Case 1

G.R No. 47362 Dec. 19, 1940

Petitioner: Juan F. Villaroel
Respondent: Bernardino Estrada
FACTS:
1. On May 9, 1912, Alejandra F.
Callao, mother of Juan Villaroel
(petitioner), obtained from
spouses Mariano and Severina
debt of P 1000.00 payable
after 7 years.
2. Alenjadra
died,
leaving
Villaroel as the sole heir,
spouses Estrada died leaving
Bernandino Estrada.
3. Petitioner
then
made
a
promise in writing promising
respondent to pay the amount
of 1000.00 with an interest of
12% per annum.
4. Petitioner did not make good
on his promise.
5. CFI, decided favoring Estrada,
that petitioner to pay the
amount and interest. Hence,
this appeal on court.

ISSUE:
WON petitioner is bound to pay the
obligation which already prescribes.

on which he thereby waives

the benefit of prescription.
4. His obligation is not a moral
obligation
but
a
civil
obligation.
HELD:
1. The
court
sustained
the
decision.
2. The present case at bar is not
based
on
the
original
obligation contracted by the
mother of the petitioner,
which had already prescribed
but which the defendant
contracted in Aug. 9, 1930 by
assuming the fulfillment of the
obligation
and
unilaterally
binding himself.
3. The petitioner defense on
prescription is without merit.
The right to prescription may
be waived or renounced.
General rule, when debt is
already barred by prescription,
it cannot be enforced by the
creditor. But a new contract
recognizing and assuming the
prescribed debt would be valid
and enforceable when the
parties
acknowledge
the
correctness
of
the
debt,
promise to pay it after the
same has prescribed, with full
knowledge of the prescription

Case No. 2
G.R No. 46274 Nov.2 1939
Plaintiff-appeellee: A.O Fisher
Defendant-appellant:
John
Robb

C.

Facts:
1. Sep. 1935 Board of Directors
of the Philippine Greyhound
Club
Inc.
told
herein
defendant-appellant Robb to
make a business trip to
Shanghai
to
study
the
operation of a dog racing
course.
2. He stayed at American club
where he becomes acquitted
with
the
plaintiff-appellee,
Fisher, through their mutual
friends. Though conversation
he learned that Fisher was a
manager of dog racing horse.

3. Fisher upon knowing Robb

purpose for the trip show
great interest and invited him
to his establishment and give
him the information. He also
become interested in Phil.
Greyhound Club and asked the
defendant (Robb) if he could
have a part therein which the
latter answered in affirmative.
Therein filled a subscription
blank for 3000 in payment of
the fist installment. Rob also
returned to Philippines.
4. Months
later,
BOD
of
Greyhound issued a call for
the payment of the second
installment and the plaintiff
did so in the amount of
2000.00
5. However, the club fails.
6. When defendant return and
knew about this he undertook
the organization of a company
called Phil. Racing Club, and
immediately endeavored to
save the investment of those
who
had
subscribed
to
Greyhound, by acquiring the
remaining assets of the latter.
7. Defendant wrote a letter to
the plaintiff explaining the
situation and his plan that he
felt morally responsible to the
stockholders who had paid

their second installment. And

felt morally obligated to return
their second investment.
8. Plaintiffs letter respond he
wrote to return the entire
amount.
9. Defendants answer, to the
effect it was not his duty
under the law to reimburse for
any loss which he suffered in
connection with Greyhound in
the same way that he could
not
expect
anymore
to
reimburse him on his lost.
10. CFI favored the plaintiff and
ordered the same to pay the
former the sum of the second
installment 2000.00 Hence,
defendant Robb appealed on
this court.

ISSUE:
WON the trial court erred in holding
that
there
was
sufficient
consideration to justify the promise
made by the defendant-appellant, in
his letter.

HELD:
1. The
CFI
REVERSED.

decision

was

2. The court held that the

promise made by an organizer
of a dog racing course to a
stockholder to return to him
certain amounts paid by the
latter in satisfaction of his
subscription upon the belief of
said organizer that he was
morally responsible, is not an
essential consideration or as
an essential element for the
legal existence of an onerous
contract which would bind the
defendant to comply his
promise. The tenor of the
letter is not making the
defendant to bind himself on
the contract of payment.
3. Defendant said he felt morally
responsible not because they
were bound to do so, but
because
they
voluntary
assumes so. The returning of
2000.00 was prompted by pity
as the result of the loss the
latter
has
suffered.
The
obligation
which
was
contracted is therefore purely
morals and, as such is not
demandable in law but only in
conscience, over which human
judges has no jurisdiction.

Case No. 3
G.R No. 48006. July 8, 1942
Petitioner: Fausto Barredo
Respondents: Severino Garcia
and Timotea Almario

Facts:
1. About half past one in the
morning of May 3, 1936, on
the road between Malabon
and Navotas, Province of Rizal,
there was ahead on collision
between a taxi of the Malate
Taxicab
driven
by
Pedro
Fontanilla and a carretela
guided by Pedro Dimapilis. The
carrtela overtune and one of
its passenger, 16 yrs. old boy
Faustino
Garcia,
suffered
injuries from which he died
two day later.
2. A criminal case was filed
against Fonatanilla in CFI and
was sentence accordingly. The
court also granted that the
right to bring a separate civil
action to be reversed.
3. CA affirmed the sentence in
the lower court.

4. Garcia and Almario, parents of

the deceased boy, on March 7
1939, brought and action in
the
CFI
against
Faustino
Barredo as the sole proprietor
of the Malate Taxicab and
employer of Fonatnilla for a
civil action.
5. July, 8, 1939, CFI awarded
damages in favor of the
plaintiffs for 2000 plus legal
interest from the date of the
complaint. The court said that
as to Barredos responsibility
is on no proof of exercised of
diligence of a good father of
the family to prevent the
damage. infact Fonatanilla had
been caught violating several
traffic laws. Therefore he must
indemnify the plaintiffs under
the provisions of Quasi-delict.
6. Barredos defense he said he
liability is goverened by RPC;
hence his liability is only
subsidiary, and there has been
no civil action against Pedro
Fonatnilla, the person who is
criminal liable, hence he
cannot be held liable.
7. CAs decision is expressed
The liability imposed upon
him sought to be imposed
upon him in this contract is
not a civil action arising from

the crime of Fontanilla but an

obligation imposed in the
principle of Quasi-delict by
reason of his negligence in the
selection or supervision of his
servant as employee.

ISSUE:
WON this separate civil action filed
against petitioner can held him
directly responsible for the payment
of damages.

Held:
1. SC AFFIRMED the decision of
CA.
2. It gives for points: (Please
refer to the transcribe notes.)

4.
Case No. 4
G.R No. L-32599
Petitioner: Edgardo E. Mendoza
Respondent: Hon. Arrieta and
Timbol Salazar

Facts:
1. Oct. 22 1969, 4 in the
afternoon, a 3-way vehicular
accident occurred along MacArthur highway, involving a
Mercedz-Benz
driven
by
petitioner Arieta, a private
jeep owned and driven by
Rodolfo Salazar, and a gravel
and sand truck owned by
respondent and driven by
Freedie Montoya.
2. As a consequence of the
mishap, two separate action of
Reckless Imprudence Causing
damage to Property were filed
against Montoya and Salazar.
3. Petitioner testified that the
jeep overtook the truck driven
by Montoya, severed to the
left and hit his car, he also
said that petitioner jump out
of the jeep not then aware
that he bumped his car. His

5.

6.

7.

version
was
adopted
by
Montoya.
Salazar on his defense said
that he signal for turning left
but was stop by a police man
directing the traffic and that
he was bumped by Montoya
throwing him out of his jeep.
Lower Courts decision held
Montoya guilty of reckless
imprudence and acquitting
Salazar.
Aug.22,
1970
upon
the
termination of criminal case
he filed two separate civil
action to Salazar and Timbol
who is the owner of the truck.
However,
the
case
was
dismissed the judge reason
that there should be a
reservation of right. Hence,
this appeal.

Issue:
WON petitioner is entitled to be
awarded civilly upon the termination
of the criminal case.
Held:
Salazar Case
1. His acquittal from the criminal
case yields to the conclusion
that the petitioner opted to
base his case of action on

culpa criminal and not culpa

aquiliana, as evidence by his
active
participation
and
intervention in the prosecution
of the criminal case.
2. His acquittal is not based on
reasonable
doubt;
consequently a civil action can
no longer be instituted.
Timbol Case
1. He is held on quasi-delict.

Case No. 5
G.R No. 23769. Sep. 16, 1925
Plaintiff-appellee: Song Fo and
Com.
Defendant-appellant:
Hawaiian
Phil Co.

FACTS:
1. Song Fo & Company filed a
case
against
Hawaiian
Philippine Co. for breach of
contract
asking
for
P70,369.50,
with
legal
interest, and costs.

2. Hawaiian Philippine Co. set up

the defense that since the
plaintiff had defaulted in the
payment for the molasses
delivered to it they were
compelled to cancel and
rescind the said contract
3. A letter addressed by the
administrator of the HawaiianPhilippine Co. to Song Fo &
Company on December 13,
1922 contains their contract in
writing. It states the ff:
o Mr. Song Fo agreed to
the delivery of 300,000
gallons of molasses
o Mr. Song Fo also asked
if we could supply him
with another 100,000
gallons of molasses,
and we stated we
believe that this is
possible and will do our
best to let you have
these extra 100,000
gallons during the next
year
o Regarding the payment
for our molasses, Mr.
Song Fo gave us to
understand that you
would pay us at the
end of each month for
molasses delivered to
you

4. Lower
Court
held
that
defendant to pay from the
date of presentation of the
complaint and with costs.
Hence this appeal.
ISSUES:
WoN the agreement was for Hawaiian
Philippine Co. to supply 300,000 or
400,000 gallons of molasses
WoN Hawaiian-Philippine Co. had the
right to rescind the contract of sale
made with Song Fo & Company
because the latter failed to pay for
the molasses w/in the time agreed
upon.

HELD:
1. The
agreement
was
for
Hawaiian Philippine Co. to
supply 300,000 gallons of
molasses
and
Hawaiian
Philippine Co. had no legal
right to rescind the contract of
sale because of the failure of
Song Fo & Company to pay for
the molasses within the time
agreed upon by the parties.
From the language of the letter, it
was inferred that the Hawaiian-

Philippine Co. agreed to deliver to

Song Fo & Company 300,000 gallons
of molasses. The Hawaiian-Philippine
Co. also believed it possible to
accommodate Song Fo & Company by
supplying the latter company with an
extra 100,000 gallons. But the
language used with reference to the
additional 100,000 gallons was not a
definite
promise
and
did
not
constitute an obligation.
The
letters
indicate
that
the
agreement was for Song Fo &
Company to pay the HawaiianPhilippine Co. upon presentation of
accounts at the end of each month.
Song Fo & Company should have paid
for the molasses delivered in
December, 1922, and for which
accounts were received by it on
January 5, 1923, not later than
January 31 of that year. Instead,
payment was not made until February
20, 1923. However, it is a general
rule that rescission will not be
permitted for a slight or casual
breach of the contract, but only for
such breaches as are so substantial
and fundamental as to defeat the
object of the parties in making the
agreement. A delay in payment for a
small quantity of molasses for some
twenty days is not such a violation of
an essential condition of the contract
was warrants rescission for nonperformance. In addition to this,
Hawaiian-Philippine Co. waived this

condition when it arose by accepting

payment of the overdue accounts and
continuing with the contract. There is
no outstanding fact which would
legally sanction the rescission of the
contract by the Hawaiian-Philippine
Co.

2. The first cause of action of the

plaintiff is based on the
greater expense to which it
was put in being compelled to
secure molasses from other
sources.
Three
hundred
thousand gallons of molasses
was
the
total
of
the
agreement. 55,006 gallons of
molasses were delivered by
the defendant to the plaintiff
before the breach. 244,994
gallons
of
molasses
undelivered which the plaintiff
had to purchase in the open
market. 100,000 gallons of
molasses were secured from
the Central North Negros
Sugar Co., Inc., at two
centavos a gallon. As this is
the same price specified in the
contract between the plaintiff
and
the
defendant,
the
plaintiff suffered no material
loss in having to make this
purchase. This leaves as a

result 144,994 gallons which

the plaintiff admits that it
could have secured from the
Central
Victorias
Milling
Company, at three and onehalf centavos per gallon. The
plaintiff had to pay the Central
Victorias Milling company one
and one-half centavos a gallon
more for the molasses than it
would have had to pay the
Hawaiian-Philippine
Co.
Translated into pesos and
centavos, this meant a loss to
the plaintiff of approximately
P2,174.91. The plaintiff may
have been put to greater cost
in making the purchase of the
molasses in the open market,
we would concede under the
first cause of action in round
figures
P3,000Plaintiff
is
entitled to recover damages
from the defendant for breach
of contract in the amount of
P3,000.
3. The second cause of action
relates to lost profits on
account of the breach of the
contract. The only evidence in
the record on this question is
the stipulation of counsel to
the effect that had Mr. Song
Heng, the manager of Song Fo
& Company, been called as a
witness,
he
would
have

testified that the plaintiff

would have realized a profit of
P14,948.43, if the contract of
December 13, 1922, had been
fulfilled by the defendant.
Indisputably, this statement
falls far short of presenting
proof on which to make a
finding as to damages. The
testimony of the witness Song
Heng, it we may dignify it as
such, is a mere conclusion, not
a proven fact. As to what
items up the more than
P14,000 of alleged lost profits,
whether loss of sales or loss of
customers, or what not, we
have no means of knowing

Case No. 6
G.R No. 108346. July 11, 2001
Petitioners: Spouses Mariano and
Avelina Velarde
Respondents:
CA,
David
Raymundo and George Raymundo

FACTS:
1. Raymundo owes the land and
house in question. His father
George
negotiated
with
plaintiffs the sale of the said
property. A Deed of Sale with

Assumption of Mortgage was

executed by David with the
following terms:
o That David sells the
land and house with
improvements to the
Velardes
in
consideration
of
Php800,000.00
o That the parcel of land
was
mortgaged
by
David to BPI to secure
the payment of a loan
of Php1,800,000.00
o That
the
Velardes
hereby assume to pay
the
mortgage
obligations
of
P1,800,000.00 in favor
of BPI.
2. Avelina
executed
an
Undertaking which stipulated
that:
o She paid David the sum
of Php800,000.00 and
assumed the mortgage
obligations with BPI as
per the Deed of Sale
with
Assumption
of
Mortgage
o While her application
for the assumption of
the
mortgage
obligations is pending
with the bank, she
would
pay
the
mortgage obligation in
the name of David until

such time when her

application is approved
In
the
event
she
violated the terms, the
downpayment
of
Php800,000.00 plus all
payments made on the
mortgage loan shall be
forfeited in favor of
David.

3. After the execution of the sale,

the
Velardes
paid
the
mortgage obligation with the
bank for three months until
they were advised that their
application was not approved.
Thereafter, they did not make
any further payment.
4. Defendatns wrote plaintiff that
their non-payment of the
mortgage
obligations
constituted non-performance
of their obligation. Plaintiffs
replied, indicating that they
are
willing
to
pay
the
remaining balance in cash
provided 3 new conditions:
o That the house be
delivered immediately
delivered
for
occupancy
o That the defendants
should
cause
the
release of title and
mortgage from the BPI
and make the title
available and free from

any
liens
or
encumbrances
That the defendants
execute an absolute
deed of sale in favor
free from any liens or
encumbrances not later
than January 21, 1987

5. Defendants sent plaintiffs a

notarial
notice
of
cancellation/rescission of the
intended sale of the subject
property due to their noncompliance with the terms and
obligations of the Deed of Sale
with Assumption of Mortgage
and the Undertaking. The
Velardes filed a Complaint
against the defendants for
specific performance, nullity of
cancellation,
writ
of
possession
and
damages.
However, in an order dated
May 15, 1991, Judge Santos
granted oetitioners motion for
reconsideration and directed
the parties to proceed with the
sale.
6. Private respondents appealed
to CA. CA set aside the Order
of Jadge Santos and reinstate
the order of Judge Ynares
decision
favoring
the
defendant. Hence, this applea
by the petitioners.
ISSUES:

Whether or not the nonpayment of the mortgage

obligation of the Velardes
resulted in a breach of
contract.
Whether or not the rescission
of the contract by the
Raymundos was justified.

HELD:
1. The court held that the private
respondent to return the
amount to the petitioner.
2. Defense of the petitioner:
They
contend
that
their
nonpayment of the mortgage
obligation did not constitute a
breach of contract considering
their request was disapproved
by the bank.
3. But according to the court,
this is no reason to stop
paying
altogether
the
mortgage obligation. When
they received the notice of
disapproval, they should have
paid the balance of the P1.8
million loan. Instead, they sent
a
letter
to
respondents
offering to make a payment
only upon the fulfillment of
certain
conditions
not
originally agreed upon in the

contract of sale. Therefore, the

Velardes committed a breach
of contract.
4. The rescission of the contract
was justified. In the case at
bar, private respondent validly
exercised their right to rescind
the contract, because of the
failure of petitioners to comply
with their obligation to pay the
balance purchase price.
5. Petitioner violated the essence
of reciprocity in the contract
sale and such violation in the
contract of sale and such
violation give right to the
respondent to rescind. The
breach they committed was
the non performance of a
reciprocal obligation, not a
violation
of
terms
and
conditions of the mortgage
contract.
Therefore
the
automatic
recission
and
forfeiture of payment does not
apply; as illustrated in the
provisions, mutual restitution
is required to bring back the
parties
to
their
original
situation prior to the inception
of the contract.
Case No. 7
G.R No. L-42283. March 13,1985

Plaintiffs-appellees:
Buenaventura Angeles
Defendants-appellants:
Torres Calasanz

Ursula

Facts:
1. This is a case, CA certified only
pure question of law have been
raised.
2. Dec 19, 1957, herein plaintiffsappellees entered into a contract to
sell with defendants-appellants for
the formers purchase of a parcel of
land located in Cainta, Rizal. The
agreed amount is P3,920.00 plus 7%
interest per annum.
3. The plaintiffs-appellees made a
down payment of P392.00 upon the
execution of the contract and
promised to pay the balance in
monthly installments of P41.20 until
fully paid.
The plaintiffs-appellees
paid the monthly installments until
July 1966 and their aggregate
payment already reached P4,533.38.
4. After several months, due to
plaintiffs-appellees failure to pay the
monthly
installments
despite
defendants-appellants demands, the
latter cancelled the contract to sell
pursuant to a provision in the
contract which states that the seller
(defendants-appellants) has the right
to declare the contract cancelled and
of no effect as a consequence of

failure to pay the agreed amount plus

interests.
5. Thus, the plaintiffs-appellees filed a
civil action in court to compel
defendants-appellants to execute in
their favour a final deed of sale citing
their
aggregate
payment
of
P4,533.38 which includes payment of
interests,
taxes
and
incidental
expenses.
6. The lower court rendered judgment
in favor of the plaintiffs-appellees and
a motion for reconsideration filed by
the
defendants-appellants
were
denied. The Court of Appeals then
brought the matter to the Supreme
Court as it involves pure questions of
law.
Issue:
Whether or not the contract has been
automatically and validly cancelled
by the defendant-appellants (Ursula
Torres Calasanz and Tomas Calasanz)
Held:
1. Citing the case of University of the
Philippines v. De los Angeles (35
SCRA 102) where it is stated that if
the other party denies that rescission
(of a contract) is justified, it is free to
resort to judicial action in its own
behalf and bring the matter to court
and that for it is only the final
judgement of the Court that will
conclusively and finally settle the
action taken whether the action taken

was or was not correct in law, the

Supreme Court that the right to
rescind
the
contract
for
non
performance of one of its stipulations
is not absolute.
2. Furthermore, citing Song Fo & Co.
v. Hawaiian-Philippine Co., (47 Phil.
821, 827) which states that The
general rule is that rescission of a
contract will not be permitted for a
slight or casual breach, but only for
such substantial and fundamental
breach as would defeat the very
object of the parties in making the
agreement, the Court held that the
breach of the contract is so slight and
casual when the initial down payment
plus the aggregates amount is
considered.
3. The Court also cited Article 1234 of
the Civil Code which states that: If
the obligation has been substantially
performed in good faith, the obligor
may recover as though there had
been a strict and complete fulfillment,
less damages suffered by the
obligee as a provision which
militates against the unilateral act of
the
defendants-appellants
in
cancelling the contract.
4. The Court also held that the
contract to sell, being essentially a
contract of adhesion, must be
construed against the party causing
it.
5. Therefore, the Court ruled in favour
of the plaintiffs-appellees and did not

uphold the cancellation of the

contract.
The petition of the
defendants-appellants was denied
and the plaintiffs-appellees were
ordered to pay the remaining balance
and after which the defendantsappellants were ordered to execute a
final deed of sale in favour of the
plaintiffs-appellee.

Case No. 8
G.R. No. 55665. February 8, 1989
Petitioner:
Delta
Motor
Corporation
Respondents: Eduardo Genuino
etc. and CA

Facts:
1. July 1972, two letters-quotation
were submitted by Delata to Genuino
offering to sell black iron pipes.The
first letter quoted the price of the
specifications of the pipe including
delivery amounting to 66,000. The
second letter provides for the selling
price and the other type of the pipes
including delivery amounting to
5,400.00. Hector Genuino and signed.
They also made downpayment.
2. July 1972 Delta offered to deliver
the iron pipes but the Genuinos did
not accept the offer because the
construction of the ice plant is not yet
finished.

3. Almost three years later, April 15,

1972, Guinuno on behalf of the ice
plant comp., ask for the delivery upon
30 days upon receipt. And manifested
to pay the second installment.
4. Delta countered the pipes cannot
be delivered on the prices quoted on
July 1972. The contracts stipulation is
good only within 30 days upon the
offer. And thus they sent new prices.
5. Genunos rejected the new quoted
pricesand instead filed a complaint
for specific performance with damage
seeking to compel delta to deliver the
pipes.
6. Delta answered is a prayer for
rescission of contracts pursuant to
Art. 1191.
7. CFI favor delta.
8. On appeal, CA reversed and
ordered private respondents to make
payments specified in the terms of
payment. It cited two main reason:
1. As Delta was the one who
prepared
the
contracts
and
admittedly, it had knowledge of the
fact that the black iron pipes would
be used by the Genuinos in their cold
storage plant which was then
undergoing
construction
and
therefore, would require sometime
before the Genuinos would require
delivery, Delta should have included
in said contracts a deadline for
delivery but it did not. As a matter of
fact neither did it insist on delivery
when the Genuinos refused to accept
its offer of delivery. [CA Decision, pp.
16-17; Rollo, pp. 71-72.]

2. Delta's refusal to make

delivery in 1975 unless the Genuinos
pay a price very much higher than
the prices it previously quoted would
mean
an
amendment
of
the
contracts. It would be too unfair for
the plaintiffs if they will be made to
bear the increase in prices of the
black iron pipes when they had
already paid quite an amount for said
items and defendant had made use of
the advance payments. That would
be unjust enrichment on the part of
the defendant at the expense of the
plaintiffs and is considered an
abominable business practice.
Issue:
WON the condition of the two
contracts was breach which entitled
delta to rescind.

Held:
1. The Court AFFIRMED the decision
of CA.
2. Accordingly, Delta made no
whatsoever manifestation that it had
opted to rescind the contract with the
Genuinos. It only raised rescission as
a defense when it was sued for
specific performance by private
respondents. It is highly inequitable
to rescind the contract with the
Genuinos when it already made down
payments. Additionally, if it claims
rescission it should return the amount
of the downpayment. It is for these

reason that there is a merit in Deltas

claim of suspense condition but
nevertheless waived performance of
these obligations and opted to go
with the contract in much higher
price. Delat cannot asked to increase
prices based to increase the cost.
Case No. 9
G.R No. 101762. July 6, 1993
Petitioner: Vermen Reality Dev.
Corp
Respondents: CA
Facts:
1 Under the conditions of the socalled Offsetting Agreement,
Vermen Realty (the first party
in the contract) and Seneca
Hardware (the second party)
were
under
a
reciprocal
obligation. Seneca Hardware
shall deliver to Vermen Realty
construction materials worth
P552,000.00.
2

Vermen Realty's obligation

under
the
agreement
is
threefold:
a

he shall pay Seneca

Hardware P276,000.00
in cash;

he
shall
deliver
possession of units 601

and 602, Phase I,

Vermen
Pines
Condominiums
(with
total
value
of
P276,000.00)
to
Seneca Hardware;
c

another unit for their use

when they went to Baguio on
April 8, 1982.
4

In its reply the Vermen Realty

corporation averred that Room
602 was leased to another
tenant
because
Seneca
Hardware corporation had not
paid anything for purchase of
the condominium unit. Vermen
Realty corporation demanded
payment
of
P27,848.25
representing the balance of
the purchase price of Room
601.

On June 21, 1985, Seneca

Hardware filed a complaint
with the Regional Trial Court of
Quezon City (Branch 92) for
rescission of the Offsetting
Agreement with damages. In
said
complaint,
Seneca
Hardware alleged that Vermen
Realty
Vermen
Realty
Corporation
had
stopped
issuing purchase orders of
construction materials after
April, 1982, without valid
reason, thus resulting in the
stoppage of deliveries of
construction materials on its
(Seneca Hardware) part, in

upon completion of
Vermen
Pines
Condominiums
Phase
II, Seneca Hardware
shall be given option to
transfer to similar units
therein.

As found by the appellate

court and admitted by both
parties, Seneca Hardware had
paid
Vermen
Realty
the
amount of P110,151.75, and
at the same time delivered
construction materials worth
P219,727.00.
Pending
completion of Phase II of the
Vermen Pines Condominiums,
Vermen Realty delivered to
Seneca Hardware units 601
and 602 at Phase I of the
Vermen Pines Condominiums
(Rollo, p. 28). In 1982, the
Vermen Realty repossessed
unit 602. As a consequence of
the repossession, the officers
of
the
Seneca
Hardware
corporation
had
to
rent

violation of
Agreement.

the

Offsetting

After conducting hearings, the

trial court rendered a decision
dismissing the complaint and
ordering the plaintiff (Seneca
Hardware in this petition) to
pay defendant (Vermen Realty
in
this
petition)
on
its
counterclaim in the amount of
P27,848.25 representing the
balance due on the purchase
price of condominium unit
601.

On appeal, respondent court

reversed the trial court's
decision as adverted to above.

Hence this petition

Issue
WON the circumstances of the case
warrant rescission of the Offsetting
Agreement as prayed for by Seneca
Hardware?

Held:

Yes. The Court ruled in favor of

Seneca Hardware.

There is no controversy that the

provisions
of
the
Offsetting
Agreement are reciprocal in nature.
Reciprocal obligations are those
created or established at the same
time, out of the same cause, and
which results in a mutual relationship
of creditor and debtor between
parties.
In
reciprocal
obligations,
the
performance of one is conditioned on
the simultaneous fulfillment of the
other
obligation.
Under
the
agreement, Seneca Hardware shall
deliver to Vermen Realty construction
materials. Vermen Realty's obligation
under the agreement is three-fold:
a

he shall pay Seneca

Hardware P276,000.00
in cash;
he
shall
deliver
possession of units 601
and 602, Phase I,
Vermen
Pines
Condominiums
(with
total
value
of
P276,000.00)
to
Seneca Hardware;

upon completion of
Vermen
Pines
Condominiums
Phase
II, Seneca Hardware
shall be given option to
transfer to similar units
therein.

Article 1191 of the Civil Code

provides the remedy of rescission in
(more appropriately, the term is
"resolution") in case of reciprocal
obligations, where one of the obligors
fails to comply with what is
incumbent upon him.
In the case at bar, Vermen Realty
argues that it was Seneca Hardware
who failed to perform its obligation in
the Offsetting Agreement. Seneca
Hardware, on the other hand, points
out that the subject of the Offsetting
Agreement is Phase II of the Vermen
Pines Condominiums. It alleges that
since construction of Phase II of the
Vermen Pines Condominiums has
failed to begin it has reason to move
for rescission of the Offsetting
Agreement, as it cannot forever wait
for the delivery of the condominium
units to it.
It is evident from the facts of the case
that Seneca Hardware did not fail to
fulfill its obligation in the Offsetting

Agreement. The discontinuance of

delivery of construction materials to
Vermen Realty stemmed from the
failure of Vermen Realty to send
purchase orders to Seneca Hardware.
The impossibility of fulfillment of the
obligation on the part of Vermen
Realty necessitates resolution of the
contract
for
indeed,
the
nonfulfillment
of
the
obligation
aforementioned
constitutes
substantial breach of the Offsetting
Agreement.

Article 1191, NCC

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.

Case No. 10
Joint Case. Aug. 7, 1989
Petitioner: Cetus Development
Inc.
Respondent: CA

FACTS:
1.
Private respondents were the
lessees of the premises originally
owned by Susana Realty. The
payments of the rentals were paid by
them to a collector of the Susana
Realty who went the premises
monthly.
Susana Realty, however,
sold the property to petitioner Cetus
Development,
Inc.
The
private
respondents then continued to pay
their monthly rentals to a collector
sent by the petitioner. In succeeding
months, for three months, the private
respondents failed to pay their rentals

because no collector came. They then

contacted the petitioner over the
telephone as to where they should
pay their rentals. The petitioner then
told them that they would send a
collector to collect the rentals. Private
respondents waited but no collector
came.
2. Petitioner then sent a letter to each
of
the
private
respondents
demanding that they vacate the
subject premises and to pay their
arrearages within 15 days from the
receipt thereof. With this, private
respondents immediately upon the
receipt of such demand, tendered
their payments which were accepted
by the petitioner with the condition
that the acceptance was without
prejudice to the filing of ejectment
suit. For failure of the private
respondents to vacate the premises
as demanded, petitioner filed an
ejectment suit against them.
ISSUE:
Whether or not there was a delay of
payment by the private respondents

to the petitioner considering that

upon receipt of the demand letter,
they immediately tendered their
payments.
HELD:
No. There was no failure yet
on the part of the private respondents
to pay rents for three consecutive
months. It has been duly established
that it has been customary for private
respondents to pay their rentals
through a collector sent by the lessor.
Article 1169 of the Civil
Code provides that those obliged to
deliver or to do something incur in
delay from the time the oblige
judicially or extrajudicially demands
from them the fulfillment of their
obligation.
The moment the petitioner
extrajudicially demand the payment
of the rentals, private respondents
immediately
answered
their
obligation by paying their arrearages
of rentals to the petitioner.