vacate the same and remove his house therefrom.

WHEREFORE, IN VIEW OF THE FOREGOING, the Resolution appealed from dated October 12,
1970 is hereby REVERSED. The decision of the respondent court dated April 23, 1970 is hereby
REINSTATED and AFFIRMED, with costs against private respondent.

SO ORDERED.

Teehankee, Makasiar, Fernandez, De Castro and Melencio-Herrera, JJ., concur.

Footnotes

1 Special Eight Division, Alvendia, J., ponente, Palma and A. Reyes, JJ., concurring.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-29360 January 30, 1982

JOSE C. ZULUETA, petitioner,

vs.
HON. HERMINIO MARIANO, in his capacity as Presiding Judge of Branch X of the Court of
First Instance of Rizal; and LAMBERTO AVELLANA, respondents.

MELENCIO-HERRERA, J.:

In this action for mandamus and Prohibition, petitioner seeks to compel respondent Judge to assume
appellate, not original jurisdiction over an Ejectment case appealed from the Municipal Court of Pasig
(CC No. 1190 entitled Jose C. Zulueta vs. Lamberto Avellana), and to issue a Writ of Execution in said
case.

The antecedental facts follow:

Petitioner Jose C. Zulueta is the registered owner of a residential house and lot situated within the
Antonio Subdivision, Pasig, Rizal.

On November 6, 1964, petitioner Zulueta and private respondent Lamberto Avellana, a movie director,
entered into a "Contract to Sell" the aforementioned property for P75,000.00 payable in twenty years
with respondent buyer assuming to pay a down payment of P5,000.00 and a monthly installment of
P630.00 payable in advance before the 5th day of the corresponding month, starting with December,
1964.

It was further stipulated:

12) That upon failure of the BUYER to fulfill any of the conditions herein stipulated,
BUYER automatically and irrevocably authorizes OWNER to recover extra-judicially,
physical possession of the land, building and other improvements which are the
subject of this contract, and to take possession also extra-judicially whatever personal
properties may be found within the aforesaid premises from the date of said failure to
answer for whatever unfulfilled monetary obligations BUYER may have with OWNER;
and this contract shall be considered as without force and effect also from said date;
all payments made by the BUYER to OWNER shall be deemed as rental payments
without prejudice to OWNER's right to collect from BUYER whatever other monthly
installments and other money obligations which may have been paid until BUYER
vacates the aforesaid premises; upon his failure to comply with any of the herein
conditions BUYER forfeits all money claims against OWNER and shall pay a monthly
rental equivalent to his monthly installment under Condition 1 of this Contract from the
date of the said failure to the date of recovery of physical possession by OWNER of
the land, building and other improvements which are the subject of this Contract;
BUYER shall not remove his personal properties without the previous written consent
 of OWNER, who, should he take possession of such properties following the aforesaid
failure of BUYER, shall return the same to BUYER only after the latter shall have
fulfilled all money claims against him by OWNER; in all cases herein, demand is
waived;

Respondent Avellana occupied the property from December, 1964, but title remained with petitioner
Zulueta.

Upon the allegation that respondent Avellana had failed to comply with the monthly amortizations
stipulated in the contract, despite demands to pay and to vacate the premises, and that thereby the
contract was converted into one of lease, petitioner, on June 22, 1966, commenced an Ejectment suit
against respondent before the Municipal Court of Pasig (CC No. 1190), praying that judgment be
rendered ordering respondent 1) to vacate the premises; 2) to pay petitioner the sum of P11,751.30
representing respondent's balance owing as of May, 1966; 3) to pay petitioner the sum of P 630.00
every month after May, 1966, and costs.

Respondent controverted by contending that the Municipal Court had no jurisdiction over the nature
of the action as it involved the interpretation and/or rescission of the contract; that prior to the execution
of the contract to sell, petitioner was already indebted to him in the sum of P31,269.00 representing
the cost of two movies respondent made for petitioner and used by the latter in his political campaign
in 1964 when petitioner ran for Congressman, as well as the cost of one 16 millimeter projector
petitioner borrowed from respondent and which had never been returned, which amounts, according
to their understanding, would be applied as down payment for the property and to whatever obligations
respondent had with petitioner. The latter strongly denied such an understanding. Respondent's total
counterclaim against petitioner was in the amount of P42,629.99 representing petitioner's pleaded
indebtedness to private respondent, claim for moral damages, and attorney's fees.

The counterclaim was dismissed by the Municipal Court for being in an amount beyond its jurisdiction.
However, as a special defense, private respondent sought to offset the sum of P31,269.00 against his
obligations to petitioner.

Deciding the case on May 10, 1967, the Municipal Court found that respondent Avellana had failed to
comply with his financial obligations under the contract and ordered him to vacate the premises and
deliver possession thereof to petitioner; to pay petitioner the sum of P21,093.88 representing
arrearages as of April, 1967, and P630.00 as monthly rental from and after May, 1967 until delivery of
possession of that premises to petitioner. That conclusion was premised on title finding that breach of
any of the conditions by private respondent converted the agreement into a lease contractual and
upon the following considerations:

The question involved herein is that of possession, that who of the contending parties
has the better right to possession of the properly in question. The issue in this case
being that of possession, the claim of defendant against plaintiff or P 31,269.00
indebtedness, has no place as a defense here. It should be the subject- matter of a
separate action against, plaintiff Jose C. Zulueta. As it is, said indebtedness is only a
claim still debatable and controversial and not a final judgment. 'It is our considered
opinion that to admit and to allow such a defense would be tantamount to prejuding
the claim on its merits prematurely in favor of defendant. This court can not do without
violating some rules of law. This is not the proper court and this is not the proper case
in which to ventilate the claim.

Respondent Avellana appealed to the Court of First Instance of Rizal presided by respondent Judge.
Thereat, petitioner summoned for execution alleging private respondent's failure to deposit in
accordance the monthly rentals, which the latter denied. Respondent Judge held resolution thereof in
abeyance.

On February 19, 1968, respondent Avellana filed a Motion to Dismiss Appeal alleging that, inasmuch
as the defense set up in his Answer was that he had not breached his contract with petitioner, the
case necessarily involved the interpretation and/or rescission of the contract and, therefore, beyond
the jurisdiction of the Municipal Court. Petitioner opposed claiming that the Complaint had set out a
clear case of unlawful detainer considering that judicial action for the rescission of the contract was
unnecessary due to the automatic rescission clause therein and the fact that petitioner had cancelled
said contract so that respondent's right to remain in the premises had ceased.

On March 21, 1968, respondent Judge dismissed the case on the ground of lack of jurisdiction of the
Municipal Court, explaining:

The decision of the lower court declared said Contract to Sell to have been converted
into a contract of lease. It is the contention of the defendant that the lower court had
no jurisdiction to entertain the case as the same involves the interpretation of contract
as to whether or not the same has been converted to lease contract. Although the
contract to sell object of this case states that the same may be converted into a lease
contract upon the failure of the defendant to pay the amortization of the property in
question, there is no showing that before filing this case in the lower court, the plaintiff
has exercised or has pursued his right pursuant to the contract which should be the
basis of the action in the lower court.

Petitioner's Motion for Reconsideration was denied by respondent Judge as follows:

The plaintiff having filed a motion for reconsideration of this Court's Order dismissing
the appeal, the Court, while standing pat on its Order dismissing this case for lack of
jurisdiction of the lower court over the subject matter, hereby takes cognizance of the
case and will try the case as if it has been filed originally in this Court.

WHEREFORE, let this case be set for pre-trial on July 12, 1968 at 8:30 a.m. with notice
to an parties.

Petitioner then availed of the instant recourse.

Was the action before the Municipal Court of Pasig essentially for detainer and, therefore, within its
exclusive original jurisdiction, or one for rescission or annulment of a contract, which should be litigated
before a Court of First Instance?

Upon a review of the attendant circumstances, we uphold the ruling of respondent Judge that the
Municipal Court of Pasig was bereft of jurisdiction to take cognizance of the case filed before it. In his
Complaint, petitioner had alleged violation by respondent Avellana of the stipulations of their
agreement to sell and thus unilaterally considered the contract rescinded. Respondent Avellana
denied any breach on his part and argued that the principal issue was one of interpretation and/or
rescission of the contract as well as of set-off. Under those circumstances, proof of violation is a
condition precedent to resolution or rescission. It is only when the violation has been established that
the contract can be declared resolved or rescinded. Upon such rescission, in turn, hinges a
pronouncement that possession of the realty has become unlawful. Thus, the basic issue is not
possession but one of rescission or annulment of a contract. which is beyond the jurisdiction of the
Municipal Court to hear and determine.
 A violation by a party of any of the stipulations of a contract on agreement to sell real
property would entitle the other party to resolved or rescind it. An allegation of such
violation in a detainer suit may be proved by competent evidence. And if proved a
justice of the peace court might make a finding to that effect, but it certainly cannot
declare and hold that the contract is resolved or rescinded. It is beyond its power so to
do. And as the illegality of the possession of realty by a party to a contract to sell is
premised upon the resolution of the contract, it follows that an allegation and proof of
such violation, a condition precedent to such resolution or rescission, to render
unlawful the possession of the land or building erected thereon by the party who has
violated the contract, cannot be taken cognizance of by a justice of the peace court.
... 1

True, the contract between the parties provided for extrajudicial rescission. This has legal effect, however,
where the other party does not oppose it. 2 Where it is objected to, a judicial determination of the issue is
still necessary.

A stipulation entitling one party to take possession of the land and building if the other
party violates the contract does not ex proprio vigore confer upon the former the right
to take possession thereof if objected to without judicial intervention and'
determination. 3

But while respondent Judge correctly ruled that the Municipal Court had no jurisdiction over the case and
correctly dismissed the appeal, he erred in assuming original jurisdiction, in the face of the objection
interposed by petitioner. Section 11, Rule 40, leaves no room for doubt on this point:

Section 11. Lack of jurisdiction —A case tried by an inferior court without jurisdiction
over the subject matter shall be dismiss on appeal by the Court of First Instance. But
instead of dismissing the case, the Court of First Instance may try the case on the
merits, if the parties therein file their pleadings and go to trial without any objection to
such jurisdiction.

There was no other recourse left for respondent Judge, therefore, except to dismiss the appeal.

If an inferior court tries a case without jurisdiction over the subject-matter on appeal,
the only authority of the CFI is to declare the inferior court to have acted without
jurisdiction and dismiss the case, unless the parties agree to the exercise by the CFI
of its original jurisdiction to try the case on the merits. 4

The foregoing premises considered, petitioner's prayer for a Writ of Execution of the judgment of the
Municipal Court of Pasig must perforce be denied.

WHEREFORE, the Writ of mandamus is denied, but the Writ of Prohibition is granted and respondent
Court hereby permanently enjoined from taking cognizance of Civil Case No. 10595 in the exercise of
its original jurisdiction. No costs.

SO ORDERED.

Makasiar, Fernandez, Guerrero and Plana, JJ., concur.

Teehankee, J., concur in the result.

Footnotes

1 Nera vs. Vacante, 3 SCRA 505, 511 (1961).

2 Tolentino, Civil Code of the Phil., Vol. IV, 1962 ed, p. 168,

3 Nera vs. Vacante, supra.

4 Ganancial vs. Atillo, 14 SCRA 460 (1965).

 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. L-55665 February 8, 1989

DELTA MOTOR CORPORATION, petitioner,

vs.
EDUARDA SAMSON GENUINO, JACINTO S. GENUINO, Jr., VICTOR S. GENUINO, HECTOR S.
GENUINO, EVELYN S. GENUINO, and The COURT OF APPEALS, respondents.

Alcasid, Villanueva & Associates for petitioner.

Luna, Puruganan, Sison & Ongkiko for respondents.

CORTES, J.:

Petitioner, through this petition for review by certiorari, appeals from the decision of respondent
appellate court in CA-G.R. No. 59848-R entitled "Eduarda Samson Genuino, et al. v. Delta Motor
Corporation" promulgated on October 27, 1980.

The facts are as follows:

Petitioner Delta Motor Corporation (hereinafter referred to as Delta) is a corporation duly organized
and existing under Philippine laws.

On the other hand, private respondents are the owners of an iceplant and cold storage located at 1879
E. Rodriguez Sr. Avenue, Quezon City doing business under the name "España Extension Iceplant
and Cold Storage."

In July 1972, two letter-quotations were submitted by Delta to Hector Genuino offering to sell black
iron pipes. T

The letter dated July 3, 1972 quoted Delta's selling price for 1,200 length of black iron pipes schedule
40, 2" x 20' including delivery at P66,000.00 with the following terms of payment:

a. 20% of the net contract price or P13,200.00 will be due and payable upon signing
of the contract papers.

b. 20% of the net contract price or P13,200.00 will be due and payable before
commencement of delivery.

c. The balance of 60% of the net contract price or P39,600.00 with 8% financing charge
per annum will be covered by a Promissory Note bearing interest at the rate of 14%
per annum and payable in TWELVE (12) equal monthly installment (sic), the first of
which will become due thirty (30) days after the completion of delivery. Additional 14%
will be charged for all delayed payments. [Exh. "A"; Exh. 1.]
The second letter-quotation dated July 18, 1972 provides for the selling price of 150 lengths of black
iron pipes schedule 40, 1 1/4" x 20' including delivery at P5,400.00 with the following terms of payment:

a. 50% of the net contract price or P 2,700.00 will be due and payable upon signing of
the contract papers.

b. 50% of the net contract price or P 2,700.00 will be due and payable before
commencement of delivery. [Exh. "C"; Exh. "2".]

Both letter-quotations also contain the following stipulations as to delivery and price offer:

DELIVERY

Ex-stock subject to prior sales.

xxx xxx xxx

Our price offer indicated herein shall remain firm within a period of thirty (30) days from
the date hereof. Any order placed after said period will be subject to our review and
confirmation. [Exh. "A" and "C"; Exhs. "l" and "2".]

Hector Genuino was agreeable to the offers of Delta hence, he manifested his conformity thereto by
signing his name in the space provided on July 17, 1972 and July 24, 1972 for the first and second
letter-quotations, respectively.

It is undisputed that private respondents made initial payments on both contracts — for the first
contract, P13,200.00 and, for the second, P2,700.00 — for a total sum of P15,900.00 on July 28, 1972
(Exhs. "B" and "D"].

Likewise unquestionable are the following. the non-delivery of the iron pipes by Delta; the non-payment
of the subsequent installments by the Genuinos; and the non-execution by the Genuinos of the
promissory note called for by the first contract.

The evidence presented in the trial court also showed that sometime in July 1972 Delta offered to
deliver the iron pipes but the Genuinos did not accept the offer because the construction of the ice
plant building where the pipes were to be installed was not yet finished.

Almost three years later, on April 15, 1975, Hector Genuino, in behalf of España Extension Ice Plant
and Cold Storage, asked Delta to deliver the iron pipes within thirty (30) days from its receipt of the
request. At the same time private respondents manifested their preparedness to pay the second
installment on both contracts upon notice of Delta's readiness to deliver.

Delta countered that the black iron pipes cannot be delivered on the prices quoted as of July 1972.
The company called the attention of the Genuinos to the stipulation in their two (2) contracts that the
quoted prices were good only within thirty (30) days from date of offer. Whereupon Delta sent new
price quotations to the Genuinos based on its current price of black iron pipes, as follows:

P241,800.00 for 1,200 lengths of black iron pjpes schedule 40, 2" x 20' [Exh. "G-1".]

P17,550.00 for 150 lengths of black iron pipes schedule 40, 1 1/4" x 20' [Exh. "G-2".]
The Genuinos rejected the new quoted prices and instead filed a complaint for specific performance
with damages seeking to compel Delta to deliver the pipes. Delta, in its answer prayed for rescission
of the contracts pursuant to Art. 1191 of the New Civil Code. The case was docketed as Civil Case
No. Q-20120 of the then Court of First Instance of Rizal, Branch XVIII, Quezon City.

After trial the Court of First Instance ruled in favor of Delta,the dispositive portion of its decision reading
as follows:

WHEREFORE, premises considered, judgment is rendered:

1. Declaring the contracts, Annexes "A" and "C" of the complaint rescinded;

2. Ordering defendant to refund to plaintiffs the sum of P15,900.00 delivered by the

latter as downpayments on the aforesaid contracts;

3. Ordering plaintiffs to pay defendant the sum of P10,000.00 as attorney's fees; and,

4. To pay the costs of suit. [CFI Decision, pp. 13-14; Rollo, pp. 53-54.]

On appeal, the Court of Appeals reversed and ordered private respondents to make the payments
specified in "Terms of Payment — (b)" of the contracts and to execute the promissory note required
in the first contract and thereafter, Delta should immediately commence delivery of the black iron
pipes.* [CA Decision, p. 20; Rollo, p. 75.]

The Court of Appeals cited two main reasons why it reversed the trial court, namely:

1. As Delta was the one who prepared the contracts and admittedly, it had knowledge
of the fact that the black iron pipes would be used by the Genuinos in their cold storage
plant which was then undergoing construction and therefore, would require sometime
before the Genuinos would require delivery, Delta should have included in said
contracts a deadline for delivery but it did not. As a matter of fact neither did it insist on
delivery when the Genuinos refused to accept its offer of delivery. [CA Decision, pp.
16-17; Rollo, pp. 71-72.]

2. Delta's refusal to make delivery in 1975 unless the Genuinos pay a price very much
higher than the prices it previously quoted would mean an amendment of the contracts.
It would be too unfair for the plaintiffs if they will be made to bear the increase in prices
of the black iron pipes when they had already paid quite an amount for said items and
defendant had made use of the advance payments. That would be unjust enrichment
on the part of the defendant at the expense of the plaintiffs and is considered an
abominable business practice. [CA Decision, pp. 18-19; Rollo, pp. 73-74.]

Respondent court denied Delta's motion for reconsideration hence this petition for review praying for
the reversal of the Court of Appeals decision and affirmance of that of the trial court.

Petitioner argues that its obligation to deliver the goods under both contracts is subject to conditions
required of private respondents as vendees. These conditions are: payment of 20% of the net contract
price or P13,200.00 and execution of a promissory note called for by the first contract; and payment
of 50% of the net contract price or P2,700.00 under the second contract. These, Delta posits, are
suspensive conditions and only upon their performance or compliance would its obligation to deliver
the pipes arise [Petition, pp. 9-12; Rollo, pp. 1720.] Thus, when private respondents did not perform
their obligations; when they refused to accept petitioner's offer to deliver the goods; and, when it took
them three (3) long years before they demanded delivery of the iron pipes that in the meantime, great
and sudden fluctuation in market prices have occurred; Delta is entitled to rescind the two (2) contracts.

Delta relies on the following provision of law on rescission:

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one
of the obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek rescission,
even after he has chosen fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing
the fixing of a period.

This is understood to be without prejudice to the rights of third persons who have
acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law.

In construing Art. 1191, the Supreme Court has stated that, "[r]escission will be ordered only where
the breach complained of is substantial as to defeat the object of the parties in entering into the
agreement. It will not be granted where the breach is slight or casual." [Phil. Amusement Enterprises,
Inc. v. Natividad, G.R. No. L-21876, September 29, 1967, 21 SCRA 284, 290.] Further, "[t]he question
of whether a breach of a contract is substantial depends upon the attendant circumstances." [Universal
Food Corporation v. Court of Appeals, G. R. No. L-29155, May 13,1970,33 SCRA 1, 18].

In the case at bar, the conduct of Delta indicates that the Genuinos' non-performance of its obligations
was not a substantial breach, let alone a breach of contract, as would warrant rescission.

Firstly, it is undisputed that a month after the execution of the two (2) contracts, Delta's offer to deliver
the black iron pipes was rejected by the Genuinos who were "not ready to accept delivery because
the cold storage rooms have not been constructed yet. Plaintiffs (private respondents herein) were
short-funded, and did not have the space to accommodate the pipes they ordered" [CFI Decision, p.
9; Rollo, p. 49].

Given this answer to its offer, Delta did not do anything. As testified by Crispin Villanueva, manager of
the Technical Service department of petitioner:

Q You stated that you sent a certain Evangelista to the España

Extension and Cold Storage to offer the delivery subject matter of the
contract and then you said that Mr. Evangelista reported (sic) to you
that plaintiff would not accept delivery, is that correct, as a summary of
your statement?

A A Yes, sir.

Q Now, what did you do in the premises (sic)?

A Yes, well, we take the word of Mr. Evangelista. We could not deliver
the said black iron pipes, because as per information the Ice Plant is
not yet finished.
 Q Did you not report that fact to ... any other defendant-officials of the
Delta Motor Corporation?

A No.

Q And you did not do anything after that?

A Because taking the word of my Engineer we did not do anything.

[TSN, December 8, 1975, pp. 18-19.]

xxx xxx xxx

And secondly, three (3) years later when the Genuinos offered to make payment Delta did not raise
any argument but merely demanded that the quoted prices be increased. Thus, in its answer to private
respondents' request for delivery of the pipes, Delta countered:

Thank you for your letter dated April 15, 1975, requesting for delivery of Black Iron
pipes;.

We regret to say, however, that we cannot base our price on our proposals dated July
3 and July 18, 1972 as per the following paragraph quoted on said proposal:

Our price offer indicated herein shall remain firm within a period of thirty
(30) days from the date hereof. Any order placed after said period will
be subject to our review and confirmation.

We are, therefore, enclosing our re-quoted proposal based on our current price. [Exh.
"G".]

Moreover, the power to rescind under Art. 1191 is not absolute. "[T]he act of a party in treating a
contract as cancelled or resolved on account of infractions by the other contracting party must be
made known to the other and is always provisional, being ever subject to scrutiny and review by the
proper court." [University of the Phils. v. De los Angeles, G. R. No. L-28602, September 29, 1970, 35
SCRA 102, 107; Emphasis supplied.]

In the instant case, Delta made no manifestation whatsoever that it had opted to rescind its contracts
with f-he Genuinos. It only raised rescission as a defense when it was sued for specific performance
by private respondents.

Further, it would be highly inequitable for petitioner Delta to rescind the two (2) contracts considering
the fact that not only does it have in its possession and ownership the black iron pipes, but also the
P15,900.00 down payments private respondents have paid. And if petitioner Delta claims the right to
rescission, at the very least, it should have offered to return the P15,900.00 down payments [See Art.
1385, Civil Code and Hodges v. Granada, 59 Phil. 429 (1934)].

It is for these same reasons that while there is merit in Delta's claim that the sale is subject to
suspensive conditions, the Court finds that it has, nevertheless, waived performance of these
conditions and opted to go on with the contracts although at a much higher price. Art. 1545 of the Civil
Code provides:
 Art. 1545. Where the obligation of either party to a contract of sale is subject to any
condition which is not performed, such party may refuse to proceed with the contract
or he may waived performance of the condition. . . . [Emphasis supplied.]

Finally, Delta cannot ask for increased prices based on the price offer stipulation in the contracts and
in the increase in the cost of goods. Reliance by Delta on the price offer stipulation is misplaced. Said
stipulation makes reference to Delta's price offer as remaining firm for thirty (30) days and thereafter,
will be subject to its review and confirmation. The offers of Delta, however, were accepted by the
private respondents within the thirty (30)-day period. And as stipulated in the two (2) letter-quotations,
acceptance of the offer gives rise to a contract between the parties:

In the event that this proposal is acceptable to you, please indicate your conformity by
signing the space provided herein below which also serves as a contract of this
proposal. [Exhs. "A" and "C"; Exhs. "1" and "2".]

And as further provided by the Civil Code:

Art. 1319. Consent is manifested by the meeting of the offer and the acceptance upon
the thing and the cause which are to constitute the contract.

Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds
upon thing which is the object of the contract and upon the price.

Thus, the moment private respondents accepted the offer of Delta, the contract of sale between them
was perfected and neither party could change the terms thereof.

Neither could petitioner Delta rely on the fluctuation in the market price of goods to support its claim
for rescission. As testified to by petitioner's Vice-President of Marketing for the Electronics,
Airconditioning and Refrigeration division, Marcelino Caja, the stipulation in the two (2) contracts as to
delivery, ex-stock subject to prior sales, means that "the goods have not been delivered and that there
are no prior commitments other than the sale covered by the contracts.. . once the offer is accepted,
the company has no more option to change the price." [CFI Decision, p. 5; Rollo, p. 45; Emphasis
supplied.] Thus, petitioner cannot claim for higher prices for the black iron pipes due to the increase
in the cost of goods. Based on the foregoing, petitioner Delta and private respondents Genuinos
should comply with the original terms of their contracts.

WHEREFORE, the decision of the Court of Appeals is hereby AFFIRMED.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ., concur.

Footnotes

* The Court of Appeals decision was penned by Justice German. Justice de la Fuente
wrote a separate concurring opinion. Justice Cenzon concurred both with Justice
German's decision and Justice de la Fuente's opinion. Justice Gancayco, however,
wrote a separate dissenting opinion to which Justice Patajo concurred.