MACEDA LAW

MCLAUGHLIN vs. CA
FACTS: Petitioner Luisa McLaughlin (seller) and private respondent Ramon
Flores (buyer) entered into a contract of conditional sale of real property. The
total purchase price is P140,000. P26,550 should be paid upon execution of
the deed and the balance not later than May 31, 1977 with an interest of 1%
per month until fully paid.
Flores failed to pay and hence petitioner filed a complaint for the rescission of
the deed of conditional sale. Eventually, the parties entered into a
compromise agreement, which was accepted by the court.
The parties agreed that Flores shall pay P50,000 upon signing of the
agreement and the balance in 2 equal instalments payable on June 30, 1980
and December 31, 1980. Flores also agreed to pay P1,000 monthly rental
until the obligation is fully paid for the use of the subject matter of the deed of
conditional sale. They also agreed that in the event Flores fails to comply with
his obligations, the petitioner will be entitled to the issuance of a writ of
execution rescinding the deed of conditional sale and all the payments made
will be forfeited in favor of the plaintiff.
On October 15, 1980, petitioner wrote to Flores demanding payment of the
balance on or before October 31. This demand included the instalment due on
June 30 and December 31, 1980.
On October 30, Flores sent a letter signifying his willingness and intention to
pay the full balance.
On November 7, petitioner filed a motion for writ of execution alleging that
Flores failed to pay the instalment due on June 1980 and also failed to pay
the monthly rentals from that date. She prayed that the deed of conditional
sale be rescinded with forfeiture of all payments and payment of the monthly
rentals and eviction of Flores. The trial court granted the motion.
On November 17, Flores filed a motion for reconsideration tendering at the
same time a certified managers check payable to petitioner and covering
the entire obligation including the December 1980 instalment. The trial
court denied the motion.
On appeal, the CA ruled in favor of Flores holding that the delay in payment
was not a violation of an essential condition which would warrant a
rescission since On November 17 or just 17 days from the October 31

deadline set by petitioner, Flores tendered the certified managers check

and that it was inequitable for Flores to forfeit all the payments made
(P101,550).
ISSUE: WHETHER it is inequitable to cancel the contract and to have the
amount paid by Flores be forfeited to petitioner particularly after Flores
had tendered the certified managers check in full payment of the
obligation. YES.
HELD: There is already substantial compliance by Flores with the
compromise agreement. More importantly, the Maceda law recognizes the
vendors right to cancel the contract to sell upon the breach and
nonpayment of the stipulated instalments but requires a grace period after
at least 2 years of regular instalment payments.
But in cases where less than 2 years of instalments were paid, the seller
shall give the buyer a grace period of not less than 60 days from the date
the instalment became due. If the buyer fails to pay the instalments due at
the expiration of the grace period, the seller may cancel the contract after
thirty days from the receipt by the buyer of the notice of the cancellation or
the demand for rescission of the contract by a notarial act. Assuming that
under the terms of agreement the December 31 instalment was due when on
October 15 petitioner demanded payment of the balance on or before
October 31, petitioner could cancel the contract after 30 days from the
receipt by Flores of the notice of cancellation.
Considering petitioners motion for execution filed on
November 7 as a notice of cancellation, petitioner could cancel the contract
after 30 days from the receipt by Flores of said motion.
Flores tender of payment together with his motion for reconsideration on
November 17 was well within the 30 day period granted by law.
The tender made by Flores of a certified bank managers check was a valid
tender of payment. It covered the full amount of the obligation. However,
although he had made a valid tender of payment which preserved his rights
as a vendee, he did not follow it with consignation or deposit of the sum
due with the court. Hence he remains liable for the payment of his
obligation because of his failure to deposit the amount due with the court.

ISSUE: W/N Mortel can ask for specific

performance

HELD: NO. The contract of sale was subject to a

suspensive condition which is to convert the
building into a condominium. This condition ever
happened.

PD 957 and RA 6581 cannot be applied because

they presuppose the existence of a valid and
effective contract to sell a condominium.

MORTEL vs. KAASCO

FACTS:

KASSCO is the owner of a lot and building in Sta.

Cruz Manila

The 1st floor is being rented by PNB. The building

and lot is also mortgaged to PNB to secure a loan
made by
KASSCO.

KASSCO applied for its building to be converted to

a condominium. One of the conditions for its
application to
be approved is that the mortgage in favor of PNB
be cancelled.
That same year, Mortel and KASSCO entered into
an agreement regarding the 2nd floor of the
building. KASSCO sold some units to Mortel but
this had a condition regarding the pending
application of KASSCO for condominium
conversion.
KASSCO never got the consent of PNB to free the
building from its mortgage, hence it was not
converted.
Mortel still held the said units by paying rental fees.

KASSCO later on asked and sued Mortel to leave

the premises.

Morel is now suing for specific peformance

regarding the contract of sale between him
KASSCO

ACTIVE REALTY vs. DORYA

Facts:
Active Realty is the owner and developer of Town and Country Hills
Executive Village. It entered into a
Contract to SEll with respondent Daroya whereby Daroya agreed to
buy a 515 sq.m. lot for P224,025 in Active Realty's subdivision.

The contract stipulated that the Daroya shall pay an initial amount upon
execution and the balance in 60
monthly installments. Adding the downpayment and installment
payments made by Daroya, it would appear that he has already paid
an amount higher than that stated as the contract price.

Respondent defaulted representing 3 monthly amortizations. Petitioner sent

respondent a notice of
cancellation of their contract to sell, to take effect 30 days from receipt
of the letter. Daroya offered to
pay for the balance of the contract price but Active Realty refused as
it has allegedly sold the lot to another buyer.
Daroya then filed a complaint for specific performance.

ISSUE:
W/n Active Realty can be compelled to refund to the respondent the value of
the lot or to deliver a substitute lot at Daroya's option.
HELD:
The contract to sell in the case at bar is governed by RA 6552 more popularly
known as the Maceda Law.
Daroya has already paid in 4 years a total amount exceeding the contract
price. Active Realty decided
to cancel the contract when Daroya defaulted on three monthly amortizations.
However the records clearly show that the petitioner failed to comply with the
mandatory twin requirements for a valid and effective cancellation under the
law, i.e. it failed to send a notarized notice of cancellation and refund the cash
surrender value. In fact, the records disclose that it was only during the
preliminary hearing of the case before the court tribunal when petitioner
offered to pay the cash surrender value.
The court finds it illegal that Active Realty without complying with the
mandatory requirements for cancelling the contract, forfeited both Daroya's
land and money after Daroya has paid for not just the contract price but more
than the consideration stated in the contract to sell.
For failure to cancel the contract in accordance with the procedure provided
by law, the court held that the
contract to sell between the parties remained valid and subsisting. Daroya has
the right to offer to pay for the balance of the purchase price without interest
which Daroya did in this case. However, Daroya can no longer exercise this
right as the subject lot was aLready sold by the petitioner to another buyer.
Petitioner is now ordered to refund to respondent the actual value to the lot
resold or deliver a substitute lot at the option of Daroya.
FABRIGAS vs. DEL MONTE
FACTS: Spouses Fabrigas(petitioner) and respondent San francisco Del
Monte, Inc.(Del Monte) entered into an agreement, denominated as Contract
to Sell No. 2482-V, whereby the latter agreed to sell to Spouses Fabrigas a
parcel of residential land. The said lot was worth P109,200.00 and it was
registered in the name of respondent Del Monte. The agreement stipulated
that Spouses Fabrigas shall pay P30,000.00 as downpayment and the
balance within ten years in monthly successive installments of P1,285.69.

After paying P30,000.00, Spouses Fabrigas took possession of the property

but failed to make any installment payments on the balance of the purchase
price. Despite the demand letter made by Del Monte and the grace period
given still the said Spouses did not comply with their obligations.
On January 21, 1985, petitioner Marcelina and Del Monte entered into
another agreement denominated as Contract to Sell No. 2941-V, covering the
same property but under restructed terms of payment. Under the second
contract, the parties agreed on a new purchase price of P131,642.58, the
amount of P26,328.52 as downpayment and the balance to be paid in monthly
installments of P2,984.60 each.
After the said deal, the petitioner made some delinquent installments paying
less than the stated amount, to which Del Monte made a demand letter to the
petitioners. And this time they ordered the cancellation of the Contract to Sell
No. 2941-V
ISSUE: Whether or not the Contract to Sell No. 2941-V was valid.
HELD: The Court quotes with approval the following factual observations of
the trial court, which cannot be disturbed in this case, to wit:
The Court notes that defendant, Marcelina Fabrigas, although she had to sign
contract No. 2491-V, to avoid forfeiture of her downpayment, and her other
monthly amortizations, was entirely free to refuse to accept the new contract.
There was no clear case of intimidation or threat on the part of plaintiff in
offering the new contract to her. At most, since she was of sufficient
intelligence to discern the agreement she is entering into, her signing of
Contract No. 2491-V is taken to be valid and binding. The fact that she has
paid monthly amortizations subsequent to the execution of Contract to Sell
No. 2491-V, is an indication that she had recognized the validity of such
contract. . . .
In sum, Contract to Sell No. 2491-V is valid and binding. There is nothing to
prevent respondent Del Monte from enforcing its contractual stipulations and
pursuing the proper court action to hold petitioners liable for their breach
thereof.

DISTINGUISHING FROM OTHER REMEDY OF RECISSION

UNIVERSAL FOOD CORP. v. COURT OF APPEALS
FACTS: This is a petition for certiorari by the UFC against the CA decision of
February 13, 1968 declaring the BILL OF ASSIGNMENT rescinded, ordering
UFC to return to Magdalo Francisco his Mafran sauce trademark and to pay
his monthly salary of P300.00 from Dec. 1, 1960 until the return to him of said
trademark and formula.
In 1938, plaintiff Magdalo V. Francisco, Sr. discovered a formula for the
manufacture of a food seasoning (sauce) derived from banana fruits popularly
known as MAFRAN sauce. It was used commercially since 1942, and in the
same year plaintiff registered his trademark in his name as owner and
inventor with the Bureau of Patents. However, due to lack of sufficient capital
to finance the expansion of the business, in 1960, said plaintiff secured the
financial assistance of Tirso T. Reyes who, after a series of negotiations,
formed with others defendant Universal Food Corporation eventually leading
to the execution on May 11, 1960 of the aforequoted "Bill of
Assignment" (Exhibit A or 1).
On May 31, 1960, Magdalo Francisco entered into contract with UFC
stipulating among other things that he be the Chief Chemist and Second VicePresident of UFC and shall have absolute control and supervision over the
laboratory assistants and personnel and in the purchase and safekeeping of
the chemicals used in the preparation of said Mafran sauce and that said
positions are permanent in nature.
In line with the terms and conditions of the Bill of Assignment, Magdalo
Francisco was appointed Chief Chemist with a salary of P300.00 a month.
Magdalo Francisco kept the formula of the Mafran sauce secret to himself.
Thereafter, however, due to the alleged scarcity and high prices of raw
materials, on November 28, 1960, Secretary-Treasurer Ciriaco L. de Guzman
of UFC issued a Memorandum duly approved by the President and General
Manager Tirso T. Reyes that only Supervisor Ricardo Francisco should be
retained in the factory and that the salary of plaintiff Magdalo V. Francisco, Sr.,
should be stopped for the time being until the corporation should resume its
operation. On December 3, 1960, President and General Manager Tirso T.
Reyes, issued a memorandum to Victoriano Francisco ordering him to report
to the factory and produce "Mafran Sauce" at the rate of not less than

100 cases a day so as to cope with the orders of the corporation's various
distributors and dealers, and with instructions to take only the necessary daily
employees without employing permanent employees. Again, on December 6,
1961, another memorandum was issued by the same President and General
Manager instructing the Assistant Chief Chemist Ricardo Francisco, to recall
all daily employees who are connected in the production of Mafran Sauce and
also some additional daily employees for the production of Porky Pops. On
December 29, 1960, another memorandum was issued by the President and
General Manager instructing Ricardo Francisco, as Chief Chemist, and
Porfirio Zarraga, as Acting Superintendent, to produce Mafran Sauce and
Porky Pops in full swing starting January 2, 1961 with further instructions to
hire daily laborers in order to cope with the full blast operation. Magdalo V.
Francisco, Sr. received his salary as Chief Chemist in the amount of P300.00
a month only until his services were terminated on November 30, 1960. On
January 9 and 16, 1961, UFC, acting thru its President and General Manager,
authorized Porfirio Zarraga and Paula de Bacula to look for a buyer of the
corporation including its trademarks, formula and assets at a price of not less
than P300,000.00. Due to these successive memoranda, without plaintiff
Magdalo V. Francisco, Sr. being recalled back to work, he filed the present
action on February 14,1961. Then in a letter dated March 20, 1961, UFC
requested said plaintiff to report for duty, but the latter declined the request
because the present action was already filed in court.
ISSUES:
1. Was the Bill of Assignment really one that
involves transfer of the formula for Mafran sauce itself?
2. Was petitioners contention that Magdalo
Francisco is not entitled to rescission valid?
RULING:
1. No. Certain provisions of the bill would lead one to believe that the formula
itself was transferred. To quote, the respondent patentee "assign, transfer
and convey all its property rights and interest over said Mafran trademark and
formula for MAFRAN SAUCE unto the Party of the Second Part," and the last
paragraph states that such "assignment, transfer and conveyance is absolute
and irrevocable (and) in no case shall the PARTY OF THE First Part ask,
demand or sue or the surrender of its rights and interest over said MAFRAN
trademark and mafran formula."

However, a perceptive analysis of the entire instrument and the language

employed therein would lead one to the conclusion that what was actually
ceded and transferred was only the use of the Mafran sauce formula. This
was the precise intention of the parties.
The SC had the following reasons to back up the above conclusion. First,
royalty was paid by UFC to Magdalo Francisco. Second, the formula of said
Mafran sauce was never disclosed to anybody else. Third, the Bill
acknowledged the fact that upon dissolution of said Corporation, the patentee
rights and interests of said trademark shall automatically revert back to
Magdalo Francisco. Fourth, paragraph 3 of the Bill declared only the transfer
of the use of the Mafran sauce and not the formula itself which was admitted
by UFC in its answer.
Fifth, the facts of the case undeniably show that what was transferred was
only the use. Finally, our Civil Code allows only the least transmission of
right, hence, what better way is there to show the least transmission of right of
the transfer of the use of the transfer of the formula itself.
2. No. Petitioners contention that Magdalo Franciscos petition for rescission
should be denied because under Article 1383 of the Civil Code of the
Philippines rescission can not be demanded except when the party suffering
damage has no other legal means to obtain reparation, was of no merit
because it is predicated on a failure to distinguish between a rescission for
breach of contract under Article 1191 of the Civil Code and a rescission by
reason of lesion or economic prejudice, under Article 1381, et seq. This was
a case of reciprocal obligation. Article 1191 may be scanned without
disclosing anywhere that the action for rescission thereunder was
subordinated to anything other than the culpable breach of his obligations by
the defendant. Hence, the reparation of damages for the breach was purely
secondary. Simply put, unlike Art. 1383, Art. 1191 allows both the rescission
and the payment for damages. Rescission is not given to the party as a last
resort, hence, it is not subsidiary in nature.

SPS. VALENZUELA v. KALAYAAN

FACTS: Kalayaan Development & Industrial Corporation discovered that
Spouses Jose and Gloria Valenzuela had occupied and built a house on a
parcel of land it owned, and demanded that they vacate said property. Upon
negotiation, however, petitioners and Kalayaan entered a Contract to Sell
wherein the petitioners would purchase 236 square meters of the subject
property for P1,416,000 in twelve equal monthly installments. The contract
further stated that upon failure to pay any of said installments, petitioners
would be liable for liquidated penalty at 3% a month compounded monthly
until fully paid. Kalayaan would also execute the deed of absolute sale only
upon full payment.
Petitioners were only able to pay monthly installments amounting to a total of
P208, 000.00. They then requested Kalayaan to issue a deed of sale for 118
square meters of the lot where their house stood, arguing that since they had
paid half the purchase price, or a total of P708,000.00 representing 118
square meters of the property. Kalayaan, on the other hand, sent two demand
letters asking petitioners to pay their outstanding obligation including agreed
penalties.
Gloria Valenzuelas sister, Juliet Giron, assumed the remaining balance for the
118 square meters of the subject property at P10,000.00 per month to
Kalayaan, which the latter accepted for and in behalf of Gloria. Thereafter,
Kalayaan demanded that petitioners pay their outstanding obligation, but were
unheeded. Kalyaan then filed a Complaint fot the Rescission of Contract and
Damages against petitioners. The RTC of Caloocan rendered a Decision in
favor of Kalayaan, rescinding the contract between the parties and ordering
petitioners to vacate the premises.
Petitioners sought recourse from the CA. They aver that the CA failed to see
that the original contract between petitioners and Kalayaan was altered,
changed, modified and restricted as a consequence of the change in the
person of the principal debtor (Sps. Valenzuela to Juliet). When Kalayaan
agreed to a monthly amortization of P10,000.00 per month the original
contract was changed, and that the same recognized Juliets capacity to pay
and her designation as the new debtor. Nevertheless, the CA affirmed the
RTC ruling.

ISSUE: If the original contract was novated and the principal obligation to pay
for the remaining half of the subject property was transferred from petitioners
to Juliet.

HELD: NO. Novation is never presumed. Novation is the extinguishment of an

obligation by the substitution or change of the obligation by a subsequent one
which extinguishes or modifies the first, either by changing the object or
principal conditions, or by substituting another in place of the debtor, or by
subrogating a third person in the rights of the creditor. Parties to a contract
must expressly agree that they are abrogating their old contract in favor of a
new one. In absence of an express agreement, novation takes place only
when the old and new obligations are incompatible on every point.
These are the indispensable requisites of novation:
1) There must be a previous valid obligation;
2) There must be an agreement of the parties concerned to a new contract;
3) There must be the extinguishment of the old contract; and
4) There must be the validity of the new contract.

In the instant case, none of the aforementioned requisites are present, as

Kalayaan never agreed to the creation of a new contract between them or
Juliet. Kalayaans acceptance of the late payments made by Juliet is, at best,
an act of tolerance on part of Kalayaan that could not have modified the
contract.
The non-fulfillment by petitioners of their obligation to pay, which is a
suspensive condition for the obligation of Kalayaan to sell and deliver the title
to the property, rendered the Contract to Sell ineffective and without force and
effect. The parties stand as if the conditional obligation had never existed;
Kalayaan cannot be compelled to transfer ownership of the property to
petitioners.
SPS. MONTECALVO v. HEIRS OF PRIMERO
FACTS: Petitioners filed this appeal from the Decision of the Court of Appeals
(CA) affirming the Regional Trial Court's (RTC's) dismissal of their action for
specific performance where they sought to compel the respondents to convey
the property subject of their purported oral contract of sale.
The property involved in this case is a portion of a parcel of land (860
sqm) registered in the name of Eugenia Primero
Eugenia leased the lot to Irene Montecalvo

She eventually entered into an un-notarized Agreement with Irene with

the following stipulations:
o Irene would deposit the amount of P40,000.00 which shall
form part of the down payment equivalent to 50% of the
purchase price.
o During the term of negotiation of 30 to 45 days from receipt of
said deposit, Irene would pay the balance of the down
payment.
o In case of default in the payment of the down payment, the
deposit would be returned within 10 days from the lapse of
said negotiation period and the Agreement deemed
terminated.
o If the negotiations pushed through, the balance would be paid
in 10 equal monthly installments from receipt of the down
payment, with interest
Irene failed to pay the full down payment within the stipulated
negotiation period. Nonetheless, she continued to stay on the
disputed property, and still made several payments
On the other hand, Eugenia did not return the deposit and refused to
accept further payments only in 1992.
Irene caused a survey of lot and the segregation of a portion but
Eugenia opposed her claim and asked her to vacate the property.
Eugenia and the heirs of her deceased husband filed a complaint for
unlawful detainer against Irene and her husband before the MTC of
Iligan City.
Parties stipulated that the issue to be resolved was whether their
Agreement had been rescinded and novated.
MTC dismissed the case for lack of jurisdiction since the issue is not
susceptible of pecuniary estimation. MTC's Decision dismissing the
ejectment case became final as Eugenia and her children did not
appeal therefrom.
Irene and Nonilon retaliated by instituting Civil Case with the RTC of
Lanao del Norte for specific performance, to compel Eugenia to
convey the lot in question
RTC rendered dismissed the complaint and the counterclaim for lack
of legal and factual bases; ordered petitioners to pay rentals due, and
12% legal interest
Petitioners appealed to the CA
CA rendered affirmed the RTC Decision.

Motion for Reconsideration was filed but CA denied the same for lack
of merit

ISSUES:
1. WON AN ORAL CONTRACT OF SALE IS BINDING [UPON] THE
SELLER.
2. WON A SELLER IN AN ORAL CONTRACT OF SALE CAN BE
COMPELLED TO EXECUTE THE REQUIRED DEED OF SALE
AFTER THE AGREED CONSIDERATION WAS PAID AND
POSSESSION THEREOF DELIVERED TO AND ENJOYED BY THE
BUYER.
3. WON THE BUYER HAS A RIGHT TO ENFORCE AN ORAL
CONTRACT OF SALE AFTER THE PORTION SOLD IS
SEGREGATED BY AGREEMENT OF THE PARTIES.
4. WON THE SELLER IS BOUND BY THE HANDWRITTEN RECEIPTS
PREPARED AND SIGNED BY HER EXPRESSLY INDICATING
PAYMENTS OF LOTS.
5. WON THE TRIAL COURT COULD RENDER A JUDGMENT ON
ISSUES NOT DEFINED IN THE PRE-TRIAL ORDER.
HELD:
Issue No. 1
Court distinguished a contract of sale from a contract to sell in that in
a contract of sale the title to the property passes to the buyer upon the
delivery of the thing sold; in a contract to sell, ownership is, by
agreement, reserved in the seller and is not to pass to the buyer until
full payment of the purchase price.
The absence of a provision in the Agreement transferring title from the
owner to the buyer is taken as a strong indication that the Agreement
is a contract to sell.
As stated in the Agreement, the payment of the purchase price, in
installments within the period stipulated, constituted a positive
suspensive condition, the failure of which is not really a breach but an
event that prevents the obligation of the seller to convey title in
accordance with Article 1184 of the Civil Code. Hence, for petitioners'
failure to comply with the terms and conditions laid down in the
Agreement, the obligation of the predecessor-in-interest of the
respondents to deliver and execute the corresponding deed of sale
never arose.

Issue No. 2

For a contract of sale to be valid, the following elements must be

present: (a) consent or meeting of the minds; (b) determinate subject
matter; and (3) price certain in money or its equivalent. Until the
contract of sale is perfected, it cannot serve as a binding juridical
relation between the parties.
More than half of the 82 receipts presented merely indicated receipt of
differing sums of money and are not consistent with the allegation of
the petitioners that they have paid the full amount of the purchase
price
The alleged oral contract of sale of the property was not proved by
preponderant evidence. Hence, petitioners cannot compel the
successors-in-interest of the deceased Eugenia to execute a deed of
absolute sale in their favor.

Issue No. 3

Testimony of the surveyor shows that Eugenia was neither around

when the survey was conducted nor gave her express consent to the
conduct of the same. The resulting subdivision plan, submitted by the
petitioners to the trial court to prove that Eugenia caused the
segregation of the lot, cannot be appreciated.
In civil cases, the party having the burden of proof must establish his
case by a preponderance of evidence. The evidence presented by the
petitioners, fails to convince this Court that Eugenia gave her consent
to the purported oral deed of sale.
Court agreed with CA that there was no contract of sale between the
parties. Hence, petitioners cannot rightfully compel the successors-ininterest of Eugenia to execute a deed of absolute sale

Issue No. 4
Lastly, petitioners argue that the courts below erred in imposing a P2,500.00
monthly rental from 1985 onwards, since said amount is far greater than the
last agreed monthly rental (December 1984) of P500.00.
In its Decision, the CA affirmed the ruling of the RTC "that the trial court had
authority to fix a reasonable value for the continued use and occupancy of the

leased premises after the termination of the lease contract, and that it was not
bound by the stipulated rental in the contract of lease since it is equally settled
that upon termination or expiration of the contract of lease, the rental
stipulated therein may no longer be the reasonable value for the use and
occupation of the premises as a result of the change or rise in values.
Moreover, the trial court can take judicial notice of the general increase in
rentals of real estate especially of business establishments".49 The appellate
court likewise held that the petitioners failed to discharge their burden to show
that the said price was exorbitant or unconscionable.50 Hence, the CA found
no reason to disturb the trial court's decision ordering the petitioners to pay
P2,500.00 as monthly rentals.51 The appellate court further held that "to
deprive Eugenia of the rentals due her as the owner-lessor of the subject
property would result to unjust enrichment on the part of Irene."52
The courts below correctly took judicial notice of the nature of the leased
property subject of the case at bench based on its location and commercial
viability. As described in the Agreement, the property is immediately in front of
St. Peter's College.53 More significantly, it is stated in the Declaration of Real
Property submitted by the petitioners as evidence in the trial court, that the
property is used predominantly for commercial purposes.54 The assessment
by the trial court of the area where the property is located is therefore fairly
grounded.
Furthermore, the trial court also had factual basis in arriving at the said
conclusion, the same being based on the un-rebutted testimony of a witness
who is a real estate broker. With respect to the prevailing valuation of the
property in litigation, witness Atty. Primero, a licensed real estate broker
testified that:
x x x There is no fixed pricing for each year because it always depends on the
environment so that if the price in 1986, as you were referring to 1986, it
would have risen or increased from P1,000.00, then it would increase to
P3,000.00, then it would increase to P7,000.00 and again increase to
P15,000.00 and right now the current price of property in that area is
P25,000.00 per square meter.55
The RTC rightly modified the rental award to P2,500.00 per month,
considering that it is settled jurisprudence that courts may take judicial notice
of the general increase in rentals, particularly in business establishments.
WHEREFORE, the petition is DENIED. The November 28, 2003 Decision of
the Court of Appeals affirming the October 22, 2001 Decision of the Regional
Trial Court of Lanao del Norte, Branch 2, is hereby AFFIRMED.
SO ORDERED.

KULANG 2 DIGEST
UNIVERSITY OF THE PHILIPPINES VS. DE LOS ANGELES
FACTS: On November 2, 1960, UP and ALUMCO entered into a logging
agreement whereby the latter was granted exclusive authority to cut, collect
and remove timber from the Land Grant for a period starting from the date of
agreement to December 31, 1965, extendible for a period of 5 years by
mutual agreement.
On December 8, 1964, ALUMCO incurred an unpaid account of P219,362.94.
Despite repeated demands, ALUMCO still failed to pay, so UP sent a notice
to rescind the logging agreement. On the other hand, ALUMCO executed an
instrument entitled Acknowledgment of Debt and Proposed Manner of
Payments. It was approved by the president of UP, which stipulated the
following:
In the event that the payments called for are not sufficient to liquidate the
foregoing indebtedness, the balance outstanding after the said payments
have been applied shall be paid by the debtor in full no later than June 30,
1965.
In the event that the debtor fails to comply with any of its promises, the Debtor
agrees without reservation that Creditor shall have the right to consider the
Logging Agreement rescinded, without the necessity of any judicial suit
ALUMCO continued its logging operations, but again incurred an unpaid
account. On July 19,1965, UP informed ALUMCO that it had, as of that date,
considered rescinded and of no further legal effect the logging agreement,
and that UP had already taken steps to have another concessionaire take
over the logging operation. ALUMCO filed a petition to enjoin UP from
conducting the bidding. The lower court ruled in favor of ALUMCO, hence, this
appeal.
ISSUE: Can petitioner UP treat its contract with ALUMCO
rescinded, and may disregard the same before any judicial
pronouncement to that effect?
RULING: YES. In the first place, UP and ALUMCO had expressly stipulated
that upon default by the debtor, UP has the right and the power to consider
the Logging Agreement of December 2, 1960 as rescinded without the
necessity of any judicial suit. As to such special stipulation and in connection

with Article 1191 of the Civil Code, the Supreme Court, stated in Froilan vs.
Pan Oriental Shipping Co:
There is nothing in the law that prohibits the parties from entering into
agreement that violation of the terms of the contract would cause cancellation
thereof, even without court intervention. In other words, it is not always
necessary for the injured party to resort to court for rescission of the contract.