LEAO v CA

**Reciprocal obligations; delay

FACTS: Fernando, as vendor, and Leao, as vendee executed a contact to sell involving a piece of land.
Leao bound herself to pay to Fernando the sum of P107, 750.00 as total purchase price. The manner of
paying is as follows:
1. 10, 775.00 as down payment paid at the signing
2. Balance of 96, 975.00 shall be paid within a period of 10 years at a monthly amortization of
1,747.30 to begin from December 1985, with interest at 18% per annum based on balances.
The contract also provided a grace period of 1 month within which to make the payments. Should the grace
period expire without the installments being satisfied, the 18% interest will be charged on the unpaid
installments.
Should a period of 90 days elapse from the expiration of the grace period without the
unpaid installment being paid, Fernando as a vendor was authorized to declare the contract
cancelled and the payments made together with all the improvements made on the premises
shall be considered rents paid for use and occupation.
After execution of the contract, Leao made several payments in lump sum and thereafter constructed a
house. The last payment was made on April 1989.
Fernando filed an ejectment case, MTC ordered Leano to vacate and pay compensation for the use and
occupation of the property.
Leano filed with the RTC a complaint for specific performance and assailed the decision of MTC for being
violative of her right to due process.
RTC rendered decision ordering Leao to pay Fernando her outstanding obligations under the contract to
sell. Upon MR by Fernando, RTC ruled that the transaction bet parties was an absolute sale, making
petitioner Leao the owner of the lot upon actual delivery thereof and Fernando cannot recover it unless
the contract is rescinded.
On the issue of delay. RTC held that the plaintiff has clearly defaulted in the payment of the monthly
amortizations due even though the 10 year period has not yet lapsed and that she should be liable for the
payment of interest and penalities in accordance to the stipulations in the contract.
ISSUES : 1. Whether the transaction between the parties is an absolute sale or conditional sale
3. Whether there was a proper cancellation of contract to sell
4. Whether petitioner was in delay in the payment of monthly amortizations.
Conditional Sale. The intention of the parties was to reserve the ownership of the land in the seller until
the buyer has paid the total purchase price. What was transferred was the possession of the property, not
the ownership.
No proper cancellation of contract to sell. RA 6552 (Realty Installment Buyer Protection Act)
provides that If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of
the payment on the property equivalent to 50% of the total payments made, and after 5 yrs of
installments, an additional 5% every year but not to exceed 90%. Provided that the actual cancellation of
the contract shall take place after 30 days from the receipt by the buyer of the notice of cancellation or
the demand for rescission of contract by notarial act and upon full payment of the cash surrender value
to the buyer. As Leao was not given cash surrender value of the payments that she made,
there was still no actual cancellation.
Leao was in delay for not paying the monthly amortization. While the contract provided for a 10
year period within which payment shall be made, the same contract provided that the purchase price shall
be paid in monthly installments. Petitioner cannot ignore the provision on the payment of monthly
installments by claiming that the 10 yr period within which to pay has not lapsed.

Art 1169 provides that in reciprocal obligation, neither party incurs delay if one fails to comply or is not
ready to comply in the proper manner with what is incumbent upon him. From the time one of the parties
fulfills his obligation, delay the other begins.
In the case at bar, Fernando performed his part of the obligation by allowing petitioner to continue in
possession and use of the property. Clearly, when Leao did not pay the monthly installments, she was in
delay and therefore liable for damages.

HEIRS OF BACUS v CA
Luis Bacus leased to PR Duray a parcel of agricultural land (3,002 sqm) for 6 years, ending May 31, 1990.
The contract contained and option to buy clause, under which the lessee had the exclusive and
irrevocable right to but 2k sqm within 5 years after the effectivity of the contract at P200 p/sqm.
Close to the expiration of the contract, Bacus died and thereafter the Duray Sps. Informed Roque Bacus
that theu were willing and ready to purchase the property under the option to buy clause.
On March 30, 1990, due to the refusal of the petitioners to sell, Durays adverse claim was annotated by the
Register of Deeds of Cebu at the back of the TCT covering the segregated 2k sqm portion.
April 5, 1990, Duray filed a complaint for specific performance against the heirs or Luis Bacus with the
Lupon asking that the be allowed to purchase the lot specifically referred to in the contract. Duray
presented a certification from the bank manager of Standard Chartered Bank, Cebu City, addressed to Luis
Bacus stating that arrangements were being made to allow Duray to borrow funds of approx. 700k to
enable him to meet his obligations under the contract with Luis Bacus.

Having failed to reach an agreement in the Lupon, Duray filed a complaint for specific performance with
damages before the RTC paring that Heirs would: (a) execute a deed of sale over the subj property in favor
of PR; (2) receive the purchase price; (3) pay damages.
Heirs alleged that before the death of Bacus, PR conveyed to them the formers lack of interest to exercise
the option due to insufficiency of funds. They further allegd that the bank certification presented cannot be
deemed legal tender (medium of payment recognized by a legal system to be valid for meeting a financial
obligation)
October 30, 1990 (after expiration of contract) PR caused issuances of cashier;s check in the amt of P650,
000.00, payable to the petitioners at anytime upon demand.
The TC ruled in favor of the PR and the appeal of the Petitioners before the CA was dismissed on the
ground that the PR had exercised their option to buy before the expiration of the contract ( May 31, 1990)
and that PR had expressed its readiness to purchase by the cautionary letters and the bank certification
long before the expiration of the contract and also by annotating his adverse claim at the back of the TCT of
the subj property 2 mons before the end of lease contract.
ISSUES: (1) Were the PR required to deliver the money or consign it in the court before the petitioner
executes a deed of transfer?
(2) Did the PR incur delay when they did not deliver the purchase price or consign it in the court before the
expiration of the contract?
HELD:
Obligations under an option to buy are reciprocal obligations. The performance of one obligation
is conditioned on the simultaneous fulfillment of the other obligation. Payment of the purchase price by
the creditor is contingent upon the execution and delivery of deed of sale by the debtor. Only upon the
petitioners actual execution and delivery of the deed of sale were the PR required to pay.

PR did not incur delay. In reciprocal obligation, neither party incurs delay if one fails to comply or is
not ready to comply in the proper manner with what is incumbent upon him. From the time one of the
parties fulfills his obligation, delay the other begins.
In this case, PR as early as March 15, 1990 communicated to the petitioners their intention to buy, but
petitioners had not yet executed a deed of sale or expressed readiness to do so. As there was no compliance
yet of what is incumbent upon petitioners under the option to buy, PR had not incurred in delay when the
cashiers check was issued even after the contract expired (Oct 30, 1990).

MEGAWORL GLOBUS ASIA, INC vs TANESCO

** Reciprocal obligation; demand not necessary; designation of time is a controlling
motive
July 7, 1995. Petitioner and respondent entered into a Contract to Buy and Sell a condo unit at a pre-selling
project in Makati. Purchase prise was P16, 802,037.32 to be paid as follows:
1. P4, 940, 611.19 - by post dated check payable on July 14, 1995;
2. P9,241, 120, 50- through 30 equal monthly installments of P308, 037.35 from Aug 14,
1995 to Jan 14, 1998;
3. Balance of P2, 520, 305.63 on October 31, 1998- the stipulated delivery date of the unit,
provided if construction is completed earlier, Tanesco would pay the balance w/n 7 days
after receipt of notice of turn over.
Sec. 4 of the Contract states that:
**construction shall be completed and delivered not later than October 31, 1998,
with additional grace period of 6 months barring delay if conditions beyond the control of the seller
would prevent delivery.
Tanesco paid all installments leaving the balance of 2mil pending delivery. Megaworld however
failed to deliver even after the grace period had lapsed.
After 3 years, Megaworld, by notice of turnover informed Tanesco that the unit was ready for
inspection preparatory to delivery. Tanesco replied through counsel that in view of Megaworlds
failure to deliver the unit on time, she was demanding the return of the total payments made with
interest of 12% per annum from April 1999. Tanesco pointed out that none of the excepted causes of
delay under Sec. 4 of the contract occurred.
Tanesco filed for recission of contract, refund of payment and damages before the Housing and
Land Use Regulatory Boards (HLURB) Field Office.
Megaworld attributed delay to the 1997 Asian financial crisis which was beyond its control and tha
the default had not set in, Tanesco not having made any judicial or extrajudicial demand for
delivery.
HLURB Arbiter dismissed Tanescos complaint and was ordered to pay the balance of the purchase
price. On appeal, the HLURD Board of Commissioners sustained Arbiters decision on the ground
of laches for failure to demand rescission when the right thereto accrued.
Tanesco appealed to the CA which reversed previous orders and held that under Art 1169, no
judicial or extra judicial demand shall be necessary to put the obligor in default if the contract, as in
herein parties contract, states the date when the obligation should be performed. The delay should
be reckoned from Oct 31, 1998 there being no force majeure to warrant the application of the April
1999 (6 mons grace period) alternative date.
HELD:
Compliance by Megaworld with its obligation is determinative of compliance by Tanesco with her
obligation to pay the balance of the purchase price. Megaworld having failed to comply, it is liable
therefor.

That the notice of turnover preceded Tanescos demand for refund does not abate her cause. For
demand would have been useless. Megaworld admittedly having failed its obligation to deliver
unit on agreed date.
The Court cannot generalize the 1997 Asian financial crisis to be unforseeable and beyond the
control of a business corp. A real estate enterprise engaged in pre-selling of condo units is
concededly a master in projections on commodities and currency movements, as well as business
risks. The fluctuating movement of the Phil Peso in the foreign market is an everyday occurrence,
hence not an instance of caso fortuito. Megaworlds excuse for its delay does not thus lie.
Tanescos claim not barred by laches. Laches being a creation of equity, its application is
controlled by equitable considerations. It bears noting that Tanesco has religiously complied with
her bligations in paying the monthly installments, and it was Megaworld who failed to comply with
its obligation. A circumspect weighing of equitable considerations thus titls the scale of justice in
favor of Tanesco.
Tanesco is entitled to be reimbursed the total amount paid pursuant to Sec 23 of PD 957.

GENERAL MILLING CORP v RAMOS

Requisites of finding default: 1) obligation is demandable 2) debtor delays
performance 3) creditor judicially or extra-judicially demands performance
GMC entered a GROWERS CONTRACT with Sps. Ramos under which, GMC was to supply broiler
chickens for the spouses to raise on their land. The contract was accompanied by a Deed of Real
Estate Mortgage over a piece of real property upon which the Sps conjugal home was built. The Sps
further agreed to put up a surety bond at the rate of P20,000 per 1,000 chicks delivered. The Deed
of Real Estate Mortgage extended to Sps. Ramos a max credit limit of P215k payable wthin an
indefinite period with an interest of 12% per annum.
Sps Ramos were unable to settle their account with GMC, alleging that they suffered business losses
because of the negligence of GMC and its violation of the growers contract.
March 31, 1997, counsel for GMC notified Sps. Ramos that GMC would institute foreclosure
proceedings on their mortgage property.
May 7, 1997, GMC filed a petition for Extra-judicial Foreclosure of Mortgage. Subj property was
subsequently foreclosed and sold at a public auction to GMC after required notice and publication.
It was foreclosed for P935,882,075 representing losses on chickens and feeds exclusive of interest.
March 3, 2000, Sps. Ramos filed for Annulment / Declaration of nullity of Extrajudicial foreclosure
on the ground of non-compliance with the required posting and publication. It was alleged that the
deed of Real Estate Mortgage had no fixed term and that GMC did not notify them of the
foreclosure.
Ruling of TC. Holding in favor of Sps Ramos, TC ruled that since the duration of the term was not
fixed therefore depend exclusively upon the will of the debtor-spouse, the obligation is not due and
payable until an action is commenced by the mortgagee (GMC) against the mortgagor (Sps. Ramos)
for having the court fix term when the instrument is payable. Therefore GMCs extrajudicial
foreclosure was premature because the Spss obligation under their contract is not yet due.
Ruling of CA. CA sustained decision on TC but on a different ground, CA ruled that GMCs action
against SPS Ramos was premature, as they were not in default when the action was filed on May 7,
1997. GMC made no demand to SPS Ramos for the full payment of their obligation, that the letters
presented by GMC as evidence did not demand but only requested Sps. Ramos to go to the Office
of GMC to discuss the settlement of their account.
ISSUE: Was there sufficient demand?

HELD: GMC claims that the March 31, 1997 is akin to a demand, the Court disagrees.
There are 3 requisites necessary for a finding of default:
1) obligation is demandable
2) debtor delays performance
3) creditor judicially or extra-judicially demands performance
Accdg to CA, GMC did not make a demand but merely requested the Sps to go to their office to
discuss the settlement of their account, in spite of demand GMC instituted the foreclosure. Neither
was there any provision in the Deed allowing GMC to extra-judicially foreclose without the need of
demand.
Indeed Art 1169 requires:
Art. 1169. Those obliged to deliver or to do something incur in delay from the time the
obligee judicially or extrajudicially demands from them the fulfillment of their obligation.
However, the demand by the creditor shall not be necessary in order that delay may exist:
(1) When the obligation or the law expressly so declares;
As the contract in the instant case carries no such provision on demand not being necessary for delay
to exist, GMC should have first made a demand on the spouses before proceeding to foreclose the
real estate mortgage.

CRUZ v GRUSPE
The claim arose from a vehicular accident when the minibus owned by Cruz collided with Gruspes
car , leaving the latters car totally wrecked. The next day, Cruz, along with Ibias (brgy. Official)
whnet to Gruspes office and executed a Joint Affidavit of Undertaking promising to replace
Gruspes car or pay for its value (350,000) in 20 days or until Nov. 15, 1999, with an interest of 12%
p/mon after such date until fully paid.
When Cruz and Ibis failed to comply, Gruspe filed a complaint for collection of sum of money on
November 19, 1999 before the RTC. Petitioners alleged that they were forced and deceived by
Gruspe- a lawyer to affix their signature on the JAU in order to release the minibus.
RTC ruled in favor of Gruspe and ordered petitioners to pay the former 220,000 + 15% p/a from
November 15, 1999. CA affirmed but reduced interest rate to 12% p/a. CA declared that the JAU
was a contract, and said that petitioners failed to present evidence to support contention of vitiated
consent.
Present case. Petitioners contend that the JAU was not a contract therefore cannot be a source of
obligation. That an affidavits purpose is to simply attest to the facts that are within his knowledge
while a contract requires a meeting of the minds bet 2 contracting parties.
Also, they claim that prior to the filing of the complaint on Nov 19,1999, Gruspe did not make any
demand upon them. Hence, pursuant to Art 1169, they could not be considered in default, that
without this demand Gruspe could not yet take any action.
ISSUES:
HELD: A simple reading of the JAU readily discloses that it contains stipulations characteristic of a
contract, it contained a stipulation where petitioners promised to replace Gruspes car or pay for its
value after 20 days, and a 12% interest rate shall be imposed for any delayed payment.

There is no merit to he allegation of vitiated consent. Petitioners admit to the genuiness and due
execution of the JAU when they said they signed it to release the minibus. Consent was present
although they may have given it grudgingly.
Computation of Interest rate. In the absence of a finding the lower court that Gruspe made a
demand prior to the filing of the complaint, the interest cannot be computed from Nov 15, 1997
because until a demand has been made, petitioners could not be said to be in default. The demand
could be considered to have been made upon the filing of the complaint on November 19, 1999 and it
is only from this date that the interest be computed.
The Court notes that the interest rate was imposed by the CA on a rate per annum, instead of the rate
per month basis as provided in the JAU without explaining the reason. Neitherparty questions the
change. Nonetheless, the Court affirms the change finding the interest rate agreed upon in the JAU
excessive.