Period

14. Pacific Banking Corporation vs CA G.R. No. L-45656, May 5, 1989

FACTS: The organizer of Insular Farms, INC. (IFI), Joseph Hart and Eleanor Hart approached John
Clarkin for financial assistance. Both parties signed a Memorandum of Agreement that stipulate the
division of shares outstanding; 510 for John Clarkin and 490 for Joseph and Eleanor Hart. Due to
financial challenge, IFI took out a loan of P250,000 from Pacific Banking Corporation (PBC) in July
1956. Subsequently, IFI issued a promissory note for P250,000 to PBC, with repayment scheduled in
5 equal annual installments, and the first installment due on or before July 1957. It was also
specified that in the event of default on any installment, all remaining installments would become
immediately due and payable. Notably, this loan was effected without any security, except for the
Continuing Guaranty of Clarkin. Despite the business facing challenges, PBC, along with its then
Executive Vice President, Chester Babst, did not demand payment for the initial installment due in
July 1957 or the entire outstanding obligation.

The business continued to decline, prompting Hart to offer all of IFI's shares of stocks as additional
collateral to PBC. This was done to secure an extension for the payment of the July 1957 installment
and took place on February 19, 1958. On March 3, 1958, Pacific Farms Inc. (PFI) was established and
entered the same line of business as IFI. The following day, PBC, represented by Babst, notified IFI
that the entire obligation was due within 48 hours. On March 7, 1958, Hart received notice that the
shares of stocks would be auctioned publicly. This auction was temporarily halted when the court
granted a preliminary injunction in response to a complaint for reconveyance and damages.
However, the court later lifted the injunction, and on March 21, the 1,000 shares of IFI were sold to
PFI. Hart filed a case challenging the validity of the share sale, arguing that there was an indefinite
extension of time to fulfill their obligation under the promissory note, and the bank did not make a
demand but merely requested additional collateral. The trial court ruled against the private
respondents, but a favorable judgment was reached on appeal.

ISSUE: Whether or not the Bank is liable with the Chester G. Babst ( the notary public) for the
premature foreclosure of the shares of stock.

Held: Yes. The foreclosure sale was premature and done in bad faith, petitioners are liable for
damages arising from a quasi-delict. It was established that there was an agreement to extend
indefinitely the payment of the installment. Consequently, Pacific Banking Corporation was
precluded from enforcing the payment of the said installment. As found by the Court of Appeals,
there was really no investigation of Insular Farms’ ability to pay the loan after the pledge was
executed but before the demand for payment, considering that the latter was made barely two
weeks after the execution of the pledge.

As between Pacific Banking and Babst, the law merely gives the employer a right to reimbursement
from the employee for what is paid to the private respondent. Article 2181 does not make recovery
from the employee a mandatory requirement. A right to relief shall be recognized only when the
party concerned asserts it through a proper pleading filed in court. In this case, the employer, Pacific
Banking Corporation did not manifest any claim against Babst by filing a cross-claim before the trial
court; thus, it cannot make its light automatically enforceable. Babst was made a party to the case
upon the complaint of the private respondents in his official capacity as Executive Vice President of
the bank. In the absence of a cross-claim against Babst, the court has no basis for enforcing a right
against him to which his co-defendant may be entitled. We leave the matter to the two petitioners’
own internal arrangements or actions should the bank decide to charge its own officer.

The Court of Appeals applied Article 2180 of the Civil Code, under which, “employers shall be liable
for the damages caused by their employees … acting within the scope of their assigned tasks.”
Chester G. Babst, as admitted, was Executive Vice-President of Pacific Banking Corporation and
“acted only upon direction by the Board of Directors of the Pacific Banking Corporation.” (p. 127,
Rollo) The appellate court also applied Article 2181 of the same Code which provides that “whoever
pays for the damages caused by his dependents or employees may recover from the latter what he
has paid or delivered in satisfaction of the claim.” (Art. 2181, Civil Code).

14. Reference: https://lexmercatoriaphilippines.wordpress.com/2014/03/16/pacific-bank-v-hart-g-r-

FACTS: To acquire a 150-square-meter house and lot in Pulanglupa, Las Pinas City, the respondents,
Gil and Fernandina Galang, obtained a loan of Php 173,800.00 from Fortune Savings and Loan
Association (FSLA). To fulfill the payment, they mortgaged the property in favor of FSLA, and
subsequently, the National Home Mortgage Finance Corporation (NHMFC) acquired the lot from
FSLA. Leticia Cannu, one of the petitioners in this case, agreed to purchase the mortgaged property
for Php 120,000.00 and assumed the remaining mortgage obligations with NHMFC and the
property's developer. Despite multiple payments, there was still a balance of Php 45,000.00. A deed
of sale and assumption of mortgage was executed between the Galang and Cannu spouses, leading
the petitioners to take immediate possession of the house and lot. Despite requests from Adelina
Timbang (the attorney-in-fact) and Fernandina Galang for the balance payment, warning of potential
eviction if not settled, the Cannus refused to comply.

On May 21, 1993, Fernandina Galang fully paid Php 233,957.64 to settle the remaining balance in the
mortgage loan with NHMFC. The Cannus contested the release of Transfer Certificate Title Number
T-8505 in favor of the Galangs, insisting that they already owned the property. A Complaint for
Specific Performance and Damages was filed, seeking a declaration that the Cannu spouses be
recognized as owners of the house and lot, subject to reimbursing the amount paid by the Galang
spouses in preterminating the mortgage loan with NHMFC. Consequently, the NHMFC held in
abeyance the release of said TCT.

ISSUES: Whether or not the petitioners’ breach of obligation was substantial; whether or not there
was no substantial compliance with the obligation to pay the monthly amortization with the NHMFC;
whether or not the action for rescission was subsidiary.

HELD: The Cannus' failure to settle the Php 45,000.00 constitutes a significant breach of obligation.
According to Article 1191 of the Civil Code of the Philippines, the decision of one party to fulfill an
obligation is based on a breach of faith by the other party, which violates the reciprocal obligation.
Despite having ample time to make the payment, the petitioners did not comply with their
obligation, even after repeated demands. Rescission is permissible only in cases of substantial
breaches that undermine the purpose of the parties in entering into the agreement.

Additionally, Felipe and Leticia Cannu committed another breach of obligation in the Deed of Sale
with Assumption of Mortgage. The formal assumption of the mortgage obligation with the NHMFC
did not occur due to the Cannus' failure to submit the necessary requirements to be recognized as
successors-in-interest for the concerned house and lot in Pulanglupa. Article 1191, rather than
Article 1381, is the applicable provision in this case, as it is a retaliatory provision in the sense that
the action is not substantive. The court is duty-bound to compel the parties involved to surrender
whatever they may have received from each other in resolving the Deed of Sale with Assumption of
Mortgage. It is inequitable for one party to be bound to fulfill their obligation when the other party
fails to do their part.

15. Reference: https://lspuoblicon2015.wordpress.com/2016/03/25/sps-felipe-and-leticia-cannu-vs-

FACTS: On May 11, 1967, the private respondents entered into a Contract to Sell and a Deed of Sale
for 42 subdivision lots, transferring these lots to Binalbagan Tech, Inc. Subsequently, Binalbagan
executed an Acknowledgement of Debt with Mortgage Agreement, mortgaging the lots to the estate
of Puentebella. The first installment, due on June 10, 1967, went unpaid.

During this period, a legal case involving the aforementioned lots was ongoing. In 1974, the
petitioner was ousted from the subdivision lots and was only reinstated to possession in 1982. Upon
regaining possession, the respondent demanded payment through a demand letter, accompanied by
a statement of account as of September 1982, amounting to Php367,509.92, representing the land
price and accrued interest up to that date. Binalbagan failed to make the payment, leading the
respondent to file a case against them.

The trial court ruled in favor of Binalbagan, citing the absence of fraud and asserting that the time
frame for initiating an action based on a written contract (which is 10 years) had already lapsed.
However, the Court of Appeals reversed the trial court's decision, prompting the filing of a petition
for review on certiorari.

ISSU: Whether or not the period to institute action upon a written contract has prescribed.

HELD: The statute of limitations for filing a lawsuit based on a written contract is 10 years (Art 1144,
CC). The respondent's claim arises from a deed of sale executed in 1967, transferring ownership of
the lots to Binalbagan. The civil case seeking title recovery and damages was filed in 1982.

Calculating from 1967 to 1982, deducting the 8 years from 1974 to 1982 leaves only 7 years passed.
Hence, the respondent's case falls within the 10-year prescriptive period.

Moreover, the principle against unjust enrichment weighs against the petitioner. Allowing ownership
of the 42 lots without full payment would result in unjust enrichment.

Therefore, the petition is rejected, and the Court of Appeals' decision stands affirmed.

Reference:

https://www.scribd.com/doc/306921345/Binalbagan-Tech-Inc-vs-CA
17. Vicelet & Vicelen Lalicon v. NHA, G.R. No. 185440, 13 July 2011

FACTS: In 1980, the NHA executed a Deed of Sale with Mortgage for a Quezon City lot in favor of
Isidro and Flaviana Alfaro (the Alfaros). The deed specified that the sold lot could not be alienated,
transferred, or encumbered for a period of 5 years from the mortgage release date without prior
written consent from the NHA. In 1990, while the mortgage was still in effect, the Alfaros sold the
land to their son, Victor Alano, who had a common-law wife and two daughters, namely petitioners
Vicelet and Vicelen Lalicon. The NHA released the mortgage in 1991 upon full payment of the
Alfaro's loan.

Approximately 4 and a half years after the mortgage release, Victor registered the 1990 land sale,
leading to the cancellation of his parents' title and the issuance of a Transfer Certificate of Title (TCT)
in Victor's name. Subsequently, Victor mortgaged the land to various individuals, including Marcela
Lao Chua. After 2 years, Victor sold the property to Chua, resulting in the cancellation of Victor's TCT
and the issuance of a new TCT in Chua's name.

One year later, the NHA filed a case before the QC RTC seeking the annulment of the transactions
that violated NHA rules and regulations. This includes the NHA's 1980 sale of the land to the Alfaros,
the Alfaros' 1990 sale of the land to Victor, and the subsequent sale of the land to Chua

ISSUE/S: Whether or not NHA’s right to rescind has prescribed. Whether or not subsequent buyers
of land acted in good faith hence, cannot be affected by the rescission.

RULING: The Alfaros' resale without obtaining the NHA's consent constitutes a substantial breach of
their contract, violating the essence of the government's socialized housing program, which aims to
maintain beneficiaries' ownerships for a reasonable period, in this case, at least five years free from
encumbrances. While the Lalicons reference Article 1389 of the Civil Code, arguing that the "action
to claim rescission must be commenced within four years" from the commission of the cause, it's
important to note that an action for rescission can stem from either Article 1191 or Article 1381. It
has been clarified that Article 1191 pertains to rescission in reciprocal obligations, particularly within
the framework of Article 1124 of the Old Civil Code, which uses the term "resolution." This context
limits resolution to reciprocal obligations, where a breach by one party implies a resolutory
condition, entitling the other party to rescission.

Reference:

https://www.coursehero.com/file/57179088/4-Lalicon-v-NHAdocx/
18. Ayala Life Insurance v. Ray Barton Dev’t, GR No. 163075, 23 January 2006

FACTS: On December 22, 1995, Ayala Life Assurance, Inc., petitioner, and Ray Burton Development
Corporation, respondent, entered into a contract denominated as a "Contract to Sell," with a "Side
Agreement" of even date. In these contracts, petitioner agreed to sell to respondent a parcel of land,
with an area of 1,691 square meters, situated at Madrigal Business Park, Ayala Alabang Village,
Muntinlupa City, covered by Transfer Certificate of Title No. 186485 of the Registry of Deeds of
Makati City. The purchase price of the land is P55,000.00 per square meter or a total of
P93,005,000.00, payable as follows:

(a) On contract date – P24,181,300.00 representing 26 percent of the purchase price, inclusive of the
P1,000,000.00 option money;

(b) Not later than January 6, 1996 – P3,720,200.00 representing 4 percent of the purchase price to
complete 30 percent down payment; and

(c) In consecutive quarterly installments for a period of 5 years from December 22, 1995 –
P65,103,500.00 representing the 70 percent balance of the purchase price.

The contract contains a stipulation in paragraphs 3 and 3.1 for an "Event of Default." It provides that
in case the purchaser (respondent) fails to pay any installment for any reason not attributable to the
seller (petitioner), the latter has the right to assess the purchaser a late penalty interest on the
unpaid installment at two (2%) percent per month, computed from the date the amount became
due until full payment thereof. And if such default continues for a period of six (6) months, the seller
has the right to cancel the contract without need of court declaration by giving the purchaser a
written notice of cancellation. In case of such cancellation, the seller shall return to the purchaser
the amount he received, less penalties, unpaid charges and dues on the property.

Respondent paid thirty (30%) down payment and the quarterly amortization, including the one that
fell due on June 22, 1998.

However, on August 12, 1998, respondent notified petitioner in writing that it will no longer
continue to pay due to the adverse effects of the economic crisis to its business. Respondent then
asked for the immediate cancellation of the contract and for a refund of its previous payments as
provided in the contract.

Petitioner refused to cancel the contract to sell. Instead, on November 25, 1999, it filed with the
Regional Trial Court, Branch 66, Makati City, a complaint for specific performance against
respondent, docketed as Civil Case No. 99-2014, demanding from the latter the payment of the
remaining unpaid quarterly installments beginning September 21, 1999 in the total sum of
P33,242,382.43, inclusive of interest and penalties.

Respondent, in its answer, denied any further obligation to petitioner, asserting that on August 12,
1998, it (respondent) notified the latter of its inability to pay the remaining installments. Respondent
invoked the provisions of paragraphs 3 and 3.1 of the contract to sell providing for the refund to it of
the amounts paid, less interest and the sum of 25% of all sums paid as liquidated damages.
ISSUE:

1. Whether respondent's non-payment of the balance of the purchase price gave rise
to a cause of action on the part of petitioner to demand full payment of the purchase
price; and cralawlibrary

2. Whether petitioner should refund respondent the amount the latter paid under the
contract to sell.

HELD: On December 10, 2001, the trial court issued a decision finding the respondent in clear
violation of the law in bad faith. The decision ordered the respondent to pay the petitioner the sum
of P33,242,383.43, representing the unpaid principal amount, agreed-upon interest, and penalties.
Additionally, the respondent was directed to pay the petitioner P200,000.00 as attorney's fees and
cover the costs of the suit. Upon full payment of these amounts, the court mandated the petitioner
to execute a deed of absolute sale, transferring full title and ownership of the land subject to the
sale to the respondent.

However, on appeal, the Court of Appeals, in a decision dated January 21, 2004, reversed the trial
court's decision. The appellate court ordered Ayala Life to refund all sums paid under the Contract to
Sell, with 12% interest per annum from August 12, 1998, until fully paid, deducting 25% of the total
amount paid as liquidated damages.

The Court of Appeals determined that the transaction between the parties was a contract to sell
rather than a contract of sale. According to the contract, ownership of the land remained with the
petitioner until the respondent fully paid the purchase price. The failure to pay in full was seen as an
event preventing the petitioner from transferring title to the respondent. The court argued that
under such circumstances, a cause of action for specific performance did not arise, and the
provisions of the contract regarding the "Event of Default" should govern.

In response, the petitioner filed a petition for review on certiorari, contending that the Court of
Appeals committed reversible errors. The petitioner argued that the nature of the agreement,
whether a contract to sell or a contract of sale, is immaterial, as the petitioner has the right to
choose between fulfillment and rescission of the contract, with damages in either case.

Reference:

https://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/40800
19. Victorias Planters v. VMC, 97 Phil 318, G.R. No. L-6648, July 25, 1955

FACTS: The petitioners, Victorias Planters Association, Inc. and North Negros Planters Association,
Inc., and the respondent, Victorias Milling Co., Inc., entered into a milling contract outlining a 30-
year period for processing the sugar cane produced by the petitioners at the respondent's central.
The agreement also specified that in case of force majeure, the contract would be considered
suspended during this period

Due to World War II, spanning four years, and the subsequent post-war period of two years, the
petitioners were unable to produce sugarcane, and the sugar central was destroyed. Arguing that
the milling contract's 30-year duration had lapsed, the petitioners asserted that the contract should
be deemed terminated.

The respondent countered, asserting that the contract referred to a "30 years milling period" and
not a "30 years in time." They claimed that the petitioners were obligated to deliver sugar cane,
which they failed to do over the six-year period.

The trial court ruled in favor of the petitioners, prompting the respondent corporation to appeal this
judgment.

ISSUE: Whether or not the petitioners be compelled to deliver sugar cane to the appellant for six
more years to make up for what they failed to deliver during fortuitous event.

HELD: No. The period of six years-four during the Japanese occupation when the appellant did not
operate its mill and the last two during which the appellant reconstructed its mill-cannot be
deducted from the thirty-year period stipulated in the contracts.

The stipulation in the contract that in the event of force majeure the contract shall be deemed
suspended during said period does not mean that the happening of any of those events stops the
running of the period agreed upon. It only relieves the parties from the fulfillment of their respective
obligations during that time -the petitioners from delivering sugar cane and the respondent central
from milling it.To require the planters to deliver the sugar cane which they failed to deliver during
the fortuitous event is to demand from the obligors the fulfillment of an obligation which was
impossible of performance at the time it became due. The obligee not being entitled to demand
from the obligors the performance of the latters' part of the contracts under those circumstances
cannot later on demand its fulfillment. The performance of what the law has written off cannot be
demanded and required.

The prayer that the petitioners be compelled to deliver sugar cane for six more years to make up for
what they failed to deliver, the fulfillment of which was impossible, if granted, would in effect be an
extension of the terms of the contracts entered into by and between the parties.

Reference:

https://bingbing-wanders.blog/victorias-planters-assn-inc-et-al-vs-victorias-milling-co-inc/