Intestate Estate of Presbitero v. CA, G.R.

102432
FACTS:
Ricardo Presbitero entered into two contracts with private respondent Leonardo
Canoso:
1ST CONTRACT: CONFORMITY OF AGREEMENT
Presbitero retained the services of the latter to negotiate with the Land Bank of the
Philippines (LBP) and the Ministry of Agrarian Reform (MAR) in Cotabato City for
the sale of Hacienda Maria which comprises some 270 hectares of land located at
Balogo, Pigcawayan, North Cotabato and which is owned by the former.
To finish the processing and submission of documents within 120 days to Manila, by the
Land Bank of the Philippines and Ministry of Agrarian Reform Cotabato City and shall
be subjected to the delay of the approval of the DBP additional loan negotiated by
petitioner.
2ND CONTRACT: CONTRACT OF SERVICE
Presbitero bound himself to compensate private respondent for his services in making the
necessary preparation and production of necessary documents required
To effect the recovery of the proceeds of the land transfer payment from the Land bank in
an amount equivalent to 25% of the gross total sales of petitioners properties
Before Presbitero's claim with the LBP was approved, a third agreement was entered into with
the private respondent in Bacolod City under which the latter's original fee of 25% was reduced
to 17 1/2%.
When his claim was finally approved, Presbitero sent two (2) letters to the LBP concerning the
release of a part of the proceeds to the private respondent:
(1) 1st Letter: addressed to the LBP President, requested that the amount equivalent to
Seventeen and One Half (17 1/2%) per cent be released in the name of Leonardo
Canoso
(2) 2nd Letter: requested that he (Presbitero) be notified in writing upon receipt and
informed the Land Bank that he will personally release the cash and bonds to Mr.
Canoso due to advances made by him during the processing of the documents.
However, when a part of the proceeds was released, the private respondent was not given his
share as agreed upon. Hence, the latter filed a complaint against Presbitero before the RTC of
Cotabato City which was docketed as Civil Case No. 68 and assigned to Branch 15 of the said
court.
TRIAL COURT handed down a decision in favor of respondent Canoso: ordered
Presbitero to pay respondent the 25% collectible of the defendant from the Land Bank.
COURT OF APPEALS modified the decision by reducing the principal award to the
private respondent from 25% to 17 1/2% of the amount to be collected by Presbitero
from the LBP.

ISSUE:
W/N respondent court erred in finding that Canoso (private respondent) had complied with the
terms and conditions of the contract
HELD:
No. Obligations arising from contracts have the force of law between the contracting
parties and should be complied with in good faith. Unless the stipulations in a contract are
contrary to law, morals, good customs, public order or public policy, the same are binding as
between the parties.
In this case, the contracts entered into by the parties were valid contracts. The two (2)
complementary instruments gave rise to reciprocal obligations which are defined as those
that arise from the same cause, and in which each party is a debtor and a creditor of the other,
such that the obligation of one is dependent upon the obligation of the other.
No error was committed by the appellate and trial courts in concluding that the private
respondent complied with the terms and conditions of the contracts. This is supported by the
evidence, both testimonial and documentary, presented by the private respondent during trial
before the lower court. Moreover, Presbitero's letter to the LBP authorizing the release of a
portion of the proceeds to the private respondent reinforces the latter's position that he had
actually complied with the terms and conditions of the contract.
In the interpretation of contracts, it is the general rule that if the terms thereof are clear as to the
intention of the contracting parties, the literal meaning of the stipulations shall control.
Furthermore, subsequent or contemporaneous acts of the contracting parties shall be considered
in judging their intention. In this case, it was clearly agreed upon by the contracting parties
that the private respondent would undertake, among others, the processing, negotiation and
followup of Presbitero's claim with the LBP within a stipulated period of 120 days.

Art. 1234. If the obligation has been substantially complied with in good faith, the
obligor may recover as though there had been strict and complete compliance with the
obligation, less damages suffered by the oblige.
All they had in mind was that the preparation, processing and filing of the necessary
documents within the 120 days were needed to effect the recovery of proceeds from the
LBP.
To follow-up with Presbiteros claim with the LBP was not among the matters
contemplated by the parties in the said agreement; and even assuming that private
respondent breached the agreement by not fully accomplishing his obligation within the
stipulated period, said breach was but of a slight and casual nature hardly enough to
warrant rescission.

Art. 1235. When the obligee accepts the performance, knowing its incompleteness or
irregularity, and without expressing protest or objection, the obligation is deemed fully
complied with
Presbitero accepted the performance of the obligation as evidenced by the letter to the
LBP authorizing the release of a portion of the proceeds to the private respondent
Finally, to allow Presbitero to rescind the contract would not only violate the wellsettled
rule on mutuality of contracts which provides that the validity or compliance of a
contract cannot be left to the will of one of the contracting parties but would also
work an injustice to the rights of the private respondent who has already performed his
obligation pursuant to their agreement.
Presbitero's correlative obligation must perforce be also fulfilled. There is no evidence to
indicate that the private respondent was remise or negligent in the performance of his
obligation. Neither was there any evidence presented to show that it was through
Presbitero's own efforts that this claim with the LBP was approved.