Roman Catholic Archbishop vs.

CA/RIETA

G.R. No. 77425 June 19, 1991

FACTS:
1. RIETA FILED NULLIFICATION OF DEED OF DONATION, RECISSION OF CONTRACT
AND RECONVEYANCE OF REAL PROPERTY WITH DAMAGES against Ignao and ROMAN
CATHOLIC BISHOP OF IMUS, CAVITE/MANILA.
1. Executed deed of donation covering a parcel of land
i. CONDITION: Donee shall not dispose or sell the property within a period of one hundred
(100) years from the execution of the deed of donation, otherwise would render ipso
facto null and void; deed and property would revert back to donors.

2. Bishop of Imus executed a deed of absolute sale to Ignao for P114,000

2. IGNAO: MOTION TO DISMISS
1. No legal capacity to sue
2. No cause of action
3. Prescribed (added by Roman Catholic Bishop of Imus)
4. Not a real party in interest (Bishop of Manila)
Was ruled that the complaint for cause of action has already prescribed.

3. APPEALED TO CA:
1. WON the action for rescission of contracts (deed of donation and deed of
sale) has prescribed
2. WON the dismissal of the action for rescission of contracts (deed of
donation and deed of sale) on the ground of prescription carries with it the dismissal of
the main action for reconveyance.

CA held that action not prescribed.

ISSUE:
Has the cause of action already prescribed? NO.
ARTICLE 764: "(t)his action shall prescribe after 4 years from the non-compliance with
the condition, may be transmitted to the heirs of the donor, and may be exercised
against the donee's heirs.
Is there a cause of action? UNJUSTIFIED CAUSE OF ACTION

HELD:
Judgment SET ASIDE and another judgment DISMISSED.
1. DEED HAS AUTOMATIC REVERSION EXPRESSED, JUDICIAL DECLARATION NOT
NECESSARY HENCE.
a. Judicial action for rescission of a contract is not necessary where the contract provides
that it may be revoked and cancelled for violation of any of its terms and conditions.
b. Judicial action is proper only when there is absence of a special provision granting the
power of cancellation.

2. UNDUE RESTRICTION ON RIGHTS OF OWNERSHIP, CONTRARY TO PUBLIC POLICY.

a. DONATION: effective transfer of title over the property from the donor to the donee.
Once a donation is accepted, the donee becomes the absolute owner of the property
donated. Although the donor may impose certain conditions in the deed of donation, the
same must not be contrary to law, morals, good customs, public order and public policy.
b. Condition imposed must not be perpetual or for an unreasonable period of time.

GR No. 170405 February 2, 2010

Facts:
De Leon sold 3 parcels of land to Ong. The properties were mortgaged to Real
Savings and Loan Association. The parties executed a notarized deed of absolute
sale with assumption of mortgage. The deed of Assumption of mortgage shall be
executed in favor of Ong after the payment of 415K. Ong complied with it. De Leon
handed the keys of to Ong and informed the loan company that the mortgage has
been assumed by Ong. Ong made some improvements in the property. After
sometime, Ong learned that the properties were sold to Viloria and changed the
locks to it. Ong went to the mortgage company and learned that the mortgage was
already paid and the titles were given to Viloria. Ong filed a complaint for the nullity
of second sale and damages. De Leon contended that Ong does not have a cause of
action against him because the sale was subject to a condition which requires the
approval of the loan company and that he and Ong only entered a contract to sell.

Issue:
Whether or not the parties entered into a contract of sale

Ruling:
Yes, the parties entered into a contract of sale. In a contract of sale, the seller
conveys ownership of the property to the buyer upon the perfection of the contract.
The non-payment of the price is a negative resolutory condition. Contract to sell is
subject to a positive suspensive condition. The buyer does not acquire ownership of
the property until he fully pays the purchase price. In the present case, the deed
executed by the parties did not show that the owner intends to reserve ownership of
the properties. The terms and conditions affected only the manner of payment and
not the immediate transfer of ownership. It was clear that the owner intended a
sale because he unqualifiedly delivered and transferred ownership of the properties
to the respondent
G.R. No. 151168August 25, 2010CEBU AUTOMETIC MOTORS, INC. and TIRSO
UYTENGSU III,
Petitioners,Vs.GENERAL MILLING CORPORATION, Respondent.
Facts: GMC, a domestic corporation, is the registered owner of the GMC Plaza
Complex, a commercial building on Legaspi Extension corner McArthur Boulevard,
Cebu City.
On February 2, 1998, GMC, represented by its General Manager, Luis Calalang Jr.
(Calalang), entered into a contract with CAMI, a domestic corporation, for the lease
of a 2,906 square meter commercial space within GMCs building(leased premises).
The lease contract was for a period of twenty (20) years, with the monthly rental
fixed atP10,000.00. The contract further stipulated that the property shall be used
exclusively by CAMI as a garage and repair shop for vehicles, and imposed upon
CAMI the following terms and conditions:
C. The LESSEE shall upon the signing of this contract immediately deposit with the
LESSOR the following amounts:
a. The sum of PESOS: - TEN THOUSAND & 00/100 (P10,000.00) inclusive of VAT
Philippine currency, to be applied as rental for the last month;
b. The sum PESOS TEN THOUSAND & 00/100 (P10,000.00) as guarantee deposit
to defray the cost of the repairs necessary to keep the leased premises in a good
state of repair and to pay the LESSEES unpaid bills from the various utility services
in the leased premises; that this amount shall be refundable, if upon the termination
of this contract, the leased premises are in good state of repair and the various
utility bills have been paid.
x x x x H. The LESSEE shall not place or install any signboard, billboard, neon lights,
or other form of advertising signs on the leased premises or on any part thereof,
except upon the prior written consent of the LESSOR
.x x x x M. Finally, the failure on the part of the LESSOR to insist upon a strict
performance of any of the terms, conditions and covenants hereof shall not be
deemed a relinquishment or waiver of any right or remedy that said LESSOR may
have, nor shall it be construed as a waiver of any subsequent breach or default of
the terms, conditions and covenants herein contained, unless expressed in writing
and signed by the LESSOR or its duly authorized representative.
According to GMC, CAMI violated the provisions of the lease contract when:
a)CAMI subleased a portion of the leased premises without securing GMCs prior
written consent;
b) CAMI introduced improvements to the leased premises without securing GMCs
consent; and
c) CAMI did not deliver the required advance rental and deposit to GMC upon the
execution of the lease contract.
On June 11, 1999, GMC sent CAMI a letter informing the latter that it was
terminating the lease contract and demanding that CAMI vacate the premises and
settle all its unpaid accounts before the end of that month.
On July 7, 1999, GMC filed a complaint for unlawful detainer with the MTCC against
CAMI, asserting that it terminated the lease contract on June 11, 1999because CAMI
violated the terms of the contract and continued to do so despite GMCs repeated
demands and reminders for compliance; and that CAMI refused to vacate the leased
premises. GMC also impleaded Uytengsu, the General Manager of CAMI, in his
official and personal capacities.
Issue:
Whether GMC sent CAMI the required demand letter.
Held: The law of contracts (essentially, Articles 1191 of the Civil Code for judicial
rescission and Article 1659 for the judicial rescission of lease agreements) firmly
establishes that the failure to pay or to comply with the contractual term does not,
by itself, give rise to a cause of action for rescission; the cause of action only
accrues after the lessee has been in default for its failure to heed the demand to
pay or to comply. With the contract judicially rescinded, the demand to vacate find
full legal basis.
Article 1673, implemented pursuant to Section 2, Rule 70, does away with a
separate judicial action for rescission, and allows under a single complaint the
judicial ejectment of the lessee after extrajudicial rescission has taken place. These
combined remedies account for the separate aspects of the demand letter: the
demand to pay rentals or to comply with the terms of the lease, and to vacate. The
tenant's refusal to heed the demand to vacate, coming after the demand to pay or
to comply similarly went unheeded, renders unlawful the continued possession of
the leased premises; hence, the unlawful detainer action.
In Dio v. Concepcion, we ruled that: Under Article 1673 of the Civil Code, the lessor
may judicially eject the lessee for, among other causes:
(1) lack of payment of the price stipulated; or
(2) violation of any of the conditions agreed upon in the contract. Previous to the
institution of such action, the lessor must make a demand upon the lessee to pay or
comply with the conditions of the lease and to vacate the premises. It is the owners
demand for the tenant to vacate the premises and the tenants refusal to do so
which makes unlawful the withholding of possession. Such refusal violates the
owners right of possession giving rise to an action for unlawful detainer.
Lalicon v National Housing Authority (Obligations and
Contracts)
Lalicon v National Housing Authority
GR No. 185440
July 13, 2011

RESCISSION & PRESCRIPTION

FACTS:

(1) On November 25, 1980 the National Housing Authority (NHA) executed a Deed of Sale
with Mortgage over a Quezon City lot in favor of the spouses Isidro and Flaviana Alfaro (the
Alfaros). The deed of sale provided, among others, that the Alfaros could sell the land within
five years from the date of its release from mortgage without NHA's prior written consent.
Thus:

x x x. 5. Except by hereditary succession, the lot herein sold and conveyed, or any part
thereof, cannot be alienated, transferred or encumbered within five (5) years from the date
of release of herein mortgage without the prior written consent and authority from the
VENDOR-MORTGAGEE (NHA). x x x

The mortgage and the restriction on sale were annotated on the Alfaros' title on April 14,
1981.

(2) About nine years later or on November 30, 1990, while the mortgage on the land
subsisted, the Alfaros sold the same to their son, Victor Alfaro.
(3) After full payment of the loan or on March 21, 1991 the NHA released the mortgage.
(4) Six days later or on March 27 Victor transferred ownership of the land to his illegitimate
daughters. (5) On December 14, 1995 Victor mortgaged the land to Marcela Lao Chua, Rosa
Sy, Amparo Ong, and Ida See.
(6) Subsequently, on February 14, 1997 Victor sold the property to Chua, one of the
mortgagees.

RTC: 1990 sale of the land to their son Victor, and the subsequent sale of the same to
Chua, made in violation of NHA rules and regulations. It ruled that, although the Alfaros
clearly violated the five-year prohibition, the NHA could no longer rescind its sale to them
since its right to do so had already prescribed, applying Article 1389 of the New Civil Code.
 The NHA and the Lalicons, who intervened, filed their respective appeals to the Court of
Appeals (CA).

CA: CA reversed the RTC decision and found the NHA entitled to rescission. The CA
declared TCT 277321 in the name of the Alfaros and all subsequent titles and deeds of sale
null and void. It ordered Chua to reconvey the subject land to the NHA but the latter must
pay the Lalicons the full amount of their amortization, plus interest, and the value of the
improvements they constructed on the property.

ISSUE: Whether or not the subsequent sales constituted breach in the obligation and may
give rise to rescission

-------------------------------------------------------------------------------------------------------
--------

APPLICABLE LAW/S:

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. (1124)

Art. 1381. The following contracts are rescissible:

(1) Those which are entered into by guardians whenever the wards whom they represent
suffer lesion by more than one-fourth of the value of the things which are the object
thereof;
(2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated in
the preceding number;
(3) Those undertaken in fraud of creditors when the latter cannot in any other manner
collect the claims due them;
(4) Those which refer to things under litigation if they have been entered into by the
defendant without the knowledge and approval of the litigants or of competent judicial
authority;
(5) All other contracts specially declared by law to be subject to rescission. (1291a)

-------------------------------------------------------------------------------------------------------
--------

HELD: (1) Lalicons' request for exemption from the five-year restriction was not granted.
Resale without NHA's consent is a substantial breach.

The five-year restriction against resale, counted from the release of the property from the
NHA mortgage, measures out the desired hold that the government felt it needed to ensure
that its objective of providing cheap housing for the homeless is not defeated by wily
entrepreneurs. The restriction clause is more of a condition on the sale of the property to
the Alfaros rather than a condition on the mortgage constituted on it. The Lalicons
claim that the NHA unreasonably ignored their letters that asked for consent to the resale of
the subject property. They also claim that their failure to get NHA's prior written consent
was not such a substantial breach that warranted rescission. But the NHA had no
obligation to grant the Lalicons' request for exemption from the five-year restriction as to
warrant their proceeding with the sale when such consent was not immediately forthcoming.
And the resale without the NHA's consent is a substantial breach. The essence of the
government's socialized housing program is to preserve the beneficiary's ownerships for a
reasonable length of time, here at least within five years from the time he acquired it free
from any encumbrance.

(2) Action has not prescribed.

NHA sought annulment of the Alfaros' sale to Victor because they violated the five-year
restriction against such sale provided in their contract. Thus, the CA correctly ruled that
such violation comes under Article 1191 where the applicable prescriptive period is that
provided in Article 1144 which is 10 years from the time the right of action accrues. The
NHA's right of action accrued on February 18, 1992 when it learned of the Alfaros' forbidden
sale of the property to Victor. Since the NHA filed its action for annulment of sale on April
10, 1998, it did so well within the 10-year prescriptive period.

(3) Lalicons and Chua were not buyers in good faith.

Since the five-year prohibition against alienation without the NHA's written consent was
annotated on the property's title, the Lalicons very well knew that the Alfaros' sale of the
property to their father, Victor, even before the release of the mortgage violated that
prohibition.

(4) Lastly, since mutual restitution is required in cases involving rescission under Article
1191, the NHA must return the full amount of the amortizations it received for the property,
plus the value of the improvements introduced on the same, with 6% interest per annum
from the time of the finality of this judgment.
G.R. No. L-23893 March 23, 1926

MANUEL RIOS and PACIENCIA REYES, plaintiffs-appellants, vs.

JACINTO PALMA Y HERMANOS, S. C., RAFAEL PALMA, and PERFECTO
JACINTO, defendants-appellees.

STREET, J.:

This action was instituted in the Court of First Instance of the City of Manila by Manuel
Rios and wife, Paciencia Reyes, for the purpose of recovering the sum of P23,300, with
legal interest, and costs, as damages alleged to have been incurred by the plaintiffs by
reason of breach of a contract of lease. The defendants named in the complaint are the
firm of Jacinto, Palma y Hermanos, S. C., as lessee, in the same firm. Upon hearing the
cause the trial court absolved the defendants from the complaint and the plaintiffs
appealed.

No transcript of the oral testimony appears in the record, with the result that our view of
the case will be limited to the questions of law arising upon the facts found by the trial
court, in connection with the letter (Exhibit K) referred to in the opinion.

Facts: It appears that by contract dated September 1, 1920, the plaintiffs, as owners of a
parcel of land on Gagalangin Street, Tondo District, Manila, let the same, with the
improvements thereon, to the firm of Jacinto, Palma y Hermanos, S. C., for the term of
fifteen years at a monthly rental of P400 payable in advance during the first ten days of
each month. Among the provisions contained in this contract we note clause 9, which is
to the effect that the terms and conditions of the contract shall be obligatory upon and
redound to the benefit of the persons composing the lessee firm, their heirs executors,
administrators, successors and assigns, as well as the successors and assigns of the
lessors. The lessee entered upon the possession of the leased premises upon the date
above stated; and the payment of the agreed rental was continued until November and
December of the year 1923, for which months the rent fell into arrears.
Meanwhile several successive reorganizations of the lessee firm had been effected as
follows: The first lessee, Jacinto, Palma y Hermanos, S. C., was succeeded by the firm of
P. & F. Jacinto, and the latter in turn by the firm of Palma Brothers & Co., Ltd., to be
itself again succeeded by Palma & Co,. a corporation. The plaintiffs were informed of
these changes in the personality of the lessee and, as the trial court found, acquiesced
therein.

In view of the default in the payment of the monthly rental for the months of November
and December, 1923, Mr. Gregorio Araneta, as attorney for Manuel Rios, addressed a
letter, on December 27, 1923, to Rafael Palma, as partner in the original firm and its
former manager. In the course of this letter the writer asked Mr. Palma, in case the
lessee could not continue to pay the rent, to return the property at once to Rios, without
prejudice to ulterior responsibility for damages for breach of contract. The writer added
that Rios desired prompt action in the matter and that he must have possession of the
property on or before the 29th of the month, otherwise he would be compelled to begin
a detainer suit.

In response to this demand the occupant, Palma Bros. & Co., Ltd., or Palma & Co., or
whoever had actual possession, vacated the premises on December 29, giving
notification to the plaintiff Manuel Rios, who at once assumed possession. We gather
from the record that the rent for November and December, 1923, has subsequently been
paid; but the premises appear to have been entirely vacant during the months of
January and February, 1924, and for this period no compensation has been paid to the
plaintiffs by any one. Beginning with March, 1924, the property was let by the plaintiffs
for a term of three years, renewable for another three, to the firm of Walter A. Smith Co.,
Inc., upon the best terms then procurable in the market, which was at a monthly rental
of P250.

In this court the plaintiffs, as appellants, have assigned error among other things, to the
failure of the trial court to give judgment for the sum of P800, the stipulated rent for
January and February, 1924, and for the further sum of P22,500, being the difference
between the amount which the lessee had agreed to pay during the twelve years that the
lease was to run from the time when the plaintiffs resumed possession and the amount
which, during the same period, the plaintiffs would obtain from the new-lessee, or
others, at the rate of P150 a month.

The firm of Jacinto, Palma y Hermanos, S. C., allowed a default judgment to be entered
in this case for its failure to answer, but the individual defendants interposed an answer
relying upon two special defenses which will be examined in turn. It is first claimed that
the original lessee and the partners in that concern were discharged by a novation of the
original contract whereby the lessee was changed and new debtor substituted for the
original debtor. We are of the opinion that there is no merit in this defense and that the
facts found by the trial court are not sufficient in law to show a discharge of the parties
liable upon the original lease. What appears to have occurred, and what the court found,
was that the plaintiff Rios said that it was all right when told of the successive changes in
the personality of the lessee, and he seems to have been content to receive the monthly
rent from anybody who wanted to pay it.

But by preference to clause 9 of the contract, it will be seen that the lessors really had no
choice in their attitude to these changes. It was there stipulated that the provisions of
the lease should be obligatory upon and redound to the benefit not only of the persons
composing the lessee firm but their assigns. The transfer of the lease was therefore
anticipated in the lease and stipulated for, and the lessors had no right to complain as
the leased premises passed from one entity to another. The contract, however, does not
stipulate that the original lessee should be discharged by any such assignment, and an
agreement to this effect cannot be implied from the mere forced acquiescence of the
lessors in the transfer of the lease.

The second ground of defense to the action is, in the opinion of the majority of the
members of the court, of a more meritorious character. This defense is planted upon the
fact that after the default occurred in the payment of rent for the months of November
and December, 1923, the lessors voluntarily, and upon their own demand, resumed
possession of the premises. It is insisted for the defense that this relieved the original
lessee and all other persons liable upon the lease from any liability for future rent and
therefore from any liability for damages that may have accrued, or might accrue, to the
lessors during the remainder of the term of the lease. The situation is one that must be
considered in the light of certain provisions of the Civil Code, to which attention will be
directed.

In the case before us the lessors clearly elected to resolve or rescind the contract. Now it
is an inseparable incident of resolution or rescission that the parties are bound to
restore to each other the thing which has been the subject matter of the contract,
precisely as in the situation where a decree of nullity is granted. In the common case of
the resolution of a contract of sale for failure of the purchaser to pay the stipulated price,
the seller is entitled to be restored to the possession of the thing sold, if it has already
been delivered. But he cannot have both the thing sold and the price which was agreed
to be paid, for the resolution of the contract has the effect of destroying the obligation to
pay the price. Similarly, in the case of the resolution, or rescission, of a contract of lease,
the lessor is entitled to be restored to the possession of the leased premises, but he
cannot have both the possession of the leased premises for the remainder of the term
and the rent which the other party had contracted to pay. The termination of the lease
has the effect of destroying the obligation to pay rent for the future.

The damages or indemnity conceded in case of resolution by article 1124 and the
damages conceded by article 1556 in the case of the rescission of a lease have reference
to the damages for the default which gave rise to the right to terminate the lease. In a
case of the kind now before us it would cover rent in arrears and damage done by the
lessee to the leased premises or other special damages in particular cases resulting from
nonperformance of the lessees obligation. By no reasonable interpretation of these
provisions can the indemnity or damages be understood as extending the rent for the
future, inasmuch as the termination of the lease abrogated liability for future rent.

At first blush it might appear that the case would perhaps be affected by the reservation
contained in the demand of plaintiffs attorney for the surrender of the premises, in
which he stated that the demand was without prejudice to ulterior responsibility for
damages. But a moments reflection ought to show that the right of action here reserved
must be understood as having reference to such damages as might be recoverable in law,
consistently with the election of the plaintiffs to rescind the contract.

Held: From what has been said it follows that the judgment absolving the defendants
from the complaint must be affirmed; and it is ordered, with costs against the
appellants.

The plaintiffs were unable to find a new tenant until March 1, 1924, when the property
was leased to Walter A. Smith, Inc., for the period of three years at a rental of P250 per
month, P150 less than that which the plaintiffs would have received under the former
lease. On April 4, 1924, the plaintiffs brought the present action for damages alleged to
have been suffered by reason of the defendants breach of contract.

The theory that damages for the loss of profits suffered subsequent to the rescission of a
lease, but before the expiration of its original term, are incompatible with the idea of
rescission, is entirely new and in direct conflict with the views expressed by this court It
is also out of harmony with all other cases upon the subject of damages for breach of
contract in this jurisdiction and cannot be good law.
Ong vs Bognalbal G.R. No 149140 September 12, 2006

On January 2, 1995, Architect Ernesto Bognalbal (E.B. Bognalbal Construction) was hired by petitioner,
Victoria Ong, for the construction of her boutique on a contract price of P200,000 but subject to change in
respect to economic factors and change of order. The agreement was to complete the work within 45 days
and payment shall be made every two weeks based on the accomplishment of work value. The project
started on Jan. 19, 1995.

The contract between petitioner and respondent provides:

4.01 Progress Billing will commence 15 days after the Contractor receive[s] the notice to
proceed from the Owner.

4.02 Balance will be collected every 2-weeks, based on the accomplishment of work
value submitted by the contractor to the Owner and to be certified for payment by the
architect assigned on site.

4.03 Final and full payment of the consideration herein above-mentioned shall be made
by the owner to the contractor upon fulfilling the condition set forth and approved by the
architect assigned on site.9

Work Accomplished Billing

Jan 19-28, 1995 17.975% petitioner paid P 35,950
Jan 19 to Feb 15, 1995 34.65% petitioner paid P 69,300
Feb 16 to March 3, 1995 20.63% petitioner paid P 41,500
March 4-18 Work 15.47% No payment P 30,950
Total 88.85% P 181,700

Petitioner wanted a change of order within 3 days from vinyl tiles to kenzo flooring on April 22, 1995.
Kenzo flooring took time to construct because of the curing process and additional costs shall be incurred.
The rushed work of kenzo flooring was not acceptable to petitioner Victoria Ong. She refused to pay the
4th billing. Demand of respondent Bognalbal for petitioner Ong to pay for the kenzo flooring was
made on or before April 24, 1995. Petitioner Victoria Ong didnt pay, respondent Bognalbal abandoned
the kenzo flooring job on April 25, 1995.

(Petitioner Ong hired another contractor, she incurred P 78,000 and additional damages, and the
completion of the kenzo flooring was delayed for 82 days.)

Petitioner Ong claims, as a defense against payment of the fourth progress billing, that "the only reason
why the fourth billing was not paid was because [respondent Bogalbal] himself agreed and committed to
collect the fourth progress billing after he completed the Kenzo flooring." 24 Petitioner Ong claims that,
because of this promise, her obligation to pay respondent Bogalbal has not yet become due and
demandable.

Issue: Is Bognalbal liable to pay?

Ruling:
SC (Petition for Certiorari is dismissed) ruled in favor of respondent Bognalbal. MeTCs decision
was affirmed. (Respondent Victoria Ong is liable pay.)
Novation is never presumed. Unless it is clearly shown either by express agreement of the parties or by
acts of equivalent import, defense will never be allowed.
assuming that there was indeed a novation of the obligation of Petitioner Ong to pay the fourth billing
so as to include as additional condition the completion of the Kenzo flooring, such new condition would,
nevertheless, be deemed fulfilled. This is pursuant to Article 1186 of the Civil Code which provides:

Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its
fulfillment.

(This could mean that the prevention of petitioner Ong of the fulfillment of the vinyl tiles, made
the condition of the contract fulfilled, without due course to any of her change order.)
(petitioner) Ong has not sufficiently proven the alleged contract novation

Breach of contract was her [petitioner Ong] failure to pay what she was legally bound to pay under her
contract with respondent Bognalbal. Payment, being the very consideration of the contract, is certainly
not a mere casual or slight breach but a very substantial and fundamental breach as to defeat the object of
the parties making the agreement, due to which rescission of the contract may be had (Ang vs. CA, 170
SCRA 286, 296).
 Osmena III vs. SSS
Extinguishment of Determinate Thing
Facts
Osmena III and 4 other members of the Senate and SSS members seek for
nullification of the following issuances of Social Security Commission
1. Res. No. 428, July 124, 2004- Swiss Challenge Method approved the sale of the entire
equity share of SSS to Equitable PCI bank
2. Res. 485, August 11, 2004 pertains to the timetable and instruction to bidders
SSS in order to liquefy its long term investments and diversify them into higher
yielding and less volatile investments which includes its shareholdings in EPCIB
(Reason: shares in question substantially declined in value and SSS could no longer
afford to continue holding on them)In a purchase agreement it was agreed in that SSS
will sell all its EPCIB shares to BDO
COA and DOJ (in its opinion) approved the agreement
Bidding was made subject to the right of BDO Capital to match the highest bid
BDO turned out t be the highest bidder
Petitioner alleged that BDO to buy EPCIB shares is inconsistent with the idea of
public bidding
BDO and EPCIB had a merger, all EPCIB shares were transferred to BDO
 IssueW/N in questioning the alleged resolution can still recover the shares and subject
it to a proper bidding process
Ruling
No, petitioners can no longer recover the shares
The obligation to give a determinate thing is extinguished if the object is lost
without the fault of the debtor
Under the Civil Code, a thing is considered lost when it perishes or disappears on
such a way that it cannot be recovered.
In the very real sense, the interplay of the ensuing factor: a) the BDO-EPCIB
merger and b) the cancellation of subject shares and their replacement by totally new
common shares of BDO had rendered the erstwhile 187.84 M EPCIB shares of SSS
unrecoverable in the contemplation of Civil Code provision
Froilan vs. Pan Oriental Shipping Co.
September 30, 1954
103 PHIL. 473
PARAS, J.:
Nature of the Case: Appeal from an Order of the CFI of Manila.
FACTS
After Fernando Froilans, plaintiff, failure of payment for the remaining balance,
interest incurred and insurance premiums of the said vessel (MV/FS 197), the
contract made was rescinded by the Shipping Administration (SA). Upon
repossession of the said vessel, Shipping Administration approved a charter
contract to Pan Oriental Shipping (POS), defendant. Upon receiving the vessel, Pan
Oriental Shipping had it repaired and had paid the stipulated initial payment. On the
contract, Shipping Administration gave Pan Oriental option to purchase the boat.
Upon the reconsideration submitted by Froilan, the Cabinet resolved to restore
Froilan to his rights under the original sale with conditions that he shall pay a sum of
money upon delivery of the vessel to him, that he shall continue paying the
remaining installments due, and that he shall assume the expenses incurred for the
repair and by docking of the vessel.
This decision was then protested by Pan Shipping Oriental saying that the said
vessel was delivered to it by the Shipping Administration thus Shipping
Administration must be the one to dispose of said authority to the property and that
Froilan has already given up his rights to the said vessel upon failure to comply.
When Froilan paid and Pan Oriental refused to surrender possession of the vessel,
he filed an action for in the Court of First Instance of Manila to recover possession
thereof and have him declared the rightful owner of said property.
ISSUE
Whether Pan Oriental or Froilan had the right to the vessel.
Whether or not the governments motion to dismissPan Oriental counterclaims may
prosper.
HELD:
In the circumstances of this case, neither Froilan nor the Pan Oriental holds a valid
contract over the vessel. However, since the Shipping Administration, representing
the government ratified its proposed contract with Froilan by receiving the full
consideration of the sale to the latter and since Pan Oriental has no capacity to
question the Shipping Administration of the actuation made, the decision of the
lower court adjudicating the vessel to FroiIan and its successor Compaia Maritima,
must be sustained.
As considered in the case, Pan Oriental cannot be considered a possessor in bad
faith until after the institution of the instant case. However, since it is not disputed
that said appellant made useful and necessary expenses on the vessel, appellant is
entitled to the refund of such expenses with the right to retain the vessel until he
has been reimbursed therefore. As it is by the concerted acts of defendants and
intervenor Republic of the Philippines that appellant was deprived of the possession
of the vessel over which appellant had a lien for his expenses, appellees Froilan,
Compaia Maritima, and the Republic of the Philippines3are declared liable for the
reimbursement to appellant of its legitimate expenses, as allowed by law, with legal
interest from the time of disbursement.