Other Remedy of Exacting Performance

8/13/2019 Other Remedy of Exacting Performance

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other remedy of exacting performance. As aconsequenceof the resolution, the parties should be restored, asfar as

practicable, to their original situation which can beapproximated only be ordering the return of thethingswhich were the object of the contract, with theirfruits andof the price, with its interest, computed from thedate ofinstitution of the action.

UNIVERSAL FOOD CORPORATION VS. CA33 SCRA 1

FACTS:This is a petition for certiorari by the UFC againstthe CA decision of February 13, 1968 declaring theBILLOF ASSIGNMENT rescinded, ordering UFC toreturn toMagdalo Francisco his Mafran sauce trademarkand to payhis monthly salary of P300.00 from Dec. 1, 1960until thereturn to him of said trademark and formula.

In 1938, plaintiff Magdalo V. Francisco, Sr.discovered a formula for the manufacture of a foodseasoning (sauce) derived from banana fruits

popularlyknown as MAFRAN sauce. It was usedcommercially since1942, and in the same year plaintiff registered histrademark in his name as owner and inventor withtheBureau of Patents. However, due to lack of

sufficientcapital to finance the expansion of the business, in1960,said plaintiff secured the financial assistance ofTirso T.Reyes who, after a series of negotiations, formedwithothers defendant Universal Food Corporationeventuallyleading to the execution on May 11, 1960 of theaforequoted "Bill of Assignment" (Exhibit A or 1).

On May 31, 1960, Magdalo Francisco entered into

contract with UFC stipulating among other thingsthat he

be the Chief Chemist and Second Vice-President ofUFCand shall have absolute control and supervision

over thelaboratory assistants and personnel and in the purchaseand safekeeping of the chemicals used in the

preparationof said Mafran sauce and that said positions are

permanentin nature.

In line with the terms and conditions of the Bill ofAssignment, Magdalo Francisco was appointedChiefChemist with a salary of P300.00 a month.MagdaloFrancisco kept the formula of the Mafran saucesecret tohimself. Thereafter, however, due to the allegedscarcityand high prices of raw materials, on November 28,1960,Secretary-Treasurer Ciriaco L. de Guzman of UFCissued aMemorandum duly approved by the President and

GeneralManager Tirso T. Reyes that only SupervisorRicardoFrancisco should be retained in the factory and thatthesalary of plaintiff Magdalo V. Francisco, Sr.,should bestopped for the time being until the corporationshouldresume its operation. On December 3, 1960,President and

General Manager Tirso T. Reyes, issued amemorandum toVictoriano Francisco ordering him to report to thefactoryand produce "Mafran Sauce" at the rate of not lessthan100 cases a day so as to cope with the orders of thecorporation's various distributors and dealers, andwithinstructions to take only the necessary dailyemployees

without employing permanent employees. Again,on


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December 6, 1961, another memorandum wasissued bythe same President and General Managerinstructing theAssistant Chief Chemist Ricardo Francisco, to

recall alldaily employees who are connected in the production ofMafran Sauce and also some additional dailyemployeesfor the production of Porky Pops. On December 29,1960,another memorandum was issued by the PresidentandGeneral Manager instructing Ricardo Francisco, asChiefChemist, and Porfirio Zarraga, as ActingSuperintendent,to produce Mafran Sauce and Porky Pops in fullswingstarting January 2, 1961 with further instructions tohiredaily laborers in order to cope with the full blastoperation.Magdalo V. Francisco, Sr. received his salary asChiefChemist in the amount of P300.00 a month onlyuntil his

services were terminated on November 30, 1960.OnJanuary 9 and 16, 1961, UFC, acting thru itsPresident andGeneral Manager, authorized Porfirio Zarraga andPaulade Bacula to look for a buyer of the corporationincludingits trademarks, formula and assets at a price of notlessthan P300,000.00. Due to these successive

memoranda,without plaintiff Magdalo V. Francisco, Sr. beingrecalled

back to work, he filed the present action onFebruary 14,1961. Then in a letter dated March 20, 1961, UFCrequestedsaid plaintiff to report for duty, but the latterdeclined therequest because the present action was already filedin

court.

ISSUES:1. Was the Bill of Assignment really one thatinvolves transfer of the formula for Mafran sauceitself?2. Was petitioners contention that Magdalo

Francisco is not entitled to rescission valid?

RULING:

1. No. Certain provisions of the bill would leadone to believe that the formula itself wastransferred. Toquote, the respondent patentee "assign, transferandconvey all its property rights and interest over saidMafran trademark and formula for MAFRANSAUCEunto the Party of the Second Part," and the last

paragraph states that such "assignment, transfer andconveyance is absolute and irrevocable (and) in nocaseshall the PARTY OF THE First Part ask, demandor suefor the surrender of its rights and interest over saidMAFRAN trademark and mafran formula."

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

would leadone to the conclusion that what was actually cededandtransferred was only the use of the Mafran sauceformula.This was the precise int ention of the parties.

The SC had the following reasons to back up theabove conclusion. First, royalty was paid by UFCtoMagdalo Francisco. Second, the formula of said

Mafransauce was never disclosed to anybody else. Third,the Billacknowledged the fact that upon dissolution of saidCorporation, the patentee rights and interests ofsaidtrademark shall automatically revert back toMagdaloFrancisco. Fourth, paragraph 3 of the Bill declaredonlythe transfer of the use of the Mafran sauce and not

theformula itself which was admitted by UFC in its


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answer.Fifth, the facts of the case undeniably show thatwhat wastransferred was only the use. Finally, our CivilCode allows

only the least transmission of right, hence, what betterway is there to show the least transmission of rightof thetransfer of the use of the transfer of the formulaitself.

2. No. Petitioners contention that Magdalo Franciscos petition for rescission should be denied

because under Article 1383 of the Civil Code of thePhilippines rescission can not be demanded exceptwhenthe party suffering damage has no other legalmeans toobtain reparation, was of no merit because it is

predicatedon a failure to distinguish between a rescission for

breachof contract under Article 1191 of the Civil Codeand arescission by reason of lesion or economic

prejudice, underArticle 1381, et seq. This was a case of reciprocal

obligation. Article 1191 may be scanned withoutdisclosinganywhere that the action for rescission thereunderwassubordinated to anything other than the culpable

breach ofhis obligations by the defendant. Hence, thereparation ofdamages for the breach was purely secondary.Simply put,unlike Art. 1383, Art. 1191 allows both the

rescission andthe payment for damages. Rescission is not givento the

party as a last resort, hence, it is not subsidiary innature.

UNIVERSITY OF THE PHILIPPINES VS. DELOSANGELES35 SCRA 102

FACTS:On November 2, 1960, UP and ALUMCO entered

into a logging agreement whereby the latter wasgrantedexclusive authority to cut, collect and removetimber fromthe Land Grant for a period starting from the date

ofagreement to December 31, 1965, extendible for a period of5 years by mutual agreement.

On December 8, 1964, ALUMCO incurred anunpaid account of P219,362.94. Despite repeateddemands, ALUMCO still failed to pay, so UP senta noticeto rescind the logging agreement. On the otherhand,ALUMCO executed an instrument entitledAcknowledgment of Debt and Proposed MannerofPayments. It was approved by the president of UP,whichstipulated the following:3. In the event that the payments called for are notsufficient to liquidate the foregoing indebtedness,the balance outstanding after the said paymentshave been applied shall be paid by the debtor infull no later than June 30, 1965.5. In the event that the debtor fails to comply with

any of its promises, the Debtor agrees withoutreservation that Creditor shall have the right toconsider the Logging Agreement rescinded,without the necess ity of any judicial suit ALUMCO continued its logging operations, butagain incurred an unpaid account. On July 19,1965,UPinformed ALUMCO that it had, as of that date,consideredrescinded and of no further legal effect the loggingagreement, and that UP had already taken steps to

haveanother concessionaire take over the loggingoperation.ALUMCO filed a petition to enjoin UP fromconducting the

bidding. The lower court ruled in favor ofALUMCO,hence, this appeal.

ISSUE:Can petitioner UP treat its contract with ALUMCO

rescinded, and may disregard the same before any judicial


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especially where such interpretation will help effect justiceto buyers who, after having invested a big amountofmoney, are now sought to be deprived of the same

thru the prayed application of a contract clever in its phraseology,condemnable in its lopsidedness and injurious in itseffectwhich, in essence, and its entirety is most unfair tothe

buyers.

Thus, since the principal obligation under thecontract is only P3,920.00 and the plaintiffs-appelleeshave already paid an aggregate amount ofP4,533.38, thecourts should only order the payment of the fewremaininginstallments but not uphold the cancellation of thecontract. Upon payment of the balance of P671.67withoutany interest thereon, the defendant mustimmediatelyexecute the final deed of sale in favor of the

plaintiffs and

execute the necessary transfer of documents, as providedin par.12 of the contract.

Sagrada Orden vs. Nacoco 91 Phil. 503 (1952) Nature: appeal from judgment of CFI of Manila

Facts and Background of the Case- On Jan 4, 1942, during the Japanese occupation,Taiwan Tekkosho (Japanese corporation) acquiredthe plaintiffs property (land with warehouse in

Pandacan, Manila) for Php140K- On April 4, 1946, after the liberation, the US tookcontrol and custody of the aforementioned enemy sland under Sect 12 of the Trading with the EnemyAct- In the same year, the Copra Export ManagementCompany occupied the property undercustodianship agreement with the United StatesAlien Property Custodian- In August 1946, when the Copra ExportManagement Co. vacated the property, the National

Coconut Corporation (NACOCO), the defendant,occupied it next

- Sagrada Orden (plaintiff) files claims on the property with the Court of First Instance of Manilaand against the Philippine Alien PropertyAdministrator- Plaintiff petitions that the sale of the property to

Taiwan Tekkosho should be declared null and voidas it was executed under duress, that the interest ofthe Alien Property Custodian be cancelled, and that

NACOCO be given until February 28, 1949 torecover its equipment form the property and vacatethe premise- The Republic of the Philippines is allowed tointervene- CFI: the defendant (Philippine Alien PropertyAdministrator) and the intervenor (RP) are releasedfrom any liability but the plaintiff may reserve theright to recover from NACOCO reasonable rentalsfor the use and occupation of the premises- The sale of the property to the Taiwan Takkeshowas declared void and the plaintiff was given theright to recover Php3,000/month as reasonablerental from August 1946 (date when NACOCOoccupied property) to the date NACOCO vacatesthe premises- the judgment is appealed to the SC

Legal Issues1. WON the defendant is liable to pay rent for

occupying the property in question

Judgment1. The CF Is decision that the defendant should payrent from August 1946 to February 28, 1949 wasreversed, costs against the plaintiff

RatioObligations can only arise from four sources: law,contracts or quasi-contracts, crime, or negligence(Art 1089, Spanish Civil Code).

There were no laws or an express agreement between the defendant or the Alien PropertyCustodian with the plaintiff regarding payment ofrent. The property was acquired by the AlienProperty Administrator through law (Trading withthe Enemy Act) on the seizure of alien property andnot as a successor to the interests of the latter.There was no contract of rental b/w them andTaiwan Takkesho. NACOCO entered possession ofthe property from the Alien Property Custodian

without any expectation of liability for its use. NACOCO did not commit any negligence or


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offense, and there was no contract, implied orotherwise, entered into, that can be used as basisfor claiming rent on the property before the

plaintiff obtained the judgment annulling the sale toTaiwan Takkesho. The plaintiff has no right to

claim rent from NACOCO.

Important NotesArticle 1157 of the New Civil Code states thatthere are 5 sources of obligations: laws, contracts,quasi-contracts, felonies (acts or omissions

punished by law), and quasi-delicts.

Sagrada Orden Vs Nacoco Kinuha ng Haponang lupa.Action to recover parcel of land owned by P, andthen because of Japanese war was acquired byother parties, then possessed by the US govt thruits custodian then possessed by the defendantwithout agreement with the US or with the

plaintiff, and def then leased a part of the land.

Issue: WON defendant is liable to Sagrada andmust pay the rentals.

Held: No. If liable at all must arise from any ofthe four sources of obligations. APA was a trustee

of the US and if def liable, not to plaintiff but toUS govt. But defendant not liable for rentals becno express agreement bet the APA and Nacoco.Existence of implied agreement is contrary tothe circumstances.Source: Contract. But there was none.

Pelayo vs. Lauron husband vs. in-laws1906-Pelayo complained against Lauron andAbella. Pelayo a doctor, rendered service to

daughter-in-law then demanded P500 from def.

Issue: WON Lauron is liable.

Held: No. Husband liable. Art. 142 and 143 orFamily Code. Rendering medical assistance,mutual oblig. Oblig not presumed. Thoseexpressly determined in the Code or in speciallaws are the only demandable ones.Source: Laws. Family Code.

Leung Ben vs. OBrien - Gambling

O Brien filed an action in the court of CFGI ofManila to recover from Leung Ben the sum ofP15,000 alleged to have been lost by OBrien to Leung Ben in a series of gambling, banking and

percentage games:

Issue: WON OBrien can recover the money from

Leung Ben.Held: Yes. Upon general principles, recognized

both in the civil and common law, money lost ingambling and voluntary paid by the loser to thewinner cannot, in the absence of statute, berecovered in a civil action. But Act. No. 1757 ofthe Phil. Comm, which defines and penalizeddifferent forms of gambling contains numerous

provisions recognizing the right to recover moneylost in gambling. It must therefore be assumedthat the action of plaintiff was based upon theright to recovery given by section 7 of said Act,which declares that an action may be broughtagainst the banker by any person losing money ata banking or percentage game.Source: Law. Phil Comm and Civil Code.

G.R. No. L-4920 June 29, 1953FRANCISCO DIANA and SOLEDAD DIANA,

plaintiffs-appellants, vs.BATANGAS TRANSPORTATION CO.,defendant-appellee.Zosimo D. Tanalega for appellants.Gibbs, Gibbs, Chuidian and Quasha for appellee.BAUTISTA ANGELO, J.:The present appeal stems from a case originallyinstituted in the Court of First Instance of Laguna

wherein plaintiffs seek to recover from defendantas a party subsidiarily liable for the crimecommitted by an employee in the discharge of hisduty the sum of P2,500 as damages, plus legalinterest, and the costs of action.The appeal was originally taken to the Court ofAppeals but the case was certified to this court onthe ground that it poses merely a question of law.Plaintiffs are the heirs of one Florenio Diana, aformer employee of the defendant. On June 21,1945, while Florenio Diana was riding in Truck

No. 14, belonging to the defendant, driven byVivencio Bristol, the truck ran into a ditch at Bay,


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Laguna, resulting in the death of Florenio Dianaand other passengers. Subsequently, VivencioBristol was charged and convicted of multiplehomicide through reckless imprudence wherein,among other things, he was ordered to indemnify

the heirs of the deceased in the amount of P2,000.When the decision became final, a writ ofexecution was issued in order that the indemnitymay be satisfied but the sheriff filed a return statingthat the accused had no visible leviable property.The present case was started when defendant failedto pay the indemnity under its subsidiary liabilityunder article 103 of the Revised Penal Code. Thecomplaint was filed on October 19, 1948 (civil case

No. 9221).On December 13, 1948, defendant filed a motion todis- miss on the ground that there was anotheraction pending between the same parties for thesame cause (civil case No. 8023 of the Court ofFirst Instance of Laguna) in which the same

plaintiffs herein sought to recover from the samedefendant the amount of P4,500 as damagesresulting from the death of Florenio Diana whodied while on board a truck of defendant due to thenegligent act of the driver Vivencio Bristol. Thisfirst action was predicated on culpa aquiliana.On December 16, 1948, plaintiffs filed a writtenopposition to the motion to dismiss. On February 3,

1949, the lower court, having found the motionwell founded, dismissed the complaint, withoutspecial pronouncement as to costs; and their motionfor reconsideration having been denied, plaintiffstook the present appeal.The only question to be determined is whether thelower court correctly dismissed the complaint onthe sole ground that there was another action

pending between the same parties for the samecause under Rule 8, section 1(d) of the Rules ofCourt.

The determination of this issue hinges on the proper interpretation of Rule 8, section 1 (d) whichallows the dismissal of a case on the ground that"there is another action pending between the same

parties for the same cause." Former Justice Moran,commenting on this ground, says: "In order thatthis ground may be invoked, there must be betweenthe action under consideration and the other action,(1) identity of parties, or at least such asrepresenting the same interest in both actions; (2)identity of rights asserted and relief prayed for, the

relief being found on the same facts; and (3) theidentity on the two preceding particulars should be

such that any judgment which may be rendered onthe other action will, regardless of which party issuccessful, amount to res adjudicata in the actionunder consideration." [I Moran, Comments on theRules of Court, (1952), p. 168.].

There is no doubt with regard to the identity of parties. In both cases, the plaintiffs and thedefendant are the same. With regard to the identityof reliefs prayed for, a different considerationshould be made. It should be noted that the presentcase (civil case No. 9221) stems from a criminalcase in which the driver of the defendant was foundguilty of multiple homicide through recklessimprudence and was ordered to pay an indemnityof P2,000 for which the defendant is madesubsidiarily liable under article 103 of the RevisedPenal Code, while the other case (civil case No.8023) is an action for damages based on culpaaquiliana which underlies the civil liability

predicated on articles 1902 to 1910 of the old CivilCode. These two cases involve two differentremedies. As this court aptly said: "A quasi-delictor culpa aquiliana is a separate legal institutionunder the Civil Code, with a substantivity all itsown, and individuality that is entirely apart andindependent from a delict or crime. * * *. Adistinction exists between the civil liability arisingfrom a crime and the responsibility for cuasi-

delictos or culpa extra-contractual. The samenegligent act causing damages may produce civilliability arising from a crime under article 100 ofthe Revised Penal Code, or create an action forcuasi-delito or culpa extra-contractual underarticles 1902-1910 of the Civil Code (Barredo vs.Garcia and Al- mario, 73 Phil., 607). The otherdifferences pointed out between crimes and culpaaquiliana are:.1. That crimes affect the public interest, whilecuasi-delitos are only of private concern.

2. That, consequently, the Penal Code punishes orcorrects the criminal act, while the Civil Code, bymeans of indemnification, merely repairs thedamage.3. That delicts are not as broad as quasi-delicts,

because the former are punished only if there is a penal law clearly covering them, while the latter,cuasi-delitos, include all acts in which 'any kind offault or negligence intervenes. (P. 611, supra.).Considering the distinguishing characteristics ofthe two cases, which involve two different

remedies, it can hardly be said that there is identityof reliefs in both actions as to make the present


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case fall under the operation of Rule 8, section 1(d)of the Rules of Court. In other words, it is amistake to say that the present action should bedismissed because of the pendency of anotheraction between the same parties involving the same

cause. Evidently, both cases involve differentcauses of action. In fact, when the Court of Appealsdismissed the action based on culpa aquiliana (civilcase No. 8023), this distinction was stressed. It wasthere said that the negligent act committed bydefendant's employee is not a quasi crime, for suchnegligence is punishable by law. What plaintiffsshould have done was to institute an action underarticle 103 of the Revised Penal Code (CA-G.R.

No. 3632-R). And this is what plaintiffs have done.To deprive them now of this remedy, after theconviction of defendant's employee, would be todeprive them altogether of the indemnity to whichthey are entitled by law and by a court decision,which injustice it is our duty to prevent.Wherefore, the order appealed from is reversed andthe case is hereby remanded to the lower court forfurther proceedings. No pronouncement as to costs.Paras, C.J., Pablo, Bengzon, Padilla, Tuason,Montemayor, Jugo, and Labrador, JJ., concur.

G.R. No. 109125 December 2, 1994

ANG YU ASUNCION, ARTHUR GO AND KEHTIONG, petitioners, vs.THE HON. COURT OF APPEALS and BUENREALTY DEVELOPMENT CORPORATION,respondents.Assailed, in this petition for review, is the decisionof the Court of Appeals, dated 04 December 1991,in CA-G.R. SP No. 26345 setting aside anddeclaring without force and effect the orders ofexecution of the trial court, dated 30 August 1991

and 27 September 1991, in Civil Case No. 87-41058.The antecedents are recited in good detail by theappellate court thusly:On July 29, 1987 a Second Amended Complaintfor Specific Performance was filed by Ang YuAsuncion and Keh Tiong, et al., against Bobby CuUnjieng, Rose Cu Unjieng and Jose Tan before theRegional Trial Court, Branch 31, Manila in CivilCase No. 87-41058, alleging, among others, that

plaintiffs are tenants or lessees of residential and

commercial spaces owned by defendants describedas Nos. 630-638 Ongpin Street, Binondo, Manila;

that they have occupied said spaces since 1935 andhave been religiously paying the rental andcomplying with all the conditions of the leasecontract; that on several occasions before October9, 1986, defendants informed plaintiffs that they

are offering to sell the premises and are givingthem priority to acquire the same; that during thenegotiations, Bobby Cu Unjieng offered a price ofP6-million while plaintiffs made a counter offer ofP5-million; that plaintiffs thereafter asked thedefendants to put their offer in writing to whichrequest defendants acceded; that in reply todefendant's letter, plaintiffs wrote them on October24, 1986 asking that they specify the terms andconditions of the offer to sell; that when plaintiffsdid not receive any reply, they sent another letterdated January 28, 1987 with the same request; thatsince defendants failed to specify the terms andconditions of the offer to sell and because ofinformation received that defendants were about tosell the property, plaintiffs were compelled to filethe complaint to compel defendants to sell the

property to them.Defendants filed their answer denying the materialallegations of the complaint and interposing aspecial defense of lack of cause of action.After the issues were joined, defendants filed amotion for summary judgment which was granted

by the lower court. The trial court found thatdefendants' offer to sell was never accepted by the

plaintiffs for the reason that the parties did notagree upon the terms and conditions of the

proposed sale, hence, there was no contract of saleat all. Nonetheless, the lower court ruled thatshould the defendants subsequently offer their

property for sale at a price of P11-million or below, plaintiffs will have the right of first refusal. Thusthe dispositive portion of the decision states:WHEREFORE, judgment is hereby rendered in

favor of the defendants and against the plaintiffssummarily dismissing the complaint subject to theaforementioned condition that if the defendantssubsequently decide to offer their property for salefor a purchase price of Eleven Million Pesos orlower, then the plaintiffs has the option to purchasethe property or of first refusal, otherwise,defendants need not offer the property to the

plaintiffs if the purchase price is higher than ElevenMillion Pesos.SO ORDERED.

Aggrieved by the decision, plaintiffs appealed tothis Court in


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CA-G.R. CV No. 21123. In a decision promulgatedon September 21, 1990 (penned by JusticeSegundino G. Chua and concurred in by JusticesVicente V. Mendoza and Fernando A. Santiago),this Court affirmed with modification the lower

court's judgment, holding:In resume, there was no meeting of the minds between the parties concerning the sale of the property. Absent such requirement, the claim forspecific performance will not lie. Appellants'demand for actual, moral and exemplary damageswill likewise fail as there exists no justifiableground for its award. Summary judgment fordefendants was properly granted. Courts mayrender summary judgment when there is nogenuine issue as to any material fact and themoving party is entitled to a judgment as a matterof law (Garcia vs. Court of Appeals, 176 SCRA815). All requisites obtaining, the decision of thecourt a quo is legally justifiable.WHEREFORE, finding the appeal unmeritorious,the judgment appealed from is hereby AFFIRMED,

but subject to the following modification: The courta quo in the aforestated decision gave the plaintiffs-appellants the right of first refusal only if the

property is sold for a purchase price of ElevenMillion pesos or lower; however, considering themercurial and uncertain forces in our market

economy today. We find no reason not to grant thesame right of first refusal to herein appellants in theevent that the subject property is sold for a price inexcess of Eleven Million pesos. No pronouncementas to costs.SO ORDERED.The decision of this Court was brought to theSupreme Court by petition for review on certiorari.The Supreme Court denied the appeal on May 6,1991 "for insufficiency in form and substances"(Annex H, Petition).

On November 15, 1990, while CA-G.R. CV No.21123 was pending consideration by this Court, theCu Unjieng spouses executed a Deed of Sale(Annex D, Petition) transferring the property inquestion to herein petitioner Buen Realty andDevelopment Corporation, subject to the followingterms and conditions:1. That for and in consideration of the sum ofFIFTEEN MILLION PESOS (P15,000,000.00),receipt of which in full is hereby acknowledged,the VENDORS hereby sells, transfers and conveys

for and in favor of the VENDEE, his heirs,executors, administrators or assigns, the above-

described property with all the improvementsfound therein including all the rights and interest inthe said property free from all liens andencumbrances of whatever nature, except the

pending ejectment proceeding;

2. That the VENDEE shall pay the DocumentaryStamp Tax, registration fees for the transfer of titlein his favor and other expenses incidental to thesale of above-described property including capitalgains tax and accrued real estate taxes.As a consequence of the sale, TCT No. 105254/T-881 in the name of the Cu Unjieng spouses wascancelled and, in lieu thereof, TCT No. 195816 wasissued in the name of petitioner on December 3,1990.On July 1, 1991, petitioner as the new owner of thesubject property wrote a letter to the lesseesdemanding that the latter vacate the premises.On July 16, 1991, the lessees wrote a reply to

petitioner stating that petitioner brought the property subject to the notice of lis pendensregarding Civil Case No. 87-41058 annotated onTCT No. 105254/T-881 in the name of the CuUnjiengs.The lessees filed a Motion for Execution datedAugust 27, 1991 of the Decision in Civil Case No.87-41058 as modified by the Court of Appeals inCA-G.R. CV No. 21123.

On August 30, 1991, respondent Judge issued anorder (Annex A, Petition) quoted as follows:Presented before the Court is a Motion forExecution filed by plaintiff represented by Atty.Antonio Albano. Both defendants Bobby CuUnjieng and Rose Cu Unjieng represented by Atty.Vicente Sison and Atty. Anacleto Magnorespectively were duly notified in today'sconsideration of the motion as evidenced by therubber stamp and signatures upon the copy of theMotion for Execution.

The gist of the motion is that the Decision of theCourt dated September 21, 1990 as modified by theCourt of Appeals in its decision in CA G.R. CV-21123, and elevated to the Supreme Court upon the

petition for review and that the same was denied bythe highest tribunal in its resolution dated May 6,1991 in G.R. No.L-97276, had now become final and executory. Asa consequence, there was an Entry of Judgment bythe Supreme Court as of June 6, 1991, stating thatthe aforesaid modified decision had already

become final and executory.It is the observation of the Court that this property


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in dispute was the subject of the Notice of LisPendens and that the modified decision of thisCourt promulgated by the Court of Appeals whichhad become final to the effect that should thedefendants decide to offer the property for sale for

a price of P11 Million or lower, and consideringthe mercurial and uncertain forces in our marketeconomy today, the same right of first refusal toherein plaintiffs/appellants in the event that thesubject property is sold for a price in excess ofEleven Million pesos or more.WHEREFORE, defendants are hereby ordered toexecute the necessary Deed of Sale of the propertyin litigation in favor of plaintiffs Ang Yu Asuncion,Keh Tiong and Arthur Go for the consideration ofP15 Million pesos in recognition of plaintiffs' rightof first refusal and that a new Transfer Certificateof Title be issued in favor of the buyer.All previous transactions involving the same

property notwithstanding the issuance of anothertitle to Buen Realty Corporation, is hereby set asideas having been executed in bad faith.SO ORDERED.On September 22, 1991 respondent Judge issuedanother order, the dispositive portion of whichreads:WHEREFORE, let there be Writ of Executionissue in the above-entitled case directing the

Deputy Sheriff Ramon Enriquez of this Court toimplement said Writ of Execution ordering thedefendants among others to comply with theaforesaid Order of this Court within a period of one(1) week from receipt of this Order and fordefendants to execute the necessary Deed of Sale ofthe property in litigation in favor of the plaintiffsAng Yu Asuncion, Keh Tiong and Arthur Go forthe consideration of P15,000,000.00 and orderingthe Register of Deeds of the City of Manila, tocancel and set aside the title already issued in favor

of Buen Realty Corporation which was previouslyexecuted between the latter and defendants and toregister the new title in favor of the aforesaid

plaintiffs Ang Yu Asuncion, Keh Tiong and ArthurGo.SO ORDERED.On the same day, September 27, 1991 thecorresponding writ of execution (Annex C,Petition) was issued. 1On 04 December 1991, the appellate court, onappeal to it by private respondent, set aside and

declared without force and effect the abovequestioned orders of the court a quo.

In this petition for review on certiorari, petitionerscontend that Buen Realty can be held bound by thewrit of execution by virtue of the notice of lis

pendens, carried over on TCT No. 195816 issued inthe name of Buen Realty, at the time of the latter's

purchase of the property on 15 November 1991from the Cu Unjiengs.We affirm the decision of the appellate court.A not too recent development in real estatetransactions is the adoption of such arrangementsas the right of first refusal, a purchase option and acontract to sell. For ready reference, we might

point out some fundamental precepts that may findsome relevance to this discussion.An obligation is a juridical necessity to give, to door not to do (Art. 1156, Civil Code). The obligationis constituted upon the concurrence of the essentialelements thereof, viz: (a) The vinculum juris or

juridical tie which is the efficient cause established by the various sources of obligations (law,contracts, quasi-contracts, delicts and quasi-delicts); (b) the object which is the prestation orconduct; required to be observed (to give, to do ornot to do); and (c) the subject-persons who, viewedfrom the demandability of the obligation, are theactive (obligee) and the passive (obligor) subjects.Among the sources of an obligation is a contract(Art. 1157, Civil Code), which is a meeting of

minds between two persons whereby one bindshimself, with respect to the other, to givesomething or to render some service (Art. 1305,Civil Code). A contract undergoes various stagesthat include its negotiation or preparation, its

perfection and, finally, its consummation. Negotiation covers the period from the time the prospective contracting parties indicate interest inthe contract to the time the contract is concluded(perfected). The perfection of the contract takes

place upon the concurrence of the essential

elements thereof. A contract which is consensual asto perfection is so established upon a mere meetingof minds, i.e., the concurrence of offer andacceptance, on the object and on the cause thereof.A contract which requires, in addition to the above,the delivery of the object of the agreement, as in a

pledge or commodatum, is commonly referred to asa real contract. In a solemn contract, compliancewith certain formalities prescribed by law, such asin a donation of real property, is essential in orderto make the act valid, the prescribed form being

thereby an essential element thereof. The stage ofconsummation begins when the parties perform


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their respective undertakings under the contractculminating in the extinguishment thereof.Until the contract is perfected, it cannot, as anindependent source of obligation, serve as a

binding juridical relation. In sales, particularly, to

which the topic for discussion about the case at bench belongs, the contract is perfected when a person, called the seller, obligates himself, for a price certain, to deliver and to transfer ownershipof a thing or right to another, called the buyer, overwhich the latter agrees. Article 1458 of the CivilCode provides:Art. 1458. By the contract of sale one of thecontracting parties obligates himself to transfer theownership of and to deliver a determinate thing,and the other to pay therefor a price certain inmoney or its equivalent.A contract of sale may be absolute or conditional.When the sale is not absolute but conditional, suchas in a "Contract to Sell" where invariably theownership of the thing sold is retained until thefulfillment of a positive suspensive condition(normally, the full payment of the purchase price),the breach of the condition will prevent theobligation to convey title from acquiring anobligatory force. 2 In Dignos vs. Court of Appeals(158 SCRA 375), we have said that, althoughdenominated a "Deed of Conditional Sale," a sale is

still absolute where the contract is devoid of any proviso that title is reserved or the right tounilaterally rescind is stipulated, e.g., until orunless the price is paid. Ownership will then betransferred to the buyer upon actual or constructivedelivery (e.g., by the execution of a publicdocument) of the property sold. Where thecondition is imposed upon the perfection of thecontract itself, the failure of the condition would

prevent such perfection. 3 If the condition isimposed on the obligation of a party which is not

fulfilled, the other party may either waive thecondition or refuse to proceed with the sale (Art.1545, Civil Code). 4An unconditional mutual promise to buy and sell,as long as the object is made determinate and the

price is fixed, can be obligatory on the parties, andcompliance therewith may accordingly be exacted.5An accepted unilateral promise which specifies thething to be sold and the price to be paid, whencoupled with a valuable consideration distinct and

separate from the price, is what may properly betermed a perfected contract of option. This contract

is legally binding, and in sales, it conforms with thesecond paragraph of Article 1479 of the CivilCode, viz:Art. 1479. . . .An accepted unilateral promise to buy or to sell a

determinate thing for a price certain is bindingupon the promissor if the promise is supported by aconsideration distinct from the price. (1451a) 6Observe, however, that the option is not thecontract of sale itself. 7 The optionee has the right,

but not the obligation, to buy. Once the option isexercised timely, i.e., the offer is accepted before a

breach of the option, a bilateral promise to sell andto buy ensues and both parties are then reciprocally

bound to comply with their respectiveundertakings. 8Let us elucidate a little. A negotiation is formallyinitiated by an offer. An imperfect promise(policitacion) is merely an offer. Publicadvertisements or solicitations and the like areordinarily construed as mere invitations to makeoffers or only as proposals. These relations, until acontract is perfected, are not considered bindingcommitments. Thus, at any time prior to the

perfection of the contract, either negotiating partymay stop the negotiation. The offer, at this stage,may be withdrawn; the withdrawal is effectiveimmediately after its manifestation, such as by its

mailing and not necessarily when the offeree learnsof the withdrawal (Laudico vs. Arias, 43 Phil. 270).Where a period is given to the offeree within whichto accept the offer, the following rules generallygovern:(1) If the period is not itself founded upon orsupported by a consideration, the offeror is still freeand has the right to withdraw the offer before itsacceptance, or, if an acceptance has been made,

before the offeror's coming to know of such fact, by communicating that withdrawal to the offeree

(see Art. 1324, Civil Code; see also Atkins, Kroll& Co. vs. Cua, 102 Phil. 948, holding that this ruleis applicable to a unilateral promise to sell underArt. 1479, modifying the previous decision inSouth Western Sugar vs. Atlantic Gulf, 97 Phil.249; see also Art. 1319, Civil Code; Rural Bank ofParaaque, Inc., vs. Remolado, 135 SCRA 409;Sanchez vs. Rigos, 45 SCRA 368). The right towithdraw, however, must not be exercisedwhimsically or arbitrarily; otherwise, it could giverise to a damage claim under Article 19 of the Civil

Code which ordains that "every person must, in theexercise of his rights and in the performance of his


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duties, act with justice, give everyone his due, andobserve honesty and good faith."(2) If the period has a separate consideration, acontract of "option" is deemed perfected, and itwould be a breach of that contract to withdraw the

offer during the agreed period. The option,however, is an independent contract by itself, and itis to be distinguished from the projected mainagreement (subject matter of the option) which isobviously yet to be concluded. If, in fact, theoptioner-offeror withdraws the offer before itsacceptance (exercise of the option) by the optionee-offeree, the latter may not sue for specific

performance on the proposed contract ("object" ofthe option) since it has failed to reach its own stageof perfection. The optioner-offeror, however,renders himself liable for damages for breach of theoption. In these cases, care should be taken of thereal nature of the consideration given, for if, in fact,it has been intended to be part of the considerationfor the main contract with a right of withdrawal onthe part of the optionee, the main contract could bedeemed perfected; a similar instance would be an"earnest money" in a contract of sale that canevidence its perfection (Art. 1482, Civil Code).In the law on sales, the so-called "right of firstrefusal" is an innovative juridical relation. Needlessto point out, it cannot be deemed a perfected

contract of sale under Article 1458 of the CivilCode. Neither can the right of first refusal,understood in its normal concept, per se be broughtwithin the purview of an option under the second

paragraph of Article 1479, aforequoted, or possiblyof an offer under Article 1319 9 of the same Code.An option or an offer would require, among otherthings, 10 a clear certainty on both the object andthe cause or consideration of the envisionedcontract. In a right of first refusal, while the objectmight be made determinate, the exercise of the

right, however, would be dependent not only on thegrantor's eventual intention to enter into a binding

juridical relation with another but also on terms,including the price, that obviously are yet to belater firmed up. Prior thereto, it can at best be sodescribed as merely belonging to a class of

preparatory juridical relations governed not bycontracts (since the essential elements to establishthe vinculum juris would still be indefinite andinconclusive) but by, among other laws of generalapplication, the pertinent scattered provisions of the

Civil Code on human conduct.Even on the premise that such right of first refusal

has been decreed under a final judgment, like here,its breach cannot justify correspondingly anissuance of a writ of execution under a judgmentthat merely recognizes its existence, nor would itsanction an action for specific performance without

thereby negating the indispensable element ofconsensuality in the perfection of contracts. 11 It isnot to say, however, that the right of first refusalwould be inconsequential for, such as alreadyintimated above, an unjustified disregard thereof,given, for instance, the circumstances expressed inArticle 19 12 of the Civil Code, can warrant arecovery for damages.The final judgment in Civil Case No. 87-41058, itmust be stressed, has merely accorded a "right offirst refusal" in favor of petitioners. Theconsequence of such a declaration entails no morethan what has heretofore been said. In fine, if, as itis here so conveyed to us, petitioners are aggrieved

by the failure of private respondents to honor theright of first refusal, the remedy is not a writ ofexecution on the judgment, since there is none toexecute, but an action for damages in a properforum for the purpose.Furthermore, whether private respondent BuenRealty Development Corporation, the alleged

purchaser of the property, has acted in good faith or bad faith and whether or not it should, in any case,

be considered bound to respect the registration ofthe lis pendens in Civil Case No. 87-41058 arematters that must be independently addressed inappropriate proceedings. Buen Realty, not having

been impleaded in Civil Case No. 87-41058, cannot be held subject to the writ of execution issued byrespondent Judge, let alone ousted from theownership and possession of the property, withoutfirst being duly afforded its day in court.We are also unable to agree with petitioners thatthe Court of Appeals has erred in holding that the

writ of execution varies the terms of the judgmentin Civil Case No. 87-41058, later affirmed in CA-G.R. CV-21123. The Court of Appeals, in thisregard, has observed:Finally, the questioned writ of execution is invariance with the decision of the trial court asmodified by this Court. As already stated, therewas nothing in said decision 13 that decreed theexecution of a deed of sale between the CuUnjiengs and respondent lessees, or the fixing ofthe price of the sale, or the cancellation of title in

the name of petitioner (Limpin vs. IAC, 147 SCRA516; Pamantasan ng Lungsod ng Maynila vs. IAC,


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143 SCRA 311; De Guzman vs. CA, 137 SCRA730; Pastor vs. CA, 122 SCRA 885).It is likewise quite obvious to us that the decisionin Civil Case No. 87-41058 could not have decreedat the time the execution of any deed of sale

between the Cu Unjiengs and petitioners.

AYSON-SIMON VS. ADAMOS AND FERIAG.R. NO. L-39378 AUGUST 28, 1984

FACTS:Defendants, Nicolas Adamos and Vicente Feria,

purchased two lots forming part of the PiedadEstate inQuezon City, from Juan Porciuncula. Thereafter,thesuccessors-in-interest of the latter filed Civil Case

No. 174for annulment of the sale and the cancellation ofTCT No.69475, which had been issued to defendants-appellants byvirtue of the disputed sale. The Court rendered aDecisionannulling the saleThe said judgment was affirmed

by theAppellate Court and had attained finality.

Meanwhile, during the pendency of the case above,defendants sold the said two lots to PetitionerGenerosaAyson-Simon for Php3,800.00 plus Php800.00 forfacilitating the issuance of the new titles in favor of

petitioner. Due to the failure of the defendants todeliverthe said lots, petitioner filed a civil case for specific

performance. The trial court rendered judgment to petitioners favor. However, defendants could not

deliverthe said lots because the CA had already annulledthe saleof the two lots in Civil Case No. 174. Thus,

petitioner filedanother civil case for the rescission of the contract.

Defendants were contending that petitioner cannotchooseto rescind the contract since petitioner chose forspecific

performance of the obligation. Also, even though petitioner can choose to rescind the contract, it

would not be possible, because it has already prescribed.

ISSUES:1. Can petitioner choose to rescind the contract

even after choosing for the specific performance ofthe obligation?2. Had the option to rescind the contract

prescribed?

RULING:1. Yes. The rule that the injured party canonly choose between fulfillment and rescission oftheobligation, and cannot have both, applies when theobligation is possible of fulfillment. If, as in thiscase, thefulfillment has become impossible, Article 1191allows the injured party to seek rescission evenafter he has chosenfulfillment.

2. No. Article 1191 of the Civil Code providesthat the injured party may also seek rescission, ifthefulfillment should become impossible. The cause ofactionto claim rescission arises when the fulfillment of

theobligation became impossible when the Court ofFirstInstance of Quezon City in Civil Case No. 174declared thesale of the land to defendants by Juan Porciuncula acomplete nullity and ordered the cancellation ofTransferCertificate of Title No. 69475 issued to them. Sincethe twolots sold to plaintiff by defendants form part of the

landinvolved in Civil Case No. 174, it becameimpossible fordefendants to secure and deliver the titles to and the

possession of the lots to plaintiff. But plaintiff hadto waitfor the finality of the decision in Civil Case No.174,According to the certification of the clerk of theCourt ofFirst Instance of Quezon City (Exhibit "E-2"), the

decisionin Civil Case No. 174 became final and executory


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"as perentry of Judgment dated May 3, 1967 of the CourtofAppeals." The action for rescission must becommenced

within four years from that date, May 3, 1967.Since thecomplaint for rescission was filed on August 16,1968, thefour year period within which the action must becommenced had not expired.

ARANETA VS PHIL. SUGAR ESTATESDEVELOPMENT CO.20 SCRA 330

FACTS:J. M. Tuason & Co., Inc. is the owner of a big tractland situated in Quezon City, and on July 28, 1950,[through Gregorio Araneta, Inc.] sold a portionthereof toPhilippine Sugar Estates Development Co., Ltd.The parties stipulated, among in the contract of

purchase and sale with mortgage, that the buyerwill buildon the said parcel land the Sto. Domingo ChurchandConvent while the seller for its part will construct

streets.

But the seller, Gregorio Araneta, Inc., which beganconstructing the streets, is unable to finish theconstruction of the street in the Northeast side

because acertain third-party, by the name of Manuel Abundo,whohas been physically occupying a middle partthereof,refused to vacate the same;

Both buyer and seller know of the presence ofsquatters that may hamper the construction of thestreets

by the seller. On May 7, 1958, Philippine SugarEstatesDevelopment Co., Lt. filed its complaint against J.M.Tuason & Co., Inc., and instance, seeking tocompel thelatter to comply with their obligation, as stipulatedin the

above-mentioned deed of sale, and/or to paydamages in

the event they failed or refused to perform saidobligation.

The lower court and the appellate court ruled infavor of Phil. Sugar estates, and gave defendant

GregorioAraneta, Inc., a period of two (2) years from noticehereof,within which to comply with its obligation underthecontract, Annex "A".

Gregorio Araneta, Inc. resorted to a petition forreview by certiorari to this Court.

ISSUES:Was there a period fixed?

RULING:Yes. The fixing of a period by the courts underArticle 1197 of the Civil Code of the Philippines issought to

be justified on the basis that petitioner (defendant below) placed the absence of a period in issue by pleadingin itsanswer that the contract with respondent PhilippineSugar

Estates Development Co., Ltd. gave petitionerGregorioAraneta, Inc. "reasonable time within which tocomplywith its obligation to construct and complete thestreets."If the contract so provided, then there was a periodfixed, a"reasonable time;" and all that the court shouldhave donewas to determine if that reasonable time had

alreadyelapsed when suit was filed if it had passed, thenthe courtshould declare that petitioner had breached thecontract,Was it within the powers of the lower court to setthe

performance of the obligation in two years time?

NO. Even on the assumption that the court shouldhave

found that no reasonable time or no period at allhad been


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fixed (and the trial court's amended decisionnowheredeclared any such fact) still, the complaint nothavingsought that the Court should set a period, the court

couldnot proceed to do so unless the complaint includedit asfirst amended;Granting, however, that it lay within the Court's

power tofix the period of performance, still the amendeddecision isdefective in that no basis is stated to support theconclusion that the period should be set at twoyears afterfinality of the judgment. The list paragraph ofArticle 1197is clear that the period can not be set arbitrarily.The lawexpressly prescribes that the Court shall determinesuch

period as may under the circumstances been probablycontemplated by the parties.

It must be recalled that Article 1197 of the CivilCode

involves a two-step process. The Court must firstdetermine that "the obligation does not fix a

period" (orthat the period is made to depend upon the will ofthedebtor)," but from the nature and the circumstancesit can

be inferred that a period was intended" (Art. 1197, pars. 1and 2). This preliminary point settled, the Courtmust then

proceed to the second step, and decide what periodwas"probably contemplated by the parties" (Do., par.3). Sothat, ultimately, the Court can not fix a periodmerely

because in its opinion it is or should be reasonable, butmust set the time that the parties are shown to haveintended. As the record stands, the trial Courtappears to

have pulled the two-year period set in its decisionout of

thin air, since no circumstances are mentioned tosupportit. Plainly, this is not warranted by the Civil Code.Does reasonable time mean that the date of

performance

would be indefinite?

The Court of Appeals objected to this conclusionthat itwould render the date of performance indefinite.Yet, thecircumstances admit no other reasonable view; andthisvery indefiniteness is what explains why theagreement didnot specify any exact periods or dates of

performance.

SINGSON ENCARNACION VS. BALDOMAR77 PHIL 470

FACTS:Vicente Singson Encarnacion leased his house toJacinta Baldomar and her son, Lefrando Fernandoupon amonth-to-month basis. After Manila was liberatedin thelast war, Singson Encarnacio notified Baldomar

and herson Fernando to vacate the house because heneeded it forhis office as a result of the destruction of the

buildingwhere he had his office before. Despite thedemand, theBaldomar and Fernando continued their occupancy.

The defense of Baldomar and Fernando was thatthe

contract with Singson Encarnacion authorized themtocontinue occupancy indefinitely while they shouldfaithfully fulfill their obligation with respect to

payment ofrentals. Singson Encarnacion contended that thelease hadalways and since the beginning been upon a month-tomonth

basis.

ISSUE:Was it tenable for Singson Encarnacion to


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discontinuethe lease of Baldomar and her son?

RULING:The continuance and fulfillment of the contract of

leasecannot be made to depend solely and exclusivelyupon thefree and uncontrolled choice of the lessees betweencontinuing paying the rentals or not, completelydeprivingthe owner of all say in the matter. The defense ofBaldomarand Fernando would leave to the sole and exclusivewill ofone of the contracting parties the validity andfulfillment ofthe contract of lease, within the meaning of Article1256 ofthe Civil Code. For if this were allowed, so long asthelessee elected to continue the lease by continuingthe

payment of the rentals the owner would never beable todiscontinue the lease; conversely, although theownershould desire the lease to continue, the lessee could

effectively thwart his purpose if he should prefer toterminate the contract by the simple expedient ofstopping

payment of the rentals.

Ong vs. Century (kf)The Court of First Instance of Iloilo rendered a

judgment in favor of the plaintiff, sentencing thedefendant company to pay him the sum of P45,000,the value of certain policies of fire insurance, withlegal interest thereon from February 28, 1923, until

payment, with the costs. The defendant companyappealed from this judgment, and now insists thatthe same must be modified and that it must be

permitted to rebuild the house burnt, subject to thealignment of the street where the building waserected, and that the appellant be relieved from the

payment of the sum in which said building wasinsured. The appellant contends that under clause 14 of theconditions of the policies, it may rebuild the house

burnt, and although the house may be smaller, yet it

would be sufficient indemnity to the insured for theactual loss suffered by him.

If this clause of the policies is valid, its effect is tomake the obligation of the insurance company analternative one, that is to say, that it may either paythe insured value of house, or rebuild it. It must benoted that in alternative obligations, the debtor, the

insurance company in this case, must notify thecreditor of his election, stating which of the two prestations he is disposed to fulfill, in accordancewith article 1133 of the Civil Code. The object ofthis notice is to give the creditor, that is, the

plaintiff in the instant case, opportunity to expresshis consent, or to impugn the election made by thedebtor, and only after said notice shall the electiontake legal effect when consented by the creditor, orif impugned by the latter, when declared proper bya competent court. In the instance case, the recordshows that the appellant company did not give aformal notice of its election to rebuild, and whilethe witnesses, Cedrun and Cacho, speak of the

proposed reconstruction of the house destroyed, yetthe plaintiff did not give his assent to the

proposition, for the reason that the new housewould be smaller and of materials of lower kindthan those employed in the construction of thehouse destroyed. Upon this point the trial judgevery aptly says in his decision: "It would be animposition unequitable, as well as unjust, to compelthe plaintiff to accept the rebuilding of a smaller

house than the one burnt, with a lower kind ofmaterials than those of said house, without offeringhim an additional indemnity for the difference insize between the two house, which circumstanceswere taken into account when the insurance appliedfor by the plaintiff was accepted by the defendant." Election alleged by the appellant to rebuild thehouse burnt instead of paying the value of theinsurance is improper.

RONQUILLO VS. COURT OF APPEALS

G.R. No. L-55138

FACTS:Petitioner Ernesto V. Ronquillo was one of four (4)defendants for the collection of the sum ofP117,498.98

plus attorney's fees and costs. The other defendantswereOffshore Catertrade, Inc., Johnny Tan and PilarTan.On December 13, 1979, the lower court rendered

its Decision based on the compromise agreement,which


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stipulates, among others, that the Plaintiff agrees toreduceits total claim of P117,498.95 to only P110,000.00anddefendants agree to acknowledge the validity of

such claimand further bind themselves to initially pay out ofthe totalindebtedness of P110,000.00 the amount ofP55,000.00on or before December 24, 1979, the balance ofP55,000.00, defendants individually and jointlyagree to

pay within a period of six months from January1980, or

before June 30, 1980.

Upon the defendants default, herein private respondent (then plaintiff) filed a Motion forExecution.Ronquillo and another defendant Pilar Tan offeredto paytheir shares of the 55,000 already due.

But on January 22, 1980, private respondentAntonio So moved for the reconsideration and/ormodification of the aforesaid Order of executionand

prayed instead for the "execution of the decision initsentirety against all defendants, jointly andseverally.

Petitioner opposed the said motion arguing thatunder the decision of the lower court beingexecuted whichhas already become final, the liability of the four(4)defendants was not expressly declared to be

solidary,consequently each defendant is obliged to pay onlyhis own

pro-rata or 1/4 of the amount due and payable.

ISSUE:What is the nature of the liability of the defendants(including petitioner), was it merely joint, or was itseveralor solidary?

RULING:

SOLIDARY.

In this regard, Article 1207 and 1208 of the CivilCode provides -"Art. 1207. The concurrence of two or more

debtors in one and the same obligation does notimply thateach one of the former has a right to demand, orthat eachone of the latter is bound to render, entirecompliance withthe prestation. There is a solidary liability onlywhen theobligation expressly so states, or when the law orthenature of the obligation requires solidarity.

Art. 1208. If from the law, or the nature or thewording of the obligation to which the precedingarticlerefers the contrary does not appear, the credit ordebt shall

be presumed to be divided into as many equalshares asthere are creditors and debtors, the credits or debts

beingconsidered distinct from one another, subject to theRules

of Court governing the multiplicity of suits."

Clearly then, by the express term of thecompromise agreement, the defendants obligatedthemselves to pay their obligation "individually and

jointly."

The term "individually" has the same meaning as"collectively", "separately", "distinctively",respectively or"severally". An agreement to be "individually

liable"undoubtedly creates a several obligation, and a"severalobligation" is one by which one individual bindshimself to

perform the whole obligation.

The obligation in the case at bar being described as"individually and jointly", the same is thereforeenforceable against one of the numerous obligors.

PNB vs. Independent Planters Association (kf)Appeal by PNB from the Order of the defunct


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Court of First Instance of Manila dismissing PNB'scomplaint against several solidary debtors for thecollection of a sum of money on the ground thatone of the defendants (Ceferino Valencia) diedduring the pendency of the case (i.e., after the

plaintiff had presented its evidence) and thereforethe complaint, being a money claim based oncontract, should be prosecuted in the testate orintestate proceeding for the settlement of the estateof the deceased defendant pursuant to Section 6 ofRule 86 of the Rules of Court which reads: SEC. 6.Solidary obligation of decedent. the obligation ofthe decedent is solidary with another debtor, theclaim shall be filed against the decedent as if hewere the only debtor, without prejudice to the rightof the estate to recover contribution from the otherdebtor. In a joint obligation of the decedent, theclaim shall be confined to the portion belonging tohim. The appellant assails the order of dismissal,invoking its right of recourse against one, some orall of its solidary debtors under Article 1216 of theCivil Code ART. 1216. The creditor may

proceed against any one of the solidary debtors orsome or all of them simultaneously. The demandmade against one of them shall not be an obstacleto those which may subsequently be directedagainst the others, so long as the debt has not been

fully collected. ISSUE: whether in an action for collection of a sumof money based on contract against all the solidarydebtors, the death of one defendant deprives thecourt of jurisdiction to proceed with the caseagainst the surviving defendants.HELD: It is now settled that the quoted Article1216 grants the creditor the substantive right toseek satisfaction of his credit from one, some or allof his solidary debtors, as he deems fit orconvenient for the protection of his interests; and if,

after instituting a collection suit based on contractagainst some or all of them and, during its

pendency, one of the defendants dies, the courtretains jurisdiction to continue the proceedings anddecide the case in respect of the survivingdefendants.Similarly, in PNB vs. Asuncion, A cursory perusalof Section 6, Rule 86 of the Revised Rules of Courtreveals that nothing therein prevents a creditorfrom proceeding against the surviving solidarydebtors. Said provision merely sets up the

procedure in enforcing collection in case a creditorchooses to pursue his claim against the estate of the

deceased solidary, debtor. It is crystal clear that Article 1216 of the New CivilCode is the applicable provision in this matter. Said

provision gives the creditor the right to 'proceedagainst anyone of the solidary debtors or some or

all of them simultaneously.' The choice isundoubtedly left to the solidary, creditor todetermine against whom he will enforce collection.In case of the death of one of the solidary debtors,he (the creditor) may, if he so chooses, proceedagainst the surviving solidary debtors withoutnecessity of filing a claim in the estate of thedeceased debtors. It is not mandatory for him tohave the case dismissed against the survivingdebtors and file its claim in the estate of thedeceased solidary debtor . . . Section 6, Rule 86 of the Revised Rules of Courtcannot be made to prevail over Article 1216 of the

New Civil Code, the former being merely procedural, while the latter, substantive.

IMPERIAL INSURANCE INC. VS. DAVID133 SCRA 317, November 21, 1984

FACTS:Felicisimo V. Reyers and his wife Emilia T. David,herein defendant-appellant, executed 2 indemnityagreements in favor of appellee The Imperial

InsuranceInc, jointly and severally to assure indemnificationof thelatter of whatever liability it may incur inconnection withits posting the security bonds to lift the attachmentsin 2civil cases instituted for the amount of P60, 000andP40,000, for the benefit of Felicisimo V. Reyes.

The spouses jointly and severally, executedanother indemnity agreement in favor of appelleeto assureindemnification of the latter under a homestead

bond forthe sum of P7, 500.00 it had executed jointly andseverallywith them in favor of the Development Bank of thePhilippines.Felicisimo later died and Special Proceedingsentitled In the Matter of the Intestate Estate of

FelicisimoV. Reyes, commenced. His wife qualified and


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took heroath of office as the administratix of the saidintestateestate.

Meanwhile, judgment was rendered in the twoCivil Cases against the spouses. Appellee madedemandson Emilia David to pay the amounts of P60,000and P40,000 under the surety bonds and arrears in

premiumsthereon. A motion to dismiss was filed by theappellant onthe ground the plaintiffs cause of action, if there

be any,have been barred for its failure to file its claimsagainst theestate of the deceased Felicisimo V. Reyes in duetime. Shecontends that appellees claim should have been

presentedaccording to Rule 86 of the Revised Rules of Courtand itsfailure to do so operates to bar its claim forever.After trial, the court rendered judgment againstthe herein appellant Emilia T. David.

ISSUE:Can the creditor choose to proceed against thesurviving solidary debtor instead of bringing anaction inaccordance with Rule 86 (sec. 5) of the RevisedRules ofCourt?

RULING:Yes. Under the law and well-settled jurisprudence,when the obligation is a solidary one, the creditor

may bring his action in toto against any of the debtorsobligatedin solidum. In the case at bar, appellant signed a

joint andseveral obligation with her husband in favor ofhereinappellee; as a consequence, the latter may demandfromeither of them the whole obligation. Asdistinguished from

a joint obligation where each of the debtor isentitled only

for a proportionate part of the debt and the creditorisentitled only to a proportionate part of the credit, inasolidary obligation the creditor may enforce the

entireobligation against one of the debtors. Moreover, inthe caseof Philippine International Surety vs. Gonzales,Where the obligation assumed by several persons is joint andseveral,each of the debtors is answerable for the wholeobligationwith the right to seek contribution from his co-debtors. Article 1216 of the Civil Code also states that,The creditor may proceed against any one of the solidarydebtors orsome or all of them simultaneously. The demandmadeagainst one of them shall not be an obstacle tothosewhich may subsequently be directed against theothers, solong as the debt has not been fully collected.There is

nothing improper, as held in Manila Surety &Fidelity Co.vs. Villarama, in the creditors filing of an actionagainstthe surviving solidary debtor alone, instead ofinstituting a

proceeding for the settlement of the deceaseddebtorwherein his claim would be filed.

Lambert vs. Fox 26 phil 588 (kf)

This is an action brought to recover a penalty prescribed on a contract as punishment for the breach thereof. Early in 1911 the firm known as John R. Edgar &Co., engaged in the retail book and stationery

business, found itself in such condition financiallythat its creditors, including the plaintiff and thedefendant, together with many others, agreed totake over the business, incorporate it and acceptstock therein in payment of their respective credits.A few days after the incorporation was completed

plaintiff and defendant entered into the followingagreement: xxx the undersigned mutually and


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reciprocally agree not to sell, transfer, or otherwisedispose of any part of their present holdings ofstock in said John R. Edgar & Co. Inc., till afterone year from the date hereof. Either partyviolating this agreement shall pay to the other the

sum of one thousand (P1,000) pesos as liquidateddamages, unless previous consent in writing tosuch sale, transfer, or other disposition be obtained.

Notwithstanding this contract the defendant Foxsold his stock in the said corporation to E. C.McCullough of the firm of E. C. McCullough &Co. of Manila, a strong competitor of the said JohnR. Edgar & Co., Inc. The learned trial court decided the case in favor ofthe defendant upon the ground that the intention ofthe parties as it appeared from the contract inquestion was to the effect that the agreementshould be good and continue only until thecorporation reached a sound financial basis, andthat that event having occurred some time beforethe expiration of the year mentioned in the contract,the purpose for which the contract was made andhad been fulfilled and the defendant accordinglydischarged of his obligation thereunder. Thecomplaint was dismissed upon the merits. ISSUE: Did the court erred in the construction ofthe contract?HELD: "As for us, we do not construe or interpret

this law. It does not need it. We apply it. Byapplying the law, we conserve both provisions forthe benefit of litigants. The first and fundamentalduty of courts, in our judgment, is to apply the law.Construction and interpretation come only after ithas been demonstrated that application isimpossible or inadequate without them. They arethe very last functions which a court shouldexercise. The majority of the law need nointerpretation or construction. They require onlyapplication, and if there were more application and

less construction, there would be more stability inthe law, and more people would know what the lawis." In the case at bar the parties expressly stipulatedthat the contract should last one year. No reason isshown for saying that it shall last only nine months.Whatever the object was in specifying the year, itwas their agreement that the contract should last ayear and it was their judgment and conviction thattheir purposes would not be subversed in any lesstime. What reason can give for refusing to follow

the plain words of the men who made the contract?We see none.

In this jurisdiction penalties provided in contractsof this character are enforced . It is the rule that

parties who are competent to contract may makesuch agreements within the limitations of the lawand public policy as they desire, and that the courts

will enforce them according to their terms. (CivilCode, articles 1152, 1153, 1154, and 1155; Fornowvs. Hoffmeister, 6 Phil. Rep., 33; Palacios vs.Municipality of Cavite, 12 Phil. Rep., 140; Gsellvs. Koch, 16 Phil. Rep., 1.) The only caserecognized by the Civil Code in which the court isauthorized to intervene for the purpose of reducinga penalty stipulated in the contract is when the

principal obligation has been partly or irregularlyfulfilled and the court can see that the persondemanding the penalty has received the benefit ofsuch or irregular performance. In such case thecourt is authorized to reduce the penalty to theextent of the benefits received by the partyenforcing the penalty. In this jurisdiction, there is no difference between a

penalty and liquidated damages, so far as legalresults are concerned. In either case the party towhom payment is to be made is entitled to recoverthe sum stipulated without the necessity of provingdamages. Indeed one of the primary purposes infixing a penalty or in liquidating damages, is toavoid such necessity.

The suspension of the power to sell has a beneficial purpose, results in the protection of the corporationas well as of the individual parties to the contract,and is reasonable as to the length of time of thesuspension. We do not here undertake to discussthe limitations to the power to suspend the right ofalienation of stock, limiting ourselves to thestatement that the suspension in this particular caseis legal and valid. The judgment is reversed, the case remanded withinstructions to enter a judgment in favor of the

plaintiff and against the defendant for P1,000, withinterest; without costs in this instance.

ELEIZEGUI VS MANILA LAWN TENNISCLUBG.R. 967FACTS:

This suit concerns the lease of a piece of land for afixed consideration and to endure at the will of thelessee.

By the contract of lease the lessee is expresslyauthorized


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to make improvements upon the land, by erecting buildings of both permanent and temporarycharacter, bymaking fills, laying pipes, and making such otherimprovements as might be considered desirable for

thecomfort and amusement of the members.

With respect to the term of the lease the presentquestion has arisen. In its decision three theorieshave been presented: One which makes theduration depend upon the will of the lessor, who,upon one month's noticegiven to the lessee, may terminate the lease sostipulated;another which, on the contrary, makes it dependentuponthe will of the lessee, as stipulated; and the third, inaccordance with which the right is reversed to thecourts tofix the duration of the term.

The first theory is that which has prevailed in the judgment below, as appears from the language inwhichthe basis of the decision is expressed: "The court isof theopinion that the contract of lease was terminated by

thenotice given by the plaintiff on August 28 of lastyear . . . ."And such is the theory maintained by the plaintiffs,whichexpressly rests upon article 1581 of the Civil Code,the lawwhich was in force at the time the contract wasenteredinto (January 25, 1890). The judge, in giving to thisnotice

the effect of terminating the lease, undoubtedlyconsidersthat it is governed by the article relied upon by the

plaintiffs, which is of the following tenor: "Whenthe termhas not been fixed for the lease, it is understood to

be foryears when an annual rental has been fixed, formonthswhen the rent is monthly. . . ." The second clause ofthe

contract provides as follows: "The rent of the saidland is

fixed at 25 pesos per month."

ISSUE:Was there a conventional term, a duration, agreedupon in the contract in question?

RULING:Yes. The obligations which, with the force of law,the lessors assumed by the contract entered into, sofar as

pertaining to the issues, are the following: "First. . .. Theylease the above-described land to Mr. Williamson,whotakes it on lease . . . for all the time the members ofthesaid club may desire to use it . . . Third. . . . theowners ofthe land undertake to maintain the club as tenant aslongas the latter shall see fit, without altering in theslightestdegree the conditions of this contract, even thoughtheestate be sold."In view of these clauses, it can not be said thatthere is no stipulation with respect to the durationof the

lease, or that, notwithstanding these clauses, article1581,in connection with article 1569, can be applied. Ifthis wereso, it would be necessary to hold that the lessorsspoke invain that their words are to be disregarded a claimwhichcan not be advanced by the plaintiffs nor upheld byanycourt without citing the law which detracts all legal

forcefrom such words or despoils them of their literalsense.

Other Remedy of Exacting Performance

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