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ARTICLE 1174: FORTUITOUS EVENT with said decision.

Hence, a petition for review on


certiorari was instituted by the National Power
1. JUNTILLA VS. FONTANAR Corporation (NPC) and Benjamin Chavez, Plant
FACTS: Superintendent of NPC.

Herein plaintiff was a passenger of the public utility Petitioners denied private respondents' allegations and, by
jeepney on course from Danao City to Cebu City. The way of defense, contended that they have maintained the
jeepney was driven by driven by defendant Berfol water in the Angat Dam at a safe level and that the
Camoro and registered under the franchise of Clemente opening of the spillways was done gradually and after all
Fontanar. When the jeepney reached Mandaue City, the precautionary measures had been taken. Petitioner NPC
right rear tire exploded causing the vehicle to turn turtle. further contended that it had always exercised the
In the process, the plaintiff who was sitting at the front diligence of a good father in the selection of its officials
seat was thrown out of the vehicle. Plaintiff suffered a and employees and in their supervision. It also claimed
lacerated wound on his right palm aside from the injuries that written warnings were earlier sent to the towns
he suffered on his left arm, right thigh, and on his back. concerned, and that there was no direct causal relationship
between the alleged damages suffered by the respondents
Plaintiff filed a case for breach of contract with damages and the acts and omissions attributed to the former. That
before the City Court of Cebu City. Defendants, in their it was the respondents who assumed the risk of residing
answer, alleged that the tire blow out was beyond their near the Angat River, and even assuming that respondents
control, taking into account that the tire that exploded was suffered damages, the cause was due to a fortuitous event
newly bought and was only slightly used at the time it and such damages are of the nature and character of
blew up. damnum absque injuria, hence, respondents have no
ISSUE: cause of action against them.

Whether or not the tire blow-out is a fortuitous event? ISSUE:

HELD: Whether petitioners can escape civil liability by invoking


force majeure as the proximate cause of the loss and
No. In the case at bar, the cause of the unforeseen and damage.
unexpected occurrence was not independent of the human
will. The accident was caused either through the HELD:
negligence of the driver or because of mechanical defects No. Petitioners cannot escape liability because their
in the tire. Common carriers should teach drivers not to negligence is the proximate cause of the loss and damage.
overload their vehicles, not to exceed safe and legal speed Act of God or force majeure, by definition, are
limits, and to know the correct measures to take when a extraordinary events not foreseeable or avoidable, events
tire blows up thus insuring the safety of passengers at all that could not be foreseen, or which, though foreseen, are
times. inevitable. It is therefore not enough that the event should
2. NPC VS. CA not have been foreseen or anticipated, as is commonly
believed, but it must be one impossible to foresee or to
FACTS: avoid. 7 As a general rule, no person shall be responsible
for those events which could not be foreseen or which
In the early morning hours of October 27, 1978, at the
though foreseen, were inevitable.
height of typhoon "Kading", a massive flood covered the
towns near Angat Dam, particularly the town of However, the principle embodied in the act of God
Norzagaray, causing several deaths and the loss and doctrine strictly requires that the act must be occasioned
destruction of houses, farms, plants, working animals and solely by the violence of nature. Human intervention is to
other properties of the people residing near the Angat be excluded from creating or entering into the cause of the
River. Private respondents blamed the sudden rush of mischief. When the effect is found to be in part the result
water to the reckless and imprudent opening of all the of the participation of man, whether due to his active
three (3) floodgates of the Angat Dam spillway, without intervention or neglect or failure to act, the whole
prior warning to the people living near or within the occurrence is then humanized and removed from the rules
vicinity of the dam. In view of these, an action for applicable to the acts of God.
damages was filed by respondents. The trial court ruled in
favor of the latter. Likewise the Court of Appeals affirmed
Generally it cannot be said that damage, injury or loss is Unfortunately, the truck was burned by unidentified
due to an act of God where it was caused merely by persons while it was parked unattended at Sitio Aras,
excessive or heavy rainfall, storms and to weather Bigaan, San Teodoro, Oriental Mindoro, due to
conditions which are not unusual in character, those mechanical trouble.
which could have been reasonably anticipated or where
The incident resulted in a lawsuit where the trial court
the injury complained of is due rather to the negligence or
found petitioner responsible for the destruction or loss of
mismanagement of man than to the disturbance of the
the leased 6 x 6 truck and ordered it to pay respondent
elements or where such damage, injury or loss might have
been mitigated or prevented by diligence exercised after a. the balance of the unpaid rental for the 6 x 6 truck with
the occurrence. interest at 12 percent from June 22, 1994 (the rendition of
the judgment) up to the payment of the amount
In the case at bar, although the typhoon "Kading" was an
act of God, petitioners can not escape liability because b. costs of repair and overhaul of the said truck, with
their negligence was the proximate cause of the loss and interest rate of 12 percent until fully paid; and
damage. The Court of Appeals found that the defendants
failed to take the necessary safeguards to prevent the c. P20,000 as attorney's fees for compelling respondent to
danger that the Angat Dam posed in a situation of such secure the services of counsel in filing his complaint.
nature as that of typhoon "Kading". The representative of On appeal, the Court of Appeals sustained the trial court's
the "PAG-ASA" who testified in these proceedings, Justo ruling that petitioner was not without fault for the loss and
Iglesias, Jr., stated that based on their records the rainfall destruction of the truck and, thus, liable therefor.
on October 26 and 27, 1978 is classified only as moderate,
and could not have caused flash floods. He testified that Hence, the present petition. Petitioner contended that the
flash floods exceeds 50 millimeters per hour and lasts for burning of the truck was a fortuitous event, for which it
at least two (2) hours. He stated that typhoon "Yaning" should not be held liable pursuant to Article 1174 of the
which occurred on October 7 to 14, 1978 gave a much Civil Code.
heavier rainfall than "Kading", and so did other previous
ISSUE
typhoons.
1.WON the burning of the truck was a fortuitous event?
Also, despite of the announcements of the newspaper of
the expected occurrence of a powerful typhoon code- RULING
named "Kading", the water level in the dam was
maintained at its maximum from October 21, until 1. No, it does not.
midnight of October 26, 1978. Rationalization
It has been held in several cases that when the negligence 1. The Supreme Court denied the petition. According to
of a person concurs with an act of God producing a loss, the Court, in order for a fortuitous event to exempt one
such person is not exempt from liability by showing that from liability, it is necessary that one has committed no
the immediate cause of the damage was the act of God. negligence or misconduct that may have occasioned the
To be exempt he must be free from any previous loss. When the effect, is found to be partly the result of a
negligence or misconduct by which the loss or damage person's participation whether by active intervention,
may have been occasioned. neglect or failure to act, the whole occurrence is
WHEREFORE, finding no reversible error in the humanized and removed from the rules applicable to acts
Decision appealed from, the same is hereby affirmed in of God.
toto, with cost against petitioner. 2. The records clearly showed that petitioner failed to
3. MINDEX RESOURCES VS. MORILLO exercise reasonable care and caution that an ordinarily
prudent person would have used in the same situation.
FACTS Petitioner fell short of ordinary diligence in safeguarding
the leased truck against the accident, which could have
Private respondent Ephraim Morillo and petitioner
been avoided in the first place
Mindex Resources Corporation entered into a verbal
agreement for the lease of the former's 6 x 6 ten-wheeler
cargo truck for use in Mindex's mining operations in
Binaybay, Bigaan, San Teodoro, Oriental Mindoro.
4. METRO CONCAST STEEL ISSUE:
CORPORATION VS. ALLIED BANK
WON petitioner is liable to pay interest on the premium
to be refunded to the respondents
ARTICLE 1175: INTERESTS TO BE IMPOSED ON RULING:
OBLIGATIONS
1. Petitioner avers that Tio Khe Chio, albeit pertaining to
1. SUNLIFE OF CANADA VS. TAN KIT marine insurance, is instructive on the issue of payment
of interest.
FACTS:
2. There, the Court pointed to Sections 243 and 244 of the
1. Respondent Tan Kit is the widow and designated
Insurance Code which explicitly provide for payment of
beneficiary of Norberto Tan Kit (Norberto), whose
interest when there is unjustified refusal or withholding of
application for a life insurance policy, with face value of
payment of the claim by the insurer, and to Article 220924
P300,000.00, was granted by petitioner on October 28,
of the New Civil Code which likewise provides for
1999.
payment of interest when the debtor is in delay.
2. On February 19, 2001, or within the two-year
3. The Court finds, however, that Tio Khe Chio is not
contestability period, Norberto died of disseminated
applicable here as it deals with payment of interest on the
gastric carcinoma. Consequently, respondent Tan Kit
insurance proceeds in which the claim therefor was either
filed a claim under the subject policy.
unreasonably denied or withheld or the insurer incurred
3. In a letter Petitioner Sun Life denied the claim of delay in the payment thereof.
Respondent Tan Kit on account of Norberto‘s failure to
4. In this case, what is involved is an order for petitioner
fully and faithfully disclose in his insurance application
to refund to respondents the insurance premium paid by
certain material and relevant information about his health
Norberto as a consequence of the rescission Of the
and smoking history
insurance contract on account of the latter‘s concealment
4. According to petitioner, its underwriters would not of material information in his insurance application.
have approved Norberto‘s application for life insurance Moreover, petitioner did not unreasonably deny or
had they been given the correct information. Believing withhold the insurance proceeds as it was satisfactorily
that the policy is null and void, petitioner opined that its established that Norberto was guilty of concealment.
liability is limited to the refund of all the premiums paid
5. It is undisputed that simultaneous to its giving of notice
5. Sun Life enclosed in the said letter a check for to respondents that it was rescinding the policy due to
P13,080.93 representing the premium refund. Tan Kit concealment, petitioner tendered the refund of premium
refused the check and insist on the payment of the by attaching to the said notice a check representing the
insurance proceeds amount of refund.

6. Petitioner then filed a Complaint for Rescission of 6. However, respondents refused to accept the same since
Insurance Contract before the RTC they were seeking for the release of the proceeds of the
policy. Because of this discord, petitioner filed for judicial
7. The RTC held in favor of Tan Kit. The RTC concluded rescission of the contract. Petitioner, after receiving an
that petitioner, through the above-mentioned adverse judgment from the RTC, appealed to the CA.
circumstances, had already cleared Norberto of any
misrepresentation that he may have committed. 7. And as may be recalled, the appellate court found
Norberto guilty of concealment and thus upheld the
8. On appeal, the CA reversed the decision of the RTC. It rescission of the insurance contract and consequently
held that Norberto is guilty of concealment which misled decreed the obligation of petitioner to return to
petitioner in forming its estimates of the risks of the respondents the premium paid by Norberto. Moreover, we
insurance policy. This gave petitioner the right to rescind find that petitioner did not incur delay or unjustifiably
the insurance contract which it properly exercised in this deny the claim.
case.
8. Based on the foregoing, we find that petitioner properly
9. Hence, this appeal complied with its obligation under the law and contract.
Hence, it should not be made liable to pay compensatory 3. SPOUSES SOLANGON VS. SALAZAR
interest.
FACTS:
9. Considering the prevailing circumstances of the case,
On 1986, 1987, and 1990 the Solangons’ executed 3 real
we hereby direct petitioner to reimburse the premium paid
estate mortgages in which they mortgaged a parcel of land
within 15 days from date of finality of this Decision. If
situated in Sta. Maria, Bulacan, in favor of the Salazar to
petitioner fails to pay within the said period, then the
secure payment of a loan of P60, 000.00 payable within a
amount shall be deemed equivalent to a forbearance of
period of four (4) months, with interest thereon at the rate
credit. In such a case, the rate ofinterest shall be 6% per
of 6% per month, to secure payment of a loan of P136,
annum.
512.00, payable within a period of one (1) year, with
10. Wherefore, Sun Life is ordered to pay the interest interest thereon at the legal rate, and to secure payment of
on the premium a loan in the amount of P230, 000.00 payable within a
period of four (4) months, with interest thereon at the legal
2. MACALINAO VS. BPI rate.
FACTS: This action was initiated by the Solangons to prevent the
Petitioner Ileana Macalinao defaulted on the payment of foreclosure of the mortgaged property. They alleged that
her BPI credit card dues. There was a stipulation in a they obtained only one loan form the defendant-appellee,
contract that the charges and/or balance shall earn 3% per and that was for the amount of P60, 000.00, the payment
month and additional penalty fee of another 3% per of which was secured by the first of the above-mentioned
month. The Regional Trial Court reduced the 3% monthly mortgages. The subsequent mortgages were merely
interest to 2%. On appeal of the case, the Court of Appeals continuations of the first one, which is null and void
reversed the decision of the RTC holding that petitioner because it provided for unconscionable rate of interest.
Macalinao freely availed herself of the credit card facility They have already paid the defendant-appellee P78,
offered by respondent Bank of the Philippine Islands to 000.00 and tendered P47, 000.00 more, but the latter has
general public; contracts of adhesion are not invalid per initiated foreclosure proceedings for their alleged failure
se. Petitioner assailed the appellate court’s decision to pay the loan P230, 000.00 plus interest.
alleging that the interest rate and penalty charges are
ISSUES:
unconscionable and iniquitous at 36% per annum.
Is a loan obligation that is secured by a real estate
ISSUE: mortgage with an interest of 72% p.a. or 6% a month
Whether or not the interest rate and penalty charges are unconscionable?
unconscionable and iniquitous at 36% per annum.
- Yes, although the C.B. Circular No 905 lifted the ceiling
HELD: on interest rates there is nothing in the said circular that
grants lenders carte blanche authority to raise interest
The interest rate and penalty charges are unconscionable rates to levels which will either enslave their borrowers or
and iniquitous at 36% per annum. The Supreme Court lead to hemorrhaging of their assets.
held that the interest rate and penalty charge of 3% per
month or the 36% per annum should be reduced to 2% per - In the case of Medel vs. C.A. the S.C. has held that 5.5%
month or 24% per annum. In a long line of cased decided per month was reduced for being iniquitous,
by the Supreme Court, it considered the 36% per annum unconscionable and exorbitant hence it is contrary to
to be excessive and unconscionable. Citing Article1229, morals (contra bonos mores)
in exercising this power to determine what is iniquitous
- In this case the Solangons’ are in a worse situation than
and unconscionable; courts must consider the
the Medel case (6% per month interest rate) the said
circumstances of each case since what may be iniquitous
interest rate should be reduced equitably.
and unconscionable in one maybe totally just and
equitable in another. In the instant case, Macalinao made HELD:
partial payments to BPI. Therefore, the interest rate and
WHEREFORE, the appealed decision of the Court of
penalty charge of 3% per month or 36% per annum should
Appeals is AFFIRMED subject to the MODIFICATION
be reduced to 2% per month or 24% per annum.
that the interest rate of 72% per annum is ordered reduced
to 12 % per annum.
Obligations and Contracts Terms: ARTICLE 1191: RECESSION OF RECIPROCAL
OBLIGATIONS
Legal Interest- the legal rate of interest for the loan or
forbearance of any money, goods or credits, where such 2. AYSON-SIMON VS. ADAMOS
loan or renewal or forbearance is secured in whole or in
part by a mortgage upon real estate the title to which is FACTS:
duly registered, in the absence of express contract as to On December 13, 1943, Nicolas Adamos and Vicente
such rate of interest, shall be 12% per annum, unless it is Feria defendants-appellants herein purchased two lots
unconscionable or contrary to laws, morals, public policy. from Juan Porciuncula. Porciuncula’s successor in
interest sought for the annulment and cancellation of the
4. COMMONWEALTH INSURANCE CORP
sale which the court a quo favorably ruled.
VS. CA
In the meantime, during the pendency of the above-
mentioned case, defendants-appellants sold to Generosa
5. FEDERAL BUILDERS VS. FOUNDATION Ayson Simon the lots in question. Due to the failure of
SPECIALIST defendants appellants to comply with their commitment
to have the subdivision plan of the lots approved and to
deliver to deliver the titles and possession to Generosa,
ARTICLE: FIXING TERM the latter filed suit for specific performance. As a result of
the sale of the lot to said defendants sppellants being null
1. TIGLAO VS. MANILA RAILROAD and void, there is impossibity that they can comply with
FACTS their commitment to Generosa, the latter then seek the
rescission of the contract plus damages.
Petitioners are 35 retired employees of defendant
company who sought to recover salary diff due to them The defendants-appellants contend that Generosa’s action
under MOA with defendant had prescribed, considering that she had only four years
from May 29, 1946 to rescind the transaction.
Under the MOA, employed affected by the
standardized plan will receive standardized salaries ISSUE:
provided that any salary diff from date of exhaustion will Whether or not the action to rescind the obligation has
be paid when funds for the purpose are available prescribed.
ISSUE
W/N a company may be excused for payment of salary HELD:
diff of its retired employees when the agreement is subject
to condition that “salary differentials from date of Article 1191 of the Civil Code provides that an injured
exhaustion will be paid when funds for the purpose are party may also seek rescission if the fulfillment should
available”, if the company is losing its business? have become impossible. The cause of action to claim
rescission arises when the fulfillment of the obligation
HELD became impossible when the court declared that the sale
Art. 1180. When the debtor binds himself to pay when was null and void. The Generosa cannot be assailed on the
his means permit him to do so, the obligation shall be ground that she slept on her rights.
deemed to be one with a period, subject to the provisions 3. MAGLASANG VS. NORTHWESTERN
of Article 1197. UNIVERSITY
MOA does not stipulate that salary diff shall be paid FACTS:
only from surplus profits
In compliance with the CHED’s requirement before a
It is not appearing that defendant was bankcrupt – the school could offer maritime transportation programs, on
obligation to pay said salary diff may be considered as one June 10, 2004, Northwestern University (Northwestern),
with term whose duration has been left to the will of the respondent, engaged the services of GL enterprises,
debtor, so that pursuant to art. 1197, the duration of the petitioner, to install a new Integrated Bridge System or
term may be fixed by courts IBS. The parties executed two contracts. Two months
after the execution of the contracts, GL Enterprises started
delivering materials. However, when they were installing 4. MILA A. REYES VS. VICTORIA T.
the components, Northwestern halted the operations. GL TUPARAN
enterprises requested for an explanation. Northwestern
explained that the stoppage was because the materials and FACTS:
equipment were substandard. It explained that the Mila A. Reyes (petitioner) filed a complaint for
components (1) were old; (2) did not have manual and Rescission of Contract with Damages against Victoria T.
warranty certificates; (3) contained indications of being Tuparan (respondent) before the RTC.In her Complaint,
reconditioned machines; (4) did not meet with CHED and petitioner alleged, among others, that she was the
IMO standards.GL enterprises file a complaint for breach registered owner of a 1,274 square meter residential and
of contract. The RTC rendered a decision that both parties commercial lot located in Karuhatan, Valenzuela City,
are at fault. However, the CA, found that GL enterprises and covered by TCT No. V-4130.
was the only at fault, for delivering defective equipment
that materially and substantially breached the contracts. Petitioner mortgaged the subject real properties to the
Applying Article 1191 of the Civil Code, the CA declared Farmers Savings Bank and Loan Bank, Inc. (FSL Bank)
the rescission of the contracts. to secure a loan. Petitioner then decided to sell her real
properties so she could liquidate her bank loan and
ISSUE: finance her businesses. As a gesture of friendship,
respondent verbally offered to conditionally buy
Whether the CA gravely erred in (1) finding substantial
petitioner's real properties.
breach on the part of GL enterprises.
The parties and FSL Bank executed the corresponding
HELD:
Deed of Conditional Sale of Real Properties with
The Supreme Court said that, the CA correctly applied Assumption of Mortgage. Due to their close personal
Article 1191, which provides thus: The power to rescind friendship and business relationship, both parties chose
obligations is implied in reciprocal ones, in case of the not to reduce into writing the other terms of their
obligors should not comply with what is incumbent upon agreement mentioned in paragraph 11 of the complaint.
him. The injured party may choose between the
Respondent, however, defaulted in the payment of her
fulfillment and the rescission of the obligation, with the
obligations on their due dates. Instead of paying the
payment of damages in either case. He may also seek
amounts due in lump sum on their respective maturity
rescission, even after he has chosen fulfillment, if the
dates, respondent paid petitioner in small amounts from
rescission becomes impossible. The court shall decree the
time to time.
rescission, unless there be just cause authorizing the
fixing of a period. The Supreme Court said that the two Respondent countered, among others, that the tripartite
contracts require substantial breach. Then, it went also to agreement erroneously designated by the petitioner as a
cite the definition, in the case of Cannu v. Galang, that Deed of Conditional Sale of Real Property with
substantial breach are fundamental breaches that defeat Assumption of Mortgage was actually a pure and absolute
the object of the parties entering into an agreement, since contract of sale with a term period. It could not be
the law is not concerned with trifles. In the case at hand, considered a conditional sale because the acquisition of
it was incumbent upon GL enterprises to supply contractual rights and the performance of the obligation
components that would create an IBS that would therein did not depend upon a future and uncertain event.
effectively facilitate the learning of the students.
However, it miserably failed it meetings its responsibility. Respondent further averred that she successfully rescued
It supplied substandard equipment when it delivered the properties from a definite foreclosure by paying the
components (1) were old; (2) did not have manual and assumed mortgage plus interest and other finance charges.
warranty certificates; (3) contained indications of being The RTC handed down its decision finding that
reconditioned machines; (4) did not meet with CHED and respondent failed to pay in full the total purchase price of
IMO standards. Also, GL enterprises did not also refute the subject real properties. It stated that the checks and
that it delivered defective equipment. Evidently, the receipts presented by respondent refer to her payments of
materials were not likely to pass the CHED and IMO the mortgage obligation with FSL Bank. The RTC also
standards. considered the Deed of Conditional Sale of Real Property
with Assumption of Mortgage executed by and among the
two parties and FSL Bank a contract to sell, and not a
contract of sale.
The CA rendered its decision affirming with modification Granting that a rescission can be permitted under Article
the RTC Decision.The CA agreed with the RTC that the 1191, the Court still cannot allow it for the reason that,
contract entered into by the parties is a contract to sell but considering the circumstances, there was only a slight or
ruled that the remedy of rescission could not apply casual breach in the fulfillment of the obligation.
because the respondent's failure to pay the petitioner the
Out of the P1,200,000.00 remaining balance, respondent
balance of the purchase was not a breach of contract, but
paid on several dates the first and second installments of
merely an event that prevented the seller (petitioner) from
P200,000.00 each. She, however, failed to pay the third
conveying title to the purchaser (respondent).
and last installment of P800,000.00 due on December 31,
ISSUE: 1991. Nevertheless, on August 31, 1992, respondent,
through counsel, offered to pay the amount of
Whether the agreement is a contract to sell and not a
P751,000.00, which was rejected by petitioner for the
contract of sale.
reason that the actual balance was P805,000.00 excluding
HELD: the interest charges.

YES. Considering that out of the total purchase price of


P4,200,000.00, respondent has already paid the
CIVIL LAW: Contract to sell versus contract of sale substantial amount of P3,400,000.00, more or less,
The Court agrees with the ruling of the courts below that leaving an unpaid balance of only P805,000.00, it is right
the subject Deed of Conditional Sale with Assumption of and just to allow her to settle, within a reasonable period
Mortgage entered into by and among the two parties and of time, the balance of the unpaid purchase price. The
FSL Bank on November 26, 1990 is a contract to sell and Court agrees with the courts below that the respondent
not a contract of sale. showed her sincerity and willingness to comply with her
obligation when she offered to pay the petitioner the
The title and ownership of the subject properties remains amount of P751,000.00.
with the petitioner until the respondent fully pays the
balance of the purchase price and the assumed mortgage 5. PAGTALUNAN VS. DELA CRUZ VDA. DE
obligation. Thereafter, FSL Bank shall then issue the MANZANO
corresponding deed of cancellation of mortgage and the 6. FABRIGAS VS. SAN FRANCISCO DEL
petitioner shall execute the corresponding deed of MONTE, INC.
absolute sale in favor of the respondent. FACTS:
Accordingly, the petitioner's obligation to sell the subject Spouses Fabrigas (petitioner) and respondent San
properties becomes demandable only upon the happening Francisco Del Monte, Inc.(Del Monte) entered into an
of the positive suspensive condition, which is the agreement, denominated as Contract to Sell No. 2482-V,
respondent's full payment of the purchase price. Without whereby the latter agreed to sell to Spouses Fabrigas a
respondent's full payment, there can be no breach of parcel of residential land. The said lot was worth
contract to speak of because petitioner has no obligation P109,200.00 and it was registered in the name of
yet to turn over the title. Respondent's failure to pay in full respondent Del Monte. The agreement stipulated that
the purchase price is not the breach of contract Spouses Fabrigas shall pay P30,000.00 as down payment
contemplated under Article 1191 of the New Civil Code and the balance within ten years in monthly successive
but rather just an event that prevents the petitioner from installments of P1,285.69.
being bound to convey title to the respondent.
After paying P30,000.00, Spouses Fabrigas took
Thus, the Court fully agrees with the CA when it resolved: possession of the property but failed to make any
"Considering, however, that the Deed of Conditional Sale installment payments on the balance of the purchase price.
was not cancelled by Vendor Reyes (petitioner) and that Despite the demand letter made by Del Monte and the
out of the total purchase price of the subject property in grace period given still the said Spouses did not comply
the amount of ?4,200,000.00, the remaining unpaid with their obligations.
balance of Tuparan (respondent) is only ?805,000.00, a
substantial amount of the purchase price has already been On January 21, 1985, petitioner Marcelina and Del Monte
paid.It is only right and just to allow Tuparan to pay the entered into another agreement denominated as Contract
said unpaid balance of the purchase price to Reyes." to Sell No. 2941-V, covering the same property but under
restricted terms of payment. Under the second contract,
the parties agreed on a new purchase price of respondent-spouses. Accordingly, titles (TCT Nos.
P131,642.58, the amount of P26,328.52 as down payment 105202 and 105203) were transferred in the names of
and the balance to be paid in monthly installments of respondent-spouses and submitted to CDB for loan
P2,984.60 each. processing. The bank collapsed and closed before it could
release the loan.
After the said deal, the petitioner made some delinquent
installments paying less than the stated amount, to which On November 30, 1997, respondent-spouses
Del Monte made a demand letter to the petitioners. And entered into another Contract to Sell with petitioner over
this time they ordered the cancellation of the Contract to the same property for the same price. This time, they
Sell No. 2941-V availed of petitioner’s in-house financing thus,
undertaking to pay the loan over four years, from 1997 to
ISSUE: 2001.
Whether or not the Contract to Sell No. 2941-V was valid.
Respondent Arsenio demolished the original house
HELD: and constructed a three-story house allegedly valued at
P3.5 million, more or less. (Respondent Arsenio died,
The Court quotes with approval the following factual leaving his wife, herein respondent Angeles, to pay for the
observations of the trial court, which cannot be disturbed monthly amortizations.)
in this case, to wit:
On September 10, 2003, petitioner sent respondent-
The Court notes that defendant, Marcelina Fabrigas, spouses a notarized Notice of Delinquency and
although she had to sign contract No. 2491-V, to avoid Cancellation of Contract to Sell due to the latter’s failure
forfeiture of her down payment, and her other monthly to pay the monthly amortizations. Petitioner filed before
amortizations, was entirely free to refuse to accept the the Municipal Trial Court in Cities, an action for unlawful
new contract. There was no clear case of intimidation or detainer against respondent-spouses.
threat on the part of plaintiff in offering the new contract
to her. At most, since she was of sufficient intelligence to In her Answer, respondent Angeles averred that the
discern the agreement she is entering into, her signing of Deed of Absolute Sale is valid.
Contract No. 2491-V is taken to be valid and binding. The
ISSUES
fact that she has paid monthly amortizations subsequent
to the execution of Contract to Sell No. 2491-V, is an 1) Whether petitioner is obliged to refund to respondent-
indication that she had recognized the validity of such spouses all the monthly installments paid; and
contract.
2) Whether petitioner is obliged to reimburse respondent-
In sum, Contract to Sell No. 2491-V is valid and binding. spouses the value of the new house minus the cost of the
There is nothing to prevent respondent Del Monte from original house.
enforcing its contractual stipulations and pursuing the
proper court action to hold petitioners liable for their
breach thereof. RULING
7. COMMUNITIES CAGAYAN, INC VS. The petition is partly meritorious.
NANOL
Respondent-spouses are entitled to the cash
FACTS: surrender value of the payments
Sometime in 1994, respondent-spouses Arsenio on the property equivalent to 50% of the total payments
and Angeles Nanol entered into a Contract to Sell with made under the Maceda Law.
petitioner Communities Cagayan, Inc., (CCI) whereby the
latter agreed to sell to respondent-spouses a house and Respondent-spouses are entitled to reimbursement
Lots 17 and 19 located at Block 16, Camella Homes of the improvements
Subdivision, Cagayan de Oro City, for the price of made on the property.
P368,000.00 (P368T). They obtained a loan from Capitol
Development Bank (CDB), using the property as In view of the special circumstances obtaining in
collateral. To facilitate the loan, a simulated sale over the this case, we are constrained to rely on the presumption
property was executed by petitioner in favor of of good faith on the part of the respondent-spouses which
the petitioner failed to rebut. Thus, respondent-spouses
being presumed builders in good faith, we now rule on the which negates the obligation to pay rent." In the
applicability of Article 448 of the Civil Code. Article 448 alternative, petitioner may sell the lots to respondent
on builders in good faith does not apply where there is a Angeles at a price equivalent to the current fair value
contractual relation between the parties, such as in the thereof. However, if the value of the lots is considerably
instant case. We went over the records of this case and we more than the value of the improvement, respondent
note that the parties failed to attach a copy of the Contract Angeles cannot be compelled to purchase the lots. She can
to Sell. As such, we are constrained to apply Article 448 only be obliged to pay petitioner reasonable rent.
of the Civil Code, which provides viz:
ART. 448. The owner of the land on which anything has
been built, sown or planted in good faith, shall have the ARTICLE 1192: BOTH PARTIES GUILTY OF
right to appropriate as his own the works, sowing or VIOLATING THE OBLIGATION
planting, after payment of the indemnity provided for in 1. CENTRAL BANK VS. CA
Articles 546 and 548, or to oblige the one who built or
planted to pay the price of the land, and the one who The bank’s asking for advance interest for the loan is
sowed, the proper rent. However, the builder or planter improper considering that the total loan hasn’t been
cannot be obliged to buy the land if its value is released. A person can’t be charged interest for
considerably more than that of the building or trees. In nonexisting debt. The alleged discovery by the bank of
such case, he shall pay reasonable rent, if the owner of the overvaluation of the loan collateral is not an issue. Since
land does not choose to appropriate the building or trees Island Savings Bank failed to furnish the P63,000.00
after proper indemnity. The parties shall agree upon the balance of the P80,000.00 loan, the real estate mortgage
terms of the lease and in case of disagreement, the court of Sulpicio M. Tolentino became unenforceable to such
shall fix the terms thereof. extent.

The rule that the choice under Article 448 of the FACTS:
Civil Code belongs to the owner of the land is in accord Island Savings Bank, upon favorable recommendation of
with the principle of accession, i.e., that the accessory its legal department, approved the loan application for
follows the principal and not the other way around. Even P80,000.00 of Sulpicio M. Tolentino, who, as a security
as the option lies with the landowner, the grant to him, for the loan, executed on the same day a real estate
nevertheless, is preclusive. The landowner cannot refuse mortgage over his 100-hectare land located in Cubo, Las
to exercise either option and compel instead the owner of Nieves, Agusan. The loan called for a lump sum of
the building to remove it from the land. The raison d’etre P80,000, repayable in semi-annual installments for 3 yrs,
for this provision has been enunciated thus: Where the with 12% annual interest. After the agreement, a mere
builder, planter or sower has acted in good faith, a conflict P17K partial release of the loan was made by the bank and
of rights arises between the owners, and it becomes Tolentino and his wife signed a promissory note for the
necessary to protect the owner of the improvements P17,000 at 12% annual interest payable w/in 3 yrs. An
without causing injustice to the owner of the land. In view advance interest was deducted fr the partial release but
of the impracticability of creating a state of forced co- this prededucted interest was refunded to Tolentino after
ownership, the law has provided a just solution by giving being informed that there was no fund yet for the release
the owner of the land the option to acquire the of the P63K balance.
improvements after payment of the proper indemnity, or
to oblige the builder or planter to pay for the land and the Monetary Board of Central Bank, after finding that bank
sower the proper rent. He cannot refuse to exercise either was suffering liquidity problems, prohibited the bank fr
option. It is the owner of the land who is authorized to making new loans and investments. And after the bank
exercise the option, because his right is older, and failed to restore its solvency, the Central Bank prohibited
because, by the principle of accession, he is entitled to the Island Savings Bank from doing business in the
ownership of the accessory thing. Philippines. Island Savings Bank in view of the non-
payment of the P17K filed an application for foreclosure
In conformity with the foregoing pronouncement, of the real estate mortgage. Tolentino filed petition for
we hold that petitioner, as landowner, has two options. It specific performance or rescission and damages with
may appropriate the new house by reimbursing preliminary injunction, alleging that since the bank failed
respondent Angeles the current market value thereof to deliver P63K, he is entitled to specific performance and
minus the cost of the old house. Under this option, if not, to rescind the real estate mortgage.
respondent Angeles would have "a right of retention
ISSUES: shall belong to the aggrieved party, that is, Island Savings
Bank. If Tolentino had not signed a promissory note
1) Whether or not Tolentino’s can collect from the bank
setting the date for payment of P17,000.00 within 3 years,
for damages
he would be entitled to ask for rescission of the entire loan
2) Whether or not the mortgagor is liable to pay the because he cannot possibly be in default as there was no
amount covered by the promissory note date for him to perform his reciprocal obligation to pay.
Since both parties were in default in the performance of
3) Whether or not the real estate mortgage can be their respective reciprocal obligations, that is, Island
foreclosed Savings Bank failed to comply with its obligation to
HELD: furnish the entire loan and Sulpicio M. Tolentino failed to
comply with his obligation to pay his P17,000.00 debt
1) Whether or not Tolentino’s can collect from the bank within 3 years as stipulated, they are both liable for
for damages damages.
The loan agreement implied reciprocal obligations. When 3) Whether or not the real estate mortgage can be
one party is willing and ready to perform, the other party foreclosed
not ready nor willing incurs in delay. When Tolentino
executed real estate mortgage, he signified willingness to Since Island Savings Bank failed to furnish the
pay. That time, the bank’s obligation to furnish the P80K P63,000.00 balance of the P80,000.00 loan, the real estate
loan accrued. Now, the Central Bank resolution made it mortgage of Sulpicio M. Tolentino became unenforceable
impossible for the bank to furnish the P63K balance. The to such extent. P63,000.00 is 78.75% of P80,000.00,
prohibition on the bank to make new loans is irrelevant hence the real estate mortgage covering 100 hectares is
bec it did not prohibit the bank fr releasing the balance of unenforceable to the extent of 78.75 hectares. The
loans previously contracted. Insolvency of debtor is not mortgage covering the remainder of 21.25 hectares
an excuse for non-fulfillment of obligation but is a breach subsists as a security for the P17,000.00 debt. 21.25
of contract. hectares is more than sufficient to secure a P17,000.00
debt.
ARTICLE 1207: JOINT AND SOLIDARY
The bank’s asking for advance interest for the loan is OBLIGATIONS
improper considering that the total loan hasn’t been
released. A person can’t be charged interest for 1. IMIDC VS. NLRC
nonexisting debt. The alleged discovery by the bank of FACTS
overvaluation of the loan collateral is not an issue. The
bank officials should have been more responsible and the Private respondents were employees of petitioner who
bank bears risk in case the collateral turned out to be seek for separation pay and unpaid wages Labor Arbiter
overvalued. Furthermore, this was not raised in the decided the case in their favor. In the decision, IMIDC
pleadings so this issue can’t be raised. The bank was in and Filipinas Carbon were ordered to pay private
default and Tolentino may choose bet specific respondent their claims, no word “solidary" was used in
performance or rescission w/ damages in either case. But the dispositive portion of the decision Labor Arbiter
considering that the bank is now prohibited fr doing issued an alias writ execution in which it was stated that
business, specific performance cannot be granted. the sheriff was vested the power to proceed the premises
Rescission is the only remedy left, but the rescission shld of IMIDC “and/or” Filipinas Carbon, thus holding them
only be for the P63K balance. solidarily liable

2) Whether or not the mortgagor is liable to pay the ISSUE:


amount covered by the promissory note
W/N petitioner IMIDC can be held solidarily liable with
The promissory note gave rise to Sulpicio M. Tolentino’s Filipinas Carbon when it was not provided in the
reciprocal obligation to pay the P17,000.00 loan when it judgment that the defendants are liable to pay jointly and
falls due. His failure to pay the overdue amortizations severally liable a certain sum of money
under the promissory note made him a party in default,
hence not entitled to rescission (Article 1191 of the Civil
Code). If there is a right to rescind the promissory note, it
RULING: or solidary?
No. It is already a well settled doctrine that when it is not RULING:
provided in a judgment that the defendants are liable to
SOLIDARY.
pay jointly and severally a certain sum of money, none of
them may be compelled to satisfy in full said judgment In this regard, Article 1207 and 1208 of the Civil
Well entrench is the rule that solidary obligation cannot
lightly inferred. There is solidary liability only when the Code provides -
obligation EXPRESSLY so states, when the law so "Art. 1207. The concurrence of two or more debtors in
provide or when the nature of the obligation so requires one and the same obligation does not imply that each one
Petitioner’s liability is only joint not solidary of the former has a right to demand, or that each one of
2. ERNESTO RONQUILLO VS. CA the latter is bound to render, entire compliance with the
prestation. There is a solidary liability only when the
FACTS: obligation expressly so states, or when the law or the
nature of the obligation requires solidarity.
Petitioner Ernesto V. Ronquillo was one of four (4)
defendants for the collection of the sum of P117,498.98 Art. 1208. If from the law, or the nature or the wording of
plus attorney's fees and costs. The other defendants were the obligation to which the preceding article refers the
Offshore Catertrade, Inc., Johnny Tan and Pilar Tan. contrary does not appear, the credit or debt shall be
presumed to be divided into as many equal shares as there
On December 13, 1979, the lower court rendered its
are creditors and debtors, the credits or debts being
Decision based on the compromise agreement, which
considered distinct from one another, subject to the Rules
stipulates, among others, that the Plaintiff agrees to
of Court governing the multiplicity of suits."
reduce its total claim of P117,498.95 to only P110,000.00
and defendants agree to acknowledge the validity of such Clearly then, by the express term of the compromise
claim and further bind themselves to initially pay out of agreement, the defendants obligated themselves to pay
the total indebtedness of P110,000.00 the amount of their obligation "individually and jointly."
P55,000.00 on or before December 24, 1979, the balance
of P55,000.00, defendants individually and jointly agree The term "individually" has the same meaning as
to pay within a period of six months from January 1980, "collectively", "separately", "distinctively", respectively
or before June 30, 1980. or "severally". An agreement to be "individually liable"
undoubtedly creates a several obligation, and a "several
Upon the defendant’s default, herein private respondent obligation" is one by which one individual binds himself
(then plaintiff) filed a Motion for Execution. to perform the whole obligation.
Ronquillo and another defendant Pilar Tan offered to pay The obligation in the case at bar being described as
their shares of the 55,000 already due. But on January 22, "individually and jointly", the same is therefore
1980, private respondent Antonio So moved for the enforceable against one of the numerous obligors.
reconsideration and/or modification of the aforesaid
Order of execution and prayed instead for the "execution 3. MANLAR RICEMILL VS. DEYTO
of the decision in its entirety against all defendants, jointly
and severally.
Petitioner opposed the said motion arguing that under the
decision of the lower court being executed which has
already become final, the liability of the four (4)
defendants was not expressly declared to be solidary,
consequently each defendant is obliged to pay only his
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 it
several