GAITE VS FONACIER

FACTS:-

a) Plaintiff-Appellee’s Arguments (Gaite – Win)

- Filed a case against Defendants for the collection of the amount of P65,000.00
-Argued that Defendants failed to pay the amount of P65,000.00 to him pursuant to their
surety bond agreement and that Defendants had lost their right to make use of the period
given them when their bond automatically expired-
Trial court rendered a decision in his favor

b) Defendant-Appellant’s Arguments (Fonacier, et al. – Lost)

- Argued that the obligation sued upon by Plaintiff was subject to a condition that the
amount ofP65,000.00 would be payable out of the first letter of credit covering the first
shipment of iron ore and/or the first amount derived from the local sale of the iron ore by
the Larap Mines &Smelting Co., Inc.; that up to the time of the filing of the complaint, no
sale of the iron ore had been made, hence the condition had not yet been fulfilled; and
that consequently, the obligation was not yet due and demandable
-Appealed to SC the decision of the trial court

ISSUE:
-Whether or not Defendants obligation to Plaintiff is subject to a suspensive condition
such that the former’s obligation is not yet due and demandable

RULING:
Conclusion:
-Defendants obligation is subject to a term and not a suspensive condition. Defendants’
obligation became due and demandable. Defendants are ordered to pay to Plaintiff,
jointly and severally, P65,000.00 with interest at 6% per annum. The appeal is dismissed.

Whether the obligation of defendants and his sureties to pay Plaintiff become due and
demandable when the former failed to renew the surety bond?

Yes, the obligation becomes demandable. The provision in the contract was not a
condition but a only a suspensive period or term to the payment of the balance of
P65,000.00. What characterizes a conditional obligation is the fact that its efficacy or
obligatory force (as distinguished from its demandability) is subordinated to the
happening of a future and uncertain event; so that if the suspensive condition does not
take place, the parties would stand as if the conditional obligation had never existed. That
the parties to the contract did not intend any such state of things to prevail. There is no
uncertainty that the payment will have to be made sooner or later; what is undetermined
is merely the exact date at which it will be made. By the very terms of the contract,
therefore, the existence of the obligation to pay is recognized; only its maturity or
demandability is deferred. The defendant lose the right of the period when it failed to
renew the surety according to ART. 1198 of the Civil Code.
GONZALES VS HEIRS OF THOMAS
FACTS:

On December 1, 1983, Paula Ao Cruz together with the plaintiffs heirs of Thomas and Paula Cruz,
entered into a Contract of Lease/Purchase with the defendant, Felix L. Gonzales, a certain parcel
of land. The defendant Gonzales paid the annual rental on the half-portion of the property covered
by Transfer Certificate of Title No. 12111 in accordance with the second provision of the Contract
of Lease/Purchase and thereafter took possession of the property, installing thereon the defendant
Jesus Sambrano as his caretaker. The defendant Gonzales did not, however, exercise his option to
purchase the property immediately after the expiration of the one-year lease. He remained in
possession of the property without paying the purchase price provided for in the Contract of
Lease/Purchase and without paying any further rentals thereon.

A letter was sent by one of the plaintiffs-heirs to the defendant Gonzales informing him of the
lessors decision to rescind the Contract of Lease/Purchase due to a breach thereof committed by
the defendant which also served as a demand on the defendant to vacate the premises within 10
days from receipt of said letter. However, the defendant refused to vacate the property and
continued possession thereof.

Alleging breach of the provisions of the Contract of Lease/Purchase, the plaintiffs filed a complaint
for recovery of possession of the property – subject of the contract with damages, both moral and
compensatory and attorney’s fees and litigation expenses. The defendant Gonzales filed his answer
praying for a dismissal of the complaint filed against him and an award of moral, exemplary and
actual damages, as well as litigation expenses.

The trial court rendered a decision in favor of the defendant. It held that the failure of the plaintiffs
to secure the Transfer Certificate of Title, as provided for in the contract, does not entitle them to
rescind the contract. The plaintiff appealed to the Court of Appeals which reversed the decision of
the Trial Court. Hence, this petition.

ISSUE:

Whether or not the express stipulation of the contract which is to secure the Transfer Certificate of
Title a condition precedent before the petitioner could exercise his option to buy the property.

RULING:

Yes, it is a condition precedent. If a stipulation in a contract admits of several meanings, it shall

be understood as bearing that import most adequate to render it effectual. An obligation cannot
be enforced unless the plaintiff has fulfilled the condition upon which it is premised. Hence, an
obligation to purchase cannot be implemented unless and until the sellers have shown their title
to the specific portion of the property being sold.
We hold that the ninth provision was intended to ensure that respondents would have a valid title
over the specific portion they were selling to petitioner. Only after the title is assured may the
obligation to buy the land and to pay the sums stated in the Contract be enforced within the
period stipulated. Verily, the petitioners obligation to purchase has not yet ripened and cannot be
enforced until and unless respondents can prove their title to the property subject of the Contract.

Therefore, respondents cannot rescind the contract, because they have not caused the transfer of
the TCT to their names, which is a condition precedent to petitioners obligation. This Court has
held that there can be no rescission (or more properly, resolution) of an obligation as yet non-
existent, because the suspensive condition has not happened.

PARKS VS PROVINCE OF TARLAC

FACTS:

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

In 1921, Cirer and Hill sold the same property to George L. Parks.

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

ISSUE:

Whether or not the donation was coupled with a condition precedent? W/N the action to revoke has
prescribed?

HELD:

No. The condition to erect a school within six months is not a condition precedent. The characteristic of
a condition precedent is that the acquisition of the right is not effected while said condition is mot
complied with or is not deemed complied with. Meanwhile nothing is acquired and there is only an
expectancy of a right. Consequently, when a condition is imposed, the compliance of which cannot be
effected except when the right is deemed acquired, such condition cannot be a condition precedent. In
the present case the condition that a public school be erected and a public park be made of the donated
land could not be complied with except after giving effect to the donation.

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

TAYLOR VS UY TIENG PIAO

This case comes by appeal from the Court of First Instance of the city of Manila, in a case where
the court awarded to the plaintiff the sum of P300, as damages for breach of contract. The
plaintiff appeals on the ground that the amount of damages awarded is inadequate; while the
defendant Uy Tieng Piao appeals on the ground that he is not liable at all. The judgment having
been heretofore affirmed by us in a brief opinion, we now avail ourselves of the occasion of the
filing of a motion to rehear by the attorneys for the plaintiff to modify the judgment in a slight
measure and to state more fully the reasons underlying our decision.

It appears that on December 12, 1918, the plaintiff contracted his services to Tan Liuan and Co.,
as superintendent of an oil factory which the latter contemplated establishing in this city. The
period of the contract extended over two years from the date mentioned; and the salary was to be
at the rate of P600 per month during the first year and P700 per month during the second, with
electric light and water for domestic consumption, and a residence to live in, or in lieu thereof
P60 per month.

At the time this agreement was made the machinery for the contemplated factory had not been
acquired, though ten expellers had been ordered from the United States; and among the
stipulations inserted in the contract with the plaintiff was a provision to the following effect:

It is understood and agreed that should the machinery to be installed in the said factory
fail, for any reason, to arrive in the city of Manila within a period of six months from date
hereof, this contract may be cancelled by the party of the second part at its option, such
cancellation, however, not to occur before the expiration of such six months.

The machinery above referred to did not arrive in the city of Manila within the six months
succeeding the making of the contract; nor was other equipment necessary for the establishment
of the factory at any time provided by the defendants. The reason for this does not appear with
certainty, but a preponderance of the evidence is to the effect that the defendants, in the first
months of 1919, seeing that the oil business no longer promised large returns, either cancelled
the order for the machinery from choice or were unable to supply the capital necessary to finance
the project. At any rate on June 28, 1919, availing themselves in part of the option given in the
clause above quoted, the defendants communicated in writing to the plaintiff the fact that they
had decided to rescind the contract, effective June 30th then current, upon which date he was
discharged. The plaintiff thereupon instituted this action to recover damages in the amount
of P13,000, covering salary and perquisites due and to become due under the contract.

The case for the plaintiff proceeds on the idea that the stipulation above quoted, giving to the
defendants the right to cancel the contract upon the contingency of the nonarrival of the
machinery in Manila within six months, must be understood as applicable only in those cases
where such nonarrival is due to causes not having their origin in the will or act of the defendants,
as delays caused by strikes or unfavorable conditions of transporting by land or sea; and it is
urged that the right to cancel cannot be admitted unless the defendants affirmatively show that
the failure of the machinery to arrive was due to causes of that character, and that it did not have
its origin in their own act or volition. In this connection the plaintiff relies on article 1256 of the
Civil Code, which is to the effect that the validity and fulfillment of contracts cannot be left to
the will of one of the contracting parties, and to article 1119, which says that a condition shall be
deemed fulfilled if the obligor intentially impedes its fulfillment.

It will be noted that the language conferring the right of cancellation upon the defendants is
broad enough to cover any case of the nonarrival of the machinery, due to whatever cause; and
the stress in the expression "for any reason" should evidently fall upon the word "any." It must
follow of necessity that the defendants had the right to cancel the contract in the contingency that
occurred, unless some clear and sufficient reason can be adduced for limiting the operation of the
words conferring the right of cancellation. Upon this point it is our opinion that the language
used in the stipulation should be given effect in its ordinary sense, without technicality or
circumvention; and in this sense it is believed that the parties to the contract must have
understood it.

Article 1256 of the Civil Code in our opinion creates no impediment to the insertion in a contract
for personal service of a resolutory condition permitting the cancellation of the contract by one
of the parties. Such a stipulation, as can be readily seen, does not make either the validity or the
fulfillment of the contract dependent upon the will of the party to whom is conceded the
privilege of cancellation; for where the contracting parties have agreed that such option shall
exist, the exercise of the option is as much in the fulfillment of the contract as any other act
which may have been the subject of agreement. Indeed, the cancellation of a contract in
accordance with conditions agreed upon beforehands is fulfillment.

In this connection, we note that the commentator Manresa has the following observation with
respect to article 1256 of the Civil Code. Says he: "It is entirely licit to leave fulfillment to the
will of either of the parties in the negative form of rescission, a case frequent in certain contracts
(the letting of service for hire, the supplying of electrical energy, etc.), for in such supposed case
neither is the article infringed, nor is there any lack of equality between the persons contracting,
since they remain with the same faculties in respect to fulfillment." (Manresa, 2d ed., vol. 8, p.
610.) 1awph!l.net

Undoubtedly one of the consequences of this stipulation was that the employers were left in a
position where they could dominate the contingency, and the result was about the same as if they
had been given an unqualified option to dispense with the services of the plaintiff at the end of
six months. But this circumstance does not make the stipulation illegal.

The case of Hall vs. Hardaker (61 Fla., 267) cited by the appellant Taylor, though superficially
somewhat analogous, is not precisely in point. In that case one Hardaker had contracted to render
competent and efficient service as manager of a corporation, to which position it was understood
he was to be appointed. In the same contract it was stipulated that if "for any reason" Hardaker
should not be given that position, or if he should not be permitted to act in that capacity for a
stated period, certain things would be done by Hall. Upon being installed in the position
aforesaid, Hardaker failed to render efficient service and was discharged. It was held that Hall
was released from the obligation to do the things that he had agreed to perform. Some of the
judges appear to have thought that the case turned on the meaning of the phrase "for any reason,"
and the familiar maxim was cited that no man shall take advantage of his own wrong. The result
of the case must have been the same from whatever point of view, as there was an admitted
failure on the part of Hardaker to render competent service. In the present case there was no
breach of contract by the defendants; and the argument to the cntrary apparently suffers from the
logical defect of assuming the very point at issue.

But it will be said that the question is not so much one concerning the legality of the clause
referred to as one concerning the interpretation of the resolutory clause as written, the idea being
that the court should adjust its interpretation of said clause to the supposed precepts of article
1256, by restricting its operation exclusively to cases where the nonarrival of the machinery may
be due to extraneous causes not referable to the will or act of the defendants. But even when the
question is viewed in this aspect their result is the same, because the argument for the restrictive
interpretation evidently proceeds on the assumption that the clause in question is illegal in so far
as it purports to concede to the defendants the broad right to cancel the contract upon nonarrival
of the machinery due to any cause; and the debate returns again to the point whether in a contract
for the prestation of service it is lawful for the parties to insert a provision giving to the employer
the power to cancel the contract in a contingency which may be dominated by himself. Upon this
point what has already been said must suffice.

As we view the case, there is nothing in article 1256 which makes it necessary for us to warp the
language used by the parties from its natural meaning and thereby in legal effect to restrict the
words "for any reason," as used in the contract, to mean "for any reason not having its origin in
the will or acts of the defendants." To impose this interpretation upon those words would in our
opinion constitute an unjustifiable invasion of the power of the parties to establish the terms
which they deem advisable, a right which is expressed in article 1255 of the Civil Code and
constitutes one of the most fundamental conceptions of contract right enshrined in the Code.

The view already expressed with regard to the legality and interpretation of the clause under
consideration disposes in a great measure of the argument of th appellant in so far as the same is
based on article 1119 of the Civil Code. This provision supposes a case where the obligor
intentionally impedes the fulfillment of a condition which would entitle the obligee to exact
performance from the obligor; and an assumption underlying the provision is that the obligor
prevents the obligee from performing some act which the obligee is entitled to perform as a
condition precedent to the exaction of what is due to him. Such an act must be considered
unwarranted and unlawful, involving per se a breach of the implied terms of the contract. The
article can have no application to an external contingency which, like that involved in this case,
is lawfully within the control of the obligor.

In Spanish jurisprudence a condition like that here under discussion is designated by Manresa a
facultative condition (vol. 8, p. 611), and we gather from his comment on articles 1115 and 1119
of the Civil Code that a condition, facultative as to the debtor, is obnoxious to the first sentence
contained in article 1115 and renders the whole obligation void (vol. 8, p. 131). That statement is
no doubt correct in the sense intended by the learned author, but it must be remembered that he
evidently has in mind the suspensive condition, such as is contemplated in article 1115. Said
article can have no application to the resolutory condition, the validity of which is recognized in
article 1113 of the Civil Code. In other words, a condition at once facultative and resolutory may
be valid even though the condition is made to depend upon the will of the obligor.

If it were apparent, or could be demonstrated, that the defendants were under a positive
obligation to cause the machinery to arrive in Manila, they would of course be liable, in the
absence of affirmative proof showing that the nonarrival of the machinery was due to some cause
not having its origin in their own act or will. The contract, however, expresses no such positive
obligation, and its existence cannot be implied in the fact of stipulation, defining the conditions
under which the defendants can cancel the contract.

Our conclusion is that the Court of First Instance committed no error in rejecting the plaintiff's
claim in so far as damages are sought for the period subsequent to the expiration of the first six
months, but in assessing the damages due for the six-month period, the trial judge evidently
overlooked the item of P60, specified in the plaintiff's fourth assignment of error, which
represents commutation of house rent for the month of June, 1919. This amount the plaintiff is
clearly entitled to recover, in addition to the P300 awarded in the court below.

We note that Uy Tieng Piao, who is sued as a partner with Tan Liuan, appealed from the
judgment holding him liable as a member of the firm of Tan Liuan and Co.; and it is insisted in
his behalf that he was not bound by the act of Tan Liuan as manager of Tan Liuan and Co. in
employing the plaintiff. Upon this we will merely say that the conclusion stated by the trial court
in the next to the last paragraph of the decision with respect to the liability of this appellant in
our opinion in conformity with the law and facts.

The judgment appealed from will be modified by declaring that the defendants shall pay to the
plaintiff the sum of P360, instead of P300, as allowed by the lower court, and as thus modified
the judgment will be affirmed with interest from November 4, 1919, as provided in section 510
of the Code of Civil Procedure, and with costs. So ordered.

Uy Tieng, defendant, employed taylor, plaintiff, for two years as the oil mill superintendent.
Written in the contract that the machinery to be installed in the factory fail and to not arrive in
manila within 6 months, this contract can be cancelled by the defendant. The machinery failed
to arrived in manila within 6 months. Because the defendant saw that the oil business no longer
promised large returns. After 6 months the defendant decided to revoke the contract and notified
the plaintiff of his discharge. Plaintiff sued the defendant for the commission he would have
received under the contract. The plaintiff also stated that the defendants voluntarily prevented the
arrival of the said agreement, and under article 1186 of the Civil Code, the condition should be
considered fulfilled.

Issue:

Whether or not the defendant is liable for the salary the plaintiff lost under the contract.

Held:

No. Because according to the terms agreed upon the defendant has the right to cancel the contract.
Article 1186 is not applicable because it only supposes a case where the obligor is the one who
prevented the fulfillment of the obligation, not the obligee.

ROMAN CATHOLIC ARCHBISHOP OF MANILA VS COURT OF APPEALS

FACTS
: Private respondents spouses Eusebio de Castro and Martina Rieta executed a deed of donation in favor
of the Roman Catholic Archbishop of Manila covering a parcel of land wherein a resolutory condition
was imposed that donee shall not dispose or sell the property within a period of one hundred (100)
years from the execution of the deed of donation, otherwise would render ipso facto null and void and
such deed and property would revert back to donors. However, prior to the exhaustion of the period of
one hundred (100) years, the Bishop of Imus executed a deed of absolute sale to spouses Florencio and
Soledad Ignao for P114,000.00. Rieta then filed a complaint for the nullification of the deed of donation,
reconveyance of the property with damages, and for the rescission of the contract. Ignao, in his answer
said that the action for the rescission of the contract and reconveyance of the property has already
prescribed.
ISSUE
: Whether or not the cause of action in the case at bar has already prescribed. -- NO
HELD
: As a general rule, article 764 of the New Civil Code provides that "(t)his action shall prescribe after 4
years from the non-compliance with the condition, may be transmitted to the heirs of the donor, and
may be exercised against the donee's heirs. But in the case at bar, there is no need for prescription to be
applied where a stipulation for automatic reversion is expressly provided for in the terms of the deed of
donation. Hence, there is no need for a judicial declaration for the rescission of a contract because the
law of the contract governs. Judicial action is proper only when there is absence of a special provision
granting the power of cancellation. However, the resolutory condition is held to be an undue restriction
on the rights of ownership and is contrary
to public policy. A donation is an effective transfer of title over the property from the donor to the done
e. Once adonation is accepted, the donee becomes the absolute owner of the property donated.
Although the donor may impose certain conditions in the deed of donation, the same must not be
contrary to law, morals, good customs, public order and public policy. The condition imposed must not
be perpetual or for an unreasonable period of time