salgado - case digest obligation and contracts

7/16/2019 Salgado - Case Digest Obligation and Contracts

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Estelita Villamar vs. Balbino Mangaoil

G.R. No. 188661April 11, 2012………………………………………………………………………………………

The Roman Catholic Church vs. Regino PanteG.R. No. 174118April 11, 2012………………………………………………………………………………………

Insular Investment and Trust Corporation vs. Capital One Equities Corp. and PlantersDevelopment Bank G.R. No.183308April 25, 2012………………………………………………………………………………………

Prieto vs. CAG.R. No. 158597June 18, 2012……………………………………………………………………………………….

Heirs of Servando Franco vs. Spouses Veronica and Danilo GonzalesG.R. No. 159709June 27, 2012……………………………………………………………………………………….

Subic Bay Metropolitan Authority vs. CAG.R. No.: G.R. No. 192885Date: July 4, 2012…………………………………………………………………………………..

Virgilio S. David vs. Misamis Occidental II Electric Cooperative, Inc.G.R. No.: G.R. No. 194785Date: July 11, 2012…………………………………………………………………………………

Gold Loop Properties Inc. vs. GSISG.R. No. 171076Date: August 1, 2012……………………………………………………………………………….

Lilia B. Luz, et al. vs. Florante BaylonG.R. No. 182435August 13, 2012…………………………………………………………………………………….

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RECISSION FOR BREACH OF OBLIGATION TO DELIVER

Case Name: Estelita Villamar vs. Balbino Mangaoil

G.R. No.: G.R. No. 188661Date: April 11, 2012Petitioner: Estelita Villamar Respondent: Balbino Mangaoil

FACTS:

The petitioner Villamar, the registered owner of the property, entered into an agreementwith the respondent Mangaoil to purchase and sale a parcel of land. The terms in their agreementincludes the down payment of P 185,000 pesos, which will be for the payment of a loan securedfrom the Rural Bank of Cauayan so that it will be withdrawn and released from the bank and that

a deed of absolute sale will be executed in favor of the respondent Mangaoil which was complied by the parties.

Consequently, the respondent Mangaoil informed the petitioner that he will withdrawfrom the agreement for the land was not yet free from incumbrances as there were still tenantswho were not willing to vacate the land without giving them back the amount that theymortgaged the land. Also, the petitioner failed and refused, despite repeated demands, to handover the Certificate of Title. Then, the respondent Mangaoil demanded the refund of the down payment that he had secured with the petitioner and filed a complaint with the RTC to rescindthe contract of sale. In the response of the petitioner, she averred that she had already compliedwith the obligations and caused the release of the mortgaged land and the delivery of theCertificate of Title will be facilitated by a certain Atty. Pedro C. Antonio. The respondentinsisted that he can rescind the contract for the petitioner had failed to deliver the Certificate of Title.

The RTC and the CA dismissed the complaints for upon the deed of absolute sale, therewas already a valid and constructive delivery.

ISSUE: 1) Whether or not the failure of delivery of the Certificate of Title will constituterescission of the contract?2) Whether or not the execution of the deed of sale of real property is equivalent to a valid andconstructive delivery?

HELD:

1) No, the Court held that the failure of the petitioner to comply with the obligation todeliver to the respondent the possession of the property and the certificate of the title.



Based on Article 1191 of the New Civil Code of the Philippines, it is clear that “the

power to rescind obligations is implied in reciprocal ones, in case one of the obligors should notcomply with what is incumbent upon him.” The respondent cannot be deprived of his right todemand for rescission in view of the petitioner’s failure to abide with item nos. 2 and 3 of theagreement. This remains true notwithstanding the absence of express stipulations in the

agreement indicating the consequences of breaches which the parties may commit. To holdotherwise would render Article 1191 of the NCC as useless.

2) The execution of the deed of absolute sale does not constitute a constructive delivery for this case falls under to the exception since a mere presumption and not conclusive delivery wascreated as the respondent failed to take material possession of the subject property. A person whodoes not have actual possession of the thing sold cannot transfer constructive possession by theexecution and delivery of a public instrument. Thus, the respondent can rescind the contract.

The petition was denied and the petitioner is bound return the down payment plus interestto the respondent.



COMPENSATION: SET-OFF; REQUISITES

Case Name: Insular Investment and Trust Corporation vs. Capital One Equities Corp. andPlanters Development Bank G.R. No.: G.R. No.183308Date: April 25, 2012Petitioner: Insular Investments and Trust CorporationRespondent: Capital One Equities Corp. (now known as Capital One Holdings Corp.) andPlanters Development Bank

FACTS:

Insular Investment and Trust Corporation (IITC) and Capital One Equities Corp. (COEC)

and Planters Development Bank (PDB) have been regularly engaged in trading, sale and purchase of Philippine Treasury bills. On various dates, IITC had purchased from COEC. IITC purchased from COEC treasury bills worth P 260, 683, 392.51 and was able to deliver only 121,050,000. On May 2, 1994, COEC purchased from IITC P 186,790,000 worth of treasury bills.PDC issued confirmation on the sale in favor of IITC.

On May 10, 1994, COEC demanded a letter from IITC the physical delivery of thesecurities last May 2, 1994. Then, on its May 18, 1994 letter to PDB, IITC requested, on behalf of COEC, the delivery of IITC treasury bills, which had been fully paid. On May 30, 1994,COEC protested the tenor of IITC’s letter to PDB and took exception to IITC’s assertion that itmerely acted as a facilitator with regard to the sale of the treasury bills.

IITC sent COEC a letter dated June 3, 1994, demanding that COEC deliver to it (IITC)the P139,833,392.00 worth of treasury bills or return the full purchase price. In either case, italso demanded that COEC (1) pay IITC the amount of P1,729,069.50 representing businessopportunity lost due to the non-delivery of the treasury bills, and (2) deliver treasury billsworth P121,050,000 with the same maturity dates originally purchased by IITC.

COEC sent a letter-reply dated June 9, 1994 to IITC in which it acknowledged itsobligation to deliver the treasury bills worth P139,833,392.00 which it sold to IITC and formallydemanded the delivery of the treasury bills worthP186,774,739.49 which it purchased from IITC.COEC also demanded the payment of lost profits in the amount ofP3,253,250.00. Consideringthat COEC and IITC both have claims against each other for the delivery of treasury bills, COEC proposed that a legal set-off be effected, which would result in IITC owing COEC the differenceof P46,941,446.49.

In its June 13, 1994 letter to COEC, IITC rejected the suggestion for a legal setting-off of obligations, alleging that it merely acted as a facilitator between PDB and COEC. Despiterepeated demands, however, PDB failed to deliver the balance of P136,790,000.00 worth of



treasury bills which IITC purchased from PDB allegedly for COEC. COEC was likewise unableto deliver the remaining IITC T-Bills amounting to P119,633,392.00. Neither PDB and COECreturned the purchase price for the duly paid treasury bills.

Thus COEC filed a complaint with the RTC which found that COEC still has obligations

to pay IITC IITC P119,633,392.00 worth of treasury bills. However, since IITC and COEC were both debtors and creditors of each other, the RTC off-set their debts, resulting in a differenceof P17,056,608.00 in favor of COEC. As to PDB’s liability, it ruled that PDB had the obligationto pay P136,790,000.00 to IITC. Thus, the trial court ordered (a) IITC to payCOEC P17,056,608.00 with interest at the rate of 6% from June 10, 1994 until full payment and(b) PDB to pay IITC P136,790,000.00 with interest at the rate of 6% from March 21, 1995 untilfull payment.

The aggrieved parties appealed with the CA and affirmed the decision of the RTC andabsolved PDB from any liability because PDB was not involved with any of the transactions.

ISSUE: 1) Whether or not COEC can set-off its obligation to IITC as against the latter’sobligation to it.

2) Whether or not IITC acts as a conduit between COEC and PDB?

HELD:

1) Yes, the Supreme Court ruled that the set-off compensation is allowed. As against thecontention of IITC, COEC had proven that IITC is a principal on its sale of the treasury bills thusholding them liable for paying such. Therefore, both IITC and COEC are principal creditors of the other over debts which consist of consumable things or a sum of money, the RTC correctly

ruled that COEC may validly set-off its claims for undelivered treasury bills against that of IITC’s claims.

The court ruled the applicable provisions of law are Articles 1278, 1279 and 1290 of theCivil Code of the Philippines. In Article 1278 states that compensation shall take place when two persons, in their own right, are creditors and debtors of each other. Also, in Article 1290, statesthat when all the requisites mentioned in Article 1279 are present, compensation takes effect byoperation of law, and extinguishes both debts to the concurrent amount, even though thecreditors and debtors are not aware of the compensation.

The requisites of a valid compensation are present in the cases of the debts between IITC

and COEC. As stated in Article 1279 of the Civil Code of the Philippines, such requisites are (1)That each one of the obligors be bound principally, and that he be at the same time a principalcreditor of the other; (2) That both debts consist in a sum of money, or if the things due areconsumable, they be of the same kind, and also of the same quality if the latter has been stated;(3) That the two debts be due; (4) That they be liquidated and demandable; and (5) That over neither of them there be any retention or controversy, commenced by third persons andcommunicated in due time to the debtor. Therefore, both shall be allowed to set-off their obligations with each other.



2) No, IITC did not act as a conduit in the transactions between IITC and PDB because IITCacted as principal purchaser from PDB and principal seller to COEC, and not simply as a conduit between PDB and COEC.

Thus, the petition was partly granted, the CA’s decision was set aside and reinstate the

modified decision of the RTC ruling in favor of COEC. Also, PDB was also was found liable.



CONTRACTS: MISTAKE; VOIDABLE CONTRACT

CASE NAME: The Roman Catholic Church vs. Regino PanteG.R. No.: G.R. No. 174118Date: April 11, 2012

Petitioner: The Roman Catholic Church, represented by the Archbishop of CaceresRespondent: Regino Pante

FACTS:

The Roman Catholic Church, represented by the Archbishop of Caceres sold a 32-squaremeter lot to the respondent Regino Pante, who in the belief of the Church as an actual occupantof the lot. Terms fixed at a purchase price of P 11,200, a down payment P 1,120 and a balance payable in three years. Subsequently, the Church sold a lot to the spouses Rubi, which includedthe lot that was previously sold to the respondent Pante. Then, the spouses Rubi erected a fencealong the lot, including the lot of Pante, which blocked the access of Pante from their family

home to the municipal road. Pante instituted an action before the RTC to annul the sale betweenthe Church and spouses Rubi.

The Church contended that Pante misrepresented that they were the actual occupant of the said lot. Also, the sale was a mistake that would constitute a voidable contract because Pantemade them believe that he was a qualified occupant and Pante was aware that they sell lots onlyto those occupants and residents. Pante averred that they were using it as passageway from hisfamily home to the road, which signifies that he is really using the actual lot.

The RTC ruled in favor to the Church, for it was a misrepresentation of Pante and hedelayed in the payment of the lot for he only consigned the balance with the RTC after thechurch refused to accept the payments.

Then, the respondent Pante appealed to the appellate court, which reversed the decisionof the RTC and granted the annulment of the sale. Thus, a petition by the Church was brought before the certiorari.

ISSUE: Whether or not the sale was a voidable contract?

HELD:

No, the Supreme Court ruled that there were no misrepresentation made that wouldvitiate the consent and render the contract as voidable. As consent as one of the essentialrequisites of a valid contract and such consent should be free, voluntary, willful and a reasonableunderstanding of the various obligations that the parties have assumed for themselves. However if consent is given through mistake, violence, intimidation, undue influence and fraud, it wouldrender a contract voidable. On Article 1331 of the Civil Code, mistake could only render acontract voidable if the following requisites concur: 1. the mistake must be either with regard tothe identity or with regard to the qualification of one of the contracting parties; and 2. the identityor qualification must have been the principal consideration for the celebration of the contract.



In this case, there is no mistake as to the qualifications as to the policy of the Church onselling only for those who are occupants and residents, for neither Pante nor spouses Rubi wouldqualify as residents of the said 32-square meter lot, as none of them had occupied or resided onthe lot. The lot is a passageway for the respondent Pante, thus it is considered as his “RIGHT OFWAY.”

Also, records show that the Parish Priest was aware that Parte was not an actual occupantand still he allowed the sale to Pante. So, the Church cannot by any means contend that theChurch was misled by the act of Pante, that there was vitiation of consent on the said sale.

In Article 1390 of the Civil Code declares that voidable contracts are binding, unlessannulled by a proper court action. From the time the sale to Pante was made and up until it soldthe subject property to the spouses Rubi, the Church made no move to reject the contract withPante; it did not even return the down payment he paid. The Church’s bad faith in selling the lot

to Rubi without annulling its contract with Pante negates its claim for damages.

There was no vitiation of consent; therefore, the contract between the Church and Pantestands valid and existing. The delay of Pante in paying the full price could not nullify thecontract, since it was a contract of sale (as correctly observed by the CA). In the terms of thecontract, it did not stipulate that the Church will retain ownership until full payment of the price.The right to repurchase given to the Church if ever Pante fails to pay within the grace period provided would have been unnecessary had ownership not already passed to Pante.



RATIFICATION AND CONTRACT OF ADHESION

Case Name: Prieto vs. CAG.R. No.: G.R. No. 158597Date: June 18, 2012

Petitioner: Marcos V. PrietoRespondents: The Hon. Court of Appeals (Former Ninth Division), Hon. Rose Mary R. Molina-Alim, In her Capacity as Pairing Judge of Branch 67 of the RTC, First Judical Region, Buang, LaUnion, Far East Bank and Trust Company, now the Bank of the Philippine Islands, through Atty.Edilberto B. Tenefrancia, and spouses Antonio and Monette Prieto

FACTS:The petitioner/plaintiff Marcos V. Prieto with his spouse and Susan Prieto executed a

Special Power of Attorney (SPA) to spouses Antonio and Monette Prieto to use their real property in La Union. The real property with the Transfer Certificate of Title (TCT) No. T-40223was used as collateral for a loan of P 5,000,000 from Far Eastern Bank and Trust Company

(FEBTC). The defendants spouses Antonio and Monette Prieto obtained the load evidenced by promissory notes and real estate mortgage contracts were in the name of the defendants, whichlater on was extra-judicially foreclosed by FEBTC because of the defendant failed to pay their loans.

The petitioner/plaintiff Marcos Prieto filed Temporary Restraining Order (TRO) againstthe bank with the RTC, which was granted, contending that the real estate mortgage and promissory notes was in the name of the defendant spouses thus it should be null and void abinitio. The RTC dismissed the application for the writ of preliminary injunction stating thatalthough the name of the petitioner/plaintiff Marcos as a registered owner, did not appear in thereal estate contracts, the petitioner/plaintiff cannot be absolved from liability because he ratifiedthe contract by acknowledging the contract. Such acknowledgement was sent through a saidletter of acknowledgement and was found as a document of adhesion.

As a principal, the contracts entered into by his agent on his behalf even if assuming thatthe agent has exceeded his authority. Thus, the petitioner/plaintiff Marcos Prieto filed an appealwith the CA, which was dismissed because of the delay in filing and this petition was sought oncertiorari.

ISSUE:1) Whether or not the ratification by the petitioner/plaintiff would validate the real estate

mortgage and promissory notes and such ratification in letter of acknowledgment could be treated as a contract of adhesion.

HELD:

Yes, the Supreme Court held that the petitioner/plaintiff had precisely granted thedefendant Antonio as his agent the authority to borrow money, and to transfer and convey the property by way of mortgage to FEBTC; to sign, execute and deliver promissory notes; and to



receive the proceeds of the loans on the former’s behalf. In other words, the mortgage contractswere valid and enforceable against petitioner/plaintiff, who is fully bound by their terms. It isstipulated under Article 1898 of the Civil Code, the acts of an agent done beyond the scope of hisauthority do not bind the principal unless the latter expressly or impliedly ratifies the same.

As to the ratification by the contract of adhesion, although his agent, the defendant, hadexceeded the express authority, the petitioner/plaintiff is liable by virtue of the expressedratification. In agency, ratification is the adoption or confirmation by one person of an act performed on his behalf by another without authority. The substance of ratification is theconfirmation after the act, amounting to a substitute for a prior authority.

The court held that the petitioner/plaintiff was a lawyer that he is aware of the import andconsequences of the letter of acknowledgment. It is not a contract of adhesion for the petitioner/plaintiff is not the weaker party because he is fully aware of the meaning of every phrase and letter of the letter of acknowledgment as well as the legal effect of his confirmation of

the act of his agent.

Thus, the court affirms the decision of the CA.



CONTRACTS: NOVATION

Case Name: Heirs of Servando Franco vs. Spouses Veronica and Danilo GonzalesG.R. No.: G.R. No. 159709Date: June 27, 2012

Petitioner: Heirs of Servando FrancoRespondents: Spouses Veronica and Danilo Gonzales

FACTS:

Defendants Servando Franco and Leticia Mendel obtained loans from Veronica Gonzalesfor the latter was engaged in the business of financing under the company Gonzales CreditEnterprises. There were three loans which the Servando and Leticia secured with the respondent,which was not paid on maturity. The third loan was secured by a property was owned by oneLeticia Makalintal Yapintchay, who issued a special power of attorney in favor of Leticia Medel,authorizing her to execute the mortgage. The fourth loan was engaged with Dr. Rafael Mendel,

the husband of Leticia Mendel of P 60,000 by executing a promissory note which consolidatesthe other previous loans which totals to P 500,000.

Upon maturity of the new promissory note, the defendants failed to pay their obligation.So, the plaintiffs filed a complaint for the collection of the full amount of the loan, plus interestsand other charges. Servando contended that he did not obtain any loan from the respondents, hewas not benefited from its proceed and he signed the promissory note as a witness.

With the various appeals and motion for reconsideration with the RTC and CA, it wasdecided that the parties should be liable for the loans. Servando opposed that he and therespondents had agreed to fix the entire obligation at P775,000.00. According to Servando, their agreement, which was allegedly embodied in a receipt dated February 5, 1992, whereby he madean initial payment of P400,000.00 and promised to pay the balance of P375,000.00 on February29, 1992, superseded the July 23, 1986 promissory note. But the RTC ruled over Servando’sopposition and moved to the execution of the judgment for it is final and executory. Then,Servando’s heir s, on account of his intervening death, appealed that there was novation is the judgment that transpired upon the decision of the court on December 9, 1991 and February 5,1992.

ISSUE: Whether or not there is novation between the judgments rendered by the courts?

HELD:

No, the court rule that there is no novation when there is no irreconcilable incompatibility between the old and the new obligations. There is no novation in case of only slightmodifications; hence, the old obligation prevails. Extinguishment of the old obligation is annecessary element for novation and the new one will arise from such.



Novation arises when there is a substitution of an obligation by a subsequent one thatextinguishes the first, either by changing the object or the principal conditions, or by substitutingthe person of the debtor, or by subrogating a third person in the rights of the creditor. For a valid

novation to take place, there must be, therefore: (a) a previous valid obligation; (b) an agreementof the parties to make a new contract; (c) an extinguishment of the old contract; and (d) a validnew contract. In short, the new obligation extinguishes the prior agreement only when thesubstitution is unequivocally declared, or the old and the new obligations are incompatible onevery point. A compromise of a final judgment operates as a novation of the judgment obligationupon compliance with either of these two conditions.

On the receipt of February 5, 1992 did not create a new obligation incompatible with theold one under the promissory note that was issued. It was only a payment of the obligation of Servando and did not establish a new obligation. The Court ruled that the payment of theobligation does not novate the instrument that only expressly recognize the old obligation, or

changes only the terms of the payment, or adds other obligation that is not incompatible with theold ones, or the new contract merely supplements the old one. The new contract that is a merereiteration, acknowledgement or ratification of the old contract with slight modifications or alterations as to the cause or object or principal conditions can stand together with the former one, and there can be no incompatibility between them. Moreover, a creditor’s acceptance of

payment after demand does not operate as a modification of the original contract.

Novation is not presumed by the parties, there should be an expressed agreement thatwould abrogate the old one in favor of the new one. In the absence of the express agreement, theold and the new obligation should be incompatible on every point. The incompatibility of theobligation is that the two obligations cannot stand together, each one having independence from

each other.

Thus, the court affirms the decision of the CA promulgated on March 19, 2003.



CONTRACTS: RECEIPROCAL OBLIGATIONS

Case Name: Subic Bay Metropolitan Authority vs. CAG.R. No.: G.R. No. 192885Date: July 4, 2012

Petitioner: Subic Bay Metropolitan AuthorityRespondents: Honorable Court of Appeals and Subic International Hotel Corporation

FACTS:

The petitioner and the private respondent entered into a lease agreements to rehabilitatethe Subic Naval Base by taking over abandoned barracks and constructing a hotel and restaurantfacilities in order to accommodate the need of the growing number of businessmen andencourage tourism in the Freeport Zone. Both parties entered into a Lease DevelopmentAgreement which stipulated Section 6.1,for the payment of service fees, which pertain to the

proportionate share of the private respondent in the costs that the petitioner may incur in the provision of services, maintenance and operation of common facilities computed at $0.10 per square meter of the gross land area of the leased property.

Consequently, upon the conduct of lease compliance audit, it was found that the privaterespondent and other Freeport locators were not billed of the service fees. This led to a series of conciliation and clarificatory meetings between the parties. Consequently, the SBMA Boarddecided to waive the payment of future service fees and advised private respondent to lodge its protest for the payment of accumulated service fees to the accounting department. Then, the private respondent requested for a reconsideration for the billing alleging that the services for which the billings was supposed to be based were not actually provided by the petitioner but byindependent contractors. On the other hand, the petitioner contended that the services feesincluded other services which indirectly redounded for the benefit of the tenants. The petitioner has the clear legal right to impose service fees under Section 13 (a) (3) of R.A. No. 7227, whichdoes not specifically pertain to garbage collection, electricity, telephone, and water service alone but to other services such as fire protection, maintenance of common areas, police protection,and other services of similar nature.

The private respondent filed a Petition for Declaratory Relief with the RTC praying for the determination by the Court on whether petitioner has the right to collect for the accumulatedservice fees from the private respondent. The RTC rendered its decision in favor of the privaterespondent and held that petitioner has no legal right under Section 6.3 of the Lease andDevelopment Agreement to enforce the collection of previous billings for fixed service fees.

Upon this judgment, the petitioner appealed to the CA but was later on dismissed andarose this petition for certiorari.

ISSUE: Whether or not the petitioner has the right to collect for the service fees from the privaterespondent?



HELD:

No, the Court held that the petitioner has no right to collect from the private respondent.The records show that petitioner did not actually provide most of the services enumerated in theLease and Development Agreement and that the obligation involved in the agreement was

reciprocal in nature. It is apparent that the questioned provisions of the contract are reciprocal innature. Reciprocal obligations are those which arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon theobligation of the other .12 They are to be performed simultaneously such that the performance of one is conditioned upon the simultaneous fulfillment of the other .13 For one party to demand the performance of the obligation of the other party, the former must also perform its ownobligation. Accordingly, petitioner, not having provided the services that would require the payment of service fees as stipulated in the Lease Development Agreement, is not entitled tocollect the same.

The Court agrees with the ruling of the CA that private respondent's obligation to pay

was dependent upon petitioner's performance of its reciprocal duty to provide the agreed service,and since petitioner failed to perform its part of the deal, it cannot exact compliance from privaterespondent of its duty to pay. The payment of "Service Fees" is not dependent on the actualrendition of the services enumerated therein as the said fees comprise of the tenant's proportionate share for all the costs which petitioner as landlord may incur in providing,maintaining or operating the facilities.

Lastly, it is apparent that the petitioner who did not actually render the service cannotdemand payment from the private respondent for its proportionate share of the services whichwere not really incurred. This is also contrary to the claim of the petitioner that the nature of “service fees” is “additional rent.” The Court also held that the petitioner should have changed

the term “service fees” to “additional rent” if that is the actual intent of the parties. This showeda flaw in reasoning of the petitioner. Thus, the petition is dismissed.

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CONTRACTS: CONTRACT OF SALE; DELIVERY; INTERPRETATION; STATUTE OFFRAUDS

Case Name: Virgilio S. David vs. Misamis Occidental II Electric Cooperative, Inc.G.R. No.: G.R. No. 194785

Date: July 11, 2012Petitioner: Virgilio S. DavidRespondent: Misamis Occidental II Electric Cooperative, Inc.

FACTS:

The petitioner Virgilio David was the proprietor of of VSD Electric Sales, a companyengaged in the business of supplying electrical hardware including transformers for rural electriccooperatives. It entered into a contract with the respondent Misamis Occidental II ElectricCooperative, Inc. (MOELCI) in order to solve its problem of power shortage affecting some

areas within its coverage, MOELCI expressed its intention to purchase a 10 MVA power transformer from David. The General Manager of MOELCI, Engr. Reynaldo Rada (Engr. Rada),went to meet David in the latter’s office in Quezon City. David agreed to supply the power transformer provided that MOELCI would secure a board resolution because the item would stillhave to be imported. Both parties agreement on the purchase of transformers and its termsamounting to P 5,000,000 and it was shipped even without the down payment of MOELCI.

After such time, nothing was heard from MOELCI and David went to Ozamis City toconfirm if the shipment was made, which subsequently MOELCI had said that they were not stillin physical possession of the shipment. Contrary to what MOELCI had said, the shipment wasactually received by them and copies of the bill of lading evidenced the receipt of the companyof the said shipment.

Several demand letters have been made to collect the amount of the transformers andDavid filed a complaint with the RTC for specific performance. MOELCI replied that there wasno contract of sale because it was under the Statute of Frauds and that there was only a quotationletter that could not be considered as a binding contract. The RTC dismissed the complaint for the reason that although a contract of sale was perfected, it was not consummated because Davidfailed to prove that there was indeed a delivery of the subject item and that MOELCI received it.David appealed to the CA but it was also dismissed but in an opposed view of the decision of theRTC.

ISSUE: Whether or not there is a perfected contract of sale and the delivery consummated thecontract?

HELD:

Yes, the Court ruled that there was a perfected contract of sale since there was a meetingof the minds, there was consent on the part of David to transfer ownership of the power transformer to MOELCI in exchange for the price, thereby complying with the first element.



Thus, the said document cannot just be considered a contract to sell but rather a perfectedcontract of sale.

Also, the Court held that delivery consummated the contract, as one of the requisites of contract of sale. In the contract of sale, the seller is required to send the goods the goods to the

buyer delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer is deemed to be a delivery of the goods to the buyer, except in the cases provided for in Article 1503, first, second and third paragraphs, or unless a contrary intentappears.

Therefore, the petition is granted in favor of David to collect P5,472,722.27 with interestsfrom the respondent.



CONTRACTS: RECISSION; RESTITUTION

Case Name: Goldloop Properties Inc. vs. GSISG.R. No. 171076Date: August 1, 2012

Petitioner: Goldloop Properties Inc.Respondent: Government Service Insurance System

FACTS:

The petitioner Goldloop Properties executed a Memorandum of Agreement (MOA) withthe respondent Government Service Insurance System (GSIS) undertaking the construction of acondominium on the parcel of land and the renovation of the façade of Philcomcen Building atits own expense, which both was owned by the GSIS. Under the terms of their agreement, the petitioner will pay GSIS for the land in eight installments. Also, the parties will share for the profits of every condominium sold with a certain percent.

Goldloop then performed the preparatory works, such as selling the condominiums butwas not able to proceed because the building permits was not yet been approved and there werestill accrued real property taxes that were unpaid. Later on, Goldloop received a letter from GSISto rescind the MOA and Goldloop replied that the work stoppage was caused of the pendingapproval of the building permits. Still, GSIS sent a notice of rescission because Goldloop stillhave pending obligations under their MOA.

Goldloop filed a complaint with the RTC contending that it had begun with the preparatory works and such MOA should not be rescinded, which RTC granted in favor of Goldloop. Upon the decision, GSIS appealed with the CA that it had the right to rescind thecontract for failure of Goldloop to comply with the obligation as stated in the MOA, which theCA granted in favor of the GSIS. Thus, the petitioner appealed with the Supreme Court.

ISSUE: Whether or not the Memorandum of Agreement may be rescinded?

HELD:

Yes, the Court ruled that GSIS have every right to rescind the contract under the terms of the MOA. The parties may validly stipulate the unilateral rescission of their contract. Under Section 2.4 of the MOA, if Goldloop fail to start construction Should Goldloop fail to start theconstruction works within the thirty (30) working days from date all relevant permits andlicenses from concerned agencies are obtained, or within six (6) months from the date of theexecution of this Agreement, whichever is earlier, or at any given time abandon the same or otherwise commit any breach of their obligations and commitments under this Agreement, thisagreement shall be deemed terminated and cancelled without need of judicial action by givingthirty (30) days written notice to that effect to Goldloop who hereby agrees to abide by thedecision of the GSIS.



It is the duty of both parties to surrender whatever amount received or property to partwith. Goldloop should return to GSIS the possession and control of the property subject of their agreements while GSIS should reimburse Goldloop whatever amount it had received from thelatter by reason of the MOA and the Addendum.

The Court also held that rescission constitute a mutual restitution of the things pursuant toArticle 1191 of the Civil Code. In case both parties have committed a breach of the obligation,the liability of the first infractor shall be equitably tempered by the courts. If it cannot bedetermined which of the parties first violated the contract, the same shall be deemedextinguished, and each shall bear his own damages. The first infractor cannot be determined inthis case but it cannot be conclusively presumed who is the first infractor, thus both parties shall bear the damages.

Thus, it was direct by the Court for Goldloop to surrender possession of the land to theGSIS and that Goldloop should be reimbursed for the amount of expenses plus the return of themachineries, equipment and materials in the premises of the lot.



CONTRACTS; RECSISSION BY REASON OF SUBJECT BEING UNDER LITIGATION

Case Name: Lilia B. Luz, et al. vs. Florante BaylonG.R. No.: G.R. No. 182435Date: August 13, 2012

Petitioner: Lilia B. Ada, Luz B. Adanza, Flora C. Baylon, Remo Baylon, Jose Baylon, EricBaylon, Florentino Baylon, and Ma. Ruby BaylonRespondent: Florante Baylon

FACTS:

The spouses Florentino Baylon and Maximina Elnas Baylon (Spouses Baylon) who diedsurvived by their legitimate children, namely, Rita Baylon (Rita), Victoria Baylon (Victoria),Dolores Baylon (Dolores), Panfila Gomez (Panfila), Ramon Baylon (Ramon) and herein petitioner Lilia B. Ada (Lilia). Subsequently, the legitimate children Dolores died intestate and

without issue and Victoria who died was survived by her daughter, herein petitioner Luz B.Adanza. Ramon died intestate and was survived by herein respondent Florante Baylon(Florante), his child from his first marriage, as well as by petitioner Flora Baylon, his secondwife, and their legitimate children, namely, Ramon, Jr. and herein petitioners Remo, Jose, Eric,Florentino and Ma. Ruby, all surnamed Baylon.

The petitioners questioned the land that was owned by the spouses Baylon and were not partitioned between the heirs. The petitioners contended that Rita Baylon took possession of the parcels of land by the Spouses Baylon and appropriated it for herself, plus the income from thesame. Thus, the petitioners filed a complaint with the RTC and during the pendency of the case,Rita had donated a parcel of land to Florante Baylon and Rita died intestate and without issue.Upon learning this, the petitioners filed a supplemental petition to rescind the donation inaccordance with Article 1381(4) of the Civil Code for such land belonged to the estate of theSpouses Baylon. They further alleged that Rita was already sick and cannot consent to suchdonation.

The decision of the RTC was to partition the lots in dispute and rescinded the donation between Rita and Florante. It was held that the donation was prejudicial to the petitioners andshould be rescinded. So, Florante appealed to the CA which reversed the decision of the RTCand directed it to determine on whether the donated land was actually belonged to the estate of the Spouses Baylon or it belonged to the exclusive property of Rita Baylon.

ISSUE: Whether or not the donation may only be rescinded if such property belonged to theestate of the Spouses Baylon?

HELD:

No, the Court held that rescission under the rescission under Article 1381(4) of the CivilCode is not preconditioned upon the judicial determination as to the ownership of the thingsubject of litigation. Such rescission does not depend on the decision of the courts on the thing in



litigation. The primordial purpose of Article 1381(4) of the Civil Code is to secure the possibleeffectivity of the impending judgment by a court with respect to the thing subject of litigation. Itseeks to protect the binding effect of a court’s impending adjudication vis-à-vis the thing subjectof litigation regardless of which among the contending claims therein would subsequently beupheld. Accordingly, a definitive judicial determination with respect to the thing subject of

litigation is not a condition sine qua non before the rescissory action contemplated under Article1381(4) of the Civil Code may be instituted.

The petitioners had sufficiently established the presence of the requisites for therescission of a contract pursuant to Article 1381(4) of the Civil Code. It is undisputed that, at thetime they were gratuitously conveyed by Rita, Lot No. 4709 and half of Lot No. 4706 are amongthe properties that were the subject of the partition case then pending with the RTC. It is alsoundisputed that Rita, then one of the defendants in the partition case with the RTC, did notinform nor sought the approval from the petitioners or of the RTC with regard to the donationinter vivos of the said parcels of land to Florante.

Also, the Court held that Even if the donation inter vivos is validly rescinded, adetermination as to the ownership of the subject parcels of land is still necessary. It should bestressed that the partition proceedings before the RTC only covers the properties co-owned bythe parties therein in their respective capacity as the surviving heirs of Spouses Baylon. Hence,the authority of the RTC to issue an order of partition in the proceedings before it only affectsthose properties which actually belonged to the estate of Spouses Baylon.

In this regard, lots as claimed by Florante, are indeed exclusively owned by Rita, then the said parcels of land may not be partitioned simultaneously with the other properties subject of the partition case before the RTC. In such case, although the parties in the case before the RTC arestill co-owners of the said parcels of land, the RTC would not have the authority to direct the

partition of the said parcels of land as the proceedings before it is only concerned with the estateof Spouses Baylon.

salgado - case digest obligation and contracts

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