OBLICON

Development Bank v CA
Facts: In May 1987, Juan B. Dans, together with his wife Candida, his son and daughter-in-law,
applied for a loan of P500,000.00 with the Development Bank of the Philippines (DBP), Basilan Branch.
As the principal mortgagor, Dans, then 76 years of age, was advised by DBP to obtain a mortgage
redemption insurance (MRI) with the DBP Mortgage Redemption Insurance Pool (DBP MRI Pool).
Dans loan (reduced to 300k) was approved by DBP and was released. From the proceeds of the loan,
DBP deducted an amount as payment for the MRI premium and thereafter, Dans accomplished and
submitted the MRI Application and insurance and the Health Statement pool.
On September 3, 1987, Dans died of cardiac arrest. The DBP, upon notice, relayed this information to
the DBP MRI Pool. On September 23, 1987, the DBP MRI Pool notified DBP that Dans was not eligible
for MRI coverage, being over the acceptance age limit of 60 years at the time of application.
DBP apprised Candida Dans of the disapproval of her late husband's MRI application. The DBP offered
to refund the premium of P1,476.00 which the deceased had paid, but Candida Dans refused to accept
the same, demanding payment of the face value of the MRI or an amount equivalent to the loan. She,
likewise, refused to accept an ex gratia settlement of P30,000.00, which the DBP later offered.
Respondent Estate, through Candida Dans as administratrix, filed a complaint with the Regional Trial
Court, Branch I, Basilan, against DBP and the insurance pool for "Collection of Sum of Money with
Damages." Respondent Estate alleged that Dans became insured by the DBP MRI Pool when DBP, with
full knowledge of Dans' age at the time of application, required him to apply for MRI, and later
collected the insurance premium thereon.
The trial court rendered a decision in favor of respondent Estate and against DBP. The DBP MRI Pool,
however, was absolved from liability, after the trial court found no privity of contract between it and
the deceased. The trial court declared DBP in estoppel for having led Dans into applying for MRI and
actually collecting the premium and the service fee, despite knowledge of his age ineligibility.
The DBP appealed to the Court of Appeals. But the CA affirmed in toto the decision of RTC.

Held: In dealing with Dans, DBP was wearing two legal hats: the first as a lender, and the second as
an insurance agent.

advanced age, DBP exceeded the scope of its authority when it accepted Dan's application for MRI by
collecting the insurance premium, and deducting its agent's commission and service fee.

The liability of an agent who exceeds the scope of his authority depends upon whether the third
person is aware of the limits of the agent's powers. There is no showing that Dans knew of the
limitation on DBP's authority to solicit applications for MRI.

If the third person dealing with an agent is unaware of the limits of the authority conferred by the
principal on the agent and he (third person) has been deceived by the non-disclosure thereof by the
agent, then the latter is liable for damages to him.

The DBP's liability, however, cannot be for the entire value of the insurance policy. To assume that
were it not for DBP's concealment of the limits of its authority, Dans would have secured an MRI from
another insurance company, and therefore would have been fully insured by the time he died, is highly
speculative. Considering his advanced age, there is no absolute certainty that Dans could obtain an
insurance coverage from another company. It must also be noted that Dans died almost immediately,
i.e., on the nineteenth day after applying for the MRI, and on the twenty-third day from the date of
release of his loan.
One is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has
duly proved. Damages, to be recoverable, must not only be capable of proof, but must be actually
proved with a reasonable degree of certainty. Speculative damages are too remote to be included in
an accurate estimate of damages.
While Dans is not entitled to compensatory damages, he is entitled to moral damages. No proof of
pecuniary loss is required in the assessment of said kind of damages .

As an insurance agent, DBP made Dans go through the motion of applying for said insurance, thereby
leading him and his family to believe that they had already fulfilled all the requirements for the MRI
and that the issuance of their policy was forthcoming. Apparently, DBP had full knowledge that Dan's
application was never going to be approved. The maximum age for MRI acceptance is 60 years as
clearly and specifically provided in Article 1 of the Group Mortgage Redemption Insurance Policy signed
in 1984 by all the insurance companies concerned.

Central Philippines Univ. v CA

Under Article 1987 of the Civil Code of the Philippines, "the agent who acts as such is not personally
liable to the party with whom he contracts, unless he expressly binds himself or exceeds the limits of
his authority without giving such party sufficient notice of his powers."

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;

Facts: 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, 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

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

The DBP is not authorized to accept applications for MRI when its clients are more than 60 years of
age (Exh. "1-Pool"). Knowing all the while that Dans was ineligible for MRI coverage because of his

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.

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.

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.
Megaworld v Majestic Finance

The trial court held that petitioner failed to comply with the conditions of the donation and declared it
null and void. CA 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.

Issue: Whether the CA erred in finding that petitioner failed in complying with the conditions of the
donation.

Held: 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.

Facts: On September 23, 1994, Megaworld Properties and Holdings, Inc. (developer) entered into a
Joint Venture Agreement (JVA)4 with Majestic Finance and Investment Co., Inc. (owner) for the
development of the residential subdivision located in Brgy. Alingaro, General Trias, Cavite. According to
the JVA, the development of the 215 hectares of land belonging to the owner (joint venture property)
would be for the sole account of the developer;5 and that upon completion of the development of the
subdivision, the owner would compensate the developer in the form of saleable residential subdivision
lots.6 The JVA further provided that the developer would advance all the costs for the relocation and
resettlement of the occupants of the joint venture property, subject to reimbursement by the
owner;7 and that the developer would deposit the initial amount of P10,000,000.00 to defray the
expenses for the relocation and settlement, and the costs for obtaining from the Government the
exemptions and conversion permits, and the required clearances.
On September 24, 1994, the developer and owner agreed, through the addendum to the JVA, 9 to
increase the initial deposit for the settlement of claims and the relocation of the tenants from
P10,000,000.00 to P60,000,000.00. On October 27, 1994, the developer, by deed of
assignment,10 transferred, conveyed and assigned to Empire East Land Holdings, Inc.
(developer/assignee) all its rights and obligations under the JVA including the addendum.
On February 29, 2000, the owner filed in the RTC a complaint for specific performance with damages
against the developer, the developer/assignee, and respondent Andrew Tan, who are now the
petitioners herein. It was mainly based on the failure of the petitioners to comply with their obligations
under the JVA, including the obligation to maintain a strong security force to safeguard the entire joint
venture property of 215 hectares from illegal entrants and occupants.
At the conclusion of the pre-trial conference set by the RTC, the presentation of the owner's evidence
was suspended because of the parties' manifestation that they would settle the case amicably. It
appears that the parties negotiated with each other on how to implement the JVA and the addendum.
the owner filed in the RTC a manifestation and motion, 12 praying therein that the petitioners be
directed to provide round-the-clock security for the joint venture property in order to defend and
protect it from the invasion of unauthorized persons. The petitioners opposed the manifestation and
motion,13 pointing out that: (1) the move to have them provide security in the properties was
premature; and (2) under the principle of reciprocal obligations, the owner could not compel them to
perform their obligations under the JVA if the owner itself refused to honor its obligations under the
JVA and the addendum.
The RTC rendered decision directing developer to provide round-the-clock security protection of the
joint venture property (Nov. 5, 2002 decision). CA dismissed the petition.

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.

Issue: Whether or not the petitioners are obligated to perform their obligations under the JVA,
including that of providing round-the-clock security for the subject properties, despite respondents'
failure or refusal to acknowledge, or perform their reciprocal obligations there
Held: The appeal is meritorious. The CA erred in upholding the November 5, 2002 order of the RTC.
The obligations of the parties under the JVA were unquestionably reciprocal. Reciprocal obligations are
those that arise from the same cause, and in which each party is a debtor and a creditor of the other
at the same time, such that the obligations of one are dependent upon the obligations of the other.
They are to be performed simultaneously, so that the performance by one is conditioned upon the
simultaneous fulfillment by the other.
According to Article 1184 of the Civil Code, the condition that some event happen at a determinate
time shall extinguish the obligation as soon as the time expires, or if it has become indubitable that

the event will not take place. Here, the common cause of the parties in entering into the joint venture
was the development of the joint venture property into the residential subdivision as to eventually
profit therefrom. Consequently, all of the obligations under the JVA were subject to the happening of
the complete development of the joint venture property, or if it would become indubitable that the
completion would not take place, like when an obligation, whether continuous or activity, was not
performed. Should any of the obligations, whether continuous or activity, be not performed, all the
other remaining obligations would not ripen into demandable obligations while those already
performed would cease to take effect. This is because every single obligation of each party under the
JVA
rested
on
the
common
cause
of
profiting
from
the
developed
subdivision.
It appears that upon the execution of the JVA, the parties were performing their respective obligations
until disagreement arose between them that affected the subsequent performance of their accrued
obligations. Being reciprocal in nature, their respective obligations as the owner and the developer
were dependent upon the performance by the other of its obligations; hence, any claim of delay or
non-performance against the other could prosper only if the complaining party had faithfully complied
with its own correlative obligation.
Yet, the record is bereft of the proof to support the lower courts' unanimous conclusion that the owner
had already performed its correlative obligation under the JVA as to place itself in the position to
demand that the developer should already perform its obligation of providing the round-the-clock
security on the property. In issuing its order of November 5, 2002, therefore, the RTC acted
whimsically because it did not first ascertain whether or not the precedent reciprocal obligation of the
owner upon which the demanded obligation of the developer was dependent had already been
performed. Without such showing that the developer had ceased to perform a continuous obligation to
provide security over the joint venture property despite complete fulfillment by the owner of all its
accrued obligations, the owner had no right to demand from the developer the round-the-clock
security over the 215 hectares of land.
Tayag v CA
Facts: The deed of conveyance executed on May 28, 1975 by Juan Galicia, Sr., prior to his demise in
1979, and Celerina Labuguin, in favor of Albrigido Leyva involving the undivided one-half portion of a
piece of land situated at Poblacion, Guimba, Nueva Ecija for the sum of P50,000.00. It is the is the
subject matter of the present litigation between the heirs of Juan Galicia, Sr. who assert breach of the
conditions as against private respondent's claim anchored on full payment and compliance with the
stipulations thereof.
The court of origin which tried the suit for specific performance filed by private respondent on account
of the herein petitioners' reluctance to abide by the covenant, ruled in favor of the vendee (p.
64, Rollo) while respondent court practically agreed with the trial court except as to the amount to be
paid to petitioners and the refund to private respondent are concerned.
There is no dispute that the sum of P3,000.00 listed as first installment was received by Juan Galicia,
Sr. According to petitioners, of the P10,000.00 to be paid within ten days from execution of the
instrument, only P9,707.00 was tendered to, and received by, them on numerous occasions from May
29, 1975, up to November 3, 1979. Concerning private respondent's assumption of the vendors'
obligation to the Philippine Veterans Bank, the vendee paid only the sum of P6,926.41 while the
difference the indebtedness came from Celerina Labuguin (p. 73, Rollo). Moreover, petitioners asserted
that not a single centavo of the P27,000.00 representing the remaining balance was paid to them.
Because of the apprehension that the heirs of Juan Galicia, Sr. are disavowing the contract inked by
their predecessor, private respondent filed the complaint for specific performance.

prevented plaintiff from paying the installment fully" and "for the purpose of withdrawing the title to
the lot". The acceptance by petitioners of the various payments even beyond the periods agreed upon,
was perceived by the lower court as tantamount to faithful performance of the obligation pursuant to
Article 1235 of the Civil Code. Furthermore, the trial court noted that private respondent consigned
P18,520.00, an amount sufficient to offset the remaining balance, leaving the sum of P1,315.00 to be
credited to private respondent.
Insofar as the third item of the contract is concerned, it may be recalled that respondent court applied
Article 1186 of the Civil Code on constructive fulfillment which petitioners claim should not have been
appreciated because they are the obligees while the proviso in point speaks of the obligor. But,
petitioners must concede that in a reciprocal obligation like a contract of purchase, (Ang vs. Court of
Appeals, 170 SCRA 286 [1989]; 4 Paras, supra, at p. 201), both parties are mutually obligors and also
obligees (4 Padilla, supra, at p. 197), and any of the contracting parties may, upon non-fulfillment by
the other privy of his part of the prestation, rescind the contract or seek fulfillment ( Article 1191, Civil
Code). In short, it is puerile for petitioners to say that they are the only obligees under the contract
since they are also bound as obligors to respect the stipulation in permitting private respondent to
assume the loan with the Philippine Veterans Bank which petitioners impeded when they paid the
balance of said loan. As vendors, they are supposed to execute the final deed of sale upon full
payment of the balance as determined hereafter.
WHEREFORE, the petition is hereby DISMISSED and the decision appealed from is hereby AFFIRMED
with the slight modification.
Cannu v Galang
Facts: Respondents-spouses Gil and Fernandina Galang obtained a loan from Fortune Savings & Loan
Association for P173,800.00 to purchase a house and lot located at Pulang Lupa, Las Pias, with an
area of 150 square meters covered by Transfer Certificate of Title (TCT) No. T-8505 in the names of
respondents-spouses. To secure payment, a real estate mortgage was constituted on the said house
and lot in favor of Fortune Savings & Loan Association. In early 1990, NHMFC purchased the mortgage
loan of respondents-spouses from Fortune Savings & Loan Association for P173,800.00.
Respondent Fernandina Galang authorized her attorney-in-fact, Adelina R. Timbang, to sell the subject
house and lot.

Petitioner Leticia Cannu agreed to buy the property for P120,000.00 and to assume the balance of the
mortgage obligations with the NHMFC and with CERF Realty (the Developer of the property). There
were subsequent payments made by the petitioners, nut there is a remaining balance of 45k.
A Deed of Sale with Assumption of Mortgage Obligation dated 20 August 1990 was made and entered
into by and between spouses Fernandina and Gil Galang (vendors) and spouses Leticia and Felipe
Cannu (vendees) over the house and lot in question. Petitioners immediately took possession and
occupied the house and lot.

Issue: Whether the conditions of the instrument were performed by herein private respondent as
vendee.
Held: The court decided to uphold private respondent's theory on the basis of constructive fulfillment
under Article 1186 and estoppel through acceptance of piecemeal payments in line with Article 1235 of
the Civil Code.
Anent the P10,000.00 specified as second installment, the lower court counted against the vendors the
candid statement of Josefina Tayag who sat on the witness stand and made the admission that the
check issued as payment thereof was nonetheless paid on a staggered basis when the check was
dishonored (TSN, September 1, 1983, pp. 3-4; p. 3, Decision; p. 66, Rollo). Regarding the third
condition, the trial court noted that plaintiff below paid more than P6,000.00 to the Philippine Veterans
Bank but Celerina Labuguin, the sister and co-vendor of Juan Galicia, Sr. paid P3,778.77 which
circumstance was construed to be a ploy under Article 1186 of the Civil Code that "prematurely

Despite requests from Adelina R. Timbang and Fernandina Galang to pay the balance of P45,000.00 or
in the alternative to vacate the property in question, petitioners refused to do so. Because the Cannus
failed to fully comply with their obligations, respondent Fernandina Galang, on 21 May 1993,
paid P233,957.64 as full payment of her remaining mortgage loan with NHMFC.
Petitioners opposed the release of TCT No. T-8505 in favor of respondents-spouses insisting that the
subject property had already been sold to them.

Thereupon, a Complaint for Specific Performance and Damages was filed asking, among other things,
that petitioners (plaintiffs therein) be declared the owners of the property involved subject to
reimbursements of the amount made by respondents-spouses (defendants therein) in preterminating
the mortgage loan with NHMFC.

Respondent NHMFC filed its Answer.21 It claimed that petitioners have no cause of action against it
because they have not submitted the formal requirements to be considered assignees and successorsin-interest of the property under litigation.

In their Answer,22 respondents-spouses alleged that because of petitioners-spouses failure to fully pay
the consideration and to update the monthly amortizations with the NHMFC, they paid in full the
existing obligations with NHMFC as an initial step in the rescission and annulment of the Deed of Sale
with Assumption of Mortgage. In their counterclaim, they maintain that the acts of petitioners in not
fully complying with their obligations give rise to rescission of the Deed of Sale with Assumption of
Mortgage with the corresponding damages.

making the agreement.36The question of whether a breach of contract is substantial depends upon the
attending circumstances37 and not merely on the percentage of the amount not paid.

In the case at bar, we find petitioners failure to pay the remaining balance of P45,000.00 to be
substantial. Even assuming arguendo that only said amount was left out of the supposed consideration
of P250,000.00, or eighteen (18%) percent thereof, this percentage is still substantial. Taken together
with the fact that the last payment made was on 28 November 1991, eighteen months before the
respondent Fernandina Galang paid the outstanding balance of the mortgage loan with NHMFC, the
intention of petitioners to renege on their obligation is utterly clear.

The fact that petitioners tendered a Managers Check to respondents-spouses Galang in the amount of
P278,957.00 seven months after the filing of this case is of no moment. Tender of payment does not
by itself produce legal payment, unless it is completed by consignation. 40 Their failure to fulfill their
obligation gave the respondents-spouses Galang the right to rescission.
Their reliance on Article 1383 is misplaced.

The RTC rendered decision in favour of the respondents.

The subsidiary character of the action for rescission applies to contracts enumerated in Articles
138148 of the Civil Code. The contract involved in the case before us is not one of those mentioned
therein. The provision that applies in the case at bar is Article 1191.
Issue: Whether CA erred when it held that the petitioners had breached their obligation.

Held: On the first assigned error, petitioners argue that the Court erred when it ruled that their breach
of the obligation was substantial.

Settled is the rule that rescission or, more accurately, resolution, 33 of a party to an obligation under
Article 119134is predicated on a breach of faith by the other party that violates the reciprocity between
them.35 Article 1191 reads:
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.
Rescission will not be permitted for a slight or casual breach of the contract. Rescission may be had
only for such breaches that are substantial and fundamental as to defeat the object of the parties in

In the concurring opinion of Justice Jose B.L. Reyes in Universal Food Corp. v. Court of
Appeals,49 rescission under Article 1191 was distinguished from rescission under Article 1381. Justice
J.B.L. Reyes said:
. . . The rescission on account of breach of stipulations is not predicated on injury to
economic interests of the party plaintiff but on the breach of faith by the defendant, that
violates the reciprocity between the parties. It is not a subsidiary action, and Article 1191
may be scanned without disclosing anywhere that the action for rescission thereunder is
subordinated to anything other than the culpable breach of his obligations by the defendant.
This rescission is a principal action retaliatory in character, it being unjust that a party be
held bound to fulfill his promises when the other violates his. As expressed in the old Latin
aphorism: "Non servanti fidem, non est fides servanda." Hence, the reparation of damages
for the breach is purely secondary.
On the contrary, in the rescission by reason of lesion or economic prejudice, the cause of
action is subordinated to the existence of that prejudice, because it is the raison d tre as
well as the measure of the right to rescind. Hence, where the defendant makes good the
damages caused, the action cannot be maintained or continued, as expressly provided in
Articles 1383 and 1384. But the operation of these two articles is limited to the cases of
rescission for lesion enumerated in Article 1381 of the Civil Code of the Philippines, and does
not apply to cases under Article 1191.

From the foregoing, it is clear that rescission ("resolution" in the Old Civil Code) under Article 1191 is a
principal action, while rescission under Article 1383 is a subsidiary action. The former is based on
breach by the other party that violates the reciprocity between the parties, while the latter is not.
It is evident that the contract under consideration does not contain a provision authorizing its
extrajudicial rescission in case one of the parties fails to comply with what is incumbent upon him. This
being the case, respondents-spouses should have asked for judicial intervention to obtain a judicial
declaration of rescission. Be that as it may, and considering that respondents-spouses Answer (with
affirmative defenses) with Counterclaim seeks for the rescission of the Deed of Sale with Assumption
of Mortgage, it behooves the court to settle the matter once and for all than to have the case relitigated again on an issue already heard on the merits and which this court has already taken
cognizance of. Having found that petitioners seriously breached the contract, we, therefore, declare
the same is rescinded in favor of respondents-spouses.

As a consequence of the rescission or, more accurately, resolution of the Deed of Sale with Assumption
of Mortgage, it is the duty of the court to require the parties to surrender whatever they may have
received from the other. The parties should be restored to their original situation.