Oblicon

HONGKONG AND SHANGHAI BANKING CORP., LTD. STAFF RETIREMENT PLAN v SPOUSES BIENVENIDO AND EDITHA BROQUEZA

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Because of their dismissal, Spouses Broqueza were not able to pay the monthly amortizations of their respective loans. Thus, HSBC considered the accounts of the petitioners delinquent, and demanded to pay the obligations.

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So the spouses are employees of HSBC who have this retirement plan that lets them get loans and pay them through automatic salary deduction. So they get three loans but then they get fired cause there was a thing that happened that made HSBC and the employees fight. So since they have all the loans and no salary, they couldn’t pay. HSBC decides to file a civil suit to compel them to pay. The MeTC and the RTC said that the spouses should pay because the nature of the obligation is demandable at once, because the ongoing labor dispute is not a factor in the obligation itself. Just because they got fired, or there’s another pending case about their employment doesn’t mean that they shouldn’t pay na. The CA reversed this saying that the loan obligations haven’t matured, and thus weren’t demandable yet. The SC clarified that the MeTC and the RTC are correct and added that since in the Promissory Note, there wasn’t really a date specified, the obligation is PURE, and as stated in Art 1179, is demandable AT ONCE. So they have to pay lol.

RELEVANT PROVISIONS: CC, ​Art. 1179. Every obligation whose performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties, is demandable at once. Every obligation which contains a resolutory condition shall also be demandable without prejudice to the effects of the happening of the event. THE CASE: ​The case is a petition for review assailing the decision of the Court of Appeals in favor of HSBC against spouses Broqueza for the recovery of a sum of money. FACTS: ● Spouses Gerong and Editha Broqueza are employees of HSBC and are members f the HSBC Staff Retirement Plan. ● Spouses Broqueza applied and obtained a car loan, an appliance loan, and an emergency loan from HSBC, to be paid through automatic salary deduction (a benefit of their retirement plan, I think). ● A labor dispute arose between HSBC and its employees. Spouses Broqueza were terminated from employment.

PROCEDURAL HISTORY: ● HSBC filed with the Metropolitan Trial Court against Spouses Broqueza civil actions for recovery and collection of sums of money. The MeTC decided in favor of HSBC saying “the nature of HSBCL-SRP's demands for payment is civil and has no connection to the ongoing labor dispute. Thus, the loans secured by their future retirement benefits to which they are no longer entitled are reduced to unsecured and pure civil obligations. As unsecured and pure obligations, the loans are immediately demandable”. ● The Spouses Broqueza appealed before the Regional Trial Court. However, the RTC decided against them, affirming the MeTC’s decision in toto. ● The Spouses Broqueza appealed to the Court of Appeals, which reversed and set aside the decision of the RTC saying “HSBCL-SRP's complaints for recovery of sum of money against Gerong and the spouses Broqueza are premature as the loan obligations have not yet matured. Thus, no cause of action accrued in favor of HSBCL-SRP”. ● HSBC came to the Supreme Court for recourse. ISSUE: Did HSBC have the right to demand the performance of the obligation to pay from the Spouses Broqueza? HOLDING AND RATIO: YES. The RTC is correct in ruling that since the ​Promissory Notes (see additional info) do not contain a period, HSBCL-SRP has the right to demand immediate payment. ​Article 1179 of the Civil Code applies​. The fact that HSBCL-SRP was content with the prior monthly check-off from Editha Broqueza's salary is of no moment. Once Editha Broqueza defaulted in her monthly payment, HSBCL-SRP made a demand to enforce a pure obligation. ​Despite the spouses Broqueza's protestations, the payroll deduction is merely a convenient mode of payment and not the sole source of payment for the loans. HSBCL-SRP never agreed that the loans will be paid only through salary deductions. ​Neither did HSBCL-SRP agree that if Editha Broqueza ceases to be an employee of HSBC, her obligation to pay the loans will be suspended. HSBCL-SRP can immediately demand payment of the loans at anytime because the obligation to pay has no period. Moreover, the spouses Broqueza have already incurred in default in paying the monthly installments. ​Finally, the enforcement of a loan agreement involves "debtor-creditor relations founded on contract and does not in any way concern employee relations. As such it should be enforced through a separate civil action in the regular courts and not before the Labor Arbiter.​”

GONZALES v. HEIRS OF CRUZ | ​September 16, 1999 PROVISIONS​: ● Article 1179, New Civil Code DOCTRINE​: ● An obligation cannot be enforced unless the plaintiff has fulfilled the condition upon which it is premised. ● Obligations, which has its performance depend upon a future or uncertain event, is not demandable at once. ● In this case, since the contract stipulates that payment will be delivered AFTER the title has been transferred to the petitioner’s name, the respondents cannot demand payment as they had not transferred the title yet, even though the one year lease expired already. o Hence, an obligation to purchase cannot be implemented unless and until the sellers have shown their title to the specific portion of the property being sold. FACTS​: ● December 1, 1983​: Paulo Año Cruz and herein respondents heirs of Thomas and Paula Cruz entered into a Contract of Lease/Purchase with herein petitioner Gonzales. o Object​? Half-portion of a parcel of land containing an area of 12 hectares, and an accretion of 2 hectares at Rizal. o Terms​? After a period of one year upon signing, the lessee (Gonzales) ​must purchase the property on the agreeable price of one million pesos. i. [Paragraph 1] Upon signing the contract on Dec. 1, lessee shall pay annual rental amount equivalent to P2,500.00 per hectare. ii. [Paragraph 9] The lessors commit to obtain a Transfer Certificate of Title (TCT) in favor of the lessee within a reasonable time period not exceeding four years, after which a new contract, same in all respects as this one, shall be executed. o Thus, Gonzales dutifully paid the P2,500.00 per hectare (or P15,000.00 annual rental) and then took possession of the property. ● November 30, 1984​: The one-year lease expired, but Gonzales did not immediately exercise his option to purchase the property. o He remained in possession of the property without paying for the purchase price of any further rentals thereon. o Thus, one of the heirs sent a letter to Gonzales informing him of the rescinding of the contract due to the breach. o The letter also demanded the respondent to vacate the premises within 10 days of receipt of the letter. ● March 19, 1987​: Paula, the lessor, died, making the property subject to extrajudicial partition between the heirs. o The heirs filed a complaint for recovery and possession of property. ● November 23, 1987​: Gonzales filed his answer, alleging breach of paragraph 9, praying for a dismissal of the complaint and awarding of damages.

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July 8, 1992​: The trial court dismissed the case, sentencing herein petitioners to pay damages. August 13, 1997​: CA reversed the trial court’s decision, ordering respondents to surrender possession of the property covered by the contract. o Petitioner then elevated the case to the Supreme Court.

ARGUMENTS: Trial Court Paragraph 9 indicates that plaintiffs must obtain a TCT within 4 years before a new contract is to be entered into under the same terms as the first one. Thus, before a deed of Sale can be entered, the plaintiffs have to obtain a TCT in favor of the defendant. The failure of the plaintiffs to secure the TCT does not entitle them to rescind the contract. ​Article 1191, NCC gives the power to rescind to the injured party. As the plaintiffs didn’t perform, he isn’t entitled to insist on the performance of the contract because of his own breach. The plaintiffs cannot terminate the contract due to their failure to notify the defendant in due time of their intention to do so.

Court of Appeals The transfer of title to the property cannot be interpreted as a condition precedent to the payment because this interpretation runs counter to the explicit provisions of the contract AND contrary to the normal course of sale of real properties. A reading of the contract as a whole shows that the 4 year period within which the title must be transferred will only start to run upon purchase. Since the petitioner never exercise the option to purchase, he is not entitled to have the title transferred to his name.

They cannot also rescind the contract of purchase because there is a condition precedent that the plaintiffs had not fulfiiled. ISSUE: 1. W/N the ninth clause in the Contract of Lease/Purchase was a condition precedent – YES 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. 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 when 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, ​the 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. Because the ninth clause in the Contract of Lease/Purchase required respondents to obtain a separate and distinct TCT in their names and not in the name of petitioner, it logically follows that such undertaking was a ​condition precedent​ to the latter’s obligation to purchase and pay for the land. Put differently, petitioner’s obligation to purchase the land is a conditional one and is governed by Article 1181 of the Civil Code 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. -

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W/N respondents can rescind the contract – NO In the same vein, 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 obligation. This Court has held that ​there can be no rescission (or more properly, resolution) of an obligation as yet non-existent, because the suspensive condition has not happened.

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W/N paragraph 9 of the contract is a condition precedent before the petitioner could exercise his option to buy the property. W/N there is a conflict between the statements in paragraph 1 and in paragraph 9 of the contract. YES​, because the ninth clause required the respondents to obtain a separate and distinct TCT in their names and not in the name of petitioner, it logically follows that such was a condition precedent to the latter’s obligation to pay for the land. A condition is 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 of rights is made to depend by those who execute the act. Thus, the contract is not perfected unless that condition is first complied with. When 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. The obligatory force of a conditional obligation depends on the happening of a future and uncertain event. If that event never happened, it is as if the conditional obligation never existed. TL;DR: In this case, since the transfer of title (future and uncertain event) never happened, it is as if the conditional obligation (the purchase of the property) never existed.

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GAITE V. FONACIER TOPIC:​ Kinds of conditional obligations – suspensive or resolutory APPLICABLE PROVISION: 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. DOCTRINE: “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.” (see ratio for simplified version) FACTS Defendant-appellant Isabelo Fonacier was the owner of 11 iron lode mineral claims, known as Dawahan Group. Fonacier appointed Gaite as his attorney-in-fact to enter into a contract with any person for the exploration and development of mining claims on a royalty basis of not less than P0.50 per ton or ore. Gaite executed a general assignment conveying the development and exploitation of said mining claims unto the Larap Iron Mines. Fonacier decided to revoke the authority he granted to Gaite, and Gaite assented thereto subject to certain conditions. o Revocation of Power of Attorney Contract (JURIDICAL TIE) ▪ Gaite transferred to Fonacier all his rights and interests on all roads, improvements and facilities as well as the right to use the business name “Larap Iron Mines” for the consideration of PhP 20,000. ▪ Gaite transferred to Fonacier all his rights and interests over the 24,000 tons of iron ore, that the former had already extracted from the mineral claims, in consideration of the sum of P75,000. ● PhP 10K was paid upon signing the agreement. ● Balance of PhP 65K will be paid from and out of ​the rst letter of credit covering the rst shipment of iron ores and or ​the rst amount derived from the local sale of iron ore made by the Larap Mines & Smelting Co.

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To secure the payment of the said balance of P65,000.00, Fonacier promised to execute in favor of Gaite a surety bond. However, Gaite refused to sign the revocation papers unless there was going to be another surety. Fonacier executed a second surety bond, 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 Lamp Smelting Co. for an amount of not less than P65,000.00, and that, furthermore, the ​liability of said surety company would automatically expire on December 8, 1955. Up to December 8, 1955, ​no sale of the 24k tons of iron ore was made and none of the 65k was paid to Gaite.

ISSUE/RATIO

Contract expresses no contingency in the buyer’s obligation to pay. Only the maturity is deferred. o Gaite never desired or assumed to run the risk of losing his right without getting paid for it, as seen by his insistence on the surety. o Treating the condition as suspensive would leave payment at the debtor’s discretion because the ore will be sold only when the debtor wants. Doubt shall be settled in favor of the greatest reciprocity of interests, which will obtain if the buyer’s obligation is deemed to be actually existing, with only its maturity postponed or deferred. o

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Why is it in the syllabus: When is an obligation subject to a suspensive condition (Illustration) Difference between condition and period

Whether the Fonacier’s obligation to pay Gaite the PhP 65,000 balance was one with a period NOT a suspensive condition -

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YES. The obligation was one with a suspensive period, not a suspensive condition. o Fonacier claimed that the obligation was not yet demandable because the “suspensive condition” of the shipment or sale of the iron ores had not yet been fulfilled. ← WRONG. o The suspensive period was the expiration of the 2​nd surety bond on December 8,1955. Doctrine: “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.” o In other words: ▪ In an obligation with a ​suspensive condition​, the obligation arises ​only after the suspensive condition, which is some future and uncertain event, occurs. ● If the condition does not occur, it would be as if there was no conditional obligation to begin with. ▪ As opposed to an obligation with a suspensive period, where there is already an obligation but only demandability or fulfillment of which is deferred to some future and certain time or event. (As in this case) Shipment or local sale of the iron ore is not a condition precedent to the payment of the balance, but was only a​ suspensive period or term.

MCIAA v. TUDTUD ET. AL TOPIC: ​In Case of Obligations to Do or not to Do PROVISION: ​Article 1190. ​When the conditions have for their purpose the extinguishment of an obligation to give, the parties, upon the fulfilment of said conditions, shall return to each other what they have received. In case of the loss, deterioration or improvement of the thing, the provisions which, with respect to the debtor, are laid down in the preceding article shall be applied to the party who is bound to return. As for the obligations to do and not to do, the provisions of the second paragraph of Article 1187 shall be observed as regards the effect of the extinguishment of the obligation. (1123) WHAT IT IS SAYING ABOUT THE TOPIC The rights and duties between the MCIAA and Tudtud et al are governed by Article 1190 of the Civil Code which provides: When the conditions have for their purpose the extinguishment of an obligation to give, the parties, upon the fulfilment of said conditions, shall return to each other what they have received. WHY THE COURT SAID WHAT IT SAID Petitioners’ witness respondent Justiniano Borga declared that the original owners did not oppose the expropriation of the lot upon the assurance of the NAC that they would reacquire it if it is no longer needed by the airport. The condition for the extinguishment of an obligation to give had been met so article 1190 will apply. FACTS: - The predecessors-in-interest of respondents Benjamin Tudtud et al. were the owners of a parcel of land in Cebu City (Lot No. 988). - NAC sought to acquire by negotiated sale or expropriation several lots adjoining Cebu Lahug Airport to expand it, including the Cebu lot.

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o No structures related to the operation of the Cebu Lahug Airport were constructed on Lot No. 988. o Lot No. 988 was later transferred to the Air Transport Office (ATO), and then to petitioner Mactan Cebu International Airport Authority (MCIAA) via RA 6958. When the Mactan International Airport at Lapu Lapu City was opened for commercial flights, the Cebu Lahug Airport was closed and abandoned and a significant area thereof was purchased by the Cebu Property Ventures, Inc. for development as a commercial complex. Respondent Lydia Adlawan (Lydia), acting as attorney-in-fact of the original owners, sent a letter to the general manager of the petitioner Mactan Cebu International Airport Authority (MCIAA), the new owner of the lot and demanded to repurchase the lot at the same price paid at the time of the taking, without interest, no structures or improvements having been erected thereon and the Cebu Lahug Airport having been closed and abandoned, hence, the purpose for which the lot was acquired no longer existed. Respondents anchored their complaint on the assurance they claimed was made by the NAC that the original owners and/or their successors-in-interest would be entitled to repurchase the lot when and in the event that it was no longer used for airport purposes. o Cited: MCIAA v. CA: although the deed of sale between the therein respondent Melba Limbaco's predecessor-in-interest and NAC did not contain a provision for the repurchase of the subject lot should the purpose for its acquisition cease to exist, this Court allowed Limbaco to recover the lot based on parole evidence that the NAC promised the right of repurchase to her predecessor-in-interest. RTC-Cebu ruled in favour of respondents. CA affirmed RTC decision.

ISSUE: ​W/N Tudtud et al. are entitled to the reconveyance of the land expropriated. YES HELD: ​The condition for the extinguishment of an obligation to give had been met (no structures related to the operation of the Cebu Lahug Airport were constructed on the land expropriated) so article 1190 will apply. - Fery v. Municipality of Cabanatuan: this Court, passing on the question of whether a private land which is expropriated for a particular public use, but which particular public use is abandoned, may be returned to its former owner, held: o The answer to that question ​depends upon the character of the title acquired by the expropriator x x x. If, for example, land is expropriated for a particular purpose, ​with the condition that when that purpose is ended or abandoned the property shall return to its former owner, then, of course, when the purpose is terminated or abandoned, the former owner reacquires the property so expropriated. If, for example, land is expropriated for a public street and the expropriation is granted upon conditions that the city can only use it for a public street, then, of course, when the city abandons its use as a public street, it returns to the former owner, unless there is some statutory provision to the contrary - Respondents' witness respondent Justiniano Borga declared that the original owners did not oppose the expropriation of the lot ​upon the assurance of the NAC that they would reacquire it if it is no longer needed by the airport. o Another witness for respondent, Eugenio Amores, an employee of the NAC, declared that in the course of some meetings with the landowners when he

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accompanied the NAC legal team, he personally heard the NAC officials give the assurance claimed by respondents. The mode of acquisition for public purpose of a land - whether by expropriation or by contract - is not material in determining whether the acquisition is with or without condition. While the MCIAA is obliged to reconvey Lot No. 988 to respondents, respondents must return to the MCIAA what they received as just compensation for the expropriation of Lot No. 988, plus legal interest to be computed from default,35 which in this case runs from the time the MCIAA complies with its obligation to the respondents. Respondents must likewise pay the MCIAA the necessary expenses it may have incurred in sustaining Lot No. 988 and the monetary value of its services in managing it to the extent that respondents were benefited thereby. Following Article 1187 of the Civil Code, the MCIAA may keep whatever income or fruits it may have obtained from Lot No. 988, and respondents need not account for the interests that the amounts they received as just compensation may have earned in the meantime. In accordance with the earlier-quoted Article 1190 of the Civil Code vis-à-vis Article 1189 which provides that "[i]f a thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor x x x," respondents, as creditors, do not have to settle as part of the process of restitution the appreciation in value of Lot 988 which is a natural consequence of nature and time.

Separate Opinion​: Velasco, Jr., J., concurring Fery v. Municipality of Cabanatuan be revisited as the principles thereat expounded were based on American jurisprudence and may no longer be appropriate considering the ensuing inequity such application entails. ​Fery was decided not under the aegis of any of the Philippine Constitutions uniformly decreeing that private property shall not be taken forpublic use without just compensation.

LIM v COURT OF APPEALS PROVISIONS: ​Art 1182 of the NCC. Potestative Condition - A potestative condition speaks of fulfillment of an obligation rests solely upon the will of the debtor. ​An obligation which 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 FACTS: Records show that 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 another ejectment suit was filed by Lim 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. ISSUES w/ HOLDING & RATIO: 1. Was 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? No, since 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. RATIO DECIDENCI: ​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.

NAGA TELEPHONE CO., INC. v. CA | 24 February 1994 Caveat: Only issues relevant for the discussed provision under the syllabus is included in this digest.

Provisional Digest: (1) When the fulfillment of the condition depends upon the ​sole will of the debtor​: a. Conditional obligation is ​void​. (2) If it depends upon ​chance ​or upon the ​will of a third person​: a. Obligation shall take effect in conformity with the provisions of this Code. CONCEPT/DOCTRINE: Kinds of Conditional Obligation: Potestative Condition – one which depends upon the will of the contracting parties; it is one which is in the power of one of the parties to realize or prevent (1) Simple Potestative – presupposes not only a manifestation of will but also the realization of an external act (2) Purely Potestative​ – depends solely and exclusively upon the will Casual Condition – one which depends exclusively upon chance or other factors, and not upon the will of the contracting parties; a condition dependent upon the will of a third person is also included in this class Mixed Condition – one which depends upon the will of one of the contracting parties and other circumstances, including the will of a third person FACTS: ●

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Petitioner NATELCO is a telephone company rendering local as well as long distance telephone service in Naga City while private respondent, CASURECO II, is a private corporation established for the purpose of operating an electric power service in the same city. On November 1, 1977, the parties entered into a contract for the use by petitioners in the operation of its telephone service the electric light posts of private respondent in Naga City. The contract stipulated that there will be free use of 10 telephone connections as long as NATELCO needs electric light posts. Eventually, arguments ensued regarding the deterioration of the light posts allegedly caused by private respondent, installation outside of Naga City, and poor service of telephones. After 10 years, CASURECO filed for reformation of contract with damages, for petitioner’s failure to conform to the guidelines of the National Electrification Administration of reasonable compensation for use of posts.

ISSUE + HELD: PROVISIONS APPLICABLE: Article 1182​. 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.

Whether or not the prestations of the contract is subject to a purely potestative condition – ​NO. ​The contract is subject to ​mixed conditions, ​that is, they depend partly on the will of the debtor and partly on chance, hazard, or the will of a third person.

The provision in the contract being questioned by the petitioners is the following: ”(a) ​That the term or period of this contract shall be as long as the party of the first part has need for the electric light posts of the party of the second part it being understood that this contract shall terminate when for any reason whatsoever, the party of the second part is forced to stop, abandoned [sic] its operation as a public service and it becomes necessary to remove the electric lightpost.” Petitioners allege that there is nothing purely potestative about the prestations of either party because petitioner’s permission for free use of telephones is not made to depend purely on their will, neither is private respondent’s permission for free use of its posts dependent purely on its will. The Court said that petitioners’ allegations must be upheld in this regard. However, the contract is not subject to purely potestative conditions but to mixed conditions. A potestative condition is a condition, the fulfillment of which depends upon the sole will of the debtor, in which case, the conditional obligation is void. One part of the provision is a potestative condition, to wit: “​That the term or period of this contract shall be as long as the party of the first part [petitioner] has need for the electric light posts of the party of the second part [private respondent]” The other conditions from the same provision are casual conditions since they depend on chance, hazard, or the will of a third person, to wit: “x x x it being understood that this contract shall terminate when for any reason whatsoever, the party of the second part is forced to stop, abandoned [sic] its operation as a public service and it becomes necessary to remove the electric lightpost” RULING: ​Petition is ​DENIED. ​The decision of the Court of Appeals dated May 28, 1992 and its resolution dated September 10, 1992 are ​AFFIRMED.

RUSTAN PULP & PAPER MILLS, INC. V IAC FACTS ● 1966: Rustan established a pulp and paper mill in Baloi, Lanao del Norte. ● Mar. 20, 1967: Lluch, holder of a forest products license, transmitted a letter to Rustan for the supply of raw materials by the former to the latter. o In response thereto, Rustan proposed that the contract to supply to not be exclusive because they shall have the option to purchase from other qualified suppliers.

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April, 1968: Contract of sale whereby Lluch agreed to sell and Rustan and undertook to pay the price of the pulp wood raw materials to be delivered in the buyer’s plant. Buyer stipulated that he shall have the right to stop delivery of the said raw materials by the seller covered by the contract when it shall become necessary with sufficient notice to seller. In the installation of the plant facilities, the technical staff of Rustan recommended the acceptance of deliveries from other suppliers which corresponding deliveries were made. During the test run of the pulp mill, the machinery line had major defect while the deliveries of the raw materials piled up which prompted the Japanese supplier to recommend the cessation of the deliveries. The suppliers were informed to stop the deliveries through a letter. Private respondent Lluch sought to clarify the tenor of the letter as to whether the cessation of delivery or the termination of the contract of sale was intended but to no avail. With the ambiguity notwithstanding, Lluch and the other suppliers resumed the deliveries. 1969: the complaint for contractual breach was filed o Dismissed o But, the court ordered the payment by the petitioners of damages to private respondents. On appeal, the court ruled that Rustan Pulp’s suspension of deliveries was not in the lawful exercise of its rights under the contract of sale.

ISSUE/HELD 1. W/N Rustan Pulp and Paper Mills may legally exercise the right of stoppage should there be a glut of raw materials at its plant. ​NO​. 2. W/N Petitioners should be held liable for damages. ​NO RATIO 1. There is cogent basis for private respondent’s apprehension on the illusory resumption of deliveries inasmuch as the prerogative suggests a condition solely dependent upon the will of petitioners. ●

Petitioners can stop delivery of pulp wood from private respondents if the supply at the plant is sufficient as ascertained by petitioners, subject to re-delivery when the need arises as determined likewise by petitioners.

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Art. 1182, NCC: When the fulfilment of the condition depends upon the sole will of the debtor, the conditional obligation shall be void. If it depends upon chance or upon will of a third person, the obligation shall take effect in conformity with the provisions of this Code.

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A purely potestative imposition (like herein petitioners having the option to stop deliveries based solely on their will) must be “obliterated from the face of the contract without affecting the rest of the stipulations considering that the condition relates to the fulfilment of an already existing obligation and not to its inception.” A condition which is both potestative (or facultative) and resolutory may be valid, even though the saving clause is left to the will of the obligor as this Court ruled in ​Taylor vs. Uy Tieng Piao.​

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But the ​Taylor case, which allowed a condition for unilateral cancellation dependent on the arrival of factory machinery, cannot be applied because the facts relate to the birth of the undertaking and not to the fulfilment of an existing obligation. Petitioners: the letter of notice dated Sept. 30, 1968 only meant for a temporary suspension of deliveries, SC: the contract itself “speaks loudly about petitioners’ prerogative, but what diminishes the legal efficacy of such right is the condition attached to it which is dependent exclusively on the petitioners’ will o Court has no alternative but to treat the controversial stipulation as inoperative (Art. 1306, NCC) The nature of the suspension itself is again conditioned upon petitioners’ determination of the sufficiency of supplies at the plant The fact that Rustan Pulp still kept accepting Lluch’s deliveries doesn’t absolve the petitioners of their liability o

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Private petitioners may not be held liable for damages as individuals even if they entered into the contract in their official capacities The corporation has a distinct and separate identity from their members. Absent stipulations to the contrary, they may not be held liable in their personal capacities.

2) After IHC submitted its application to DBP, Joaquin wrote IHC to ​request payment of his fees amounting to ​P500, 000 for the services that he had provided and would be providing to IHC in relation to the hotel project. cash.

- He also ​intimated his amenability to receive shares of stock instead of

- ​Stockholders granted Joaquin’s request, allowing payment for Joaquin and Rafael Suarez. 3) Joaquin ​negotiated with potential foreign financiers​. He ​recommended ​that the BOD consider ​Materials Handling Corporation based on the more beneficial terms it had offered. - It was accepted and thus, negotiations with Materials Handling Corporation and with its principal, Barnes ensued. 4) While the negotiations were ongoing, ​Joaquin and Jose Valero (Exec. Director of IHC) met with another financier​, ​Weston​ to explore possible financing. 5) When ​Barnes failed to deliver the needed loan, IHC informed DBP that it would submit Weston for DBP’s consideration. As a result, DBP cancelled its previous guaranty. 6) IHC and Weston then went into an agreement, but ​DBP still denied the guaranty because of an apparent failure to comply with DBP’s November 12, 1971 letter.

INTERNATIONAL HOTEL CORPORATION V FRANSISCO B. JOAQUIN AND RAFAEL SUAREZ

7) Due to Joaquin’s failure to secure the needed loan, ​IHC cancelled the 17, 000 shares of stock previously issued to Joaquin ​as payment for their services.

PROVISIONS APPLICABLE:

8) Joaquin and Suarez ​filed a case for specific performance, annulment, damages, and injunction with the RTC. They allege that:

Art. 1186, NCC​. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. (1119)

- Barnes was recommended by IHC President, not them.

Art. 1234​. ​If the obligation has been substantially performed in good faith, the obligor may recover as though there had been a strict and complete fulfillment, less damages suffered by the obligee. (n)

- Weston was his actual choice. - The refusal of DBP to issue the guaranty due to Barnes’ failure to cooperate was IHC’s fault since they were the ones who chose Barnes.

Art. 1182. 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. (1115)

- IHC promised to pay them 17,000 shares and P1M.

FACTS: 1) Respondent ​Francisco Joaquin submitted a proposal to the Board of Directors (BOD) of the International Hotel Corporation for him to ​render technical assistance in securing a foreign loan for the construction of a hotel​, to be guaranteed by DBP.

- ​CA​: concurred with RTC decision; upheld IHC's liability under Article 1186 of the Civil Code AND ruled that in the context of Article 1234 of the Civil Code, Joaquin had substantially performed his obligations and had become entitled to be paid for his services​; and that the issuance of the shares of stock was ultra vires for having been issued as consideration for future services

- The proposal encompassed 9 phases and the board approved phase 1 to phase 6 of the same.

10) ​IHC ​files the current appeal and maintains that:

9) The ​RTC and CA deemed that IHC was liable to Joaquin and Suarez by applying Art. 1186 and 1234 of the CC.

- Article 1186 of the Civil Code was erroneously applied; that it had no intention of preventing Joaquin from complying with his obligations when it adopted his recommendation to negotiate with Barnes

Art. 1234 applies only when an ​obligor admits breaching the contract after honestly and faithfully performing all the material elements thereof except for some technical aspects that cause no serious harm to the obligee.

- Article 1234 of the Civil Code applied only if there was a merely slight deviation from the obligation, and the omission or defect was technical and unimportant

- The provision refers to an ​omission or deviation that is slight, or technical and unimportant​, and does not affect the real purpose of the contract.

- ​Substantial compliance was unacceptable because the foreign loan was material and was, in fact, the ultimate goal of its contract with Joaquin and Suarez

- The ​party claiming substantial performance must show that he has attempted in good faith to perform his contract​, but has through oversight, misunderstanding or any excusable neglect failed to completely perform in certain negligible respects, for which the other party may be adequately indemnified by an allowance and deduction from the contract price or by an award of damages.

- The obligation was indivisible and subject to a suspensive condition, ​Article 1181 of the Civil Code applied​, under which ​a partial performance was equivalent to non-performance; and that the ​award of attorney's fees should be deleted for lack of legal and factual bases ISSUES: 1) WHETHER OR NOT THE COURT OF APPEALS IS CORRECT IN AWARDING COMPENSATION AND EVEN MODIFYING THE PAYMENT TO HEREIN RESPONDENTS DESPITE NON-FULFILLMENT OF THEIR OBLIGATION TO HEREIN PETITIONER

- The ​principle of substantial performance ​is ​inappropriate when the incomplete performance constitutes a material breach of the contract. IN THE CASE,​ despite the respondents’ “substantial performance” (since they were able to find an investor despite the lack of guarantee), ​Art. 1234 is still not applicable because there was material breach​. -

2) WHETHER OR NOT THE COURT OF APPEALS IS CORRECT IN AWARDING ATTORNEY'S FEES TO RESPONDENTS HELD AND RATIO 1) ​NO RTC and CA incorrectly applied Art.1186 Article 1186, CC​. refers to the ​constructive fulfilment of a suspensive condition​. Its application calls for two requisites: a.

The intent of the debtor to prevent the fulfilment of the obligation

b.

The actual prevention of the fulfilment

Mere intention of the debtor to prevent the happening of the condition​, or to place ineffective obstacles to its compliance without actually preventing the fulfilment, is insufficient. IN THE CASE,​ the minutes of the IHC’s special board meeting discloses that Joaquin impressed upon the members of the Board that ​Materials Handling w ​ as offering more favorable terms for IHC​. -

IHC only ​relied on the opinion of its consultant in deciding to transact with Materials Handling​, and later on, with Barnes. In negotiating with Barnes, ​IHC had no intention, willful or otherwise, to prevent Joaquin and Suarez from meeting their undertaking. Such absence of any intention negated the basis for the reliance on Article 1188, CC.

RTC and CA incorrectly applied Art. 1234

The ​breach of failing to obtain DBP’s guarantee is not unimportant or slight, and the benefits alleged from Joaquin’s “substantial performance” is ​outweighed by the loss derived from having no guarantee.

IHC is nonetheless liable to pay under the rule on constructive fulfillment of a mixed conditional obligation Notwithstanding the inapplicability of Article 1186 and Article 1234 of the Civil Code, IHC was liable based on the nature of the obligation The obligation is a ​mixed conditional obligation because the ​fulfillment of the condition is ​dependent ​partly on the ​will of one of the contracting parties​, or of the ​obligor​, and partly on ​chance, hazard or the will of a third person. IN THE CASE,​ the obligation is mixed conditional because ​securing the DBP-guaranteed foreign loan did ​not solely depend on the diligence or the sole will of the respondents because it ​required the action and discretion of third persons​—a foreign financial institution and the DBP to guarantee the loan. The ​existing rule in mixed conditional obligation​: when the condition was not fulfilled ​but the ​obligor did all in his power to comply with the obligation, the condition should be deemed satisfied. IN THE CASE, ​considering that respondents were able to secure an agreement with Weston, and subsequently tried to reverse the cancellation of the guaranty by DBP, ​the Court rules that they thereby constructively fulfilled their obligation​. 2) ​NO The ​confusion on the amounts of compensation arose from the parties' inability to agree on the fees that respondents should receive.

Considering the ​absence of an agreement​, and in view of ​respondents' constructive fulfillment of their obligation​, the Court has to apply the principle of quantum meruit​ in determining how much was still due and owing to respondents. -

QUANTUM MERUIT: o measure of recovery under the principle should relate to the reasonable value of the services performed o the principle ​should only be applied if no express contract was entered into, and ​no specific statutory provision was applicable o Applying the principle, the Court held that the total amount of P200,000.00 is a ​reasonable compensation for respondents' services

AS FOR ATTORNEY FEES, the Court held that the grant of attorney fees lacked factual or legal basis -

-

Attorney's fees are not awarded every time a party prevails in a suit because of the policy that no premium should be placed on the right to litigate It is not enough justification for the award simply because respondents were compelled to protect their rights

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US$11,619.35 for the payment of real estate taxes through FedEx with Account No. x2546-4948-1 and Tracking No. 8442 4588 4268. Sison allegedly did not receive the package resulting to nonpayment of obligations and foreclosure of the Unit. She found out that the package was delivered to her neighbor but there was no signed receipt. Luwalhati and Eliza sent a demand letter to FedEx for payment of damages for non-delivery of the package, but FedEx refused. So, they filed a complaint for damages. RTC ruled in favor of Luwalhati and Eliza, awarding moral and exemplary damages, and attorney’s fees. It ruled that a check is not legal tender or a “negotiable instrument equivalent to cash,” as prohibited by the Air waybill. It stated that common carriers are presumed to be at fault whenever goods are lost. It also noted that the demand letter was made within the 2-year period sanctioned by the Air Waybill. CA affirmed the RTC ruling. It stated that by accepting the package despite the supposed defect, FedEx was deemed to have acquiesced to the transaction. Thus, it must deliver the package in good condition and could not deny liability.

RULING:

Issue: ​W/N FedEx may be held liable for damages on account of its failure to deliver the checks shipped by respondents to Sison - YES

The Court ​DENIES the petition for review on certiorari; and AFFIRMS the decision of the Court of Appeals subject to the ​MODIFICATIONS​ that:

Ratio: 1.

-

International Hotel Corporation is ordered to pay Francisco G. Joaquin, Jr. and Rafael Suarez P100,000.00 each as compensation for their services the award of P20,000.00 as attorney's fees is deleted.

FEDERAL EXPRESS CORPORATION V ANTONIO Topic: Constructive Fulfillment Art. 1186, CC: The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. Facts: ● ● ●

Eliza owned Unit 22-A in Allegro Condominium in New York. Lualhati and Eliza were in the Philippines when the monthly common charges on the Unit became due. She sent Citibank checks amounting to $17,726.18 to Veronica Sison who was based in New York for payment of monthly charges. Lualhati also sent

Petitioner disclaims liability because of respondents' failure to comply with a condition precedent - filing of a written notice of a claim for non-delivery or misdelivery within 45 days from acceptance of the shipment. A provision in a contract of carriage requiring the filing of a formal claim within a specified period is a valid stipulation. Jurisprudence maintains that compliance with this provision is a legitimate condition precedent to an action for damages arising from loss of the shipment: More particularly, where the contract of shipment contains a reasonable requirement of giving notice of loss of or injury to the goods, the giving of such notice is a condition precedent to the action for loss or injury or the right to enforce the carrier's liability. For respondent’s claim to prosper, they must surpass two (2) hurdles: first, the filing of their formal claim within 45 days; and second, the subsequent filing of the action within two (2) years, according to the Air Waybill.

2.

In this case, respondents no doubt complied with the second requisite. On the first requisite, the Court deemed respondents to have substantially complied with the 45-day period for filing a claim. Respondents arduously followed up the claim against Fedex and the latter was unable to persuasively refute Luwalhati’s efforts that she and Sison exerted. Respondents' inability to expediently file a formal claim can only be attributed to petitioner hampering its fulfillment. FedEx made ambiguous and evasive responses, handled respondents’ concern nonchalantly which bogged down respondent’s actions and impaired their compliance with the 45-day period.

What is only prohibited by the Air Waybill is money. It is settled jurisprudence that checks, being only negotiable instruments, are only substitutes for money and are not legal tender; more so when the check has a named payee and is not payable to bearer.

This is pursuant to Art 1186 of the Civil Code which provides: “The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.”

The contract between petitioner and respondents is a contract of adhesion; it was prepared solely by petitioner for respondents to conform to. Although not automatically void, any ambiguity in a contract of adhesion is construed strictly against the party that prepared it.

The Civil Code mandates common carriers to observe extraordinary diligence in caring for the goods they are transporting: Article 1733: “Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case.”

Ultimately, in shipping checks, respondents were not violating petitioner's Air Waybill. From this, it follows that they committed no breach of warranty that would absolve petitioner of liability.

The responsibility of common carriers to exercise extraordinary diligence lasts from the time the goods are unconditionally placed in their possession until they are delivered "to the consignee, or to the person who has a right to receive them.” Failing to deliver shipment to the designated recipient amounts to a failure to deliver. The shipment shall then be considered lost, and liability for this loss ensues. Petitioner is unable to prove that it exercised extraordinary diligence in ensuring delivery of the package to its designated consignee. It claims to have made a delivery but it even admits that it was not to the designated consignee.

3.

Petitioner further asserts that respondents violated the terms of the Air Waybill by shipping checks. It adds that this violation exempts it from liability. This is untenable.

The Air Waybill's prohibition mentions "negotiable instruments" only in the course of making an example. Thus, they are not prohibited items themselves. Moreover, the illustrative example does not even pertain to negotiable instruments per se but to "negotiable instruments equivalent to cash."

Ruling: ​WHEREFORE, the Petition for Review on Certiorari is DENIED.

VILLAMIL VS. SPS. ERGUIZA (2018) Topic: ​Constructive Fulfillment Relevant Provision: ​Article 1186 of the Civil Code “The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.” FACTS: 1.

2.

3.

Petitioner filed an action for recovery of possession against respondent spouses, alleging petitioner is the absolute and exclusive owner of that certain parcel of land situated in the District of Pantal, City of Dagupan. On 20 September 1972, plaintiff together with her deceased sister, Corazon Villamil, and deceased brother, Teddy Villamil, entered into an agreement with Juanito Erguiza for the purpose of selling the above-described property to the latter subject to the condition that plaintiff and her siblings would file a petition to secure authorization for minor children from the proper courts. Likewise, that in case of failure of the plaintiff and her siblings to obtain said authority, the partial payment made by the defendant Juanito Erguiza shall be applied as rent for twenty (20) years of the premises.

4.

5.

6.

Sometime in 1992 or after the lapse of twenty (20) years and the expiration of the twenty (20) years lease, plaintiff demanded from the defendants to return possession of the property but the latter failed and refused, and still fails and refuses to return possession of the property to the damage and prejudice of the plaintiff. In 2004, the MTCC dismissed the complaint on the ground that the cause of action thereof was one for the interpretation of the agreement and the determination of the parties’ respective rights. On appeal, the RTC reversed the decision on the ground that the cause of action was one for recovery of possession of real property, remanding the case to the MTCC. In its 2006 decision, MTCC ruled in favor of petitioner and ruled that the resident-spouses are bound to leave the premises. The ruling is affirmed by the RTC but was later reversed by CA, declaring that the agreement between the parties was a contract to sell involving the subject property because the vendors reserved ownership and it was subject to a suspensive condition. Hence, this petition.

ISSUE: ​Whether or not the principle of constructive fulfillment applies in the case YES Article 1186 of the Civil Code reads: “​The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.​” This provision refers to the constructive fulfillment of a suspensive condition, whose application calls for two requisites, namely: a. the intent of the obligor to prevent the fulfillment of the condition, and b. the actual prevention of the fulfillment Mere intention of the debtor to prevent the happening of the condition, or to place ineffective obstacles to its compliance, without actually preventing the fulfillment, is insufficient. Petitioner and her then co-owners undertook, upon receipt of the down payment from respondent-spouses, the filing of a petition in court, after which they promised the latter to execute the deed of absolute sale whereupon the latter shall, in turn, pay the entire balance of the purchase price. The balance of the consideration shall be paid only upon grant of the court's approval and upon execution of the deed of absolute sale. Here, ​there is no doubt that petitioner prevented the fulfillment of the suspensive condition.

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She herself admitted that they did not file any petition to seek approval of the court as regards the sale of the shares of the minor owners. In addition, the other co-owners sold their shares to petitioner such that she was able to consolidate the title in her name. Thus, the condition is deemed constructively fulfilled, as the intent to prevent fulfillment of the condition and actual prevention thereof were definitely present. Consequently, it was incumbent upon the sellers to enter into a contract with respondent-spouses for the purchase of the subject property.

Respondent-spouses' obligation to pay the balance of the purchase price arises only when the court's approval of the sale of the minor owners' shares shall have been successfully secured, in accordance with Article 1181 of the New Civil Code. Judicial approval is a condition the operative act of which sets into motion the period of compliance by respondent-spouses of their own obligation, i.e., to pay the balance of the purchase price. Accordingly, ​an obligation dependent upon a suspensive condition cannot be demanded until after the condition takes place because it is only after the fulfillment of the condition that the obligation arises​. Petitioner cannot invoke the non-fulfillment of the condition in the contract to sell when she and her then co-owners themselves are guilty of preventing the fulfillment of such condition.Decision and November 21, 2011 Resolution of the Court of Appeals in CA-G.R. CV No. 91216 are AFFIRMED.