Osmeña vs Rama

GR No. 4437 – September 9, 1909

FACTS:
Rama obtained a series of loans from plaintiff (Osmena), with which petitioner pledged her sugar harvest,
present and future properties including her house. Sometime after the execution and delivery of the loans,
respondent died. Plaintiff was succeeded by his heir who filed a case and presented evidence of an
acknowledgment by defendant of the loan stating that the same shall be paid “when her house is sold”.
Petitioner answered by setting up the defense of prescription. The lower court ruled in favor of the respondent.
Hence the petition.
ISSUE: Whether or not the loan obligation had prescribed.
RULING: No. The loans did not prescribe.
Article 1182 of the Civil Code provides that: “When the fulfillment of the condition depends upon the sole will
of the debtor, the conditional obligation shall be void. If it depends upon chance or upon the will of a third
person, the obligation shall take effect in conformity with the provisions of this Code.” The condition presented
by the petitioner in the acknowledgement is a void condition being dependent on the sole will (potestative) of
the same. The court ruled that since the said condition is found on the acknowledgment and not on the original
obligation, only the said condition is void and the acknowledgment thus becomes an absolute recognition of the
loans contracted. There already being prior acknowledgment, the debt is considered to have not prescribed.
Petition is dismissed and lower court’s decision is affirmed.

Hermosa VS Longara
Estate of Debtor vs Creditor

Summary: A debtor promised to pay a loan on condition "as soon as he receive funds derived from the sale of
his property in Spain." The debtor died and the estate sold and receive the funds from the sale of the said
property. The creditor is demanding payment from the estate.
Rule of Law: A condition not dependent on the exclusive will of the debtor is a valid condition in an obligation.
Facts: Epifanio Longara (P) filed a claim against the estate of Fernando Hermosa, Sr. (D) for money owed to
him by the deceased. He alleged that the advances were made "on condition that their payment should be
made by Fernando Hermosa, Sr. as soon as he receive funds derived from the sale of his property in Spain."
Upon Hermosa's (D) death, the property was sold and the money sent to the estate in the Philippines.
Hermosa (D) contended on appeal that the obligation contracted by the intestate was subject to a condition
exclusively dependent upon the will of the debtor (a condicion potestativa) and therefore null and void, in
accordance with Article 1115 of the old Civil Code. The Court of Appeals held that the condition was not
entirely potestative. It further ruled that the payment of the advances did not become due until the
administratrix received the money from the buyer of the property.
Issues: Is the condition "as soon as he receives funds from the sale of his property in Spain" valid?
Ruling: Yes. The condition upon which the payment of the debt depended on, "as soon as he (intestate)
receive funds derived from the sale of his property in Spain," is a condition that does not depend exclusively
upon the will of the debtor, but also upon other circumstances beyond his power or control. Upon review by
the Court of Appeals, the condition implies that the intestate had already decided to sell his house, or at least
that he had made his creditors believe that he had done so, and that all that we needed to make his obligation
(to pay his indebtedness) demandable is that the sale be consummated and the price thereof remitted to the
islands. It is evident, therefore, that the condition of the obligation was not purely protestative—i.e.,
depending exclusively upon the will of the intestate—but a mixed one, depending partly upon the will of
intestate and partly upon chance. The obligation is clearly governed by the second sentence of Article 1115 of
the old Civil Code (8 Manresa, 126). The condition is, besides, a suspensive condition, upon the happening of
which the obligation to pay is made dependent. And upon the happening of the condition, the debt became
immediately due and demandable. (Article 1114, old Civil Code; 8 Manresa, 119).
Uniwide Holdings, Inc. v. Jandecs Transportation Co., Inc.

Facts:
Petitioner Uniwide Holdings and respondent Jandecs Transportation entered into a contract of “Assignment of
Leasehold Rights” under which the latter was to operate food and snack stalls at petitioner’s Uniwide Coastal
Mall. The contract was for a period of 18 yrs. For a consideration of P2.4M. Respondent paid the contract price
in full. Petitioner, however, failed to turn over the stall units on the agreed date. Respondent sought the
rescission of the contract and the refund of its payment. Petitioner refused both. Respondent filed a complaint
in the RTC for a breach of contract, rescission of contract, damages and issuance of a writ of preliminary
attachment. In the complaint, respondent claimed that despite full payment, petitioner failed to deliver the
stall units on the stipulated date, open its own food and snack stalls near the cinema area and refused to
accommodate its request for the rescission of the contract and the refund of payment. In its answer, petitioner
admitted respondent’s full payment of the contract price but
averred that it was to turn over the units only upon completion of the mall. It likewise claimed that, under the
contract, it had option to substitute stalls to respondent, which the latter, however, rejected.
Issue: W/N petitioner’s failure to deliver the units on the commenced date of lease gave respondent the right
to rescind the contract after it had fully paid the contract price.
Ruling: Art. 1191 of the CC provides the power to rescind obligations in reciprocal ones in case one of the
obligors should not comply with what is incumbent upon him while the other is willing and ready to comply.
Certainly, petitioner’s failure to deliver the units on the commencement date of the lease gave respondent the
right to rescind the contract after the latter had already paid the contract price in full.
Further, respondent’s right to rescind the contract cannot be prevented by the fact that petitioner had the
option to substitute the stalls. Even if petitioner had that option, it did not, however, mean that it could insist
on the continuance of the contract by forcing respondent to accept the substitution. Neither did it mean that
its previous default had been obliterated completely by the exercise of the option.

Republic Glass v. Qua

Solidary Obligation, Novation
Facts
• Republic Glass, Gervel and Qua were shareholders of Ladtek

• Ladtek obtained loans from Metrobank and Private Dev’t Corp of the Phils (PDCP)

• They entered into agreement that in case of default in payment of Ladtek loans, the parties will
reimburse each other the proportionate shares of any sum that any might pay to creditors

• Ladtek defaulted on its obligation to Metrobank and PDCP

• Republic Glass Corp and Gervel Corp payed Metrobank 7M (not full payment of the amount due)

• Republic Glass and Gervel demanded to Qua reimbursement of the total amount that RGC and GC
paid to Metrobank

• Qua refused to pay

• Qua filed a complaint for injunction with damages with application for TRO

Issues
• W/N payment of the entire obligation is an essential condition for reimbursement?

• W/N there was novation of agreements as held by CA (that there was implied novation)

Ruling
On the first issue:
• Contrary to RGC and GC’s claim, payment of any amount will not automatically result in
reimbursement. If a solidary debtor pays the obligation in part, he can recover reimbursement from the co-
debtors only in so far his payment exceeded his share in the obligation. This is precisely because if solidary
debtor pays an amount equal to his proportionate share in the obligation, then he in effects pay only what is
due to him. If the debtor pays less than his share in the obligation, he cannot demand reimbursement because
his payment is less than his actual debt.

• Since they only made partial payments, RGC and GC should clearly and convincingly show that their
payments to Metro bank and PDCP exceeded their proportionate shares in the obligations before they can
seek reimbursement from Qua. RGC and GC failed to do this, thus they cannot seek reimbursement from Qua

On the second issue:
• There was no novation of the agreements. The parties did not constitute new obligations to
substitute the agreements. The terms and conditions of the agreement remains the same.

• Novation extinguishes obligation by 1) changing the object or principal conditions; 2) substituting the
person of the debtor and 3) subrogating a third person in the rights of the creditor


Dacion En Pago
(Arts. 1245 and 1934)
Governed by the law on sales, dation in payment is a transaction that takes place when property is alienated
to the creditor in full satisfaction of a debt in money – it involves the delivery and transmission of ownership of
a thing as an accepted equivalent of the performance of the obligation. (Yuson v. Vitan , 496 SCRA 540 (2007).

Philippine Lawin Bus Co. (Lawin) vs CA

Doctrine:
Nature:

RTC- Suit to claim for a sum of money against Lawin, case was dismissed
CA- Reversed RTC and ruled that Lawin has to pay ACC
SC- Affirmed CA’s decision and ordered
Facts:
• Lawin initially loaned from Advance Capital Corp. (ACC) Php 8M payable w/in
1 yr and guaranteed by a chattel mortgage of Lawin’s 9 buses. Lawin was in
default in its payments and was able to pay only Php 1.8M.
• Lawin obtained its second loan of 2M payable in one month under a
promissory note. Lawin was in default again hence it asked ACC for a
restructuring of the loan despite this Lawin was still not able to pay. The
buses for foreclosed and it was sold for 2M.
• ACC sent Lawin demand letters to settle its indebtedness amounting to hp
16,484,992.42 then subsequently filed a suit for sum of money against
Lawin. Lawin in its defense said that there was already an arrangement to
settle the obligation
A. Sale of 9 buses and its proceeds will cover for the full payment; OR
B. ACC will shoulder the rehabilitation of the buses and the earnings of
the operation will be then applied to the loan
Issue/Held: W/N there was a dacion en pago bet. the parties? NO
Ratio:
• Dacion en Pago is a special mode of payment, the debtor offers another thing
to the creditor who accepts it as equivalent of payment of the outstanding
obligation. It partakes the nature of a sale whose essential elements are a)
consent b)object certain and c) cause and the contract is perfected at the
moment of the meeting of the minds of the parties.
• In this case there was no meeting of the minds between Lawin and ACC that
the obligation would be extinguished by dacion en pago. The receipts shows
that the delivery of the 2 buses to ACC didn’t transfer the ownership of the
bus to ACC rather they were deemed to be only as Lawin’s agent in the sale
of the bus whereby the proceeds are then to be applied as payment for the
loan.
Pacific Banking Corporation vs CA
G.R. No. L-45656, May 5, 1989
Gutierrez, Jr., J.:
FACTS:
Joseph and Eleanor Hart, herein private respondents, organized Insular Farms, Inc. (IFI). They approached John
Clarkin for financial assistance. They signed a Memorandum of Agreement that stated that the division of
shares outstanding, 510 for Clarkin and 490 for the Harts. Due to financial problems, IFI borrowed P250,000
from Pacific Banking Corporation (PBC) in July 1956. Then, a promissory note of P250,000 to PBC payable for 5
equal annual installments and the first installment payable on or before July 1957. In addition to this, in case of
default in the payment of any installment when due, all others shall become due and payable. This loan was
effected without any security except for the Continuing Guaranty of Clarkin. The business floundered but PBC
and its then Executive Vice President, Chester Babst, did not demand payment for the initial July 1957
installment nor the entire obligation. The business further deteriorated so Hart pledged all IFI shares of stocks
to PBC in lieu of additional collateral and to insure an extension of the periods to pay the July 1957 installment.
This was executed on February 19, 1958. On March 3, 1958, Pacific Farms Inc. (PFI) was created and was
engage in the same business as IFI. The next day, PBC ,through Babst, wrote IFI that the entire obligation is due
in 48 hours. On March 7, 1958, Hart received a notice that the shares of stocks would be sold at a public
auction. This was temporarily halted upon the court’s grant of the preliminary injunction along with the
complaint for reconveyance abd danages. However, this was lifted by the court and on March 21, the 1,000
shares of stocks of IFI was sold to PFI. Hart filed a case which contends the validity of the sale of the shares
because there was an indefinite extension of time to pay their obligation under the promissory note and
no demand was made by the bank and the latter merely asked for more collateral. The trial court decided
against the private respondents but had a favorable judgment on appeal; hence, this petition.
ISSUE:
Whether or not the CA erred in committing grave error in finding that petitioner bank agreed to an indefinite
extension.
RULING:
In case the period of extension is not precise, the provisions of Art. 1197 should apply. In the case, there was
an agreement to extend the payment of the loan, including the first installment thereon which was due on or
before July 1957. The court is convinced that Hart had been given the assurance by the conduct of Babst that
the payment would not as yet be pressed and following the said provision, the meaning must be that there
having been intended a period to pay modifying the fixe period in original promissory note. The cause of action
of PBC would have been to ask the Courts for fixing the term. Furthermore, the pledge executed on February
1958 contained no longer the provision “on an installment of P50,000 due on or before July 1957” which can
mean no other thing that the payment for the said installment was extended. Moreover, the pledge on
February 1958 on the shares of stocks of IFI was sufficient consideration for the extension. Moreover, the
pledge which modified the fixed period in the original promissory note did not provide for dates of payment of
installments nor of any fixed date of maturity of the whole amount of indebtedness. Therefore, under Art.
1197, the date of maturity should be determined by the proper court. Hence, the disputed foreclosure and the
subsequent sale were premature.

Uraca v. CA

Facts:
The Velezes were the owners of the lot and commercial building in Cebu while the petitioners were lessees of
the said building. The Velezes through Ting wrote a letter offering to sell the subject property for P1,050,000.00
and at the same time requesting the petitioners to reply in three days. Such sale was accepted.

Uraca went to see Ting about the offer to sell but she was told by the latter that the price was P1,400,000.00 in
cash or managers check and not P1,050,000.00 as erroneously stated in their letter-offer after some haggling.
Emilia Uraca agreed to the price of P1,400,000.00 but counter- proposed that payment be paid in installments
with a down payment of P1,000,000.00 and the balance of P400,000 to be paid in 30 days. Carmen Velez Ting
did not accept the said counter offer of Emilia Uraca although this fact is disputed by Uraca. However, no
payment was made.

The Velezes sold the lot and commercial building to the Avenue Group for P1,050,000.00 net of taxes,
registration fees, and expenses of the sale. At the time the Avenue Group purchased the subject property on
July 13, 1985 from the Velezes, the certificate of title of the said property was clean and free of any annotation
of adverse claims or lis pendens.

Issues:
I. Whether or not the contract of sale was perfected; and
II. Whether or not the CA erred in not ruling that petitioners have better rights to buy and own the Velezes
property for registering their notice of lis pendens ahead of the Avenue Groups registration of their deeds of
sale.

Held:
Novation is never presumed; it must be sufficiently established that a valid new agreement or obligation has
extinguished or changed an existing one. The registration of a later sale must be done in good faith to entitle
the registrant to priority in ownership over the vendee in an earlier sale.

On the first issue: no extinctive novation.

The lynchpin of the assailed Decision is the public respondents conclusion that the sale of the real property in
controversy. The Court noted that the petitioners accepted in writing and without qualification the Velezes
written offer to sell at P1,050,000.00 within the three-day period stipulated therein. Hence, from the moment
of acceptance on July 10, 1985, a contract of sale was perfected since undisputedly the contractual elements of
consent, object certain and cause concurred.

Article 1600 of the Civil Code provides that (s)ales are extinguished by the same causes as all other obligations,
x x x. Article 1231 of the same Code states that novation is one of the ways to wipe out an obligation. Extinctive
novation requires: (1) the existence of a previous valid obligation; (2) the agreement of all the parties to the new
contract; (3) the extinguishment of the old obligation or contract; and (4) the validity of the new one.

On the second issue: double sale of an immovable.

Under the foregoing, the prior registration of the disputed property by the second buyer does not by itself confer
ownership or a better right over the property.Article 1544 requires that such registration must be coupled with
good faith. Jurisprudence teaches us that (t)he governing principle is primus tempore, potior jure (first in time,
stronger in right). Knowledge gained by the first buyer of the second sale cannot defeat the first buyers rights
except where the second buyer registers in good faith the second sale ahead of the first, as provided by the Civil
Code. Such knowledge of the first buyer does not bar her from availing of her rights under the law, among them,
to register first her purchase as against the second buyer. But in converso knowledge gained by the second buyer
of the first sale defeats his rights even if he is first to register the second sale, since such knowledge taints his
prior registration with bad faith This is the price exacted by Article 1544 of the Civil Code for the second buyer
being able to displace the first buyer; that before the second buyer can obtain priority over the first, he must
show that he acted in good faith throughout.