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Lim v.

Development Bank
G.R. No. 177050 July 01, 2013

Facts:
Petitioners Carlos, Consolacion, and Carlito obtained a loan from respondent DBP
to finance their cattle raising business. They executed a Promissory Note undertaking to
pay the annual amortization with an interest rate of 9% per annum and penalty charge
of 11% per annum. In December 1970, petitioners obtained another loan from DBP and
executed promissory therefor. To secure the loans, petitioners executed a Mortgage in
favor of DBP over real properties registered in the names of the petitioners.
Subsequently, their cattle business collapsed and hence petitioners failed to pay the
loan amortizations, leaving outstanding loan balance. Thereafter, a restructuring
agreement in relation to the request for extension of payment of the loan amortization,
was approved by the Regional Credit Committee of DBP and communicated to Edmundo
Lim through DBP Branch Head officer Tamayo, subject to certain conditions, but
Edmundo failed to comply with the same. Consequently, the restructuring agreement
was cancelled by DBP. In the action filed by DBP for the foreclosure of petitioners
properties, the latter argued that DBPs cancellation of the Restructuring Agreement
justifies the extinguishment of their loan obligation under the Principle of Constructive
Fulfillment found in Article 1186 of the Civil Code.

Issue: Whether or not Article 1186 of the Civil Code finds application in the present
case.

Held:
No. Article 1186 enunciates the doctrine of constructive fulfillment of suspensive
conditions, which applies when the following three (3) requisites concur, viz: (1) The
condition is suspensive; (2) The obligor actually prevents the fulfillment of the
condition; and (3) He acts voluntarily. Suspensive condition is one the happening of
which gives rise to the obligation. It will be irrational for any Bank to provide a
suspensive condition in the Promissory Note or the Restructuring Agreement that will
allow the debtor-promissor to be freed from the duty to pay the loan without paying it.
Besides, petitioners have no one to blame but themselves for the cancellation of the
Restructuring Agreement.
SWIRE REALTY DEVELOPMENT CORPORATION vs JAYNE YU
G.R. No. 207133, March 09, 2015

Facts:
Respondent Jayne Yu and petitioner Swire Realty Development Corporation
entered into a Contract to Sell on July 25, 1995 covering one residential condominium
unit, of the Palace of Makati, located at P. Burgos corner Caceres Sts., Makati City, for
the total contract price of P7,519,371.80, payable in equal monthly installments until
September 24, 1997. Respondent likewise purchased a parking slot in the same
condominium building for P600,000.00. Despite full payment, of the full purchase price
for the unit while making a down payment of P20,000.00 for the parking lot, petitioner
failed to complete and deliver the subject unit on time.

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

Article 1191 of the Civil Code sanctions the right to rescind the obligation in the
event that specific performance becomes impossible.

It is evident that the report on the ocular inspection conducted on the subject
condominium project and subject unit shows that the amenities under the approved
plan have not yet been provided as of May 3, 2002, and that the subject unit has not
been delivered to respondent as of August 28, 2002, which is beyond the period of
development of December 1999 under the license to sell. Incontrovertibly, petitioner
had incurred delay in the performance of its obligation amounting to breach of contract
as it failed to finish and deliver the unit to respondent within the stipulated period. The
delay in the completion of the project as well as the delay in the delivery of the unit is
breaches of statutory and contractual obligations which entitle respondent to rescind
the contract demand a refund and payment of damages.
ESTANISLAO AND AFRICA SINAMBAN v. CHINA BANKING CORPORATION
G.R. No. 193890, March 11, 2015
Facts:
On Februaiy 19, 1990, the spouses Danilo and Magdalena Manalastas (spouses
Manalastas) executed a Real Estate Mortgage (REM) in favor of respondent China
Banking Corporation (Chinabank) over two real estate properties as security for a loan
from Chinabank. During the next few years, they executed several amendments to the
mortgage contract progressively increasing their credit line secured by the aforesaid
mortgage. The spouses Manalastas executed several promissory notes (PNs) in favor of
Chinabank. In two of the PNs, petitioners Estanislao and Africa Sinamban (spouses
Sinamban) signed as co-makers.
Chinabank instituted extrajudicial foreclosure proceedings against the mortgage
security. The foreclosure sale was held on May 18, 1998, with Chinabank offering the
highest bid of P4,600,000.00, but by then the defendants' total obligations on the three
promissory notes had risen to P5,401,975.00, before attorney's fees of 10% and
auction expenses, leaving a loan deficiency of P1,758,427.87.
On November 18, 1998, Chinabank filed a Complaint for sum of money against
the spouses Manalastas and the spouses Sinamban alleging that the spouses
Manalastas reneged on their loan obligations under the PNs which they executed in
favor of Chinabank on different dates. In the complaint before the RTC, Chinabank
prayed to direct the defendants to jointly and severally settle the said deficiency.
Issue: Whether the liability of the Sps Manalastas and Sps Sinamban is solidary or
joint.
Held:
The liability is solidary. A co-maker of a PN who binds himself with the maker
"jointly and severally" renders himself directly and primarily liable with the maker on the
debt, without reference to his solvency.

"A promissory note is a solemn acknowledgment of a debt and a formal


commitment to repay it on the date and under the conditions agreed upon by the
borrower and the lender. A person who signs such an instrument is bound to honor it
as a legitimate obligation duly assumed by him through the signature he affixes thereto
as a token of his good faith. If he reneges on his promise without cause, he forfeits the
sympathy and assistance of this Court and deserves instead its sharp repudiation."

Employing words of common commercial usage and well-accepted legal


significance, the three subject PNs uniformly describe the solidary nature and extent of
the obligation assumed by each of the defendants in Civil Case No. 11708, to wit:
"FOR VALUE RECEIVED, I/We jointly and severally promise to pay to the
CHINA BANKING CORPORATION or its order the sum of PESOS x x x[.]"
(Emphasis ours)

According to Article 2047 of the Civil Code,38 if a person binds himself solidarily
with the principal debtor, the provisions of Articles 1207 to 1222 of the Civil Code
(Section 4, Chapter 3, Title I, Book IV) on joint and solidary obligations shall be
observed. Thus, where there is a concurrence of two or more creditors or of two or
more debtors in one and the same obligation, Article 1207 provides that among them,
"[t]here is a solidary liability only when the obligation expressly so states, or when the
law or the nature of the obligation requires solidarity." It is settled that when the
obligor or obligors undertake to be "jointly and severally" liable, it means that the
obligation is solidary. In this case, the spouses Sinamban expressly bound themselves
to be jointly and severally, or solidarily, liable with the principal makers of the PNs, the
spouses Manalastas.

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