Dec 17, 2009

Civil Law 2- ObliCon- Heirs of Luis Bacus vs Court of Appeals, Spouses Faustino Duray and Victoriana Duray

This case is with regard to Art 1191 of the NCC- Reciprocal Obligations

Case of Heirs of Luis Bacus vs Court of Appeals, Spouses Faustino Duray and Victoriana Duray
G.R.No. 127695 03December2001

FACTS OF THE CASE:

On 1984 Luis Bacus leased to Faustino Duray a parcel of agricultural land with total land area of 3,002 of square meters, in Cebu. The lease was for six years ending in 1990, the contract contained an option to buy clause. Under the said option, the lessee had the exclusive and irrevocable right to buy 2,000 square meters 5 years from a year after the effectivity of the contract, at P200 per square meter. That rate shall be proportionately adjusted depending on the peso rate against the US dollar, which at the time of the execution of the contract was 14 pesos.

Close to the expiration of the contract Luis Bacus died on 1989, after Duray informed the heirs of Bacus that they are willing and ready to purchase the property under the option to buy clause. The heirs refused to sell, thus Duray filed a complaint for specific performance against the heirs of Bacus. He showed that he is ready and able to meet his obligations under the contract with Bacus. The RTC ruled in favor of the Durays and the CA later affirmed the decision.

ISSUES OF THE CASE:

Can the heirs of Luis Bacus be compelled to sell the portion of the lot under the option to buy clause?

- Yes, Obligations under an option to buy are reciprocal obligations. The performance of one obligation is conditioned on the simultaneous fulfillment of the other obligation. In other words, in an option to buy, the payment of the purchase price by the creditor is contingent upon the execution and delivery of the deed of sale by the debtor.
- When the Duray’s exercised their option to buy the property their obligation was to advise the Bacus’ of their decision and readiness to pay the price, they were not yet obliged to make the payment. Only upon the Bacus’ actual execution and delivery of the deed of sale were they required to pay.
- The Durays did not incur in delay when they did not yet deliver the payment nor make a consignation before the expiration of the contract. In reciprocal obligations, neither party incurs in delay if the other party does not comply or is not ready to comply in a proper manner with what is incumbent upon him. Only from the moment one of the parties fulfills his obligation, does delay by the other begin.

HELD:

The petition is DENIED nad the decision of the Court of Appeals is AFFIRMED.

Obligations and Contracts Terms:


Reciprocal Obligations- Those which arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously such that the performance of one is conditioned upon the simultaneous fulfillment of the other

I hope this helps.

Jeff David

Civil Law 2- ObliCon- Francisco Lao Lim vs Court of Appeals and Benito Villavicencio Dy

Case of Francisco Lao Lim vs Court of Appeals and Benito Villavicencio Dy
G.R.No. 87047 31October1990

This case is with regard to Art 1182 of the NCC- Potestative Condition- Stipulation dependent upon the sole will of the debtor


FACTS OF THE CASE:

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 OF THE CASE:

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.

HELD:

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.

Obligations and Contracts Terms:

Potestative Condition- This can be found in Art 1182 of the NCC. 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

I hope this helps.

Jeff David

Dec 4, 2009

Civil Law 2- ObliCon- Security Bank & Trust Co. and Rosito C. Manhit vs. Court of Appeals and Ysmael Ferer

This case is with regard to Art 1182 of the NCC- Potestative Condition- Stipulation dependent upon the sole will of the debtor

Case of SECURITY BANK & TRUST COMPANY and ROSITO C. MANHIT vs COURT OF APPEALS and YSMAEL C. FERRER
G.R.No. 117009 11October1995

FACTS OF THE CASE:


SBTC and Manhit contracted Ferrer to construct in 200 days a building in consideration of 1,760,000.00. Ferrer was able to finish the construction of the building within the prescribed time, but incurred additional expenses of about 300,000.00 on top of the original cost due to drastic increases in construction materials. Ferrer made timely demands for payment of the increased cost, and SBTC and a representative of an architectural firm consulted by SBTC verified Ferrer’s claims for additional cost. A recommendation was then made to settle the claim for 200,000.00 but SBTC did not pay the amount, and instead denied any liability for the additional cost. Ferrer then filed a claim for breach of contract with damages in the RTC, which ruled in favor of Ferrer, Court of Appeals affirmed the decision.

ISSUES OF THE CASE:


Is SBTC liable for the increase in cost of the construction due to drastic increases in cost of material?

- Yes, since under Art 1182 of the NCC, a conditional obligation shall be void if its fulfillment depends upon the sole will of the debtor. Under Art IX of the building contract it allows for the adjustment of the contract price upon mutual agreement of the parties.
- It is the absence of this mutual agreement that the bank is using to support its contention that it is not liable for the increased cost, and in effect this is an obligation dependent on SBTC’s sole will, since its consent is required for the recovery of the increased cost to be allowed.
- This in effect allows SBTC to acquire the constructed building at a price that is far below its actual construction cost, and this constitutes unjust enrichment for SBTC at the expense of Ferrer. This is not allowed by law by virtue of Art 22 of NCC.

HELD:


WHEREFORE, with the above modification in respect of the amount of attorney's fees, the appealed decision of the Court of Appeals in CA G.R. CV No. 40450 is AFFIRMED.


Obligations and Contracts Terms:


Conditional Obligation- a condition wherein the execution of which is suspended by a condition which has not been accomplished, and subject to which it has been contracted.

Potestative Obligation-
a condition whose fulfillment was completely within the power of the obligated party


I hope this helps.

Jeff David

Civil Law 2- ObliCon- JACINTO TANGUILIG doing business under the name and style J.M.T Engineering and General Merchandising vs. Court of Appeals and Vicente Herce Jr.

This case is with regard to ART 1174 of the NCC - Fortuitous Events

Case of JACINTO TANGUILIG doing business under the name and style J.M.T. ENGINEERING AND GENERAL MERCHANDISING vs COURT OF APPEALS and VICENTE HERCE JR.

G.R.No. 125994 29June2001

FACTS OF THE CASE:

Herce contracted Tanguilig to construct a windmill system for him, for consideration of 60,000.00. Pursuant to the agreement Herce paid the downpayment of 30,000.00 and installment of 15,000.00 leaving a 15,000.00 balance.

Herce refused to pay the balance because he had already paid this amount to SPGMI which constructed a deep well to which the windmill system was to be connected since the deepwell, and assuming that he owed the 15,000.00 this should be offset by the defects in the windmill system which caused the structure to collapse after strong winds hit their place. According to Tanguilig, the 60,000.00 consideration is only for the construction of the windmill and the construction of the deepwell was not part of it. The collapse of the windmill cannot be attributed to him as well, since he delivered it in good and working condition and Herce accepted it without protest. Herce contested that the collapse is attributable to a typhoon, a force majeure that relieved him of liability.

The RTC ruled in favor of Tanguilig, but this decision was overturned by the Court of Appeals which ruled in favor of Herce


ISSUES OF THE CASE:

Can the collapse of the windmill be attributed to force majeure? Thus, extinguishing the liability of Tanguilig?

- Yes, in order for a party to claim exemption from liability by reason of fortuitous event under Art 1174 of the Civil Code the event should be the sole and proximate cause of the loss or destruction of the object of the contract.
- In Nakpil vs. Court of Appeals, the S.C. held that 4 requisites must concur that there must be a (a) the cause of the breach of the obligation must be independent of the will of debtor (b) the event must be either unforeseeable or unavoidable; (c) the event be such to render it impossible for the debtor to fulfill his obligation in a normal manner; and (d) the debtor must be free from any participation in or aggravation of the injury to the creditor.
- Tanguilig merely stated that there was a strong wind, and a strong wind in this case is not fortuitous, it was not unforeseeable nor unavoidable, places with strong winds are the perfect locations to put up a windmill, since it needs strong winds for it to work.

HELD:

WHEREFORE, the appealed decision is MODIFIED. Respondent VICENTE HERCE JR. is directed to pay petitioner JACINTO M. TANGUILIG the balance of P15,000.00 with interest at the legal rate from the date of the filing of the complaint. In return, petitioner is ordered to "reconstruct subject defective windmill system, in accordance with the one-year guaranty" and to complete the same within three (3) months from the finality of this decision.

Obligations and Contracts Terms:

Fortuitous Events- Refers to an occurrence or happening which could not be foreseen, or even if foreseen, is inevitable. It is necessary that the obligor is free from negligence. Fortuitous events may be produced by two (2) general causes: (1) by Nature, such as but not limited to, earthquakes, storms, floods, epidemics, fires, and (2) by the act of man, such as but not limited to, armed invasion, attack by bandits, governmental prohibitions, robbery, provided that they have the force of an imposition which the contractor or supplier could not have resisted.


I hope this helps.

Jeff David

Civil Law 2- ObliCon- Danilo Solangon and Ursula Solangon vs. Jose Avelino Salazar

This case is with regard to Art 1170 of the NCC (Stipulated interest held unconscionable)

Case of DANILO SOLANGON AND URSULA SOLANGON vs JOSE AVELINO SALAZAR
G.R.No. 125994 29June2001

FACTS OF THE CASE:
On 1986, 1987, and 1990 the Solangons’ executed 3 real estate mortgages in which they mortgaged a parcel of land situated in Sta. Maria, Bulacan, in favor of the Salazar to secure payment of a loan of P60, 000.00 payable within a period of four (4) months, with interest thereon at the rate of 6% per month, to secure payment of a loan of P136, 512.00, payable within a period of one (1) year, with interest thereon at the legal rate, and to secure payment of a loan in the amount of P230, 000.00 payable within a period of four (4) months, with interest thereon at the legal rate.
This action was initiated by the Solangons to prevent the foreclosure of the mortgaged property. They alleged that they obtained only one loan form the defendant-appellee, and that was for the amount of P60, 000.00, the payment of which was secured by the first of the above-mentioned mortgages. The subsequent mortgages were merely continuations of the first one, which is null and void because it provided for unconscionable rate of interest. They have already paid the defendant-appellee P78, 000.00 and tendered P47, 000.00 more, but the latter has initiated foreclosure proceedings for their alleged failure to pay the loan P230, 000.00 plus interest.

ISSUES OF THE CASE:

Is a loan obligation that is secured by a real estate mortgage with an interest of 72% p.a. or 6% a month unconscionable?

- Yes, although the C.B. Circular No 905 lifted the ceiling on interest rates there is nothing in the said circular that grants lenders carte blanche authority to raise interest rates to levels which will either enslave their borrowers or lead to hemorrhaging of their assets.
- In the case of Medel vs. C.A. the S.C. has held that 5.5% per month was reduced for being iniquitous, unconscionable and exorbitant hence it is contrary to morals (contra bonos mores)
- In this case the Solangons’ are in a worse situation than the Medel case (6% per month interest rate) the said interest rate should be reduced equitably.
-

HELD:
WHEREFORE, the appealed decision of the Court of Appeals is AFFIRMED subject to the MODIFICATION that the interest rate of 72% per annum is ordered reduced to 12 % per annum.

Obligations and Contracts Terms:

Legal Interest- the legal rate of interest for the loan or forbearance of any money, goods or credits, where such loan or renewal or forbearance is secured in whole or in part by a mortgage upon real estate the title to which is duly registered, in the absence of express contract as to such rate of interest, shall be 12% per annum, unless it is unconscionable or contrary to laws, morals, public policy.

I hope this helps.

Jeff David

Civil Law 2- ObliCon- SECURITY BANK AND TRUST COMPANY vs. REGIONAL TRIAL COURT OF MAKATI, BRANCH 61, MAGTANGGOL EUSEBIO and LEILA VENTURA,

This is with regard to ART 1170- Interest rate from damages as stipulated by parties

Case of Security Bank and Trust Company vs. R.T.C MAKATI BR. 61 MAGTANGGOL EUSEBIO AND LEILA VENTURA
G.R.No. 113926 23October1996

FACTS OF THE CASE:
On April 27, 1983, private respondent Magtanggol Eusebio executed 3 Promissory Notes from different dates in favor of petitioner Security Bank and Trust Co. (SBTC) in the amounts of 100,000, 100,000, and 65,000. Respondent bound himself to pay the said amounts in six (6) monthly installments plus 23% interest per annum.On all the abovementioned promissory notes, private respondent Leila Ventura had signed as co-maker. Upon maturity there were still principal balance remaining on the notes. Eusebio refused to pay the balance payable, so SBTC filed a collection case against him. The RTC rendered a judgment in favor of SBTC, although the rate of interest imposed by the RTC was 12% p.a. instead of the agreed upon 23% p.a. The court denied the motion filed by SBTC to apply the 23% p.a. instead of the 12% p.a.

ISSUES OF THE CASE:


Did the RTC err in using 12% instead of the 23% as agreed upon by the parties?

- Yes, the rate of interest was agreed upon by the parties freely. Significantly, respondent did not question that rate.
- P.D. No. 1684 and C.B. Circular No. 905 no more than allow contracting parties to stipulate freely regarding any subsequent adjustment in the interest rate that shall accrue on a loan or forbearance of money, goods or credits.
- It is not for respondent court a quo to change the stipulations in the contract where it is not illegal. Furthermore, Article 1306 of the New Civil Code provides that contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.
- The 12% shall be applied for obligations arising from loans, or forbearance of money in the absence of express stipulations

HELD:
IN VIEW OF THE FOREGOING, the decision of the respondent court a quo, is hereby AFFIRMED with the MODIFICATION that the rate of interest that should be imposed be 23% per annum.

Obligations and Contracts Terms:
PROMISSORY NOTE - A written document in which a borrower agrees (promises) to pay back money to a lender according to specified terms. A written promise to pay a certain sum of money, at a future time, unconditionally.

A promissory note differs from a mere acknowledgment of debt, without any promise to pay, as when the debtor gives his creditor an I 0 U. In its form it usually contains a promise to pay, at a time therein expressed, a sum of money to a certain person therein named, or to his order, for value received. It is dated and signed by the maker. It is never under seal.

He who makes the promise is called the maker, and he to whom it is made is the payee.

I hope this helps.

Jeff David