KHE HONG CHENG V CA, 355 SCRA 701 (2001) ISSUE: whether or not the action to rescind the
r not the action to rescind the donations has already prescribed.
FACTS: Petitioner Khe Hong Cheng, alias Felix Khe, is the owner of Butuan
Shipping Lines. It appears that on or about October 4, 1985, the Philippine
Agricultural Trading Corporation shipped on board the vessel M/V PRINCE ERIC,
owned by petitioner Khe Hong Cheng, 3,400 bags of copra at Masbate, Masbate,
for delivery to Dipolog City, Zamboanga del Norte. The said shipment of copra was
covered by a marine insurance policy issued by American Home Insurance
Company (respondent Philam's assured). M/V PRINCE ERIC, however, sank
somewhere between Negros Island and Northeastern Mindanao, resulting in the
total loss of the shipment. Because of the loss, the insurer, American Home, paid
the amount of P354,000.00 (the value of the copra) to the consignee.
Having been subrogated into the rights of the consignee, American Home
instituted Civil Case No. 13357 in the Regional Trial Court (RTC) of Makati, Branch
147 to recover the money paid to the consignee, based on breach of contract of
carriage. While the case was still pending, or on December 20, 1989, petitioner
Khe Hong Cheng executed deeds of donations of parcels of land in favor of his
children, herein co-petitioners Sandra Joy and Ray Steven. The parcel of land with
an area of 1,000 square meters covered by Transfer Certificate of Title (TCT) No.
T-3816 was donated to Ray Steven. Petitioner Khe Hong Cheng likewise donated
in favor of Sandra Joy two (2) parcels of land located in Butuan City, covered by
TCT No. RT-12838. On the basis of said deeds, TCT No. T-3816 was cancelled
and in lieu thereof, TCT No. T-5072 was issued in favor of Ray Steven and TCT
No. RT-12838 was cancelled and in lieu thereof, TCT No. RT-21054 was issued in
the name of Sandra Joy. After the said decision became final and executory, a writ
of execution was forthwith issued on September 14, 1995. Said writ of execution,
however, was not served. An alias writ of execution was, thereafter, applied for
and granted in October 1996. Despite earnest efforts, the sheriff found no property
under the name of Butuan Shipping Lines and/or petitioner Khe Hong Cheng to
levy or garnish for the satisfaction of the trial court's decision. When the sheriff,
accompanied by counsel of respondent Philam, went to Butuan City on January
17, 1997, to enforce the alias writ of execution, they discovered that petitioner Khe
Hong Cheng no longer had any property and that he had conveyed the subject
properties to his children.
On February 25, 1997, respondent Philam filed a complaint with the Regional Trial
Court of Makati City, Branch 147, for the rescission of the deeds of donation
executed by petitioner Khe Hong Cheng in favor of his children and for the
nullification of their titles (Civil Case No. 97-415). Respondent Philam alleged, inter
alia, that petitioner Khe Hong Cheng executed the aforesaid deeds in fraud of his
creditors, including respondent Philam.
RTC: Denied petitioners motion to dismiss as Philam lifes claim has not
prescribed
CA: Affirms RTC infavor of Philam Life
Under accion pauliana to rescind or annul the donations made by petitioner Khe
Hong Cheng allegedly in fraud of creditors. When did the four (4) year prescriptive
period as provided for in Article 1389 of the Civil Code for respondent Philam to file
its action for rescission of the subject deeds of donation commence to run?
HELD: Petition denied. The action to claim rescission must be commenced within
four years. Since this provision of law is silent as to when the prescriptive period
would commence, the general rule, i.e, from the moment the cause of action
accrues. It is thus apparent that an action to rescind or an accion pauliana must be
of last resort, availed of only after all other legal remedies have been exhausted
and have been proven futile. For an accion pauliana to accrue, the following
requisites must concur:
1) That the plaintiff asking for rescission has a credit prior to the alienation,
although demandable later;
2) That the debtor has made a subsequent contract conveying a
patrimonial benefit to a third person;
3) That the creditor has no other legal remedy to satisfy his claim, but
would benefit by rescission of the conveyance to the third person;
4) That the act being impugned is fraudulent;
5) That the third person who received the property conveyed, if by onerous
title, has been an accomplice in the fraud.
An accion pauliana accrues only when the creditor discovers that he has no other
legal remedy for the satisfaction of his claim against the debtor other than an
accion pauliana. The accion pauliana is an action of a last resort. For as long as
the creditor still has a remedy at law for the enforcement of his claim against the
debtor, the creditor will not have any cause of action against the creditor for
rescission of the contracts entered into by and between the debtor and another
person or persons. Indeed, an accion pauliana presupposes a judgment and the
issuance by the trial court of a writ of execution for the satisfaction of the judgment
and the failure of the Sheriff to enforce and satisfy the judgment of the court. It
presupposes that the creditor has exhausted the property of the debtor. The date
of the decision of the trial court against the debtor is immaterial. What is important
is that the credit of the plaintiff antedates that of the fraudulent alienation by the
debtor of his property. After all, the decision of the trial court against the debtor will
retroact to the time when the debtor became indebted to the creditor.
Respondent Philam only learned about the unlawful conveyances made by
petitioner Khe Hong Cheng in January 1997 when its counsel accompanied the
sheriff to Butuan City to attach the properties of petitioner Khe Hong Cheng. There
they found that he no longer had any properties in his name. It was only then that
respondent Philam's action for rescission of the deeds of donation accrued
because then it could be said that respondent Philam had exhausted all legal
means to satisfy the trial court's judgment in its favor. Since respondent Philam
filed its complaint for accion pauliana against petitioners on February 25, 1997,
barely a month from its discovery that petitioner Khe Hong Cheng had no other
property to satisfy the judgment award against him, its action for rescission of the
subject deeds clearly had not yet prescribed.
ACCION PAULIANA that the creditor has no other legal remedy to satisfy his
claim against his debtor
SIGUAN VS. LIM G.R NO. 134685
FACTS: Respondent Rosa was charged by petitioner with two counts of violation
of Batas Pambansa Blg. 22 for issuing checks, in the total amount of P541,668,
dishonored by the bank for the reason of "account closed." The conviction was
affirmed by the Court of Appeals and is now pending review with the SC.
Petitioner, thereafter filed action pauliana against respondent Rosa to rescind, the
notarized deed of donation over 4 parcels of land Rosa executed in favor of her
three children, the other respondents. Petitioner claimed that there was fraudulent
transfer leaving no sufficient properties to pay her obligations with her and that the
deed of donation was antedated. During the hearing of the case, petitioner
presented evidence on Rosa's civil liability to one Victoria Suarez in the amount of
P169,000. For her defense, Rosa denied liability and the alleged antedating of the
deed. The trial court rendered judgment in favor of petitioner, ordered the
rescission of the contract and declared the titles in the name of Rosa's children null
and void. On appeal, the Court of Appeals reversed the trial court and dismissed
the action pauliana. It ruled that the deed of donation was not fraudulent transfer
as respondent debtor Rosa still owns 4 parcels of land sufficient to cover her debts
to petitioner, that the notarized deed of donation, a public document in the absence
of convincing evidence that the notary and the parties antedated the instrument, is
evidence of the fact that gave rise to its execution and of the date thereof.
Petitioner's motion for reconsideration having been denied; hence, the petition.
ISSUE: Whether or not the deed of donation was entered into fraud of the creditors
of respondent Rosa Lim?
HELD: No. Petition is hereby DISMISSED and the challenged decision of the
Court of Appeals is AFFIRMED in toto
RATIO: Article 1381 of the Civil Code enumerates the contracts which are
rescissible, and among them are "those contracts undertaken in fraud of creditors
when the latter cannot in any other manner collect the claims due them." The
action to rescind contracts in fraud of creditors is known as accion pauliana. For
this action to prosper, the following requisites must be present: (1) the plaintiff
asking for rescission has a credit prior to the alienation, although demandable
later; (2) the debtor has made a subsequent contract conveying a patrimonial
benefit to a third person; (3) the creditor has no other legal remedy to satisfy his
claim; 13 (4) the act being impugned is fraudulent; 14 (5) the third person who
received the property conveyed, if it is by onerous title, has been an accomplice in
the fraud.
In the instant case, the alleged debt of LIM in favor of petitioner was incurred in
August 1990, while the deed of donation was purportedly executed on 10 August
1989. We are not convinced with the allegation of the petitioner that the questioned
deed was antedated to make it appear that it was made prior to petitioner's credit.
the fact that the questioned Deed was registered only on 2 July 1991 is not enough
to overcome the presumption as to the truthfulness of the statement of the date in
the questioned deed, which is 10 August 1989. Petitioner's claim against LIM was
constituted only in August 1990, or a year after the questioned alienation. Thus,
the first two requisites for the rescission of contracts are absent. Even assuming
arguendo that petitioner became a creditor of LIM prior to the celebration of the
contract of donation, still her action for rescission would not fare well because the
third requisite was not met. Under Article 1381 of the Civil Code, contracts entered
into in fraud of creditors may be rescinded only when the creditors cannot in any
manner collect the claims due them. Also, Article 1383 of the same Code provides
that the action for rescission is but a subsidiary remedy which cannot be instituted
except when the party suffering damage has no other legal means to obtain
reparation for the same. The term "subsidiary remedy" has been defined as "the
exhaustion of all remedies by the prejudiced creditor to collect claims due him
before rescission is resorted to." 19 It is, therefore, essential that the party asking
for rescission prove that he has exhausted all other legal means to obtain
satisfaction of his claim. 20 Petitioner neither alleged nor proved that she did so.
On this score, her action for the rescission of the questioned deed is not
maintainable even if the fraud charged actually did exist." The fourth requisite for
an accion pauliana to prosper is not present either. As earlier discussed,
petitioner's alleged credit existed only a year after the deed of donation was
executed. She cannot, therefore, be said to have been prejudiced or defrauded by
such alienation. Respondent Rosa has 4 other real properties, hence, the
presumption of fraud will not come into play. Lastly, it should be noted that the
complainant in that case, Victoria Suarez, albeit a creditor prior to the questioned
alienation, is not a party to this accion pauliana. Article 1384 of the Civil Code
provides that rescission shall only be to the extent necessary to cover the
damages caused. Under this Article, only the creditor who brought the action for
rescission can benefit from the rescission; those who are strangers to the action
cannot benefit from its effects. 31 And the revocation is only to the extent of the
plaintiff creditor's unsatisfied credit; as to the excess, the alienation is maintained.
32 Thus, petitioner cannot invoke the credit of Suarez to justify rescission of the
subject deed of donation.
ANCHOR SAVINGS BNK VS. FURIGAY G.R NO. 191178
FACTS: On April 21, 1999, ASB filed a verified complaint for sum of money and
damages with application for replevin against Ciudad Transport Services, Inc.
(CTS), its president, respondent Henry H. Furigay; his wife, respondent Gelinda C.
Furigay; and a "John Doe." On November 7, 2003, the RTC rendered its Decision
5 in favor of ASB. While Civil Case No. 99-865 was pending, respondent spouses
donated their registered properties in Alaminos, Pangasinan, to their minor
children, respondents Hegem G. Furigay and Herriette C. Furigay. As a result,
TCTs were issued in the names of Hegem and Herriette Furigay. Claiming that the
donation of these properties was made in fraud of creditors, ASB filed a Complaint
for Rescission of Deed of Donation, Title and Damages 11 against the respondent
spouses and their children. Instead of filing an answer, respondents sought the
dismissal of the complaint, principally arguing that the RTC failed to acquire
jurisdiction over their persons as well as over the subject matter in view of the
failure of the ASB to serve the summons properly and to pay the necessary legal
fees. RTC issued an Order denying the motion to dismiss. Respondents sought
reconsideration of the Order adding that the ASB's action for rescission had
already prescribed. Upon filing of ASB's opposition to the motion for
reconsideration, the RTC reconsidered its earlier pronouncement and dismissed
the complaint for failure of ASB to pay the correct docket fees and for prescription.
On the issue of prescription, the RTC ruled that the action for rescission had
already prescribed. It stated that an action for rescission grounded on fraud should
be filed within four (4) years from the discovery of fraud. ASB filed the action for
rescission only on October 14, 2005 or after four (4) years from the time the Deed
of Donation was registered in the Register of Deeds of Alaminos, Pangasinan, on
April 4, 2001. The four-year prescriptive period should be reckoned from the date
of registration of the deed of donation and not from the date of the actual discovery
of the registration of the deeds of donation because registration is considered
notice to the whole world. On the issue of prescription, however, the CA saw things
differently. Considering the subsidiary nature of an action for rescission, the CA
found that the action of ASB had not yet prescribed, but was premature. The CA
noted that ASB failed to allege in its complaint that it had resorted to all legal
remedies to obtain satisfaction of its claim.
ISSUE: Whether the CA was correct in dismissing ASB's complaint on the ground
that the action against respondents was premature;
HELD: YES, In relation to an action for rescission, it should be noted that the
remedy of rescission is subsidiary in nature; it cannot be instituted except when the
party suffering damage has no other legal means to obtain reparation for the
same. Article 1177 of the New Civil Code provides:
The creditors, after having pursued the property in possession of the
debtor to satisfy their claims, may exercise all the rights and bring all the
actions of the latter for the same purpose, save those which are inherent in
his person; they may also impugn the actions which the debtor may have
done to defraud them.
Consequently, following the subsidiary nature of the remedy of rescission, a
creditor would have a cause of action to bring an action for rescission, if it is
alleged that the following successive measures have already been taken: (1)
exhaust the properties of the debtor through levying by attachment and execution
upon all the property of the debtor, except such as are exempt by law from
execution; (2) exercise all the rights and actions of the debtor, save those personal
to him (accion subrogatoria); and (3) seek rescission of the contracts executed by
the debtor in fraud of their rights (accion pauliana).
With respect to an accion pauliana, it is required that the ultimate facts constituting
the following requisites must all be alleged in the complaint:
1) That the plaintiff asking for rescission, has credit prior to the alienation,
although demandable later;
2) That the debtor has made a subsequent contract conveying a
patrimonial benefit to a third person;
3) That the creditor has no other legal remedy to satisfy his claim, but
would benefit by rescission of the conveyance to the third person;
4) That act being impugned is fraudulent; and
5) That the third person who received the property conveyed, if by onerous
title, has been an accomplice in the fraud.
A cursory reading of the allegations of ASB's complaint would show that it
failed to allege the ultimate facts constituting its cause of action and the
prerequisites that must be complied before the same may be instituted. ASB,
without availing of the first and second remedies, that is, exhausting the
properties of CTS, Henry H. Furigay and Genilda C. Furigay or their
transmissible rights and actions, simply undertook the third measure and
filed an action for annulment of the donation. This cannot be done.
On the issue of presciption, the four-year prescriptive period commences to
run neither from the date of the registration of the deed sought to be
rescinded nor from the date the trial court rendered its decision but from the
day it has become clear that there are no other legal remedies by which the
creditor can satisfy his claims.
III. KINDS OF OBLIGATIONS
CONDITIONAL OBLIGATIONS
GAITE VS. FONACIER G.R NO. 11827
FACTS: Defendant-appellant Isabelo Fonacier was the owner and/or holder, either
by himself or in a representative capacity, of 11 iron lode mineral claims, known as
the Dawahan Group. By a "Deed of Assignment" dated September 29, 1952,
Fonacier constituted and appointed plaintiff-appellee Fernando A. Gaite as his true
and lawful attorney-in-fact to enter into a contract with any individual or juridical
person for the exploration and development of the mining claims. Gaite in turn
executed a general assignment conveying the development and exploitation of
said mining claims unto the Larap Iron Mines, a single proprietorship owned solely
by and belonging to him, on the same royalty basis. Thereafter Gaite embarked
upon the development and exploitation of the mining claims in question, opening
and paving roads within and outside their boundaries, making other improvements
and installing facilities therein for use in the development of the mines, and in time
extracted therefrom what he claimed and estimated to be approximately 24,000
metric tons of iron ore. For some reason or another, Isabelo Fonacier decided to
revoke the authority granted by him to Gaite to exploit and develop the mining
claims in question, and Gaite assented thereto subject to certain conditions. As a
result, a document entitled "Revocation of Power of Attorney and Contract" was
executed on December 8, 1954, wherein Gaite transferred to Fonacier, for the
consideration of P20,000, plus 10% of the royalties that Fonacier would receive
from the mining claims, all his rights and interests on all the roads, improvements,
and facilities in or outside said claims, the right to use the business name "Larap
Iron Mines" and its goodwill, and all the records and documents relative to the
mines. In the same document, Gaite transferred to Fonacier all his rights and
interests over the "24,000 tons of iron ore, more or less" that the former had
already extracted from the mineral claims, in consideration of the sum of P75,000,
P10,000, of which was paid upon the signing of the agreement, and The balance
of SIXTY-FIVE "THOUSAND PESOS (P65,000) will be paid from and out of the
first letter of credit covering the first shipment of iron ores and or the first
amount derived from the local sale of iron ore made by the Larap Mines &
Smelting Co., Inc., its assigns, administrators, or successors in interests. To
secure the payment of the said balance of P65,000.00, Fonacier executed in
favor of Gaite a surety bond with the Far Eastern Surety and Insurance Co.
but it provided that the liability of the surety company would attach only
when there had been an actual sale of iron ore by the Larap Mines &
Smelting Co. for an amount of not less than P65,000, and that, furthermore,
the liability of said surety company would automatically expire on December
8, 1955. Both bonds were attached to the "Revocation of Power of Attorney
and Contract", Exhibit "A" and made integral parts thereof. Thereafter, when
the bond expired with respect to the Far Eastern Surety and Insurance Company,
no sale of the approximately 24,000 tons of iron ore had been made by the Larap
Mines & Smelting Co., Inc., nor had the 65,000 balance of the price of said ore
been paid to Gaite by Fonacier and his sureties. Whereupon, Gaite demanded
from Fonacier and his sureties payment of said amount, on the theory that they
had lost every right to make use of the period given them when their bond,
automatically expired . And when Fonacier and his sureties failed to pay as
demanded by Gaite, the latter filed the present complaint against them in the Court
of First Instance of Manila for the payment of the P65,000 balance of the price of
the ore, consequential damages, and attorney's fees. All the defendants except
Francisco Dante set up the uniform defense that the obligation sued upon by Gaite
was subject to a condition that the amount of P65,000 would be payable out of the
first letter of credit covering the first shipment of iron ore and/or the first amount
derived from the local sale of the iron ore by the Larap Mines & Smelting Co., Inc.;
that up to the time of the filing of the complaint, no sale of the iron ore had been
made, hence the condition had not yet been fulfilled; and that consequently, the
obligation was not yet due and demandable. Defendant Fonacier also contended
that only 7,573 tons of the estimated 24,000 tons of iron ore sold to him by Gaite
was actually delivered, and counterclaimed for more than P200,000 damages.
Trial Court: the lower court held that the obligation of defendants to pay plaintiff the
P65,000 balance of the price of the approximately 24,000 tons of iron ore was one
with a term: i.e., that it would be paid upon the sale of sufficient iron ore by
defendants, such sale to be effected within one year or before December 8, 1955;
that the giving of security was a condition precedent to Gaite's giving of credit to
defendants; and that as the latter failed to put up a good and sufficient security in
lieu of the Far Eastern Surety bond (Exhibit "B") which expired on December 8,
1955, the obligation became due and
demandable under Article 1198 of the New Civil Code.
ISSUE: Whether the obligation of appellant Fonacier to pay appellee Gaite the
P65,000 (balance of the price of the iron ore in question) is one with a period or
term and not one with a suspensive condition, and that the term expired on
December 8, 1955
HELD: Yes. We find the court below to be legally correct in holding that the
shipment or local sale of the iron ore is not a condition precedent (or suspensive)
to the payment of the balance of P65,000, but was only a suspensive period or
term. What characterizes a conditional obligation is the fact that its efficacy or
obligatory force (as distinguished from its demandability) is subordinated to the
happening of a future and uncertain event; so that if the suspensive condition does
not take place, the parties would stand as if the conditional obligation had never
existed. We agree with the court below that the appellants have forfeited the right
to compel Gaite to wait for the sale of the ore before receiving payment of the
balance of P65,000, because of their failure to renew the bond of the Far Eastern
Surety Company or else replace it with an equivalent guarantee. The expiration of
the bonding company's undertaking on December 8, 1955 substantially reduced
the security of the vendor's rights as creditor for the unpaid P65,000, a security
that Gaite considered essential and upon which he had insisted when he executed
the deed of sale of the ore to Fonacier. The case squarely comes under
paragraphs 2 and 3 of Article 1198 of the Civil Code of the Philippines:
(1) . . .
(2) When he does not furnish to the creditor the guaranties or securities
which he has promised.
(3) When by his own acts he has impaired said guaranties or securities
after their establishment, and when through fortuitous event they
disappear, unless he immediately gives new ones equally satisfactory."

Appellants' failure to renew or extend the surety company's bond upon its
expiration plainly impaired the securities given to the creditor (appellee Gaite),
unless immediately renewed or replaced. There is no merit in appellants' argument
that Gaite's acceptance of the surety company's bond with full knowledge that on
its face it would automatically expire within one year was a waiver of its renewal
after the expiration date. No such waiver could have been intended, for Gaite
stood to lose and had nothing to gain thereby; and if there was any, it could be
rationally explained only if the appellants had agreed to sell the ore and pay Gaite
before the surety company's bond expired on December 8, 1955. But in the latter
case the defendants- appellants' obligation to pay became absolute after one year
from the transfer of the ore to Fonacier by virtue of the deed.
GONZALES V HEIRS OF THOMAS CRUZ, 314 SCRA 585 (1999)
PETITIONER: Felix Gonzales - tenant
RESPONDENT: Heirs of Thomas Cruz lessor
FACTS: On December 1, 1983, Paula Ano Cruz, together with the respondents,
entered into a contract of lease/purchase with the petitioner, of a half-portion of a
parcel of land containing an area of 12 hectares, more or less, and an accretion of
2 hectares more or less, situated in Rodriguez town, Province of Rizal, and
covered by Transfer Certificate of Title 12111 as stipulated therein.
Petitioner paid the P2,500.00 per hectare or P15,000.00 annual rental on the half
portion of the property covered by said title in accordance with the second
provision of the contract of lease purchase and thereafter took possession of the
property installing Jesus Sambrano as his caretaker. Petitioner did not, however,
exercise his option to purchase the property immediately after the expiration of the
one-year lease on November 30, 1984, but remained in possession of the property
without paying the purchase price provided in the contract and without paying any
further rentals thereon. Due to this non- payment, demand letters were sent to
petitioner demanding him to vacate the premises, but the petitioner refused to
vacate and continued possession thereof. Paula Ano Cruz died the following day.
Alleging breach of the provisions of the contract of Lease/Purchase, the
respondents filed a complaint for recovery of possession of the property with
damages.
RTC: respondents cannot terminate the contract of lease due to their failure to
notify the petitioner in due time of their intention to that effect. Nor can they rescind
the contract of purchase considering that Paragraph 9 of the contract stated that
the lessors-plaintiffs shall obtain a Transfer Certificate of Title in the name of the
lessee within 4 years before a new contract is to be entered into under the same
terms and conditions as the original Contract of Lease/Purchase and this condition
precedent has not yet been fulfilled by the respondents.
CA reversed the decision of RTC and ruled that the transfer of title in the
appellee's name cannot be interpreted as a condition precedent to the payment of
the agreed purchase price because such interpretation not only run counter to the
explicit provisions of the contract but also was contrary to the normal course of
things anent the sale of real property. Hence, the petition.
ISSUE: WON the plaintiff rescind or terminate the Contract of Lease after the one-
year period? NO.
HELD: There can be no rescission (or more properly, resolution) of an obligation
as yet non-existent, because the suspensive condition has not happened.
RATIO: The Court found the petition meritorious. The Court ruled that the
respondents cannot rescind the contract because they have not caused the
transfer of the TCT to their names, which is a condition precedent to petitioner's
obligations. Particularly, the ninth provision was intended to ensure that
respondents would have a valid title over the specific portion they were selling to
petitioner. Only after the title is assured may the obligation to buy the land and to
pay the sums stated in the contract be enforced within the period stipulated. Verily,
the petitioner's obligation to purchase has not yet ripened and cannot be enforced
until and unless respondents can prove their title to the property subject of the
contract. Accordingly, the petition was granted and the appealed decision was
reversed and set aside.
Condition has been defined as "every future and uncertain event upon which an
obligation or provision is made to depend. It is a future and uncertain event upon
which the acquisition or resolution of rights is made to depend by those who
execute the juridical act." Without it, the sale of the property under the Contract
cannot be perfected, and petitioner cannot be obliged to purchase the property.
"When the consent of a party to a contract is given subject to the fulfillment of a
suspensive condition, the contract is not perfected unless that condition is first
complied with."
The Court has held that "[w]hen the obligation assumed by a party to a contract is
expressly subjected to a condition, the obligation cannot be enforced against him
unless the condition is complied with." Furthermore, "[t]he obligatory force of a
conditional obligation is subordinated to the happening of a future and uncertain
event, so that if that event does not take place, the parties would stand as if the
conditional obligation had never existed." In this case, the obligation of the
petitioner to buy the land cannot be enforced unless respondents comply with the
suspensive condition that they acquire first a separate and distinct TCT in their
names. The suspensive condition not having been fulfilled, then the obligation of
the petitioner to purchase the land has not arisen.
DIRECT FUNDERS HOLDING CORP. V. LAVIA, 373 SCRA 645
Petitioner: Direct Funders Holding Corp.
Respondent: RTC Judge Lavina; Kambiak Chan Jr.
FACTS: Direct Funders Holding Corporation led an action for annulment of
documents, reconveyance, recovery of possession, damages with application for
the issuance of a writ of preliminary mandatory injunction and temporary
restraining order against private respondent Kambiak Y. Chan. During the
summary hearing of the application for a temporary restraining order, the only
document presented by respondent was a conditional sale agreement.
Respondent Judge: issued the questioned order granting the issuance of a writ of
preliminary injunction and denied petitioner's motion to dismiss and supplemental
motion to dismiss and a very urgent motion for reconsideration.
CA affirmed RTCs decision and dismissed the appeal ruling that the trial court had
jurisdiction to issue the injunction that did not interfere with the writ of possession
of a coordinate court.
ISSUE: who between petitioner and respondent Kambiak Y. Chan, Jr. has a better
right to the possession of the subject property? The petitioner
RATIO: The conditional sale agreement was the only document that the
respondent presented during the summary hearing of the application for a
temporary restraining order before the Regional Trial Court, Branch 71, Pasig City.
The Supreme Court reversed and set aside the decision of the Court of Appeals.
The Court found the conditional sale agreement officious and ineffectual. First, it
was not consummated. Second, it was not registered and duly annotated on the
Transfer Certificate of Title (No. 12357) covering the subject property. Third, it was
executed about eight (8) years after the execution of the real estate mortgage over
the subject property.
To emphasize, the mortgagee (United Savings Bank) did not give its consent to
the change of debtor. It is fundamental axiom in the law on contracts that a person
not a party to an agreement cannot be affected thereby. Worse, not only was the
conditional sale agreement executed without the consent of the mortgagee-
creditor, United Savings Bank, the same was also a material breach of the
stipulations of the real estate mortgage over the subject property.
The conditions of the conditional sale agreement were not fullled, hence,
respondent's claim to the subject property was as heretofore stated ineffectual.
Article 1181 of the Civil Code reads:
"Art. 1181. In conditional obligations, the acquisition of rights, as well as
the extinguishments or loss of those already acquired, shall depend upon
the happening of the event which constitutes the condition."
On the other hand, the Court found petitioner's claim to the subject property well
substantiated for it bears a TCT, deeds of assignment and certificates of sale in its
favor, and therefore, has a better right to the possession of the property.
CORONEL vs. CA, G.R NO 103577
Parties:
Petitioners Romulo Coronel et.al; seller of parcel of land with its improvements
Catalina Mabanag; second buyer of the subject property
Private Respondent Conception Alcaraz; first buyer of the subject property
FACTS: On January 19, 1985, petitioners Romulo Coronel, et al. (hereinafter
referred to as Coronels) executed a document entitled "Receipt of Down Payment"
in favor of respondent Ramona Alcaraz. The Coronels received 50,000 php from
the respondent as downnpayment for their inherited house and lot in Quezon City.
The Receipt of Down Payment indicated the following:
We bind ourselves to effect the transfer in our names from our deceased father,
Constancio P. Coronel, the transfer certificate of title immediately upon receipt of
the down payment above-stated.
On our presentation of the TCT already in our name, We will immediately execute
the deed of absolute sale of said property and Miss Ramona Patricia Alcaraz shall
immediately pay the balance of the P1,190,000.00.
Clearly, the conditions appurtenant to the sale are the following:
1. Ramona will make a down payment of Fifty Thousand (P50,000.00) Pesos upon
execution of the document aforestated;
2. The Coronels will cause the transfer in their names of the title of the property
registered in the name of their deceased father upon receipt of the Fifty Thousand
(P50,000.00) Pesos down payment;
3. Upon the transfer in their names of the subject property, the Coronels will
execute the deed of absolute sale in favor of Ramona and the latter will pay the
former the whole balance of One Million One Hundred Ninety Thousand
(P1,190,000.00) Pesos.
On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz,
mother of Ramona, paid the down payment of P50,000.00. On February 6, 1985,
the property originally registered in the name of the Coronels' father was
transferred in their names under TCT No. 327043. On February 18, 1985, the
Coronels sold the property covered by TCT No. 327043 to intervenor-appellant
Catalina B. Mabanag (hereinafter referred to as Catalina) for P1,580,000 pesos
after the latter has paid P300,000 Pesos. For this reason, Coronels canceled and
rescinded the contract with Ramona by depositing the down payment paid by
Concepcion in the bank in trust for Ramona Patricia Alcaraz. On February 22,
1985, Concepcion, et al., filed a complaint for specific performance against the
Coronels and caused the annotation of a notice of lis pendens at the back of TCT
No. 327403. On April 2, 1985, Catalina caused the annotation of a notice of
adverse claim covering the same property with the Registry of Deeds of Quezon
City. On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the
subject property in favor of Catalina. On June 5, 1985, a new title over the subject
property was issued in the name of Catalina. Judgment for specific performance
was rendered by RTC ordering the Coronels to execute in favor of Concepcion a
deed of absolute sale covering the subject parcel of land. The CA affirmed the
decision of the trial court. Hence, the petition.
ISSUE: Whether the contract between the Coronels and Alcaraz was that of a
conditional sale or a mere contract to sell
HELD: The contract between the parties was a conditional sale. Petition dismissed
and the appealed judgment affirmed.
RATIO: When the "Receipt of Down Payment" is considered in its entirety, it
becomes more manifest that there was a clear intent on the part of petitioners to
transfer title to the buyer, but since the transfer certificate of title was still in the
name of petitioner's father, they could not fully effect such transfer although the
buyer was then willing and able to immediately pay the purchase price. Therefore,
petitioners-sellers undertook upon receipt of the down payment from private
respondent Ramona P. Alcaraz, to cause the issuance of a new certificate of title
in their names from that of their father, after which, they promised to present said
title, now in their names, to the latter and to execute the deed of absolute sale
whereupon, the latter shall, in turn, pay the entire balance of the purchase price.
The agreement could not have been a contract to sell because the sellers herein
made no express reservation of ownership or title to the subject parcel of land.
What is clearly established by the plain language of the subject document is that
when the said "Receipt of Down Payment" was prepared and signed by petitioners
Romulo A. Coronel, et al., the parties had agreed to a conditional contract of sale,
consummation of which is subject only to the successful transfer of the certificate
of title from the name of petitioners' father, Constancio P. Coronel to their names.
The Court significantly notes that this suspensive condition was, in fact, fulfilled
on February 6, 1985. Thus, on said date, the conditional contract of sale
between petitioners and private respondent Ramona P. Alcaraz became
obligatory, the only act required for the consummation thereof being the delivery
of the property by means of the execution of the deed of absolute sale in a public
instrument, which petitioners unequivocally committed themselves to do as
evidenced by the "Receipt of Down Payment." Article 1475, in correlation with
Article 1181, both of the Civil Code, plainly applies to the case at bench. Thus,
Art. 1475 The contract of sale is perfected at the moment there is a
meeting of minds upon the thing which is the object of the contract and upon the
price.
From that moment, the parties may reciprocally demand performance, subject to
the provisions of the law governing the form of contracts.
Art. 1181. In conditional obligations, the acquisition of rights, as well as the
extinguishment or loss of those already acquired, shall depend upon the
happening of the event which constitutes the condition.
Since the condition contemplated by the parties which is the issuance of a
certificate of title in petitioners' names was fulfilled on February 6, 1985, the
respective obligations of the parties under the contract of sale became mutually
demandable, that is, petitioners, as sellers, were obliged to present the transfer
certificate of title already in their names to private respondent Ramona P. Alcaraz,
the buyer, and to immediately execute the deed of absolute sale, while the buyer
on her part, was obliged to forthwith pay the balance of the purchase price
amounting to P1,190,000.00. It is also significant to note that in the first paragraph
in page 9 of their petition, petitioners conclusively admitted that:
The petitioners-sellers Coronel bound themselves "to effect the transfer in
our names from our deceased father Constancio P. Coronel, the transfer certificate
of title immediately upon receipt of the downpayment above-stated." The sale was
still subject to this suspensive condition.
Petitioners themselves recognized that they entered into a contract of sale
subject to a suspensive condition. Only, they contend, continuing in the same
paragraph, that. . .
Had petitioners-sellers not complied with this condition of first transferring
the title to the property under their names, there could be no perfected contract of
sale.
Not aware that they have set their own trap for themselves, for Article 1186 of the
Civil Code expressly provides that:
Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily
prevents its fulfillment.
Besides, it should be stressed and emphasized that what is more controlling these
mere hypothetical arguments is the fact that the condition herein referred to was
actually and indisputably fulfilled on February 6, 1985, when a new title was issued
in the names of petitioners as evidenced by TCT No. 327403. The inevitable
conclusion is that on January 19, 1985, as evidenced by the document
denominated as "Receipt of Down Payment", the parties entered into a contract of
sale subject only to the suspensive condition that the sellers shall effect the
issuance of new certificate of title from that of their father's name to their names
and that, on February 6, 1985, this condition was fulfilled. We, therefore, hold that,
in accordance with Article 1187 which pertinently provides Art. 1187. The
effects of conditional obligation to give, once the condition has been fulfilled, shall
retroact to the day of the constitution of the obligation . . . In obligations to do or not
to do, the courts shall determine, in each case, the retroactive effect of the
condition that has been complied with. The rights and obligations of the parties
with respect to the perfected contract of sale became mutually due and
demandable as of the time of fulfillment or occurrence of the suspensive condition
on February 6, 1985. As of that point in time, reciprocal obligations of both seller
and buyer arose.
RESOLUTORY (CONDITION SUBSEQUENT) If the condition was not complied
with, the effect will restore the state back to its original
PARKS VS. PROVINCE OF TARLAC
FACTS: On October 18, 1910, Concepcion Cirer and James Hill, the owners of
parcel of land No. 2 referred to in the complaint, donated it perpetually to the
municipality of Tarlac, Province of Tarlac, under certain conditions specified in the
public document in which they made this donation. The donation was accepted by
Mr. Santiago de Jesus in the same document on behalf of the municipal council of
Tarlac of which he was the municipal president. The parcel thus donated was later
registered in the name of the donee, the municipality of Tarlac. On January 15,
1921, Concepcion Cirer and James Hill sold this parcel to the herein plaintiff
George L. Parks. On August 24, 1923, the municipality of Tarlac transferred the
parcel to the Province of Tarlac which, by reason of this transfer, applied for and
obtained the registration thereof in its name, the corresponding certificate of title
having been issued to it.
The plaintiff, George L. Parks, alleging that the conditions of the donation had not
been complied with and invoking the sale of this parcel of land made by
Concepcion Cirer and James Hill in his favor, brought this action against the
Province of Tarlac, the municipality of Tarlac, Concepcion Cirer and James Hill
and prayed that he be declared the absolute owner entitled to the possession of
this parcel, that the transfer of the same by the municipality of Tarlac to the
Province of Tarlac be annulled, and the transfer certificate issued to the Province
of Tarlac cancelled.
ISSUE: WON the sale is valid since the condition in the donation was not complied
with
HELD: the appellant contends that a condition precedent having been imposed in
the donation and the same not having been complied with, the donation never
became effective. We find no merit in this contention. The appellant refers to the
condition imposed that one of the parcels donated was to be used absolutely and
exclusively for the erection of a central school and the other for a public park, the
work to commence in both cases within the period of six months from the date of
the ratification by the partes of the document evidencing the donation. It is true that
this condition has not been complied with. The allegation, however, that it is a
condition precedent is erroneous. The characteristic of a condition precedent is
that the acquisition of the right is not effected while said condition is not complied
with or is not deemed complied with. Meanwhile nothing is acquired and there is
only an expectancy of right. Consequently, when a condition is imposed, the
compliance of which cannot be effected except when the right is deemed acquired,
such condition cannot be a condition precedent. In the present case the condition
that a public school be erected and a public park made of the donated land, work
on the same to commence within six months from the date of the ratification of the
donation by the parties, could not be complied with except after giving effect to the
donation. The donee could not do any work on the donated land if the donation
had not really been effected, because it would be an invasion of another's title, for
the land would have continued to belong to the donor so long as the condition
imposed was not complied with.
The appellant also contends that, in any event, the condition not having been
complied with, even supposing that it was not a condition precedent but
subsequent, the non-compliance thereof is sufficient cause for the revocation of
the donation. This is correct. But the period for bringing an action for the revocation
of the donation has prescribed. That this action is prescriptible, there is no doubt.
There is no legal provision which excludes this class of action from the statute of
limitations. And not only this, the law itself recognizes the prescriptibility of the
action for the revocation of a donation, providing a special period of five years for
the revocation by the subsequent birth of children (art. 646, Civil Code), and one
year for the revocation by reason of ingratitude. If no special period is provided for
the prescription of the action for revocation for noncompliance of the conditions of
the donation (art. 647, Civil Code), it is because in this respect the donation is
considered onerous and is governed by the law of contracts and the general rules
of prescription. Under the law in force (sec. 43, Code of Civ. Proc.) the period of
prescription of this class of action is ten years. The action for the revocation of the
donation for this cause arose on April 19, 1911, that is six months after the
ratification of the instrument of donation of October 18, 1910. The complaint in this
action was presented July 5, 1924, more than ten years after this cause accrued.
CENTRAL PHILIPPINE UNIVERSITY VS. CA
FACTS: In 1939, the late Don Ramon Lopez, Sr., who was then a member of the
Board of Trustees of the Central Philippine College (now Central Philippine
University [CPU]), executed a deed of donation in favor of the latter of a parcel of
land identified as Lot No. 3174-B-1 of the subdivision plan Psd-1144, then a
portion of Lot No. 3174-B, for which Transfer Certificate of Title No. T-3910-A was
issued in the name of the donee CPU with the following annotations copied from
the deed of donation
1. The land described shall be utilized by the CPU exclusively for the
establishment and use of a medical college with all its buildings as part of the
curriculum;
2. The said college shall not sell, transfer or convey to any third party nor in any
way encumber said land;
3. The said land shall be called "RAMON LOPEZ CAMPUS", and the said college
shall be under obligation to erect a cornerstone bearing that name. Any net income
from the land or any of its parks shall be put in a fund to be known as the "RAMON
LOPEZ CAMPUS FUND" to be used for improvements of said campus and
erection of a building thereon.
On 31 May 1989, private respondents, who are the heirs of Don Ramon Lopez,
Sr., filed an action for annulment of donation, reconveyance and damages against
CPU alleging that since 1939 up to the time the action was filed the latter had not
complied with the conditions of the donation.
RTC: Held that petitioner failed to comply with the conditions of the donation and
declared it null and void.
CA: Ruled that the annotations at the back of petitioner's certificate of title were
resolutory conditions breach of which should terminate the rights of the donee thus
making the donation revocable.
APPLICABLE LAWS:
Art. 1181. In conditional obligations, the acquisition of rights, as well as
the extinguishment or loss of those already acquired, shall depend upon
the happening of the event which constitutes the condition. (1114)
Art. 1197. If the obligation does not fix a period, but from its nature and
the circumstances it can be inferred that a period was intended, the courts
may fix the duration thereof.
The courts shall also fix the duration of the period when it depends upon
the will of the debtor.
In every case, the courts shall determine such period as may under the
circumstances have been probably contemplated by the parties. Once
fixed by the courts, the period cannot be changed by them. (1128a)
Art. 1191. The power to rescind obligations is implied in reciprocal ones,
in case one of the obligors should not comply with what is incumbent upon
him.
The injured party may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek
rescission, even after he has chosen fulfillment, if the latter should become
impossible.
The court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons who have
acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage
Law. (1124)
ISSUE: Whether or not the donation was onerous.
HELD: (1) The donation was onerous. A clear perusal of the conditions set forth in
the deed of donation executed by Don Ramon Lopez, Sr., gives us no alternative
but to conclude that his donation was onerous, one executed for a valuable
consideration which is considered the equivalent of the donation itself, e.g., when a
donation imposes a burden equivalent to the value of the donation. The donation
had to be valid before the fulfillment of the condition. If there was no fulfillment or
compliance with the condition, such as what obtains in the instant case, the
donation may now be revoked and all rights which the donee may have acquired
under it shall be deemed lost and extinguished.
(2) The action has not prescribed. It has been held that its absolute acceptance
and the acknowledgment of its obligation provided in the deed of donation were
sufficient to prevent the statute of limitations from barring the action of private
respondents upon the original contract which was the deed of donation.
(3) Courts fixing a period is now moot and rescission is proper. Petitioner has slept
on its obligation for an unreasonable length of time. Hence, it is only just and
equitable now to declare the subject donation already ineffective and, for all
purposes, revoked so that petitioner as donee should now return the donated
property to the heirs of the donor, private respondents herein, by means of
reconveyance.
NCC 1182. When the fulfilment of the condition depends upon the sole will of the
debtor, the conditional obligation shall be void. If it depends upon the will of the a
third person, the obligation shall take effect in conformity with the provisions of this
Code.
Potestative Condition:
- one which depends upon the will of one of the contracting parties
it is only when the potestative condition depends exclusively upon the will of the
debtor that the conditional obligation is void
INSERT ALEXS
LIM V. CA
FACTS: Francisco Lim, entered into a contract of lease with Benito Dy for a period
of 3 years, from 1976 to 1979. After the stipulated term expired, the respondent
refused to leave the premises, so Francisco Lim filed an ejectment suit against
Benito Dy. This case was then taken over by a judicially approved compromise
agreement, which provides an automatic increase in rent of 20% every 3 years. On
1985 Dy, informed Lim of his intention to renew the lease up to 1988, Lim did not
agree to the renewal.
In 1987, Lim filed another ejectment suit after the failure of Dy to vacate the
premises. It was dismissed by the RTC and later affirmed by the CA for the
following reasons: (1) the stipulation in the compromise agreement which allows
the lessee (Benito Dy) to stay on the premises as long as he needs it and can pay
rents is valid, being a resolutory condition, and therefore beyond the ambit of art
1308 of the NCC; and (2) the compromise agreement has the effect of res judicata.
ISSUE: WON the stipulation in the compromise agreement which allows the
lessee to stay on the premises as long as he needs it and can pay rents is valid
HELD: No. The stipulation for as long as the defendant needed the premises and
can meet and pay said increases is a purely potestative condition because it
leaves the effectivity and enjoyment of leasehold rights to the sole and exclusive
will of the lessee. The continuance, effectivity, and fulfillment of a contract of lease
cannot be made to depend exclusively upon the free and uncontrolled choice of
the lessee between continuing payment of the rentals or not, completely depriving
the owner of any say in the matter. Mutuality does not obtain in such a contract of
lease and no equality exists between the lessor and the lessee.
The invalidity of a condition in a lease contract similar to the one at bar has been
resolved in Encarnacion vs. Baldomar, et al. where the court ruled that in an action
for ejectment, the defense interposed by the lessees that the contract of lease
authorized them to continue occupying the premises as long as they paid the rents
is untenable, because it would leave to the lessees the sole power to determine
whether the lease should continue or not. As stated, "if this defense were to be
allowed, so long as defendants elected to continue the lease by continuing the
payment of the rentals, the owner would never be able to discontinue it;
conversely, although the owner should desire the lease to continue, the lessees
could effectively thwart his purpose if they should prefer to terminate the contract
by the simple expedient of stopping payment of the rentals. This is prohibited by
the Article 1182 of the Civil Code.
The decision of the Court of Appeals is REVERSED AND SET ASIDE. Benito Dy
is ordered to immediately vacate and return the possession of the premises and
pay the monthly rentals due thereon in accordance with the compromise
agreement until he shall have actually vacated the same. This Judgment is
immediately executory.
NOTE: Potestative Condition: This can be found in Article 1182 of the NCC. A
potestative condition speaks of fulfillment of an obligation rests solely upon the will
of the debtor. An obligation that is subject to a suspensive potestative condition is
non-demandable, hence it is void. If it is the debtor himself who determines the
fulfillment of the condition, such an agreement produces no juridical effect that can
be enforced, and thus null and void.
SILOS V. PNB, GR NO. 181045, JULY 2, 2014
In loan agreements, it cannot be denied that the rate of interest is a principal
condition, if not the most important component. Thus, any modification thereof
must be mutually agreed upon; otherwise it had no binding effect.
FACTS: Spouses Eduardo and Lydia Silos secured a revolving credit line with
Philippine National Bank (PNB) through a real estate mortgage as a security.. After
two years, their credit line increased. Spouses Silos then signed a Credit
Agreement which was also amended two years later, and several Promissory
Notes (PN) as regards their Credit Agreements with PNB. The said loan was
initially subjected to a 19.5% interest rate per annum. In the Credit Agreements,
Spouses Silos bound themselves to the power of PNB to modify the inters rate
depending on whatever policy that PNB may adopt in the future, without the need
of notice upon them. Thus, the said interest rates played from 16% to as high as
32% per annum. Spouses Silos acceded to the policy by pre-signing a total of
twenty-six (26) PNs leaving the individual applicable interest rates at hand blank
since it would be subject to modification by PNB.
Spouses Silos regularly renewed and made good on their PNs, religiously
paid the interests without objection or fail. However, during the 1997 Asian
Financial Crisis, Spouses Silos faltered when the interest rates soared. Spouses
Silos 26th PN became past due, and despite repeated demands by PNB, they
failed to make good on the note. Thus, PNB foreclosed and auctioned the involved
security for the mortgage. Spouses Silos instituted an action to annul the
foreclosure sale on the ground that the succeeding interest rates used in their loan
agreements was left to the sole will of PNB, the same fixed by the latter without
their prior consent and thus, void.
RTC: ruled that such stipulation authorizing both the increase and decrease of
interest rates as may be applicable is valid.
CA: affirmed RTCs decision
ISSUE: WON the CA and RTC erred in not nullifying the interest rate provision in
the credit agreement and in the amendment to credit agreement which left the sole
unilateral determination of the respondent PNB the original fixing of interest rate
and its increase, which agreements is contrary to law YES
May the bank, on its own, modify the interest rate in a loan agreement without
violating the mutuality of contracts NO
(2) the amounts, if any, to be credited as down payment and/or trade-in;
(3) the difference between the amounts set forth under clauses (1) and (2);
(4) the charges, individually itemized, which are paid or to be paid by such
person in connection with the transaction but which are not incident to the
extension of credit;
(5) the total amount to be financed;
(6) the finance charge expressed in terms of pesos and centavos; and
(7) the percentage that the finance bears to the total amount to be financed
expressed as a simple annual rate on the outstanding unpaid balance of
the obligation.
By requiring the petitioners to sign the credit documents and the
promissory notes in blank, and then unilaterally filling them up later on, respondent
violated the Truth in Lending Act, and was remiss in its disclosure obligations.

RULING: Petition is granted. CA decision annulled and set aside.

RATIO: In loan agreements, rates based on one-sided, indeterminate, and

subjective criteria such as profitability, cost of money, bank costs, etc. is arbitrary
for there is no fixed standard or margin above or below these considerations
mutually agreed upon; otherwise, it has no binding effect. Moreover, the Court
cannot consider a stipulation granting a party the option to prepay the loan if said
party is not agreeable to the arbitrary interest rates imposed. Premium may not be
placed upon a stipulation in a contract which grants one party the right to choose
whether to continue with or withdraw from the agreement if it discovers that what
the other party has been doing all along is improper or illegal. It is basic that there
can be no contract in the true sense in the absence of the element of agreement,
or of mutual assent of the parties.
Plainly, with the present credit agreement, the element of consent or
agreement by the borrower is now completely lacking, which makes respondents
unlawful act all the more reprehensible. Accordingly, petitioners are correct in
arguing that estoppel should not apply to them, for Estoppel cannot be predicated
on an illegal act. As between the parties to a contract, validity cannot be given to it
by estoppel if it is prohibited by law or is against public policy. It appears that by
its acts, respondent violated the Truth in Lending Act, or Republic Act No. 3765,
which was enacted to protect x x x citizens from a lack of awareness of the true
cost of credit to the user by using a full disclosure of such cost with a view of
preventing the uninformed use of credit to the detriment of the national economy.
The law gives a detailed enumeration of the specific information required to be
disclosed, among which the interest and other charges are incident to the
extension of credit. Section 4 thereof provides that a disclosure statement must
be furnished prior to the consummation of the transaction, thus:

(1) the cash price or delivered price of the property or service to be acquired;