International Hotel Corp. vs Joaquin
Facts: On February 1, 1969, respondent Francisco B. Joaquin, Jr. submitted a proposal to the Board of Directors of the nternational !otel "orporation #!"$ for him to render technical assistance in securin% a forei%n loan for the construction of a hotel, to be %uaranteed by the De&elopment Ban' of the (hilippines #DB($. after submittin% the application to DB(, Joaquin )rote to !" to request the payment of his fees in the amount of (*++,+++.++ for the ser&ices that he had pro&ided and )ould be pro&idin% to !" in relation to the hotel proect that )ere outside the scope of the technical proposal. Joaquin intimated his amenability to recei&e shares of stoc' instead of cash in &ie) of !"-s financial situation. !is request )as %ranted. !e narro)ed the financiers to o%er Dunn / "ompany and 0aterials !andlin% "orporation. !e recommended that the Board of Directors consider 0aterials !andlin% "orporation based on the more beneficial terms it had offered. !is recommendation )as accepted.1+ e%otiations )ith 0aterials !andlin% "orporation and, later on, )ith its principal, pr incipal, Barnes nternational #Barnes$, ensued. 2hile the ne%otiations )ith Barnes )ere on%oin%, Joaquin and Jose 3alero, 3alero, the 45ecuti&e Director of !", met )ith another financier, the 2eston nternational "orporation #2eston$, to e5plore possible financin%.112hen Barnes failed to deli&er the needed loan, !" informed DB( that it )ould submit 2eston for DB(-s consideration. consideration.1 7s a result, DB( cancelled its pre&ious %uaranty throu%h a letter dated December 6, 1981. 1981.1 On December 1, 1981, !" entered into an a%reement )ith 2eston, and communicated this de&elopment to DB( on June 6, 198. !o)e&er, DB( denied the application for %uaranty for failure to comply )ith the
conditions contained in its o&ember 1, 1981 letter. Due to Joaquin-s failure to secure the needed loan, !", throu%h its (resident Bautista, canceled the 18,+++ shares of stoc' pre&iously issued to Joaquin and uare; as payment for their ser&ices.
of the "i&il "ode cannot be the source of !"-s obli%ation to pay respondents because: #a$ it )as Joaquin )ho had recommended Barnes? and #b$ !"-s ne%otiation )ith Barnes had been neither intentional nor )illfully intended to pre&ent Joaquin from complyin% )ith his obli%ations. Held: 1. !"-s ar%ument is meritorious.
7rticle 11=6 11=6 of the "i&il "ode reads: 7rticle 11=6. 11=6.
reliance on 7rticle 11=6 of the "i&il "ode. 2. @nder 7rticle 1>. f the obli%ation has
been substantially performed in %ood faith, the obli%or may reco&er as thou%h there had been a strict and complete fulfillment, less dama%es suffered by the obli%ee. n order that there may be substantial performance of an obli%ation,1. there must ha&e been an attempt in %ood faith to perform, )ithout any )illful or intentional departure therefrom. . did not apply. 3. !" is nonetheless liable to pay under
the rule on constructi&e fulfillment of a mi5ed conditional obli%ation.
action and discretion of third persons an able and )illin% forei%n financial institution to pro&ide the needed funds, and the DB( Board of Co&ernors to %uarantee the loan. uch third persons could not be le%ally compelled to act in a manner fa&orable to !". > or of the obli%or, and partly on chance, ha;ard or the )ill of a third person, the obli%ation is mi5ed. mi5ed.>* 6 "onsiderin% that the respondents )ere able to secure an a%reement )ith 2eston, and subsequently tried to re&erse the prior cancellation of the %uaranty by DB(, )e rule that they thereby constructi&ely fulfilled their obli%ation. 4. uantum meruit should apply in the
absence of an e5press a%reement on the fees @nder the principle of quantum meruit, a contractor is allo)ed to reco&er the reasonable &alue of the ser&ices rendered despite the lac' of a )ritten contract.
MIAA ! A"IC "acts: n eptember 199+, herein petitioner
0anila nternational 7irport 7uthority #077$ entered into a contract of lease )ith herein respondent 7&ia Filipinas nternational "orporation #7F"$, )herein 077 allo)ed 7F" to use specific portions of land as )ell as facilities )ithin the inoy 7quino nternational 7irport e5clusi&ely for the latterEs aircraft repair station and charterin% operations. , that the monthly rental o&er the subect premises )as increased to (1*,966.*+ be%innin% eptember 1, 1991, )hich is the date immediately follo)in% the e5piration of the ori%inal contract of lease. 077 sou%ht reco&ery of the difference bet)een the increased rental rate and the ori%inal rental fee amountin% to a total of (>8,++.*+ co&erin% thirtyAse&en #8$ months bet)een eptember 1, 1991 and eptember 1, 199>. Be%innin% October 199>, 7F" paid the increased rental fee. !o)e&er, it refused to pay the
lump sum of (>8,++.*+ sou%ht to be reco&ered by 077. For the continued refusal of 7F" to pay the said lump sum, its employees )ere denied access to the leased premises from July 1, 1998 until 0arch 11, 199=. of the "i&il "ode clearly
pro&ides that tGhe &arious stipulations of a contract shall be interpreted to%ether, attributin% to the doubtful ones that sense )hich may result from all of them ta'en ointly. ndeed, in construin% a contract, the pro&isions thereof should not be read in isolation, but in relation to each other and in their entirety so as to render them effecti&e, ha&in% in mind the intention of the parties and the purpose to be achie&ed.8 n other )ords, the stipulations in a contract and other contract documents should be interpreted to%ether )ith the end in &ie) of %i&in% effect to all. = n the present case, the "ourt finds nothin% repu%nant to la) )ith respect to the questioned pro&isions of the contract of lease bet)een petitioner and respondent. t is true that 7rticle , (ara%raph .+> of the "ontract of Hease states that aGny subsequent amendment to 7dministrati&e Order o. >, eries of 19=, )hich )ill effect a decrease or escalation of the monthly rental or impose ne) and additional fees and char%es, includin% but not limited to %o&ernmentI077 circulars, rules and re%ulation to this effect, shall be deemed incorporated herein and shall automatically amend this "ontract insofar as the monthly rental is concerned.9 !o)e&er, the "ourt a%rees )ith the "7 that the abo&equoted pro&ision of the lease contract should not be read in isolation. ather, it should be read to%ether )ith
the pro&isions of 7rticle 3, (ara%raph =.1, )hich pro&ide that aGny amendment, alteration or modification of theG "ontract shall not be &alid and bindin%, unless and until made in )ritin% and si%ned by the parties thereto.1+ t is clear from the fore%oin% that the intention of the parties is to subect such amendment to the conformity of both petitioner and respondent. n the instant case, there is no sho)in% that respondent %a&e his acquiescence to the said amendment or modification of the contract. 2. 7rticle 1* of the "i&il "ode clearly
states that )Ghen the obli%ee accepts the performance 'no)in% its incompleteness or irre%ularity, and )ithout e5pressin% any protest or obection, the obli%ation is deemed fully complied )ith. t may not be amiss to point out that durin% the abo&ementioned period, respondent continued to pay and petitioner 'ept on recei&in% the ori%inal rental fee of (6,*=+.++ )ithout any reser&ations or protests from the latter.1 either did petitioner indicate in the official receipts it issued that the payments made by respondent constitute only partial fulfillment of the latterEs obli%ations. For failin% to ma'e any protest or obection, petitioner is already estopped from see'in% reco&ery of the amount claimed.
A#$I%&'( ! "')ICIA%* A%+ &I*%"acts: On 0ay 6, 1999, petitioner 7quintey filed before <" Ba%uio, a complaint for sum of money and dama%es a%ainst respondents. 7%rifina alle%ed that Felicidad secured loans from her on se&eral occasions at monthly interest rates of 6 to 8. Despite demands, spouses 6,>*9 and that their debtors had e5ecuted promissory notes in fa&or of 7%rifina. pouses insisted that by &irtue of these documents, 7%rifina became the ne) collector of their debts. 7%rifina )as able to collect the total amount of (+1,+++ from Felicdad-s debtors. he tried to collect the balance of Felicidad and )hen the latter rene%ed on her promise, 7%rifina filed a complaint in the office of the baran%ay for the collection of (88,+++.++. 1,++ plus 6 per month. I!!$': )hether the obli%ation of
respondents to pay the balance of their loans, includin% interest, )as partially e5tin%uished by the e5ecution of the deeds of assi%nment in fa&or of petitioner, relati&e to the loans of 4dna (apatAi), !elen "aban%, 7ntoinette
0anuel, and Fely "irilo in the total amount of (81,+++.++. H')+: 1. @nder 7rticle 11#b$ of the e)
"i&il "ode, no&ation is enumerated as one of the )ays by )hich obli%ations are e5tin%uished. Obli%ations may be modified by chan%in% their obect or principal creditor or by substitutin% the person of the debtor .6
than (18=,9=+.++ )hich respondent Felicidad collected from her debtors. (etitioner cannot a%ain collect the same amount from respondents? other)ise, she )ould be enrichin% herself at their e5pense. either can petitioner collect from respondents more than (1+,*++.++ )hich she had already collected from imo, "antas, i&era, Don%uis, Fernande; and amire;.
correctly found that respondentsE obli%ation to pay the balance of their account )ith petitioner )as e5tin%uished, pro tanto, by the deeds of assi%nment of credit e5ecuted by respondent Felicidad in fa&or of petitioner. 7n assinment of credit is an a%reement by &irtue of )hich the o)ner of a credit, 'no)n as the assi%nor, by a le%al cause, such as sale, dation in payment, e5chan%e or donation, and )ithout the consent of the debtor, transfers his credit and accessory ri%hts to another, 'no)n as the assi%nee, )ho acquires the po)er to enforce it to the same e5tent as the assi%nor could enforce it a%ainst the debtor.8 t may be in the form of sale, but at times it may constitute a dation in payment.
defenses he could set up a%ainst the assi%nor 8= necessary in order that assi%nment may fully produce le%al effects.
Felicidad, li'e)ise, unequi&ocably declared that "aban% and "irilo no lon%er had any obli%ation to her.
)* ! J! 'C*"*5M6*5 "acts: espondent LJ 4"OA
FO02OL ystem (hil., nc. is a corporation en%a%ed in the sale of steel scaffoldin%s, )hile petitioner onny H. Ho, doin% business under the name and style ans 4nterprises, is a buildin% contractor. On February , 199+, petitioner ordered scaffoldin% equipments from respondent )orth (*>+,>*.=+.1G !e paid a do)npayment in the amount of (1*+,+++.++. 6.1> from Jomero ealty "orporation. !o)e&er, )hen respondent tried to collect the said credit from Jomero ealty "orporation, the latter refused to honor the Deed of 7ssi%nment because it claimed that petitioner )as also indebted to it. On o&ember 6, 199+, respondent sent a letter 8G to petitioner demandin% payment of his obli%ation, but petitioner refused to pay claimin% that his obli%ation had
been e5tin%uished )hen they e5ecuted the Deed of 7ssi%nment. +9 of the "i&il "ode? and #$ petitioner &iolated the terms of the Deed of 7ssi%nment )hen he failed to e5ecute and do all acts and deeds as shall be necessary to effectually enable the respondent to reco&er the collectibles. I!!$': 2O the deed of
assi%nment )as null and &oid and 2O the deed of assi%nment e5tin%uished the obli%ation. H')+:
in&alid. 7n assi%nment of credit is an a%reement by &irtue of )hich the o)ner of a credit, 'no)n as the assi%nor, by a le%al cause, such as sale, dacion en pago , e5chan%e or donation, and )ithout the consent of the debtor, transfers his credit and accessory ri%hts to another, 'no)n as the assi%nee, )ho acquires the po)er to enforce it to the same e5tent as the assi%nor could enforce it a%ainst the debtor.1*G "orollary thereto, in dacion en pago, as a special mode of payment, the debtor offers another thin% to the creditor )ho accepts it as equi&alent of payment of an outstandin% debt.
!ence, it may )ell be that the assi%nment of credit, )hich is in the nature of a sale of personal property, 19G produced the effects of a dation in payment )hich may e5tin%uish the obli%ation.+G!o)e&er, as in any other contract of sale, the &endor or assi%nor is bound by certain )arranties. 0ore specifically, the first para%raph of 7rticle 16= of the "i&il "ode pro&ides:
to pay respondent the sum of (*,>6.1> )ith le%al interest thereon. !o)e&er, )e find that the a)ard by the "ourt of 7ppeals of attorneys fees is )ithout factual basis. o e&idence or testimony )as presented to substantiate this claim. 7ttorneys fees, bein% in the nature of actual dama%es, must be duly substantiated by competent proof. "*5& *%I"ACI* ! ())A! "acts: On > 7pril 199=, FBD" e5ecuted a
lease contract in fa&or of
obli%ations. 0arch ++, Mllas Hendin% "orporation and Jose . Hauraya, in his official capacity as (resident, #respondents$ caused the sheriff of Branch *9 of the trial court to ser&e an alias 0rit of sei7ure aainst "+C. On the same day, FBD" ser&ed on the sheriff an affida&it of title and third party claim. FBD" found out that on 8 eptember ++1, respondents filed a complaint for Foreclosure of "hattel 0ort%a%e )ith eple&in, a%ainst
dismissin% FBD"s third party claim holdin% that FBD" has no ri%ht of o)nership o&er the subect properties because ection of the contract of lease is &oid for bein% a pled%e and a pactum commissorium?
H')+: 7rticles +=* and +9 of the "i&il
"ode enumerate the requisites essential to a contract of pled%e: #1$ the pled%e is constituted to secure the fulfillment of a principal obli%ation? #$ the pled%or is the absolute o)ner of the thin% pled%ed? #$ the persons constitutin% the pled%e ha&e the free disposal of their property or ha&e le%al authori;ation for the purpose? and #>$ the thin% pled%ed is placed in the possession of the creditor, or of a third person by common a%reement.
7rticle +== of the "i&il "ode prohibits the creditor from appropriatin% or disposin% the thin%s pled%ed, and any contrary stipulation is &oid. On the other hand, 7rticle 1>* of the "i&il "ode defines dacion en pago, or dation in pament , as the alienation of property to the creditor in satisfaction of a debt in money.Dacion en pago is %o&erned by the la) on sales. Philippine National Bank v. Pineda held that dation in pament requires deliver and transmission of o0ners/ip of a t/in o0ned t/e detor to t/e creditor as an accepted equivalent of t/e performance of t/e oliation .
ince ection is not a contract of pled%e, there is no pactum commissorium.
7 pro&ision )hich calls for the forfeiture of the remainin% deposit still in the possession of the lessor, )ithout preudice to any other obli%ation still o)in%, in the e&ent of the termination or cancellation of the a%reement by reason of the lessees &iolation of any of the terms and conditions of the a%reement is a penal clause that may be &alidly entered into. 7 penal clause is an accessory obli%ation )hich the parties attach to a principal obli%ation for the purpose of insurin% the performance thereof by imposin% on the debtor a special prestation #%enerally consistin% in the payment of a sum of money$ in case the obli%ation is not fulfilled or is irre%ularly or inadequately fulfilled. !ere, FBD"s forfeiture of
by offerin% lo) interest rates8G so they accepted 4quitableEs proposal and si%ned the ban'Es preAprinted promissory notes on &arious dates be%innin% 1996.
'#$I&A)' 8CI A% ! %- !H'$%%-*5
H')+:
"acts: On October 8, ++1, respondents %
1. '#$I&A)' 6A! %*& -$I)&( *" "*5$M !H*88I%-
heun% %or ,>G Len 7ppliance Di&ision, nc. and Benamin 4. Co filed an action for annulment andIor reformation of documents and contracts*G a%ainst petitioner 4quitable (" Ban' #4quitable$ and its employees, 7imee Mu and Bean Hionel 7pas, in the e%ional
Forum shoppin% e5ists )hen t)o or more actions in&ol&in% the same transactions, essential facts and circumstances are filed and those actions raise identical issues, subect matter and causes of action. >*G 6G
4quitableEs petition for relief in the <" and its petition for certiorari in the "7 did not ha&e identical causes of action. 8G On the other hand, its petition for certiorari in the "7, a special ci&il action, sou%ht to correct the %ra&e abuse of discretion amountin% to lac' of urisdiction committed by the <". n a petition for relief, the ud%ment or final order is rendered by a court )ith competent urisdiction. n a petition for certiorari, the order is rendered by a court )ithout or in e5cess of its urisdiction. 0oreo&er, 4quitable substantially complied )ith the rule on nonAforum shoppin% )hen it mo&ed to )ithdra) its petition for relief in the <" on the same day #in fact ust four hours and forty minutes after$ it filed the petition for certiorari in the "7. 2. '!CA)A&I*% C)A$!' I*)A&'+ &H' 85I%CI8)' *" M$&$A)I&( *" C*%&5AC&!
4scalation clauses are not &oid per se. !o)e&er, one )hich %rants the creditor an unbridled ri%ht to adust the interest independently and up)ardly, completely depri&in% the debtor of the ri%ht to assent to an important modification in the a%reement is &oid. "lauses of that nature &iolate the principle of mutuality of contracts. 7rticle 1+= of the "i&il "ode holds that a contract must bind both contractin% parties? its &alidity or compliance cannot be left to the )ill of one of them. For this reason, )e ha&e consistently held that a &alid escalation clause pro&ides: 1. that the rate of interest )ill only be increased if the applicable ma5imum rate of interest is increased by la) or by the 0onetary Board? and
. that the stipulated rate of interest )ill be reduced if the applicable ma5imum rate of interest is reduced by la) or by the 0onetary Board #deAescalation clause$. 4quitable dictated the interest rates if the term #or period for repayment$ of the loan )as e5tended. espondents had no choice but to accept them.
3. &H'5' 6A! %* '9&5A*5+I%A5( +'")A&I*%
45traordinary inflation e5ists )hen there is an unusual decrease in the purchasin% po)er of currency #that is, beyond the common fluctuation in the &alue of currency$ and such decrease could not be reasonably foreseen or )as manifestly beyond the contemplation of the parties at the time of the obli%ation. 45traordinary deflation, on the other hand, in&ol&es an in&erse situation. 7rticle 1*+ of the "i&il "ode pro&ides: 7rticle 1*+. n case an e5traordinary inflation or deflation of the currency stipulated should inter&ene, the &alue of the currency at the time of the establishment of the obli%ation shall be the basis of payment, unless there is an a%reement to the contrary. "or etraordinar inflation ;or deflation< to affect an oliation, t/e follo0in requisites must e proven:
1. t/at t/ere 0as an official declaration of etraordinar inflation or deflation from t/e an=o !entral n 8ilipinas ;!8<> 2. t/at t/e oliation 0as contractual in nature> and 3. t/at t/e parties epressl areed to consider t/e effects of t/e etraordinar inflation or deflation.
n this case, despite the de&aluation of the peso, the B( ne&er declared a situation of e5traordinary inflation. 0oreo&er, althou%h the obli%ation in this instance arose out of a contract, the parties did not a%ree to reco%ni;e the effects of e5traordinary inflation #or deflation$.
A)M'+A A%+ A)M'+A ! A&HA)A MA5'&I%- I%+$!&5I'! "acts: ometime in 0ay 1998, respondent
Bathala 0ar'etin% ndustries, nc., as lessee, represented by its president amon !. Carcia, rene)ed its "ontract of Hease>G )ith (onciano H. 7lmeda #(onciano$, as lessor, husband of petitioner 4ufemia and father of petitioner omel 7lmeda. @nder the said contract, (onciano a%reed to lease a portion of the 7lmeda "ompound, located at += (ason% =.* square meters, for a monthly rental of (1,1+8,>=.69, for a term of four #>$ years from 0ay 1, 1998 unless sooner terminated as pro&ided in the contract. *G
follo)in% pertinent pro&isions )hich %a&e rise to the instant case: SIXTH It is expressly understood y the parties hereto that the rental rate stipulated is ased on the present rate o! assessment on the property" and that in case the assessment should herea!ter e increased or any ne# tax" charge or urden e imposed y authorities on the lot and uilding #here the leased premises are located" $%SS%% shall pay" #hen the rental herein provided ecomes due" the additional rental or charge corresponding to the portion herey leased& provided" ho#ever" that in the event that the present assessment or tax on said property should e reduced" $%SS%% shall e entitled to reduction in the stipulated rental" like#ise in proportion to the portion leased y him& S%'%NTH In case an extraordinary in!lation or devaluation o! Philippine (urrency should supervene" the value o! Philippine peso at the time o! the estalishment o! the oligation shall e the asis o! payment&
On January 6, 199=, respondent recei&ed another letter from petitioners informin% the former that its monthly rental should be increased by 8 pursuant to condition o. 8 of the contract and 7rticle 1*+ of the "i&il "ode. espondent opposed petitioners demand and insisted that there )as no e5traordinary inflation to )arrant the application of 7rticle 1*+ in li%ht of the pronouncement of this "ourt in &arious cases. (etitioners contend that 7rticle 1*+ of the "i&il "ode does not apply to this case because the contract stipulation spea's of e5traordinary inflation or de&aluation )hile the "ode spea's of e5traordinary inflation or deflation.
the petitioners should be adusted by reason of e5traordinary inflation or de&aluation. H')+: 7rticle 1*+ of the "i&il "ode states:
n case an e5traordinary inflation or deflation of the currency stipulated should super&ene, the &alue of the currency at the time of the establishment of the obli%ation shall be the basis of payment, unless there is an a%reement to the contrary.
&')'%-&A% 5*&H'5! A%+ !*%! I%C ! $! )I%'! I%C. A%+ CA "acts: On June , 19=1, respondent @..
Inflation has been defined as the sharp
increase of money or credit, or both, )ithout a correspondin% increase in business transaction.
is a decrease or increase in the purchasin% po)er of the (hilippine currency )hich is unusual or beyond the common fluctuation in the &alue of said currency, and such increase or decrease could not ha&e been reasonably foreseen or )as manifestly beyond the contemplation of the parties at the time of the establishment of the obli%ation.>G
Hines filed a suit a%ainst petitioner ,+++.++ )hich the latter refused to pay despite repeated demands.
trial court-s order for the recomputation of the ud%ment a)ard in accordance )ith 7rticle 1*+ of the "i&il "ode contrary to e5istin% urisprudence and )ithout any e&idence at all to support it. H')+: M4.
7rticle 1*+ of the "i&il "ode states:
n case an e5traordinary inflation or deflation of the currency stipulated should super&ene, the &alue of the currency at the time of the establishment of the obli%ation shall be the basis of payment, unless there is an a%reement to the contrary. 'traordinar inflation or deflation , as
the case may be, e5ists )hen there is an unusual increase or decrease in the purchasin% po)er of the (hilippine peso )hich is beyond the common fluctuation in the &alue of said currency, and such increase or decrease could not ha&e been reasonably foreseen or )as manifestly beyond the contemplation of the parties at the time of the establishment of the obli%ation.19 45traordinary inflation can ne&er be assumed? he )ho alle%es the e5istence of such phenomenon must pro&e the same.+ n this case, there has been no e5traordinary inflation )ithin the meanin% of 7rticle 1*+ of the "i&il "ode. 7ccordin%ly, there is no plausible reason for orderin% the payment of an obli%ation in an amount different from )hat has been a%reed upon because of the purported super&ention of e5traordinary inflation. 7s it )ere, respondent )as unable to pro&e the occurrence of e5traordinary inflation since it filed its complaint in 19=1. ndeed, the record is bereft of any e&idence, documentary or testimonial, that inflation, nay, an e5traordinary one, e5isted. 4&en if the price inde5 of %oods and ser&ices may ha&e risen durin% the inter&enin% period,1 this increase, )ithout more, cannot be considered as resultin% to ,extraordinary in!lation, as to ustify the application of 7rticle 1*+.
the peso cannot be considered as the e5traordinary phenomenon contemplated by 7rticle 1*+ of the "i&il "ode. Furthermore, absent an official pronouncement or declaration by competent authorities of the e5istence of e5traordinary inflation durin% a %i&en period, as here, the effects of e5traordinary inflation, if that be the case, are not to be applied. Hest it be o&erloo'ed, 7rticle 1*+ of the "ode, as couched, clearly pro&ides that the &alue of the peso at the time o! the estalishment of the obli%ation shall control and be the basis of payment of the contractual obli%ation, unless there is Kagreement to the contrary. K t is only )hen there is a contrary a%reement that e5traordinary inflation )ill ma'e the &alue of the currency at the time of payment, not at the time of the establishment of obli%ation, the basis for payment.
AA)*! ! MACA&A%-A( "acts:
pouses 7rturo and 4sther 7balos are the re%istered o)ners of a parcel of land )ith impro&ements located at 7;ucena t., 0a'ati "ity consistin% of about three hundred t)entyAse&en #8$ square meters, co&ered by *16 of the e%istry of Deeds of 0a'ati. 7rmed )ith a pecial (o)er of 7ttorney dated June , 19==, purportedly issued by his )ife, 7rturo e5ecuted a )eceipt and /emorandum o! 0greement #0O7$ dated October 18, 19=9" in fa&or of respondent, bindin% himself to sell to respondent the subect property and not to offer the same to any other party )ithin thirty #+$ days from date. 7rturo ac'no)led%ed receipt of a chec' from respondent in the amount of Fi&e
deducted from the purchase price of One 0illion *16. On January 1, 199+, respondent filed a complaint for specific performance )ith dama%es a%ainst petitioners. 7rturo filed his ans)er to the complaint )hile his )ife )as declared in default. I!!$': )hether petitioner may be
compelled to con&ey the property to respondent under the terms of the 0O7 and the "ontract to ell. H')+:
7 perfected contract of option is an accepted unilateral promise )hich specifies the thin% to be sold and the price to be paid, )hen coupled )ith a &aluable consideration distinct and separate from the price. 7n option merely %rants a pri&ile%e to buy or sell )ithin an a%reed time and at a determined price. t is separate and distinct from that )hich the parties may enter into upon the consummation of the option.9G 7
perfected contract of option does not result in the perfection or consummation. (erusin% the 0O7, it si%nifies a unilateral offer of 7rturo to sell the property to respondent for a price certain )ithin a period of thirty days. G
admission, he merely informed respondent spouses of his readiness and )illin%ness to pay. = )hich si%nifies proof of the perfection of the contract of sale, but merely a %uarantee that respondent is really interested to buy the property. t is not the %i&in% of earnest money, but the proof of the concurrence of all the essential elements of the contract of sale )hich establishes the e5istence of a perfected sale. 16G o reser&ation of o)nership on the part of 7rturo is necessary since, as pre&iously stated, he has ne&er a%reed to transfer o)nership of the property to respondent.
!*C* ! MI)I&A%&' "acts: t appears from the e&idence that the
plaintiffAappelleeAoco, for shortAand the EdefendantAappellantAFrancisco, for bre&ityA entered into a contract of lease on January 18, 198, )hereby oco leased her commercial buildin% and lot situated at 0analili treet, "ebu "ity, to Francisco for a monthly rental of ( =++.++ for a period of 1+ years rene)able for another 1+ years at the option of the lessee.
cancelled. "laimin% that para%raph 11 of the "ontract of Hease )as in fact not part of the contract because it )as cancelled, oco filed "i&il "ase o. A1661 in the "ourt of First nstance of "ebu see'in% the annulment andIor reformation of the "ontract of Hease. ... ometime before the filin% of "i&il "ase o. A1661 Francisco noticed that oco did not anymore send her collector for the payment of rentals and at times there )ere payments made but no receipts )ere issued.
therein, Francisco paid his monthly rentals to oco by issuin% chec's of the "ommercial Ban' and K$ requestin% the latter to issue chec's to oco in the amount of ( =>+.++ e&ery 1+th of the month, ob&iously for payment of his monthly rentals. , 198* #45hibit K*K$. Ob&iously, these payments by chec's throu%h "omtrust )ere recei&ed by oco from June, 198* to 7pril, 1988 because oco admitted that an rentals due her )ere paid e5cept the rentals be%innin% 0ay, 1988. 2hile oco alle%ed in her direct e5amination that Esince 0ay, 1988 he #meanin% Francisco$ stopped payin% the monthly rentalsE #<, (alicte, p. 6, !earin% of October >, 1989$, yet on cross e5amination she admitted that before the filin% of her complaint in the instant case, she 'ne) that payments for monthly rentals )ere deposited )ith the "ler' of "ourt e5cept rentals for the months of 0ay, June, July and 7u%ust, 1988. ... (ressin% her point, oco alle%ed that E)e personally demanded from 4n%r. Francisco for the months of 0ay, June, July and 7u%ust, but 4n%r. Francisco did not pay for the reason that he had no funds a&ailable at that time.E #<A(alicte, p. =, !earin% October >, 1989$.
"ourt of "ebu. K$ particularly para%raph 8 of the pecial and 7ffirmati&e Defenses. he )as further notified of these payments by consi%nation in the letter of 7tty. 0encha&e; dated o&ember =, 198= #45hibit K 1 K$.
monthly rentals be%innin% 0ay, 1988 up to the time the complaint for e&iction )as filed on January =, 1989.
effecti&e, the debtor must first comply )ith certain requirements prescribed by la).
creditor to )hom tender of payment )as made refused to accept it, or because he )as absent or incapacitated, or because se&eral persons claimed to be entitled to recei&e the amount due #7rt. 1186, "i&il "ode$? #$ that pre&ious notice of the consi%nation had been %i&en to the person interested in the performance of the obli%ation #7rt. 1188, "i&il "ode$? #>$ that the amount due )as placed at the disposal of the court #7rt. 118=, "i&il "ode$? and #*$ that after the consi%nation had been made the person interested )as notified thereof #7rt. 118=, "i&il "ode$. Failure in any of these requirements is enou%h %round to render a consi%nation ineffecti&e. !ere, respondent lessee has utterly failed to pro&e the follo)in% requisites of a &alid consi%nation: First, tender of payment of the monthly rentals to the lessor e5cept that indicated in the June 9, l988 Hetter, 45hibit 1+. n the ori%inal records of the case, 2e note that the certification, 45hibit 11 of Filemon oon, messen%er of the F7 "orporation, certifyin% that the letter of oledad oco sent last 0ay 1+ by "ommercial Ban' and (hil. 1+*=? Him'a'o &s. (hil. 1$.
payment of the monthly rentals, thru his ban', citin% the lesseeEs letter #45h. >$ requestin% the ban' to issue chec's in fa&or of oco in the amount of (=>+.++ e&ery 1+th of each month and to deduct the full amount and ser&ice fee from his current account, as )ell as 45hibit *, letter of the 3ice (resident a%reein% )ith the request. But scrutini;in% carefully 45hibit >, this is )hat the lessee also )rote: K(lease immediately notify us e&erytime you ha&e the chec' ready so )e may send somebody o&er to %et it. K 7nd this is e5actly )hat the ban' a%reed: K(lease be ad&ised that )e are in conformity to the abo&e arran%ement )ith the understandin% that you shall send somebody o&er to pic' up the cashierEs chec' from us.K #45hibit >, see p. +, Ori%inal ecords? 45hibit *, p. 1, Ori%inal ecords$ 4&idently, from this arran%ement, it )as the lesseeEs duty to send someone to %et the cashierEs chec' from the ban' and lo%ically, the lessee has the obli%ation to ma'e and tender the chec' to the lessor. 8=>9 and >89+8 "B<" dated 0ay 11, 1988 and June 1*, 1988 under Official eceipt o. +>69 dated July 6, 1988. ecapitulatin% the testimony of the Ban' "omptroller, it is clear that the ban' did not send notice to oco that the chec's )ill be deposited in consi%nation )ith the "ler' of "ourt #the first notice$ and also, the ban' did not send notice to oco that the chec's )ere in fact deposited #the second notice$ because no instructions )ere %i&en by its depositor, the lessee, to this effect, and this lac' of notices started from eptember, 1988 to the time of the trial, that is June , 19=+.
made, )hich is separate and distinct from the notification )hich is made prior to the consi%nation, is stated in "abanos &s. "alo, C.. o. HA1+98, October +, 19*=, 1+> (hil. 1+*=. thus: K
5AM*! ! !A5A* "acts: On February 1, 1991, pouses
Jonas amos and 0yrna amos e5ecuted a contract o&er their conu%al house and lot in fa&or of usana . arao for and in consideration of (1,1+,>+.>G 4ntitled D44D OF 7H4 @D4 (7"
the property )ithin si5 months from February 1, 1991, for (1,1+,>+ plus an interest of >.* percent a month. *G t )as further a%reed that should the spouses fail to pay the monthly interest or to e5ercise the ri%ht to repurchase )ithin the stipulated period, the con&eyance )ould be deemed an absolute sale.6G On July +, 1991, 0yrna amos tendered to arao the amount of (1,6,+>.+ in the form of t)o mana%ers chec's, )hich the latter refused to accept for bein% alle%edly insufficient.8G !a&in% refused acceptance of the said chec's co&erin% the redemption price, on 7u%ust 1, 1991 she came to "ourt to consi%n the chec's #45hs. HA> and HA*$. ubsequently, she proceeded to the e%ister of Deeds to cause the annotation of lis pendens on <"< o. 1*18=> #45h. BA 1A7$. !ence, she filed the 5 5 5 ci&il case a%ainst arao. On 7u%ust =, 1991, 0yrna filed a "omplaint for the redemption of the property and moral dama%es plus attorneys fees.=G * of the e%ional > and raffled to Branch 61 of the <" of 0a'ati "ity.1+G "i&il "ase os. 91A1== and 91A>> )ere later consolidated and ointly tried before Branch 1>* of the said 0a'ati <". I!!$': 2as there a proper tender of
payment and consi%nation H')+:
due.*1G "onsi%nation is made by depositin% the proper amount to the udicial authority, before )hom the tender of payment and the announcement of the consi%nation shall be pro&ed.*G 7ll interested parties are to be notified of the consi%nation.*G "ompliance )ith these requisites is mandatory.*>G ote that the principal loan )as (1,1+,>+ plus >.* per cent monthly interest compounded for si5 months. 45pressin% her desire to pay in the fifth month, petitioner a&erred that the total amount due )as (1,6,+>.19, based on the computation of arao herself.*6G + loan? it )as therefore improper to include in that amount payments for %asoline and miscellaneous e5penses, ta5es, attorneys fees, and other alle%ed loans. 2hen arao unustly refused the tender of payment in the amount of (1,6,+>.+, petitioner correctly filed suit and consi%ned the amount in order to be released from the latters obli%ation.
)hich )as precisely )hat petitioner did AA may be done in the same act.*=G Because petitioners consi%nation of the amount of (1,6,+>.+ )as &alid, it produced the effect of payment.*9G
a&in%s 7ccount )ith petitioner "itiban' "ompensation is a reco%ni;ed mode of e5tin%uishin% obli%ations. ele&ant pro&isions of the "i&il "ode pro&ides 7rt. 18=. "ompensation shall ta'e place )hen t)o persons, in their o)n ri%ht, are creditors and debtors of each other. 7rt. 189. n order that compensation may be proper, it is necessary? #1$ $
third persons and communicated in due time to the debtor.
indicated the principal amounts as (=6,+++.++ and(6+,+++.++.
.
For failure of the respondents to pay their outstandin% loans )ith petitioner, the latter proceeded )ith the e5traudicial foreclosure of the real estate mort%a%es. 6 , 19=1. aid certificate of sale )as re%istered )ith the Office of the e%ister of Deeds on February >, 19=. On o&ember >, 19=, petitioner instituted "i&il "ase o. A6+= for deficiency ud%ment, claimin% that after applyin% the proceeds of foreclosure sale to the total unpaid obli%ations of respondents #(++,98.8=$, respondents )ere still indebted to petitioner for the sum of (=,98.6=.= espondents filed their 7ns)er 2ith "ounterclaim on December 8, 19=.9 On February 1+, 19=, respondents filed "i&il "ase o. "4BA11 for the reco&ery of the sums of (,*=>.8 debited from their sa&in%s account passboo' and the equi&alent amount of N>,+.++ tele%raphic transfer, and in addition, N**,*=.=* representin% the dama%e suffered by the respondents from letters of credit left unA ne%otiated because of petitioner-s refusal to pay the N>,+.++ demanded by the respondents.1+
&5A+'5! 5*(A) A% ! CA!&A%A5'! "acts: espondentAspouses orberto and
0ila%ros "astaPares are en%a%ed in the business of e5portin% shell crafts and other handicrafts. Bet)een 1988 and 198=, respondents obtained from petitioner 6,
Finally, petitioner reiterates that it had the ri%ht by )ay of setAoff the tele%raphic transfer in the sum of N>,+.++ a%ainst the unpaid loan account of respondents. "itin% Ban' of the (hilippine slands &. "ourt of 7ppeals,petitioner asserts that they are bound principally as both creditors and debtors of each other, the debts consistin% of a sum of money, both due, liquidated and demandable, and are not claimed by a third person. !ence, the <" did not err in holdin% that petitioner &alidly applied the
amount of (+,9+.+ #peso equi&alent of N>,+.++$ to the loan account of the respondents. I!!$': 2O petitioner had 7 basis in
)ithholdin% and subsequently applyin% in payment of respondents- o&erdue account in the tele%raphic transfer in the amount of u.s.N>,+.++ H')+: Mes.
7%reements for compensation of debts or any obli%ations )hen the parties are mutually creditors and debtors are allo)ed under 7rt. 1= of the "i&il "ode e&en thou%h not all the le%al requisites for le%al compensation are present. 3oluntary or con&entional compensation is not limited to obli%ations )hich are not yet due.1 ,+.++ tele%raphic transfer remitted by respondents- forei%n client throu%h the petitioner.
"A5I-A! ! !A% "5A%CI!C* +') M*%&' "acts: On 7pril , 19=, herein petitioner
spouses saias and 0arcelina Fabri%as #pouses Fabri%as or petitioners$ and respondent an Francisco Del 0onte, nc. #Del 0onte$ entered into an a%reement, denominated as (ontract to Sell No. 2342* ' , )hereby the latter a%reed to sell to pouses Fabri%as a parcel of residential land situated in Barrio 7lman;a, Has (ias, 0anila for and in consideration of the amount of (1+9,++.++. aid property,
)hich is 'no)n as Hot o. 9, Bloc' o. of ubdi&ision (lan #H"$ (sdA*++6>, is co&ered by 9=+ #1616*$ .*=, the amount of (6,=.* as do)npayment and the balance to be paid in monthly installments of (,9=>.6+ each. o other payments )ere made by petitioners e5cept the amount of (1+,+++.++ )hich petitioners tendered sometime in October 19=8 but )hich Del 0onte refused to accept, the latter claimin% that the payment )as intended for the satisfaction of (ontract to Sell No. 2342*' )hich had already been pre&iously cancelled. On 0arch >, 19==, Del 0onte sent a letter demandin% the payment of accrued installments under (ontract to Sell No. 2356*' in the amount of (16*,8*9.6+ less (>=,1=.*, representin% the payments made under the restructured contract, or the net amount of (118,61.+=. Del 0onte allo)ed petitioners a %race period of thirty #+$ days )ithin )hich to pay the amount as'ed to a&oid rescission of the contract.
For failure to pay, Del 0onte notified petitioners on 0arch +, 19=9 that (ontract to Sell No. 2342*' had been cancelled and demanded that petitioners &acate the property.1G On eptember =, 199+, Del 0onte instituted an action for eco&ery of (ossession )ith Dama%es a%ainst pouses Fabri%as before the <", Branch 6 of 0a'ati "ity. per annum. n their ans)er, pouses Fabri%as claimed, amon% others, that Del 0onte unilaterally cancelled the first contract and forced petitioner 0arcelina to e5ecute the second contract, )hich materially and unustly altered the terms and conditions of the ori%inal contract. Issues: 2as (ontract to Sell No. 2342* ' e5tin%uished throu%h rescission or )as it no&ated by the subsequent (ontract to Sell No. 2356*' f (ontract to Sell No. 2342* ' )as rescinded, should the manner of
rescission comply )ith the requirements of epublic 7ct o. #.7.$ 6** f (ontract to Sell No. 2342*' )as subsequently no&ated by (ontract to Sell No. 2356*' , are petitioners liable for breach under the subsequent a%reement H')+: 1.
. o&ation, in its broad concept, may either be e5tincti&e or modificatory. t is e5tincti&e )hen an old obli%ation is terminated by the creation of a ne) obli%ation that ta'es the place of the former? it is merely modificatory )hen the old obli%ation subsists to the e5tent it remains compatible )ith the amendatory a%reement. 7n e5tincti&e no&ation results either by chan%in% the obect or principal conditions #obecti&e or
real$, or by substitutin% the person of the debtor or subro%atin% a third person in the ri%hts of the creditor #subecti&e or personal$. @nder this mode, no&ation )ould ha&e dual functionsone to e5tin%uish an e5istin% obli%ation, the other to substitute a ne) one in its placerequirin% a conflu5 of four essential requisites: #1$ a pre&ious &alid obli%ation? #$ an a%reement of all parties concerned to a ne) contract? #$ the e5tin%uishment of the old obli%ation? and #>$ the birth of a &alid ne) obli%ation.1G ot)ithstandin% the improper rescission, the facts of the case sho) that "ontract to ell o. >=A 3 )as subsequently no&ated by "ontract to ell o. >91A3. 91A3 accompanied an up)ard chan%e in the contract price, )hich constitutes a chan%e in the obect or principal conditions of the contract. n enterin% into (ontract to Sell No. 2356*'" the parties )ere impelled by causes different from those obtainin% under (ontract to Sell No. 2342*' . On the part of petitioners, they a%reed to the terms and conditions of (ontract to Sell No. 2356*' not only to acquire o)nership o&er the subect property but also to a&oid the consequences of their default under (ontract No. 2342*' . On Del 0ontes end, the up)ard chan%e in price )as the consideration for enterin% into (ontract to Sell No. 2356*' . n order that an obli%ation may be e5tin%uished by another )hich substitutes the same, it is imperati&e that it be so declared in unequi&ocal terms, or that the old and the ne) obli%ations be on e&ery point incompatible )ith each other.G
not the t)o obli%ations can stand to%ether, each one ha&in% its independent e5istence. f they cannot, they are incompatible and the latter obli%ation no&ates the first. G
!ere
and bindin%.
7leandro 0ontelibano, and the Himited coApartnership Con;a%a and "ompany, had been and are su%ar planters adhered to the defendantA appelleeEs su%ar central mill under identical millin% contracts. Ori%inally e5ecuted in 1919, said contracts )ere stipulated to be in force for + years startin% )ith the 19+A1 crop, and pro&ided that the resultin% product should be di&ided in the ratio of >* for the mill and ** for the planters. ometime in 196, it )as proposed to e5ecute amended millin% contracts, increasin% the plantersE share to 6+ of the manufactured su%ar and resultin% molasses, besides other concessions, but e5tendin% the
operation of the millin% contract from the ori%inal + years to >* years.
defendant 0illin% company, and dismissed the complaint.
the appealed decisions can not stand. t must be remembered that the contro&erted resolution )as adopted by appellee corporation as a supplement to, or further amendment of, the proposed millin% contract, and that it )as appro&ed on 7u%ust +, 196, t)entyAone days prior to the si%nin% by appellants on eptember 1+, of the 7mended 0illin% "ontract itself? so that )hen the 0illin% "ontract )as e5ecuted, the concessions %ranted by the disputed resolution had been already incorporated into its terms. o reason appears of record )hy, in the face of such concessions, the appellants should reect them or consider them as separate and apart from the main amended millin% contract.
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