MONDRAGON PERSONAL SALES, INC. vs. VICTORIANO S. SOLA, JR.

,
G.R. No. 174882, January 21, 2013
By: MARYMAR JUROLAN

Doctrine:

Compensation is a mode of extinguishing to the concurrent amount the obligations of

persons who in their own right and as principals are reciprocally debtors and creditors of
each other. Legal compensation takes place by operation of law when all the requisites are
present, as opposed to conventional compensation which takes place when the parties agree to
compensate their mutual obligations even in the absence of some requisites.

Facts:

Petitioner Mondragon Personal Sales Inc., a company engaged in the business of selling
various consumer products through a network of sales representatives, entered into a Contract
of Services with respondent Victoriano S. Sola, Jr. for a period of three years. Under the said
contract, respondent, as service contractor, would provide service facilities, i.e., bodega cum
office, to petitioner's products, sales force and customers in General Santos City and as such, he
was entitled to commission or service fee.

The agreement then came into effect when petitioner's goods were delivered to
respondent's bodega and were sold by petitioner's employees. Prior to the execution of the
contract, however, respondents wife, Lina Sola, had an existing obligation with petitioner
arising from her Franchise Distributorship Agreement with the latter. On January 26, 1995,
respondent wrote a letter addressed to Renato G. de Leon, petitioner's Vice-President for
Finance, wherein he acknowledged and confirmed his wifes indebtedness to petitioner in the
amount of P1,973,154.73 (the other accountability in the sum of P1,490,091.15 was still subject
to reconciliation) and, together with his wife, bound himself to pay on installment basis the said
debt. Consequently, petitioner withheld the payment of respondent's service fees from February
to April 1995 and applied the same as partial payments to the debt which he obligated to pay. On
April 29, 1995, respondent closed and suspended operation of his office cum bodega where
petitioner's products were stored and customers were being dealt with.

On May 24, 1995, respondent filed with the RTC of Davao, a Complaint for accounting
and rescission against petitioner alleging that petitioner withheld portions of his service fees
covering the months from October 1994 to January 1995 and his whole service fees for the
succeeding months of February to April 1995, the total amount of which was P222,202.84; that
petitioner's act grossly hampered, if not paralyzed, his business operation, thus left with no
other recourse, he suspended operations to minimize losses. He prayed for the rescission of the
contract of services and for petitioner to render an accounting of his service fees.

In its Answer with Counterclaim, petitioner contended that respondents letter dated
January 26, 1995 addressed to petitioner's Vice-President for Finance, confirmed and obligated
himself to pay on installment basis the accountability of his wife with petitioner, thus
respondent's service fees/commission earned for the period of February to April 1995
amounting to P125,040.01 was applied by way of compensation to the amounts owing to it; that
all the service fees earned by respondent prior to February 1995 were fully paid to him. In his
Reply and Answer to petitioner's counterclaim, respondent averred that he was made to believe
that the sales commission contained in petitioner's memorandum dated July 5, 1994 would be
applicable to him; that it was improper for petitioner to confuse respondent's transaction with
that of his wife as it was divergent in nature and terms.

The RTC rendered its Decision in favor of defendant and against plaintiff. Respondent
filed his appeal to the CA to which petitioner filed its appellee's brief. On February 10, 2006, the
CA rendered its assailed decision granting the appeal and rescinded the Contract of Services.
Petitioner's motion for reconsideration was denied in a Resolution.

Issues:

Whether or not the CA erred:

1. In finding that petitioner breached its contract with respondent and that there is no
compensation in accordance to Article 1279 of the Civil Code;

2. In finding that respondent did not assume the obligation of his wife;

Held:

The CA found that petitioner's act of withholding respondent's service fees and thereafter
applying them as partial payment to the obligation of respondent's wife with petitioner was
unlawful, considering that respondent never assumed his wifes obligation, thus, there can be no
legal compensation under Article 1279 of the Civil Code.

We do not agree.

In his letter dated January 26, 1995 addressed to Mr. Renato G. De Leon, petitioner's
Vice-President for Finance, respondent wrote, and which we quote in full:

Gentlemen:

This refers to the account of my wife, Lina (Beng) Sola, with Mondragon Personal Sales,
Inc. in the amount of P3,463,173.88. Of this total amount, we are initially confirming the total
amount of P1,973,154.73 as due from Lina (Beng) Sola, while the remaining balance of
P1,490,091.15 will be subject to a reconciliation on or before February 5, 1995.

In recognition of Lina (Beng) Sola's account, we undertake to pay P100,000.00 on or

before February 01, 1995 and the balance of P1,873,154.73 plus interest of 18% per annum and
2% administrative charge per month on the diminishing balance will be covered by postdated
checks of not less than P100,000.00 per month starting February 28, 1995 and every end of the
month thereafter but not to exceed eighteen (18) months or July 31, 1996.

xxxxxxx
 I fully understand and voluntarily agree to the above undertaking with full knowledge of
the consequences which may arise therefrom.

Very truly yours,

(signed)
Victoriano S. Sola

A reading of the letter shows that respondent becomes a co-debtor of his wife's
accountabilities with petitioner. Notably, the last paragraph of his letter which states "I fully
understand and voluntarily agree to the above undertaking with full knowledge of the
consequences which may arise therefrom" and which was signed by respondent alone, shows
that he solidarily bound himself to pay such debt. Based on the letter, respondent's wife had an
account with petitioner in the amount of P3,463,173.88, out of which only the amount of
P1,973,154.73 was confirmed while the remaining amount of P1,490,019.15 would still be subject
to reconciliation. As respondent bound himself to pay the amount of P1,973,154.73, he becomes
petitioner's principal debtor to such amount.

We find that petitioner's act of withholding respondent's service fees/commissions and

applying them to the latter's outstanding obligation with the former is merely an
acknowledgment of the legal compensation that occurred by operation of law between the
parties. Compensation is a mode of extinguishing to the concurrent amount the obligations of
persons who in their own right and as principals are reciprocally debtors and creditors of each
other. Legal compensation takes place by operation of law when all the requisites are present, as
opposed to conventional compensation which takes place when the parties agree to compensate
their mutual obligations even in the absence of some requisites. Legal compensation requires
the concurrence of the following conditions:

(1) That each one of the obligors be bound principally, and that he be at the same time a
principal creditor of the other;

(2) That both debts consist in a sum of money, or if the things due are consumable, 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;

(5) That over neither of them there be any retention or controversy, commenced by third
persons and communicated in due time to the debtor.

We find the presence of all the requisites for legal compensation. Petitioner and
respondent are both principal obligors and creditors of each other. Their debts to each other
consist in a sum of money. Respondent acknowledged and bound himself to pay petitioner the
amount of P1,973,154.73 which was already due, while the service fees owing to respondent by
petitioner become due every month. Respondent's debt is liquidated and demandable, and
petitioner's payments of service fees are liquidated and demandable every month as they fall
due. Finally, there is no retention or controversy commenced by third persons over either of the
debts. Thus, compensation is proper up to the concurrent amount where petitioner owes
respondent P125,040.01 for service fees, while respondent owes petitioner P1,973,154.73.

ELIZABETH DEL CARMEN, Petitioner, vs. SPOUSES RESTITUTO SABORDO and

MIMA MAHILUM-SABORDO, Respondents.
G.R. No. 181723, August 11, 2014
By: Ellen R. Nalia

TOPIC: EXTINGUISHMENT OF OBLIGATIONS-PAYMENT OR PERFORMANCE

DOCTRINE:

It is settled that compliance with the requisites of a valid consignation is mandatory.

Failure to comply strictly with any of the requisites will render the consignation void. One of
these requisites is a valid prior tender of payment.

FACTS:

Respondent Restituto Sabordo (Restituto) filed an original action for declaratory relief
with damages and prayer for a writ of preliminary injunction raising the issue of whether or not
the Suico spouses have the right to recover from respondents Lots 506 and 514. The court ruled
in favor of the Suico spouses directing that the latter have until October 31, 1990 within which to
redeem or buy back from respondents Lots 506 and 514 for the sum of ONE HUNDRED
TWENTY-SEVEN THOUSAND FIVE HUNDRED PESOS (P127,500.00).

In the meantime, Toribio Suico (Toribio) died leaving his widow, Eufrocina, and several
others, including herein petitioner, as legal heirs. Later, they discovered that respondents
mortgaged Lots 506 and 514 with Republic Planters Bank (RPB) as security for a loan which,
subsequently, became delinquent.

Claiming that they are ready with the payment of P127,500.00, but alleging that they
cannot determine as to whom such payment shall be made, petitioner and her co-heirs filed a
Complaint with the RTC seeking to compel herein respondents and RPB to interplead and
litigate between themselves their respective interests on the abovementioned sum of money. The
Complaint also prayed that respondents be directed to substitute Lots 506 and 514 with other
real estate properties as collateral for their outstanding obligation with RPB and that the latter
be ordered to accept the substitute collateral and release the mortgage on Lots 506 and 514.
Upon filing of their complaint, the heirs of Toribio deposited the amount of P127,500.00 with
the RTC.
 Respondents filed their Answer with Counterclaim praying for the dismissal of the above
Complaint on the grounds that (1) the action for interpleader was improper since RPB is not
laying any claim on the sum of P127,500.00; (2) that the period within which the complainants
are allowed to purchase Lots 506 and 514 had already expired; (3) that there was no valid
consignation, and (4) that the case is barred by litis pendenciaor res judicata.

Petitioner's main contention is that the consignation which she and her co-heirs made
was a judicial deposit based on a final judgment and, as such, does not require compliance with
the requirements of Articles 125611 and 125712 of the Civil Code.

ISSUE:

Whether or not there is a valid consignation.

RULING:

There is no valid consignation. It is settled that compliance with the requisites of a valid
consignation is mandatory. Failure to comply strictly with any of the requisites will render the
consignation void. One of these requisites is a valid prior tender of payment. Under Article 1256,
the only instances where prior tender of payment is excused are: (1) when the creditor is absent
or unknown, or does not appear at the place of payment; (2) when the creditor is incapacitated
to receive the payment at the time it is due; (3) when, without just cause, the creditor refuses to
give a receipt; (4) when two or more persons claim the same right to collect; and (5) when the
title of the obligation has been lost.

None of these instances are present in the instant case. The fact that the subject lots are
in danger of being foreclosed does not excuse petitioner and her co-heirs from tendering
payment to respondents, as directed by the court. Thus, the SC finds that petitioner and her co-
heirs failed to make a prior valid tender of payment to Sabordo.

AVELINA ABARIENTOS REBUSQUILLO [substituted by her heirs, except

Emelinda R. Gualvez] vs. SPS. DOMINGO and EMELINDA REBUSQUILLO
GUALVEZ

G.R. No. 204029 June 4, 2014

By: Eisone Brix R. Manuales

Doctine/s:

In absolute simulation, there is a colorable contract but it has no substance as the parties
have no intention to be bound by it. The main characteristic of an absolute simulation is that the
apparent contract is not really desired or intended to produce legal effect or in any way alter the
juridical situation of the parties. As a result, an absolutely simulated or fictitious contract is
void, and the parties may recover from each other what they may have given under the contract.
However, if the parties state a false cause in the contract to conceal their real agreement, the
contract is relatively simulated and the parties are still bound by their real agreement. Hence,
where the essential requisites of a contract are present and the simulation refers only to the
content or terms of the contract, the agreement is absolutely binding and enforceable between
the parties and their successors in interest.

Facts :

Petioners Avelina Abarientos Rebusquillo (Avelina) and Salvador Orosco (Salvador) filed
a Complaint for annulment and revocation of an Affidavit of Self-Adjudication and a Deed of
Absolute Sale. In it, petitioners alleged that Avelina was one of the children of Eulalio
Abarientos (Eulalio) and Victoria Villareal (Victoria). Eulalio died intestate on July 3, 1964,
survived by his wife Victoria, six legitimate children, and one illegitimate child, namely: (1)
Avelina Abarientos-Rebusquillo, petitioner in this case; (2) Fortunata Abarientos-Orosco, the
mother of petitioner Salvador; (3) Rosalino Abarientos; (4) Juan Abarientos; (5) Feliciano
Abarientos; (6) Abraham Abarientos; and (7) Carlos Abarientos. His wife Victoria eventually
died intestate on June 30, 1983.

On his death, Eulalio left behind an untitled parcel of land in Legazpi City consisting of
two thousand eight hundred sixty-nine(2,869) square meters, more or less, which was covered
by Tax Declaration ARP No. (TD) 0141.

In 2001, Avelina was supposedly made to sign two (2) documents by her daughter
Emelinda Rebusquillo-Gualvez (Emelinda) and her son-in-law Domingo Gualvez (Domingo),
respondents in this case, on the pretext that the documents were needed to facilitate the titling
of the lot. It was only in 2003, as petitioners claim that Avelina realized that what she signed
was an Affidavit of Self- Adjudication and a Deed of Absolute Sale in favor of respondents. As
respondents purportedly ignored her when she tried to talk to them, Avelina sought the
intervention of the RTC to declare null and void the two (2) documents in order to reinstate
TD0141 and so correct the injustice done to the other heirs of Eulalio.

Issue: Whether or not there was a simulation of contract.

Ruling:

The Civil Code provides: Art. 1345. Simulation of a contract may be absolute or relative.
The former takes place when the parties do not intend to be bound at all; the latter, when the
parties conceal their true agreement. Art. 1346. An absolutely simulated or fictitious contract is
void. A relative simulation, when it does not prejudice a third person and is not intended for any
purpose contrary to law, morals, good customs, public order or public policy binds the parties to
their real agreement.

In absolute simulation, there is a colorable contract but it has no substance as the parties
have no intention to be bound by it. The main characteristic of an absolute simulation is that the
apparent contract is not really desired or intended to produce legal effect or in any way alter the
juridical situation of the parties. As a result, an absolutely simulated or fictitious contract is
void, and the parties may recover from each other what they may have given under the contract.
However, if the parties state a false cause in the contract to conceal their real agreement, the
contract is relatively simulated and the parties are still bound by their real agreement. Hence,
where the essential requisites of a contract are present and the simulation refers only to the
content or terms of the contract, the agreement is absolutely binding and enforceable between
the parties and their successors in interest.

In the present case, the true intention of the parties in the execution of the Deed of
Absolute Sale is immediately apparent from respondents very own Answer to petitioners
Complaint. As respondents themselves acknowledge, the purpose of the Deed of Absolute Sale
was simply to "facilitate the titling of the [subject] property," not to transfer the ownership of the
lot to them. Furthermore, respondents concede that petitioner Salvador remains in possession
of the property and that there is no indication that respondents ever took possession of the
subject property after its supposed purchase. Such failure to take exclusive possession of the
subject property or, in the alternative, to collect rentals from its possessor, is contrary to the
principle of ownership and is a clear badge of simulation that renders the whole transaction
void.

LAND BANK OF THE PHILIPPINES, vs.HEIRS OF SPOUSES JORJA RIGOR-

SORIANO AND MAGIN SORIANO, NAMELY: MARIVEL S. CARANDANG AND
JOSEPH SORIANO,
G.R. No. 178312 January 30, 2013
By: Angeline C. Ygaa

Doctrine: Under Article 2028 of the Civil Code, a compromise is a contract whereby the
parties, by making reciprocal concessions, avoid a litigation or put an end to one already
commenced.

Facts:

The respondents are the children of the late Spouses Jorja Rigor-Soriano and Magin Soriano,
the owners of the two parcels of land.

The properties became subject to Operation Land Transfer (OLT) and were valued by the Land
Bank and the Department of Agrarian Reform (DAR) at P10,000.00/hectare. Contending,
however, that such valuation was too low compared to existing valuations of agricultural lands,
the respondents commenced this action for just compensation, claiming that the properties were
irrigated lands that usually yielded 150 cavans per hectare per season at a minimum of two
seasons per year. They asked that a final valuation of the properties be pegged at
P1,800,000.00, based on Administrative Order No. 61, Series of 1992 and Republic Act No.
6657.2

Land Bank disagreed

RTC ruled judgment is hereby rendered ordering the defendant Land Bank of the Philippines to
pay petitioner Manolo Goduco the total amount of One Million Two Hundred Twenty Seven
Thousand Five Hundred Seventy One & 10/100 (P1,227,571.10)xxx

Land Bank and the respondents filed separate motions for reconsideration, but the RTC denied
their motions on August 4, 2005.

Hence, this petition

However during the pendency of the appeal, on February 29, 2012, Land Bank submitted to the
Court a so-called Joint Manifestation and Motion (Re: Unconditional Acceptance of
Revaluation) dated February 9, 2012, stating that the approval by Land Banks responsible
officers of the revaluation of the properties pursuant to DAR Administrative Order No. 1 dated
February 18, 2010, Series of 2010xxx was communicated to the respondents for their
unconditional acceptance.

Issue: Whether or not the judgment on appeal be now resolved on the basis of the acceptance of
payment by the respondents.10

Ruling:

Under the resolution dated March 12, 2012, the Court required the respondents to comment on
Land Banks submission of the Joint Manifestation and Motion.

On December 4, 2012, Land Bank submitted a Manifestation, 12 informing the Court that the
parties had filed by registered mail their Joint Motion to Approve the Attached Agreement,
submitting therewith their Agreement dated November 29, 2012.

There is no question that the foregoing Agreement was a compromise that the parties freely and
voluntarily entered into for the purpose of finally settling their dispute in this case. Under
Article 2028 of the Civil Code, a compromise is a contract whereby the parties, by making
reciprocal concessions, avoid a litigation or put an end to one already commenced. Accordingly,
a compromise is either judicial, if the objective is to put an end to a pending litigation, or
extrajudicial, if the objective is to avoid a litigation. As a contract, a compromise is perfected by
mutual consent. However, a judicial compromise, while immediately binding between the
parties upon its execution, is not executory until it is approved by the court and reduced to a
judgment.15The validity of a compromise is dependent upon its compliance with the requisites
and principles of contracts dictated by law. Also, the terms and conditions of a compromise
must not be contrary to law, morals, good customs, public policy and public order. 16

A review of the terms of the Agreement, particularly paragraph 6 and paragraph 7, indicates that
it is a judicial compromise because the parties intended it to terminate their pending litigation
by fully settling their dispute. Indeed, with the respondents thereby expressly signifying their
"unconditional or absolute acceptance and full receipt of the foregoing amounts as just
compensation for subject properties xxxpending before the Supreme Court, closed and
terminated," the ultimate objective of the action to determine just compensation for the
landowners was achieved.

PHILIPPINE NATIONAL BANK, petitioner, vs. SPOUSES ENRIQUE MANALO &

ROSALINDA JACINTO, ARNOLD J. MANALO, ARNEL J. MANALO, and ARMA J.
MANALO, respondents
[G.R. No. 174433. February 24, 2014.]
By: Ernesto Miguel B. Amores
Doctrine/s:

Article 1308 of the Civil Code expresses what is known in law as the principle of mutuality of
contracts. It provides that "the contract must bind both the contracting parties; its validity or
compliance cannot be left to the will of one of them."

Facts:

Respondent Spouses Enrique Manalo and Rosalinda Jacinto (Spouses Manalo) applied
for an All-Purpose Credit Facility in the amount of P1,000,000.00 with Philippine National
Bank (PNB) to finance the construction of their house. After PNB granted their application, they
executed a Real Estate Mortgage in favor of PNB over their property.

It was agreed upon that the Spouses Manalo would make monthly payments on the
interest. However, PNB claimed that their last recorded payment was made on December, 1997.
Thus, PNB sent a demand letter to them on their overdue account and required them to settle
the account. PNB sent another demand letter because they failed to heed the first demand.

After the Spouses Manalo still failed to settle their unpaid account despite the two
demand letters, PNB foreclose the mortgage. During the foreclosure sale, PNB was the highest
bidder for P15,127,000.00 of the mortgaged properties of the Spouses Manalo. The sheriff
issued to PNB the Certificate of Sale dated November 13, 2000.

After more than a year after the Certificate of Sale had been issued to PNB, the Spouses
Manalo instituted this action for the nullification of the foreclosure proceedings and damages.
They alleged that they had obtained a loan for P1,000,000.00 from a certain Benito Tan upon
arrangements made by Antoninus Yuvienco, then the General Manager of PNB's Bangkal
Branch where they had transacted; that they had been made to understand and had been
assured that the P1,000,000.00 would be used to update their account, and that their loan
would be restructured and converted into a long-term loan; that they had been surprised to
learn, therefore, that had been declared in default of their obligations, and that the mortgage on
their property had been foreclosed and their property had been sold; and that PNB did not
comply with Section 3 of Act No. 3135, as amended

After trial, the RTC rendered its decision in favor of PNB.

 On appeal, the CA found it necessary to pass upon the issues of PNB's failure to specify
the applicable interest and the lack of mutuality in the execution of the credit agreements
considering the earlier cited observation made by the trial court in its decision. Applying Article
1956 of the Civil Code, the CA held that PNB's failure to indicate the rate of interest in the credit
agreements would not excuse the Spouses Manalo from their contractual obligation to pay
interest to PNB because of the express agreement to pay interest in the credit agreements.
Nevertheless, the CA ruled that PNB's inadvertence to specify the interest rate should be
construed against it because the credit agreements were clearly contracts of adhesion due to
their having been prepared solely by PNB.

Issue/s:

Whether or not the CA erred in declaring that the interest rates and subsequent increases
were invalid for lack of mutuality between the contracting parties

Held:

The CA was correct.

The credit agreement executed succinctly stipulated that the loan would be subjected to
interest at a rate "determined by the Bank to be its prime rate plus applicable spread, prevailing
at the current month." This stipulation was carried over to or adopted by the subsequent
renewals of the credit agreement. PNB thereby arrogated unto itself the sole prerogative to
determine and increase the interest rates imposed on the Spouses Manalo. Such a unilateral
determination of the interest rates contravened the principle of mutuality of contracts embodied
in Article 1308 of the Civil Code.

The Court has declared that a contract where there is no mutuality between the parties
partakes of the nature of a contract of adhesion, and any obscurity will be construed against the
party who prepared the contract, the latter being presumed the stronger party to the agreement,
and who caused the obscurity. PNB should then suffer the consequences of its failure to
specifically indicate the rates of interest in the credit agreement.

The unilateral determination and imposition of the increased rates is violative of the
principle of mutuality of contracts under Article 1308 of the Civil Code, which provides that
'[t]he contract must bind both contracting parties; its validity or compliance cannot be left to the
will of one of them. Any contract which appears to be heavily weighted in favor of one of the
parties so as to lead to an unconscionable result, thus partaking of the nature of a contract of
adhesion, is void. Any stipulation regarding the validity or compliance of the contract left solely
to the will of one of the parties is likewise invalid. (Emphasis supplied)

RODRIGO RIVERA, Petitioner, v. SPOUSES SALVADOR CHUA AND S. VIOLETA

CHUA,Respondents.
G.R. No. 184458, January 14, 2015
SPS. SALVADOR CHUA AND VIOLETA S. CHUA, Petitioners, v. RODRIGO
RIVERA, Respondent.
 [G.R. NO. 184472
By: Marietes M. Sumampong

DOCTRINE:

Those obliged to deliver or to do something incur in delay from the time the obligee judicially
or extrajudicially demands from them the fulfillment of their obligation.

However, the demand by the creditor shall not be necessary in order that delay
may exist:

(1) When the obligation or the law expressly so declare; or

(2) When from the nature and the circumstances of the obligation it appears that the
designation of the time when the thing is to be delivered or the service is to be rendered was a
controlling motive for the establishment of the contract; or
(3) When demand would be useless, as when the obligor has rendered it beyond his power to
perform.

FACTS:

The parties were friends of long standing having known each other since 1973: Rivera and
Salvador are kumpadres, the former is the godfather of the Spouses Chuas son. On 24 February
1995, Rivera obtained a loan from the Spouses Chua as evidenced by a Promissory Note, in the
amount of P 120,000.00O, to be paid on December 31, 1995. It was agreed that failure to pay
the amount on due date will be charge to a FIVE PERCENT (5%) interest monthly from the date
of default until the entire obligation is fully paid for. Should the note be referred to a lawyer for
collection, a sum equivalent to twenty percent (20%) of the total amount due and payable as and
for attorneys fees which in no case shall be less than P5,000.00 and to pay in addition the cost
of suit and other incidental litigation expense.

Almost three years from the date of payment stipulated , Rivera, as partial payment for the loan,
issued and delivered to the Spouses Chua a check drawn against Riveras current account in the
amount of P25,000.00 and another check presumably issued by Rivera, duly signed and dated,
but blank as to payee and amount. Ostensibly, as per understanding by the parties, was filled out
in the amount of P133,454.00 with cash as payee. Purportedly, both checks were simply partial
payment for Riveras loan in the principal amount of P120,000.00. Upon presentment for
payment, the two checks were dishonored for the reason account closed.

Despite repeated demands and because of Riveras unjustified refusal to pay, the Spouses Chua
were constrained to file a suit. In his Answer with Compulsory Counterclaim, Rivera countered
that: (1) he never executed the subject Promissory Note; (2) in all instances when he obtained a
loan from the Spouses Chua, the loans were always covered by a security; (3) at the time of the
filing of the complaint, he still had an existing indebtedness to the Spouses Chua, secured by a
real estate mortgage, but not yet in default; (4) PCIB Check No. 132224 signed by him which he
delivered to the Spouses Chua on 21 December 1998, should have been issued in the amount of
only P1,300.00, representing the amount he received from the Spouses Chuas saleslady; (5)
contrary to the supposed agreement, the Spouses Chua presented the check for payment in the
amount of P133,454.00; and (6) there was no demand for payment of the amount of
P120,000.00 prior to the encashment of PCIB Check No. 0132224.
Rivera claimed forgery of the subject Promissory Note and denied his indebtedness thereunder.
Upon order of the MeTC, the testimony of the NBI expert was sought to examine the purported
signature of Rivera appearing in the Promissory Note and compared the signature appearing on
several documents. The expert concluded that the questioned signature appearing in the
Promissory Note and the specimen signatures appearing on the other documents submitted
were written by one and the same person. To rebut the testimony of NBI Senior Document
Examiner, Rivera only reiterated his averment that the signature appearing on the Promissory
Note was not his signature and that he did not execute the Promissory Note.

After trial, the MeTC ruled in favor of the Spouses Chua and on appeal, the Regional Trial Court
affirmed the Decision of the MeTC, but deleted the award of attorneys fees to the Spouses Chua.

Undaunted, Rivera appealed to the Court of Appeals which affirmed Riveras liability under the
Promissory Note, reduced the imposition of interest on the loan from 60% to 12% per annum,
and reinstated the award of attorneys fees in favor of the Spouses Chua.

Hence, these appeal.

ISSUE:

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT

DEMAND IS NO LONGER NECESSARY IN HOLDING RIVERA LIABLE FOR THE STATED
INTEREST UPON DEFAULT.

HELD:

Rivera argues that even assuming the validity of the Promissory Note, demand was still
necessary in order to charge him liable thereunder. The Promissory Note is unequivocal about
the date when the obligation falls due and becomes demandable31 December 1995. As of 1
January 1996, Rivera had already incurred in delay when he failed to pay the amount of
P120,000.00 due to the Spouses Chua on 31 December 1995 under the Promissory Note.

Article 1169 of the Civil Code explicitly provides:

Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee
judicially or extrajudicially demands from them the fulfillment of their obligation.

However, the demand by the creditor shall not be necessary in order that delay
may exist:

(1) When the obligation or the law expressly so declare; or

(2) When from the nature and the circumstances of the obligation it appears that the
designation of the time when the thing is to be delivered or the service is to be rendered was a
controlling motive for the establishment of the contract; or
(3) When demand would be useless, as when the obligor has rendered it beyond his power to
perform.
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not
ready to comply in a proper manner with what is incumbent upon him. From the moment one
of the parties fulfills his obligation, delay by the other begins.

In the first two paragraphs, it is not sufficient that the law or obligation fixes a date for
performance; it must further state expressly that after the period lapses, default will commence.
We refer to the clause in the Promissory Note containing the stipulation of interest. The date of
default under the Promissory Note is 1 January 1996, the day following 31 December 1995, the
due date of the obligation. On that date, Rivera became liable for the stipulated interest which
the Promissory Note says is equivalent to 5% a month. In sum, until 31 December 1995, demand
was not necessary before Rivera could be held liable for the principal amount of P120,000.00.
Thereafter, on 1 January 1996, upon default, Rivera became liable to pay the Spouses Chua
damages, in the form of stipulated interest without waiting for demand as expressly stated
therein.

The liability for damages of those who default, including those who are guilty of delay, in the
performance of their obligations is laid down on Article 1170 of the Civil Code.

ALEJANDRO V. TANKEH vs. DEVELOPMENT BANK OF THE PHILIPPINES,

STERLING SHIPPING LINES, INC., RUPERTO V. TANKEH, VICENTE ARENAS,
and ASSET PRIVATIZATION TRUST,
G.R. No. 171428.November 11, 2013
By: Lucks Mae Digaum

Doctrine/s:

The first, or causal fraud referred to in Article 1338, are those deceptions or
misrepresentations of a serious character employed by one party and without which the other
party would not have entered into the contract. Dolo incidente, or incidental fraud which is
referred to in Article 1344, are those which are not serious in character and without which the
other party would still have entered into the contract. Dolo causante determines or is the
essential cause of the consent, while dolo incidente refers only to some particular or accident
of the obligation. The effects of dolo causante are the nullity of the contract and the
indemnification of damages, and dolo incidente also obliges the person employing it to pay
damages.

Facts:

Ruperto Tankeh approached his borther, Alejandro Tankeh and proposed to the latter to
join his corporation which is operating shipping vessels. Ruperto signified to Alejandro that they
need to acquire a new vessel for their business and in order to do that, they needed a loan.
Alejandro together with Ruperto and others signed a promissory note in favor of the DBP for a
loan amounting to $3.5. The same amount used to acquire the said vessel.
When Ruperto invited Alejandro to join in the company, the former promised the latter
free 1,000 free shares as member of the BOD and assuring the latter that his eldest son shall
have a position in the company. But when the said promise was not fulfilled for Alejandro was
only able to participate in the Board meeting only once in order to be introduced to the DBP
Officers. He was also not allowed to browse on the financial data of the company. These
circumstances prompted the petitioner to severe his ties with the company and notified the DBP
of the said action. He then demanded to be released from all liabilities arising from the
corporations activities specially that of the promissory note.

Later on, it came to his knowledge that the said vessel subject of the promissory note was
sold for an inadequate price and that DBP ran after the signatories of the promissory note for
the remaining balance of the loan. This fact forced Alejandro to file a case against Ruperto, DBP,
and other persons with the RTC on the ground that he was led to sign into the promissory note
as a signatory and as such he was thereby defrauded by his brother.

The RTC rendered a decision in favor of Alejandro but was later on reversed by the CA
on appeal. The CA alleged that there was no fraud on the part of Ruperto when he signed the
promissory note. That he had affixed his signature on it voluntarily knowng fully well of the
consequences of such act.

Hence, the Petition.

Issue/s:

Whether or not there was causal fraud in the fixing of Alejandros signature in the
promissory note.

Held:

No, there was none. But there is incidental fraud present in the said case.

The first, or causal fraud referred to in Article 1338, are those deceptions or
misrepresentations of a serious character employed by one party and without which the other
party would not have entered into the contract. Dolo incidente, or incidental fraud which is
referred to in Article 1344, are those which are not serious in character and without which the
other party would still have entered into the contract. Dolo causante determines or is the
essential cause of the consent, while dolo incidente refers only to some particular or accident of
the obligation. The effects of dolo causante are the nullity of the contract and the
indemnification of damages, and dolo incidente also obliges the person employing it to pay
damages.

Jurisprudence has shown that in order to constitute fraud that provides basis to annul
contracts, it must fulfill two conditions. First, the fraud must be dolo causante or it must be
fraud in obtaining the consent of the party. Second, this fraud must be proven by clear and
convincing evidence.

Neither law nor jurisprudence distinguishes whether it is dolo incidente or dolo causante
that must be proven by clear and convincing evidence. It stands to reason that both dolo
incidente and dolo causante must be proven by clear and convincing evidence. The only
question is whether this fraud, when proven, may be the basis for making a contract voidable
(dolo causante), or for awarding damages (dolo incidente), or both.
 An assessment of the allegations in the pleadings and the findings of fact of both the trial
court and appellate court based on the evidence on record led to the conclusion that there had
been no dolo causante committed against the petitioner by Ruperto V. Tankeh. The petitioner
had given his consent to become a shareholder of the company without contributing a single
peso to pay for the shares of stock given to him by Ruperto V. Tankeh.

Although there was no fraud that had been undertaken to obtain petitioners consent,
there was fraud in the performance of the contract. The records showed that petitioner had been
unjustly excluded from participating in the management of the affairs of the corporation. This
exclusion from the management in the affairs of Sterling Shipping Lines, Inc. constituted fraud
incidental to the performance of the obligation. In Geraldez, this Court defined incidental fraud
as those which are not serious in character and without which the other party would still have
entered into the contract.

ROWENA R. SALONTE vs.

COMMISSION ON AUDIT, CHAIRPERSON MA. GRACIA PULIDO-TAN,
COMMISSIONER JUANITO G. ESPINO, JR., COMMISSIONER HEIDI L.
MENDOZA, and FORTUNATA M. RUBICO, DIRECTOR IV, COA COMMISSION
SECRETARIAT, in their official capacities
G.R. No. 207348; August 19, 2014
By: Ziazel C. Andales
Doctrine:

Obligations with a resolutory period take effect at once, but terminate upon arrival of the day
certain. A day certain is understood to be that which must necessarily come, although it may
not be known when. If the uncertainty consists in whether the day will come or not, the
obligation is conditional.

Facts:

On April 26, 1989, the City of Mandaue and F.F. Cruz and Co., Inc. (F.F. Cruz) entered into a
Contract of Reclamation in which F.F. Cruz, in consideration of a defined land sharing formula
thus stipulated, agreed to undertake, at its own expense, the reclamation of 180 hectares, more
or less, of foreshore and submerged lands from the Cabahug Causeway in that city.

The timetables, i.e., commencement of the contract and project completion, are provided in
paragraphs 2 and 15 of the Contract which state:

2. COMMENCEMENT. Work on the reclamation shall commence not later than [July
1989], after this contract shall be ratified by the Sanggunian Panlungsod;

xxxx

15. CONTRACT DURATION. The project is estimated to be completed in 6 years.

However, if all the infrastructures within the OWNERS share of the project are already
completed within the 6-year period agreed upon, any extension of time for works to be
done within the share of the DEVELOPERS, shall be at the discretion of the
 DEVELOPERS, as a growing city, changes in requirements of the lot buyers are
inevitable.

On a best effort basis, the construction of roadways, drainage system and open spaces in
the area designated as share of the City of Mandaue, shall be completed not later than
December 31, 1991.

Subsequently, the parties inked in relation to the above project a Memorandum of

Agreement (MOA) dated October 24, 1989 whereby the City of Mandaue allowed F.F. Cruz
to put up structures on a portion of a parcel of land owned by the city for the use of and to
house F.F. Cruz personnel assigned at the project site, subject to terms particularly provided
in paragraphs 3, 4 and 5 of the MOA:

3) That F.F. Cruz desires to use a portion of a parcel of land of the City of Mandaue x x x to the
extent of 495 square meters x x x to be used by them in the construction of their offices to house
its personnel to supervise the Mandaue City Reclamation Project x x x.

4) That the City of Mandaue agrees to the desire of F.F. Cruz to use a portion of the parcel of
land x x x for the latter to use for the construction of their offices to house its personnel to
supervise the said Mandaue City Reclamation Project with no rental to be paid by F.F. Cruz to
the City of Mandaue.

5) That the City of Mandaue and F.F. Cruz have agreed that upon the completion of the
Mandaue City Reclamation Project, all improvements introduced by F.F. Cruz to the portion of
the parcel x x x existing upon the completion of the said Mandaue City Reclamation Project shall
ipso facto belong to the City of Mandaue in ownership as compensation for the use of said parcel
of land by F.F. Cruz without any rental whatsoever.

Pursuant to the MOA, F.F. Cruz proceeded to construct the housing units and other facilities.

When the City of Mandaue undertook the Metro Cebu Development Project II (MCDP II), part
of which required the widening of the Plaridel Extension Mandaue Causeway. However, the
structures and facilities built by F.F. Cruz subject of the MOA stood in the direct path of the road
widening project. Thus, the Department of Public Works and Highways (DPWH) and Samuel B.
Darza, MCDP II project director, entered into an Agreement to Demolish, Remove and
Reconstruct Improvement dated July 23, 1997 with F.F. Cruz whereby the latter would demolish
the improvements outside of the boundary of the road widening project and, in return, receive
the total amount of PhP 1,084,836.42 in compensation.

Accordingly, petitioner Rowena B. Rances-Solante, Human Resource Management Officer III,

prepared and, with the approval of Darza, then issued Disbursement Voucher (DV) No. 102-07-
88-97 dated July 24, 1997 for PhP 1,084,836.42 in favor of F.F. Cruz.

Thereafter, Darza addressed a letter-complaint to the Office of the Ombudsman, Visayas,

inviting attention to several irregularities regarding the implementation of MCDP II. The letter
was referred to the COA which then issued Assignment Order No. 2000-063 for a team to audit
the accounts of MCDP II. Following an audit, the audit team issued Special Audit Office (SAO)
Report No. 2000-28, par. 5 of which states:
F.F. Cruz and Company, Inc. was paid P1,084,836.42 for the cost of the property affected by the
widening of Plaridel Extension, Mandaue Causeway. However, under Section 5 of its MOA with
Mandaue City, the former was no longer the lawful owner of the properties at the time the
payment was made.

Based on the above findings, the SAO audit team, issued the adverted ND 2000-002-101-(97)
disallowing the payment of PhP 1,084,836.42 to F.F. Cruz and naming that company, Darza and
Solante liable for the transaction. Therefrom, Solante sought reconsideration, while F.F. Cruz
appealed, but the motion for reconsideration and the appeal were jointly denied, which F.F.
Cruz in time appealed to COA Central.

In its February 15, 2008 Decision, the COA, affirmed ND 2000-002-101-97 on the strength of
the following premises:

From the above provision of the MOA, it is clear that the improvements introduced by F.F. Cruz
x x x would be owned by the City upon completion of the project which under the Contract of
reclamation should have been in 1995. However, the project was not completed in 1995 and even
in 1997 when MDCP paid for these improvements. The fact that the reclamation project had not
yet been completed or turned over to the City of Mandaue by F.F. Cruz in 1997 or two years after
it should have been completed, does not negate the right over such improvements by the City x x
x. Clearly, the intention of the stipulation is for F.F. Cruz x x x to compensate the government for
the use of the land on which the office, pavement, canteen, extension shed, house and septic
tank were erected. Thus, to make the government pay for the cost of the demolished
improvements will defeat the intention of parties as regards compensation due from the
contractor for its use of the subject land. Under Article 1315 of the Civil Code, from the moment
a contract is perfected, the parties are bound to the fulfillment to what has been expressly
stipulated and all the consequences which according to their nature, may be in keeping with
good faith, usage and law. Thus, even if the contractual stipulations may turn out to be
financially disadvantageous to any party, such will not relieve any or both parties from their
contractual obligations.

From such decision, Solante filed a Motion for Reconsideration which was denied by the COA in
a Resolution dated November 5, 2012 wherein the commission held:

x x x The arguments of Ms. Solante that as long as the Project has not yet been turned over, the
ownership of the said improvements would not be acquired yet by the City would put the entire
contract at the mercy of F.F. Cruz & Co., Inc., thus, negating the mutuality of contracts principle
expressed in Article 1308 of the New Civil Code, which states:

Art. 1308. The contracts must bind both contracting parties; its validity or compliance cannot be
left to the will of one of them.

On February 15, 2013, Solante received a Notice of Finality of Decision (NFD) stating that the
COA Decision dated February 15, 2008 and Resolution dated November 5, 2012 have become
final and executory, a copy of the Resolution having been served on the parties on November 9,
2012 by registered mail.
Hence, the instant petition.

Issue:

Whether or not the City of Mandaue owned during the period material the properties that were
demolished.

Ruling:

The petition is meritorious.

The Civil Code provision on obligations with a period is relevant. Article 1193 thereof provides:

Article 1193. Obligations for whose fulfillment a day certain has been fixed, shall be demandable
only when that day comes.

Obligations with a resolutory period take effect at once, but terminate upon arrival of the day
certain.

A day certain is understood to be that which must necessarily come, although it may not be
known when.

If the uncertainty consists in whether the day will come or not, the obligation is conditional, and
it shall be regulated by the rules of the preceding Section.

A plain reading of the Contract of Reclamation reveals that the 6-year period provided for
project completion, or, with like effect, termination of the contract was a mere estimate and
cannot be considered a period or a "day certain" in the context of the aforequoted Art. 1193.

To be clear, par. 15 of the Contract of Reclamation states: "The project is estimated to be

completed in 6 years." As such, the lapse of 6 years from the perfection of the contract did not,
by itself, make the obligation to finish the reclamation project demandable, such as to put the
obligor in a state of actionable delay for its inability to finish. Thus, F.F. Cruz cannot be deemed
to be in delay.

Moreover, even if we consider the allotted 6 years within which F.F. Cruz was supposed to
complete the reclamation project, the lapse thereof does not automatically mean that F.F. Cruz
was in delay.

As may be noted, the City of Mandaue never made a demand for the fulfillment of its obligation
under the Contract of Reclamation. Article 1169 of the Civil Code on the interaction of demand
and delay and the exceptions to the requirement of demand relevantly states:

Article 1169. Those obliged to deliver or to do something incur in delay from the time the obligee
judicially or extrajudicially demands from them the fulfillment of their obligation.

However, the demand by the creditor shall not be necessary in order that delay may exist:

(1) When the obligation or the law expressly so declares; or

(2) When from the nature and the circumstances of the obligation it appears that the
designation of the time when the thing is to be delivered or the service is to be rendered was a
controlling motive for the establishment of the contract; or

(3) When demand would be useless, as when the obligor has rendered it beyond his power to
perform.

In reciprocal obligations, neither party incurs in delay if the other does not comply or is not
ready to comply in a proper manner with what is incumbent upon him. From the moment one of
the parties fulfills his obligation, delay by the other begins.

In the instant case, the records are bereft of any document whence to deduce that the City of
Mandaue exacted from F.F. Cruz the fulfillment of its obligation under the reclamation contract.
And to be sure, not one of the exceptions to the requisite demand under Art. 1169 is established,
let alone asserted.

As it were, the Mandaue-F.F. Cruz MOA states that the structures built by F .F. Cruz on the
property of the city will belong to the latter only upon the completion of the project. Clearly, the
completion of the project is a suspensive condition that has yet to be fulfilled. Until the
condition arises, ownership of the structures properly pertains to F .F. Cruz.

To be clear, the MOA does not state that the structures shall inure in ownership to the City of
Mandaue after the lapse of 6 years from the execution of the Contract of Reclamation. What the
MOA does provide is that ownership of the structures shall vest upon, or ipso facto belong to,
the City of Mandaue when the Contract of Reclamation shall have been completed. Logically,
before such time, or until the agreed reclamation project is actually finished, F.F. Cruz owns the
structures. The payment of compensation for the demolition thereof is justified. The
disallowance of the payment is without factual and legal basis.

THE METROPOLITAN BANK AND TRUST COMPANY, Petitioner, vs.ANA GRACE

ROSALES AND YO YUK TO, Respondents.
(G.R. No. 183204/January 13, 2014)
By Cletus Villamor

Doctrine: The "Hold Out" clause applies only if there is a valid and existing obligation arising
from any of the sources of obligation enumerated in Article 1157 of the Civil Code, to wit: law,
contracts, quasi-contracts, delict, and quasi-delict.

Facts

Respondents opened with petitioner, a domestic banking corporation ajoint Dollar Accountwith
an initial deposit of US$14,000.00.On July 31, 2003, petitioner issued a "Hold Out" order
against respondents accounts.

Respondents filed before theRTC of Manila a Complaint for Breach of Obligation and Contract
with Damages, against petitioner alleging that they attempted several times to withdraw their
deposits but were unable to because petitioner had placed their accounts under "Hold Out"
status.
Petitioner alleged that respondents have no cause of action because it has a valid reason for
issuing the "Hold Out" order. It averred that they filed a criminal complaint for Estafa against
respondent due to its fraudulent scheme that causes them to reimburse their client the amount
of US$75,000.00.

The RTC finds petitioner liable for damages for breach of contract.The Court ruled that it is the
duty of petitioner to release the deposit to respondents as the act of withdrawal of a bank deposit
is an act of demand by the creditor and that the proper recourse of petitioner is against its
negligent employees and not against respondents.

Petitioner appealed to the CA who affirmed the ruling of the RTC. Petitioner filed this recourse.

Issue:

WHETHER OR NOT THE "HOLD-OUT" PROVISION IN THE APPLICATION AND

AGREEMENT FOR DEPOSIT ACCOUNT APPLY IN THIS CASE.

Ruling:

The Petition is bereft of merit.

The "Hold Out" clause does not applyto the instant case.

Petitioners reliance on the "Hold Out" clause in the Application and Agreement for Deposit
Account is misplaced.

The "Hold Out" clause applies only if there is a valid and existing obligation arising from any of
the sources of obligation enumerated in Article 1157 of the Civil Code, to wit: law, contracts,
quasi-contracts, delict, and quasi-delict. In this case, petitioner failed to show that respondents
have an obligation to it under any law, contract, quasi-contract, delict, or quasi-delict. And
although a criminal case was filed by petitioner against respondent Rosales, this is not enough
reason for petitioner to issue a "Hold Out" order as the case is still pending and no final
judgment of conviction has been rendered against respondent Rosales. In fact, it is significant to
note that at the time petitioner issued the "Hold Out" order, the criminal complaint had not yet
been filed. Thus, considering that respondent Rosales is not liable under any of the five sources
of obligation, there was no legal basis for petitioner to issue the "Hold Out" order. Accordingly,
we agree with the findings of the RTC and the CA that the "Hold Out" clause does not apply in
the instant case.

In view of the foregoing, we find that petitioner is guilty of breach of contract when it
unjustifiably refused to release respondents deposit despite demand. Having breached its
contract with respondents, petitioner is liable for damages.

In closing, it must be stressed that while we recognize that petitioner has the right to protect
itself from fraud or suspicions of fraud, the exercise of his right should be done within the
bounds of the law and in accordance with due process, and not in bad faith or in a wanton
disregard of its contractual obligation to respondents.
 Heirs Of Fausto C. Ignacio, Namely Marfel D. Ignacio-Manalo, Milfa D. Ignacio-
Manalo And Faustino D. Ignacio vs. Home Bankers Savings And Trust Company,
Spouses Phillip And Thelma Rodriguez, Catherine, Reynold & Jeanette, All
Surnamed Zuniga,
G.R. No. 177783, January 23, 2013
By: Marie Angelee V. Ygnacio

Doctrine:

When there is merely an offer by one party without acceptance of the other, there is no
contract.

Facts:

Petitioner Fausto Ignacio owned several parcels of land in Cabuyao, Laguna. When it
obtained a loan from the bank (P500,000), it mortgaged two parcels of land as security.
However, petitioner failed to pay its loan prompting respondent bank to foreclose the mortgage.
The bank succeeded in foreclosing the land. Petitioner, however, failed to repurchase the land
within the redemption period. Despite the lapse of such period and the consolidation of title in
respondent bank, petitioner offered to repurchase the properties. The present controversy was
fuelled by petitioner's stance that a verbal repurchase/compromise agreement was actually
reached and implemented by the parties.

The bank made several dispositions of the land using petitioner as the middleman-
broker. Later, petitioner sent respondent bank a letter expressing his willingness to pay the
amount of P600,000 in full, and requested respondent bank to release to him the remaining
parcels of land covered by TCT Nos. 111058 and T-154658 ("subject properties").Respondent
bank however, turned down his request. This prompted petitioner to cause the annotation of an
adverse claim on the said titles. But before such annotation, respondent bank already sold the
subject properties to private respondents.

Regional Trial Court

It ruled in favor of the respondent and declared the contract of sale between the bank
and private respondents null and void. The compromise agreement amounts to a valid contract
of sale between petitioner, as Buyer, and respondent bank, as Seller. Hence, in entertaining
other buyer for the same properties already sold to petitioner with intention to increase its
revenues, respondent bank acted in bad faith and is thus liable for damages to the petitioner.

Court of Appeals

It reversed RTCs decision. There was no written conformity by respondent bank's

officers to the amended conditions for repurchase which were unilaterally inserted by petitioner.
Consequently, no contract of repurchase was perfected and respondent bank acted well within
its rights when it sold the subject properties to herein respondents-intervenors.
Issue:

Whether a contract for the repurchase of the foreclosed properties was perfected
between petitioner and respondent bank.

Ruling:

No, there was no perfected contract for repurchase.

Contracts are perfected by mere consent, which is manifested by the meeting of the offer
and the acceptance upon the thing and the cause which are to constitute the contract.

Contracts that are consensual in nature, like a contract of sale, are perfected upon mere
meeting of the minds. Once there is concurrence between the offer and the acceptance upon the
subject matter, consideration, and terms of payment, a contract is produced. The offer must be
certain. To convert the offer into a contract, the acceptance must be absolute and must not
qualify the terms of the offer; it must be plain, unequivocal, unconditional, and without variance
of any sort from the proposal.

A qualified acceptance, or one that involves a new proposal, constitutes a counter-offer

and is a rejection of the original offer. Consequently, when something is desired which is not
exactly what is proposed in the offer, such acceptance is not sufficient to generate consent
because any modification or variation from the terms of the offer annuls the offer.

In the case at bench, Petitioner set a different repurchase price and also modified the
terms of payment, which even contained a unilateral condition for payment of the balance
(P600,000), that is, depending on petitioner's "financial position."

PETITION IS DENIED.

Swire Realty Develpment Corporation vs. Yu,

G.R. No. 207133, March 9, 2015
By: Jurdelyn C. Repaso

Doctrine:

The right of rescission of a party to an obligation under Article 1191 of the Civil Code is
predicated on a breach of faith by the other party who violates the reciprocity between them.
The breach contemplated in the said provision is the obligors failure to comply with an
existing obligation. When the obligor cannot comply with what is incumbent upon it, the
obligee may seek rescission and, in the absence of any just cause for the court to determine the
period of compliance, the court shall decree the rescission.

FACTS:
 In this case, the respondent Jayne Yu and petitioner Swire Realty Development
Corporation entered into a Contract to Sell on July 25, 1995 covering one residential
condominium unit, specifically Unit 3007 of the Palace of Makati, located at P. Burgos corner
Caceres Sts., Makati City, with an area of 137.30 square meters for the total contract price of
P7,519,371.80, payable in equal monthly installments until September 24, 1997. Respondent
likewise purchased a parking lot in the same condominium building for P600,000.00.

On September 24, 1997, respondent paid the full purchase price of P7,519,371.80 for the
unit while making a down payment of P20,000.00 for the parking lot. However,
notwithstanding full payment of the contract price, petitioner failed to complete and deliver the
subject unit on time. This prompted respondent to file a Complaint for Rescission of Contract
with Damages before the Housing and Land Use Regulatory Board (HLURB) Expanded
National Capital Region Field Office (ENCRFO).

On October 19, 2004, the HLURB ENCRFO rendered a Decision dismissing respondents
complaint. It ruled that rescission is not permitted for slight or casual breach of the contract but
only for such breaches as are substantial and fundamental as to defeat the object of the parties
in making the agreement.Petitioner moved for reconsideration, but the same was denied by the
HLURB Board of Commissioners in a Resolution.Unfazed, petitioner appealed to the Office of
the President (OP) on August 7, 2007.In a Decision, the OP, through then Deputy Executive
Secretary Manuel Gaite, dismissed petitioners appeal on the ground that it failed to promptly
file its appeal before the OP. Respondent sought reconsideration of said resolution, however, the
same was denied by the OP in a Resolution.Consequently, respondent filed an appeal to the
Court of Appeals.Petitioner moved for reconsideration, however, the CA denied the same.

ISSUE:

Whether or not rescission of the contract is proper in the instant case.

RULING:

Yes, rescission of the contract is proper in the instant case. Article 1191 of the Civil Code
sanctions the right to rescind the obligation in the event that specific performance becomes
impossible. It provides tha 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.cr

Basic is the rule that the right of rescission of a party to an obligation under Article 1191
of the Civil Code is predicated on a breach of faith by the other party who violates the reciprocity
between them. The breach contemplated in the said provision is the obligors failure to comply
with an existing obligation. When the obligor cannot comply with what is incumbent upon it, the
obligee may seek rescission and, in the absence of any just cause for the court to determine the
period of compliance, the court shall decree the rescission.

The Supreme Court said that it is evident that the report on the ocular inspection
conducted on the subject condominium project and subject unit shows that the amenities under
the approved plan have not yet been provided as of May 3, 2002, and that the subject unit has
not been delivered to respondent as of August 28, 2002, which is beyond the period of
development of December 1999 under the license to sell. Incontrovertibly, petitioner had
incurred delay in the performance of its obligation amounting to breach of contract as it failed to
finish and deliver the unit to respondent within the stipulated period. The delay in the
completion of the project as well as of the delay in the delivery of the unit is a breach of statutory
and contractual obligations which entitle respondent to rescind the contract , demand a refund
and payment of damages.

Spouses Berot vs Siapno,

GR No. 188944, 9 July 2014.
By: Naiza Mae N. delos Santos

Topic: Solidary Obligation

Doctrine:

A solidary obligation is one in which each of the debtors is liable for the entire obligation, and
each of the creditors is entitled to demand the satisfaction of the whole obligation from any or
all of the debtors. On the other hand, a joint obligation is one in which each debtors is liable
only for a proportionate part of the debt, and the creditor is entitled to demand only a
proportionate part of the credit from each debtor. The wellentrenched rule is that solidary
obligations cannot be inferred lightly. They must be positively and clearly expressed. A
liability is solidary "only when the obligation expressly so states, when the law so provides or
when the nature of the obligation so requires."

Facts:

Macaria Berot (Macaria) and spouses Rodolfo Berot (Rodolfo) and Lilia Berot (Lilia) contracted
a loan from Felipe Siapno (Siapno) in the amount of Php300,000 with annual interest of 4% per
annum. A certain parcel of land was mortgaged to cover as a security. The contract provides:
All debtors, for a single loan, bind themselves to cede, transfer and convey by way of real
estate mortgage all their rights, interest and participation in the subject parcel of land
including the improvements thereon in favor of the plaintiff and that should they fail to
perform their obligation the mortgage will be foreclosed.

Macaaria died in 2013. When the load became due, the debtors defaulted prompting the
mortgagee to institute foreclosure proceedings. In the course of the proceeding, the debtors
admitted that a load was obtained among them. The court ruled that their obligation is solidary.
Issue:

Whether or not the obligation solidary.

Held:

NO. The obligation is not solidary, but joint. Under the law, when there is a concurrence of two
or more debtors under a single obligation, the obligation is presumed to be joint. Further, for it
to be considered as solidary, it must be made expressly by law, or by the nature of the obligation
itself.

In the instant case, the testimony of debtors admitting that they contracted a loan established
only the existence of the load. Hence, there being no express term of solidarity, the presumption
of joint liability will apply. It is incumbent upon the party alleging to prove otherwise with a
preponderance of evidence that obligation under the loan contract is indeed joint and several, or
solidary.

STRONGHOLD INSURANCE CO., INC., VS. SPOUSES STROEM

G.R. No. 204689 January 21, 2015
By: Hope Cesely H. Baquero

Doctrine/s:

The state has continuously encouraged the use of dispute resolution mechanisms to promote
party autonomy. However, where a surety in a construction contract actively participates in a
collection suit, as in the case of Stronger, it is estopped from raising jurisdiction later.
Assuming that Stronger is privy to the construction agreement, they cannot be allowed to
invoke arbitration at this late stage of the proceedings since to do so would go against the
law's goal of prompt resolution of cases in the construction industry.

Facts:

Spouses Rune and Lea Stroem (Spouses Stroem) entered into an Owners-Contractor
Agreement with Asis-Leif & Company, Inc. (Asis-Leif) for the construction of a two-storey house
on the lot owned by Spouses Stroem, in Antipolo, Rizal.

Pursuant to the agreement, Asis-Leif secured Performance Bond in the amount

of P4,500,000.00 from Stronghold Insurance Company, Inc. (Stronghold). Stronghold and
Asis-Leif, through Ms. Ma. Cynthia Asis-Leif, bound themselves jointly and severally to pay the
Spouses Stroem the agreed amount in the event that the construction project is not completed.
Asis-Leif failed to finish the project on time despite repeated demands of the Spouses Stroem,
subsequently rescinded the agreement, and then hired an independent appraiser to evaluate the
progress of the construction project.

Stronghold sent a letter to Asis-Leif requesting that the company settle its obligations
with the Spouses Stroem. No response was received from Asis-Leif. Spouses Stroem filed a
Complaint for breach of contract and for sum of money with a claim for damages against Asis-
Leif, Ms. Cynthia Asis-Leif, and Stronghold. Only Stronghold was served summons. Ms. Cynthia
Asis-Leif allegedly absconded and moved out of the country.

The RTC decided in favor of the Spouses, and ordered Stronghold to pay the former.
Both parties appealed, however, the Court of Appeals affirmed the decision of RTC. Stronghold
argues that the trial court did not acquire jurisdiction over the case in view of the arbitration
clause in the agreement and considering that (R.A. 876) explicitly confines the courts authority
only to pass upon the issue. Contrary to Strongholds argument, Spouses Stroem argues that
stronghold is liable for the full amount of the performance bond. The terms of the bond clearly
show that Stronghold is liable as surety.

Issue/s:

The main issue here is whether the dispute liability of a surety under a performance
bond is connected to a construction contract and, therefore, falls under the exclusive
jurisdiction of the CIAC, and thus liable even if not privy to the contract.

Held:

The court resolves to deny the Petition. The jurisdiction of the CIAC, under E.O. 1008,
may include but is not limited to violation of specifications for materials and workmanship;
violation of the terms of agreement; interpretation and/or application of contractual timeand
delays; maintenance and defects; payment, default of employer or contractor and changes in
contract cost.

A guarantee or a surety contract under Article 2047 of the Civil Code of the Philippines is
an accessory contract because it is dependent for its existence upon the principal obligation
guaranteed by it. At first look, the Owners-Contractor Agreement and the performance bond
reference each other; the performance bond was issued pursuant to the construction agreement.
A performance bond is a kind of suretyship agreement.

It is settled that the suretys solidary obligation for the performance of the principal
debtors obligation is indirect and merely secondary. Nevertheless, the suretys liability to the
"creditor or promisee of the principal is said to be direct, primary and absolute; in other words,
he is directly and equally bound with the principal." In the present case, Article 7 of the Owners-
Contractor Agreement merely stated that a performance bond shall be issued in favor of
respondents, in which case petitioner and Asis-Leif Builders and/or Ms. Ma. Cynthia Asis-Leif
shall pay P4,500,000.00 in the event that Asis-Leif fails to perform its duty under the Owners-
Contractor Agreement. Consequently, the performance bond merely referenced the contract
entered into by respondents and Asis-Leif.

To be clear, it is in the Owners-Contractor Agreement that the arbitration clause is

found. The construction agreement was signed only by respondents and the contractor, Asis-
Leif, as represented by Ms. Ma. Cynthia Asis-Leif. It is basic that "Contracts take effect
only between the parties, their assigns and heirs". Not being a party to the
construction agreement, petitioner cannot invoke the arbitration clause.
Petitioner, thus, cannot invoke the jurisdiction of the CIAC.
 Moreover, petitioners invocation of the arbitration clause defeats the
purpose of arbitration in relation to the construction business. The state has
continuously encouraged the use of dispute resolution mechanisms to promote
party autonomy.

However, where a surety in a construction contract actively participates in a

collection suit, it is estopped from raising jurisdiction later. Assuming that
petitioner is privy to the construction agreement, they cannot be allowed to invoke
arbitration at this late stage of the proceedings since to do so would go against the
law's goal of prompt resolution of cases in the construction industry. This case is
denied. So ordered.