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OBLIGATION &

CONTRACTS
CASES

Prepared by: April Rose F. Flores

42. Heirs Of Paulino Atienza vs. Espidol

Facts:
1. The
Atienzas
own
a
registered
agricultural land at Valle Cruz, Cabanatuan
City.
2. On August 12, 2002, the Atienzas entered
into a contract to sale with Domingo Espidol.
3. Both agreed to sell the land for a total of
Php 2,854,670.00, which is payable in three
months.

4.Php 100,000.00 upon the signing


of the contract; Php 1,750,000.00 in
December 2002; and the remaining
Php 974,760.00 in June 2003.
5.Espidol paid the Atienzas Php
100,000.00 upon the execution of the
contract.
6.When the Atienzas demanded
payment of the second installment
Php 1,750,000.00 in December 2002,
however, Espidol could not pay for it.

7.He offered to pay the Atienzas Php


500,000.00 in the meantime, which
the latter did not accept.
8.On February 21, 2003, the Atienzas
filed a complaint for the annulment
of their agreement with damages.
9.Espidol argues that the nonpayment of an instalment is not a
legal ground for annulling a perfected
contract of sale.

Issue:
Whether the Atienzas are still bound to
comply with their obligation to sell the
property to Espidol despite his failure to
pay the second instalment.

Ruling: NO.
1.In view of Espidols failure to pay
the second installment on a day
certain fixed in their agreement,
the Atienzas can afterwards validly
cancel and ignore the contract to
sell.
2. The parties stood as if the
conditional obligation had never
existed
since
the
suspensive
condition did not arise.

3. Under a contract to sell, the buyers full


payment of the price is a positive suspensive
condition to the coming into effect of the
agreement.
4. In the case at bar, the Atienzas were to
retain title of ownership to the land until
Espidol, the buyer, has agreed to pay the
agreed price.
5. When Espidol failed to pay within the period
provided in their agreement, the Atienzas were
relieved of any obligations to hold the property
in reserve for him. Hence, the Court declares
the contract cancelled and the heirs obligation
under it is non-existent.

43. Reyes vs. Tuparan


Facts:
1. Mila Reyes was the registered owner
of a 1,274 square meter residential and
commercial lot located in Karuhatan,
Valenzuela City, and covered by TCT No. V4130.
2. On June 20, 1988, Reyes mortgaged the
subject real properties to the Farmers
Savings Bank and Loan Bank, Inc. (FSL
Bank) to secure a loan.

3. Reyes decided to sell her real properties so


she could liquidated her bank loan and finance
her business.
4. As a gesture of friendship, Tuparan verbally
offered to conditionally buy Reyes real
properties payable on installment basis without
interest and to assume the bank loan.
5. On November 26, 1990, the parties and FSL
Bank executed the corresponding Deed of
Conditional Sale of Real Properties with
Assumption of Mortgage. Due to their close
personal friendship and business relationship,
both parties chose not to reduce into writing the
other terms of their agreement

6. Tuparan, however, defaulted in the payment of


her obligations on their due dates. Instead of
paying the amounts due in lump sum on their
respective maturity dates, Tuparan paid Reyes in
small amounts from time to time.
7. Tuparan countered, among others, that the
tripartite agreement erroneously designated by
Reyes as a Deed of Conditional Sale of Real
Property with Assumption of Mortgage was
actually a pure and absolute contract of sale with
a term period. It could not be considered a
conditional sale because the acquisition of
contractual rights and the performance of the
obligation therein did not depend upon a future
and uncertain event.

8.Tuparan furtheraverred that she


successfully rescued the properties
from a definite foreclosure by paying
the assumed mortgage plus interest
and other finance charges.

Issue:
Whether the agreement is a
contract to sell and not a contract of
sale.

Ruling: YES.
1. The subject Deed of Conditional Sale
with Assumption of Mortgage entered into
by and among the two parties and FSL
Bank on November 26, 1990 is a contract
to sell and not a contract of sale.
2. The title and ownership of the subject
properties remains with Reyes until
Tuparan fully pays the balance of the
purchase
price
and
the
assumed
mortgage obligation.

3. Thereafter, FSL Bank shall then issue


the corresponding deed of cancellation
of mortgage and the petitioner shall
execute the corresponding deed of
absolute sale in favor of the
respondent.
4. Accordingly, the obligation of Reyes
to sell the subject properties becomes
demandable only upon the happening
of the positive suspensive condition,
which is the respondent's full payment
of the purchase price.

5.Without Tuparan's full payment,


there can be no breach of contract to
speak of because petitioner has no
obligation yet to turn over the title.
6.Tuparan's failure to pay in full the
purchase price is not the breach of
contract contemplated under Article
1191 of the New Civil Code but rather
just an event that prevents the
petitioner from being bound to
convey title to the respondent.

44. Sps. Santos vs. CA


Facts:
1. Spouses Santos owned the house andlot
in Better Living Subdivision, Paraaque,
Metro Manila.
2. The land together with the house, was
mortgaged with the Rural Bank of Salinas,
Inc., to secure a loan of Php 150,000.00.
3. The bank sent Rosalinda Santos a letter
demanding payment of Php 16,000.00 in
unpaid interest and other charges.

4.Since the Santos couple had no


funds, Rosalinda offered to sell the
house and lot to Carmen Caseda.
5.After inspecting the real property,
Carmen and her husband agreed.
6.Carmen and Rosalinda signed a
document, involving the sale of the
house Php 350,000.00 as the full
payment and Php 54,000.00 as
downpayment.

7. Among other condition set is that


Caseda will pay the balance of the
mortgage in the bank, real estate taxes,
and the electric and water bills.
8. The Casedas complied with the bank
mortgage and the bills. The Santoses,
seeing that the Casedas lacked the
means
to
pay
the
remaining
instalments and/or amortization of the
loan, repossessed the property. The
Santoses then collected the rentals
from the tenants.

9.Carmen approached the Santoses


and offered to pay the balance of the
purchase price for the house and lot.
However, the parties could not agree
and the deal could not push through
because the Santoses wanted a
higher price.
10. Carmen
prayed
that
the
Santoses execute the final deed of
conveyance over the property.

Issue:
Whether there was a perfected
contract of sale.

Ruling: NO.
1. A contract is what the law defines it to
be, taking into consideration its essential
elements, and not what the contracting
parties call it.
2. Article 1458 expressly obliges the vendor
to transfer ownership of the thing sold as
an essential element of a contract of sale.
This is because the transfer of ownership in
exchange for a price paid or promised is
the very essence of a contract of sale.

3. There was no transfer of ownership


simultaneously with the delivery of the
property purportedly sold. The records
clearly showed that, notwithstanding the fact
that the Casedas first took then lost
possession of the disputed house and lot, the
title to the property has remained always in
the name of Rosalinda Santos.
4. Although the parties had agreed that the
Casedas would assume the mortgage, all
amortization payments made by Carmen
Caseda to the bank were in the name of
Rosalinda Santos.

5. The foregoing circumstances categorically and


clearly show that no valid transfer of ownership
was made by the Santoses to the Casedas.
Absent this essential element, their agreement
cannot be deemed a contact of sale, but a
contract to sell.
6. It was a contract to sell. Ownership is reserved
by the vendor and is not to pass until full
payment of the purchase price. This is fully
applicable and applicable in this case, given that
the property involved is a titled realty under
mortgaged to a bank and would require notarial
and other formalities of law before transfer
thereof could be validly effected.

45. Parks vs. Province


of Tarlac
Facts:
1. In 1910, Concepcion Cirer and James Hill
donated parcels of land to the municipality
of Tarlac on the condition that it be used
absolutely and exclusively for the erection
of a central school and public parks, the
work to commence within six months.
2. The mayor of the municipality of Tarlac
accepted and registered the donation.

3.In 1921, Cirer and Hill sold the


same property to George L. Parks.
4.Later on the, the municipality of
Tarlac transferred their rights in the
property to the Province of Tarlac.
5.Parks filed a complaint seeking the
annulment of the donation and
asking that he be declared the
absolute owner of the property.
Parks allege that the conditions of
the donation were not complied
with.

Issues:
1.Whether the
coupled
with
precedent.

donation was
a
condition

2.Whether the action to revoke


has prescribed.

Ruling:
1. NO.

The condition to erect a school within six months


is not a condition precedent. The characteristic of a
condition precedent is that the acquisition of the right is
not effected while said condition is not complied with or
is not deemed complied with.
Meanwhile nothing is acquired and there is only an
expectancy of a right. Consequently, when a condition
is imposed, the compliance of which cannot be
effected except when the right is deemed acquired,
such condition cannot be a condition precedent.
In the present case the condition that a public school
be erected and a public park be made of the donated
land could not be complied with except after giving
effect to the donation.

2. YES. The action to revoke the donation


has prescribed. The prescriptive periods
are: 5 years for the revocation by the
subsequent birth of children, 1 year if by
reason of ingratitude.
If no special period is prescribed, 10 years,
for an onerous donation following the law of
contracts and general rules on
prescriptions.
The donation was made in 1910, the cause
of action accrued in 1911, while the action
to revoke was filed 1924, twenty three
years later.