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ARTICLE 1182

2. WON petitioner is entitled to rescind the


contract? NO
3. WON the contract is in the nature of a potestative
obligation? NO

Vda. De Mistica vs. Naguiat


418 SCRA 73
Art. 1182. Potestative Condition
Issue/Scope
Potestative Condition under Art. 1182 in relation to
Art. 1191 of Civil Code
Facts:
Predecessor-in-interest of Petitioner and herein
Defendants entered into a contract to sell in which
the latter prayed the initial payment and undertake
to pay the remaining by installment within 10 years
subject to 12% interest per annum.
Petitioner filed a complaint for rescission alleging
failure and refusal of Defendants to pay the balance
constitutes a violation of the contract which entitles
her to rescind the same
Petitioner argues that period for performance of
obligation cannot be extended to 10 years because
to do so would convert the obligation to purely
potestative.
Held:
Under Art. 1191 of Civil Code, the right to
rescind an obligation is predicated on violation
between parties brought about by breach of
faith by one of them. Rescission, however, is
allowed only when the breach is substantial
and fundamental to the fulfillment of the
obligation
In this case, no substantial breach in the Kasulatan,
it was stipulated that payment could be made even
after 10 years from execution of contract, provided
they will pay the 12% interest
Civil
Code
prohibits
purely
potestative,
suspensive, conditional obligation that depend
on the whims of the debtor. Nowhere in the deed
that payment of purchase price is dependent whether
respondents want to pay it or not, the fact that they
already made partial payment shows that parties
intended to be bound by the Kasulatan
VDA. DE MISTICA vs. NAGUIAT
G.R. No. 137909. December 11, 2003
Facts: Eulalio Mistica is the owner of a parcel of land
located at Malhacan, Meycauayan, Bulacan. A portion
thereof was leased to respondent Naguiat.
Consequently, Mistica entered into a contract to sell
with respondent over a portion of lot containing an
area of 200 sq. mtrs. The agreement was reduced to
writing in a document entitled Kasulatan sa
Pagbibilihan P 20k as the total purchase: P 2k
upon signing; P 18k to be paid within 10yrs; In case
non payment, vendee shall pay an interest of 12%
per annum.
Pursuant to said agreement, respondent gave a
downpayment of P2K & made another partial
payment of P1K & thereafter failed to make any
payments. Eulalio Mistica died sometime in Oct.
1986. Petitioner claims that she is entitled to rescind
the Contract under Article 1191 of the Civil Code,
because respondents committed a
substantial
breach when they did not pay the balance of the
purchase price within the ten-year period.
Issue:
1. WON
sell? NO

the

Kasulatan

was

contract

to

Held:
1.The Kasulatan was clearly a Contract of Sale. A
deed of sale is
considered absolute in nature when there is neither a
stipulation in the deed thattitle to the property sold is
reserved to the seller until the full payment of the
price; nor a stipulation giving the vendor the right to
unilaterally resolve the contract the moment the
buyer fails to pay within a fixed period.
2. In a contract of
sale, the remedy of an
unpaid seller is either specific performance or
rescission. Under Article 1191 of the Civil Code, the
right to rescind an obligation is predicated on the
violation of the reciprocity between parties, brought
about by a breach of faith by one of them. Rescission,
however, is allowed only where the breach is
substantial and fundamental to the fulfillment of
the obligation.
In the present case, the failure of respondents to pay
the balance of the purchase price within ten years
from the execution of the Deed did not amount to a
substantial breach. In the Kasulatan, it was stipulated
that payment could be made even after ten years
from the execution of the Contract, provided the
vendee paid 12 percent interest. The stipulations of
the contract constitute the
law between the parties; thus, courts have no
alternative but to enforce them as agreed upon and
written. Petitioner never made any demand for
the balance of the purchase price.
Petitioner even refused the payment tendered
by respondents during her husbands funeral, thus
showing that she was not exactly blameless for the
lapse of the ten-year period. Had she accepted the
tender, payment would have been made well within
the agreed period.
3. . The Kasulatan does not allow the it to be
converted
to a potestative obligation.
First,
nowhere is it stated in the Deed that payment
of the purchase price is dependent upon whether
respondents want to pay it or not.
Second, the fact that they already made partial
payment thereof only shows that the parties intended
to be bound by the Kasulatan.

TRILLANA VS. QUEZON COLLEGE


Damasa Crisostomo sent the following letter to the
Board of Trustees of the Quezon College:
June 1, 1948
The BOARD OF TRUSTEES
Quezon College
Manila
Gentlemen:
Please enter my subscription to dalawang daan (200)
shares of your capital stock with a par value of P100
each. Enclosed you will find (Babayaran kong lahat

pagkatapos na ako ay makapag-pahuli ng isda) pesos


as my initial payment and the balance payable in
accordance with law and the rules and regulations of
the Quezon College. I hereby agree to shoulder the
expenses connected with said shares of stock. I
further submit myself to all lawful demands,
decisions or directives of the Board of Trustees of the
Quezon College and all its duly constituted officers or
authorities (ang nasa itaas ay binasa at ipinaliwanag
sa akin sa wikang tagalog na aking nalalaman).
Damasa Crisostomo died on October 26, 1948. As no
payment appears to have been made on the
subscription mentioned in the foregoing letter, the
Quezon College, Inc. presented a claim before the
Court of First Instance of Bulacan in her testate
proceeding, for the collection of the sum of P20,000,
representing the value of the subscription to the
capital stock of the Quezon College, Inc. This claim
was opposed by the administrator of the estate, and
the Court of First Instance of Bulacan, after hearing
issued an order dismissing the claim of the Quezon
College, Inc. on the ground that the subscription in
question was neither registered in nor authorized by
the Securities and Exchange Commission. From this
order the Quezon College, Inc. has appealed.
It is not necessary for us to discuss at length
appellant's various assignments of error relating to
the propriety of the ground relief upon by the trial
court, since, as pointed out in the brief for the
administrator and appellee, there are other decisive
considerations which, though not touched by the
lower court, amply sustained the appealed order.
It appears that the application sent by Damasa
Crisostomo to the Quezon College, Inc. was written
on a general form indicating that an applicant will
enclose an amount as initial payment and will pay
the balance in accordance with law and the
regulations of the College. On the other hand, in the
letter actually sent by Damasa Crisostomo, the latter
(who requested that her subscription for 200 shares
be entered) not only did not enclose any initial
payment but stated that "babayaran kong lahat
pagkatapos na ako ay makapagpahuli ng isda." There
is nothing in the record to show that the Quezon
College, Inc. accepted the term of payment
suggested by Damasa Crisostomo, or that if there
was any acceptance the same came to her
knowledge during her lifetime. As the application of
Damasa Crisostomo is obviously at variance with the
terms evidenced in the form letter issued by the
Quezon College, Inc., there was absolute necessity on
the part of the College to express its agreement to
Damasa's offer in order to bind the latter. Conversely,
said acceptance was essential, because it would be
unfair to immediately obligate the Quezon College,
Inc. under Damasa's promise to pay the price of the
subscription after she had caused fish to be caught.
In other words, the relation between Damasa
Crisostomo and the Quezon College, Inc. had only
thus reached the preliminary stage whereby the
latter offered its stock for subscription on the terms
stated in the form letter, and Damasa applied for
subscription fixing her own plan of payment, a
relation, in the absence as in the present case of
acceptance by the Quezon College, Inc. of the

counter offer of Damasa Crisostomo, that had not


ripened into an enforceable contract.
Indeed, the need for express acceptance on the part
of the Quezon College, Inc. becomes the more
imperative, in view of the proposal of Damasa
Crisostomo to pay the value of the subscription after
she has harvested fish, a condition obviously
dependent upon her sole will and, therefore,
facultative in nature, rendering the obligation void,
under article 1115 of the old Civil Code which
provides as follows: "If the fulfillment of the condition
should depend upon the exclusive will of the debtor,
the conditional obligation shall be void. If it should
depend upon chance, or upon the will of a third
person, the obligation shall produce all its effects in
accordance with the provisions of this code." It
cannot be argued that the condition solely is void,
because it would have served to create the obligation
to pay, unlike a case, exemplified by Osmea vs.
Rama (14 Phil., 99), wherein only the potestative
condition was held void because it referred merely to
the fulfillment of an already existing indebtedness.
In the case of Taylor vs. Uy Tieng Piao, et al. (43 Phil.,
873, 879), this Court already held that "a condition,
facultative as to the debtor, is obnoxious to the first
sentence contained in article 1115 and renders the
whole obligation void."
Wherefore, the appealed order is affirmed, and it is
so ordered with costs against appellant.

ROMERO VS. CA
FACTS:

Romero, a civil engineer, was engaged in the


business of production, manufacture and
exportation of perlite filter aids, permalite
insulation and processed perlite ore. In 1988,
he decided to put up a central warehouse in
Metro Manila.
Flores and his wife offered a parcel of land
measuring 1,952 square meters. The lot was
covered in a TCT in the name of private
respondent
Enriqueta
Chua
vda.
de
Ongsiong. Petitioner visited the property and,
except for the presence of squatters in the
area, he found the place suitable for a central
warehouse.
Flores called on petitioner with a proposal
that should he advance the amount of
P50,000.00 which could be used in taking up
an ejectment case against the squatters,
private respondent would agree to sell the
property for only P800/square meter. Romero
agreed. Later, a "Deed of Conditional Sale"
was executed between Flores and Ongsiong.
Purchase
price:
P1,561,600.00;
Down
payment: P50K; Balance to be paid 45 days
after the removal of all the squatters; upon
full payment, Ongsiong shall execute deed of
absolute sale in favor of Romero.
Ongsiong sought to return the P50,000.00
she received from petitioner since, she said,
she could not "get rid of the squatters" on the
lot. She opted to rescind the sale in view of

her failure to get rid of the squatters.


RTC of Makati: private respondent had no
right to rescind the contract since it was she
who "violated her obligation to eject the
squatters from the subject property" and that
petitioner, being the injured party, was the
party who could, under Article 1191 of the
Civil Code, rescind the agreement.
CA: reversed TC: It opined that the contract
entered into by the parties was subject to a
resolutory condition, i.e., the ejectment of the
squatters from the land, the non-occurrence
of which resulted in the failure of the object
of the contract; that private respondent
substantially complied with her obligation to
evict the squatters; that it was petitioner who
was not ready to pay the purchase price and
fulfill his part of the contract, and that the
provision
requiring
a
mandatory
return/reimbursement of the P50,000.00 in
case private respondent would fail to eject
the squatters within the 60-day period was
not a penal clause. Thus, it concluded.

ISSUE: Whether the contract of sale was perfected?


Yes. Decision of CA was reversed.
RATIO:
A perfected contract of sale may either be absolute
or conditional depending on whether the agreement
is devoid of, or subject to, any condition imposed on
the passing of title of the thing to be conveyed or on
the obligation of a party thereto. When ownership is
retained until the fulfillment of a positive condition
the breach of the condition will simply prevent the
duty to convey title from acquiring an obligatory
force. If the condition is imposed on an obligation of a
party which is not complied with, the other party may
either refuse to proceed or waive said condition (Art.
1545, Civil Code). Where, of course, the condition is
imposed upon the perfection of the contract itself,
the failure of such condition would prevent the
juridical relation itself from coming into existence.
In determining the real character of the contract, the
title given to it by the parties is not as much
significant as its substance. For example, a deed of
sale, although denominated as a deed of conditional
sale, may be treated as absolute in nature, if title to
the property sold is not reserved in the vendor or if
the vendor is not granted the right to unilaterally
rescind the contract predicated on the fulfillment or
non-fulfillment, as the case may be, of the prescribed
condition.
The term "condition" in the context of a perfected
contract of sale pertains, in reality, to the compliance
by one party of an undertaking the fulfillment of
which would beckon, in turn, the demandability of the
reciprocal prestation of the other party. The reciprocal
obligations referred to would normally be, in the case
of vendee, the payment of the agreed purchase price
and, in the case of the vendor, the fulfillment of
certain express warranties (which, in the case at
bench is the timely eviction of the squatters on the
property).
From the moment the contract is perfected, the
parties are bound not only to the fulfillment of what

has been expressly stipulated but also to all the


consequences which, according to their nature, may
be in keeping with good faith, usage and law. Under
the agreement, private respondent is obligated to
evict the squatters on the property. The ejectment of
the squatters is a condition the operative act of which
sets into motion the period of compliance by
petitioner of his own obligation, i.e., to pay the
balance of the purchase price. Private respondents
failure "to remove the squatters from the property"
within the stipulated period gives petitioner the right
to either refuse to proceed with the agreement or
waive that condition in consonance with Article 1545
of the Civil Code.
This option clearly belongs to petitioner and not to
private respondent. There was no potestative
condition on the part of Ongsiong but a "mixed"
condition "dependent not on the will of the vendor
alone but also of third persons like the squatters and
government agencies and personnel concerned."
It would be futile to challenge the agreement here in
question as not being a duly perfected contract. A
sale is at once perfected when a person (the seller)
obligates himself, for a price certain, to deliver and to
transfer ownership of a specified thing or right to
another (the buyer) over which the latter agrees.
From the moment the contract is perfected, the
parties are bound not only to the fulfillment of what
has been expressly stipulated but also to all the
consequences which, according to their nature, may
be in keeping with good faith, usage and law. Under
the agreement, private respondent is obligated to
evict the squatters on the property. Private
respondent's failure "to remove the squatters from
the property" within the stipulated period gives
petitioner the right to either refuse to proceed with
the agreement or waive that condition in consonance
with Article 1545 of the Civil Code. This option clearly
belongs to petitioner and not to private respondent.
In contracts of sale particularly, Article 1545 of the
Civil Code allows the obligee to choose between
proceeding with the agreement or waiving the
performance of the condition. Here, evidently,
petitioner has waived the performance of the
condition imposed on private respondent to free the
property from squatters.
The right of resolution of a party to an obligation is
predicated on a breach of faith by the other party
that violates the reciprocity between them. It is
private respondent who has failed in her obligation
under the contract. Petitioner did not breach the
agreement. He has agreed, in fact, to shoulder the
expenses of the execution of the judgment in the
ejectment case and to make arrangements with the
sheriff to effect such execution.

VIRGILIO R. ROMERO, petitioner,


vs.
HON. COURT OF APPEALS and ENRIQUETA CHUA
VDA. DE ONGSIONG, respondents.

G.R. No. 107207 November 23, 1995

DOCTRINE: The term "condition" in the context of a


perfected contract of sale pertains, in reality, to the
compliance by one party of an undertaking the
fulfillment of which would beckon, in turn, the
demandability of the reciprocal prestation of the
other party. The reciprocal obligations referred to
would normally be, in the case of vendee, the
payment of the agreed purchase price and, in the
case of the vendor, the fulfillment of certain express
warranties.
SANTOS
vs.
COURT
OF
No. 120820. August 1, 2000Facts:

APPEALSG.R.

Spouses Santos owned the house and lot in


Better Living Subdivision, Paranaque, Metro
Manila. The land together with the house, was
mortgaged with the Rural Bank of Salinas,
Inc., to secure a loan of P150K. The bank sent
Rosalinda Santos a letter demanding payment of
P16K in unpaid interest and other charges. Since the
Santos couple had no funds, Rosalinda offered to sell
the house and lot to Carmen Caseda. After inspecting
thereal property, Carmen and her husband agreed.
Carmen and Rosalinda signed a document,
involving the sale of the house P350K as full
amount, P54K as down payment. Among other
condition set is that Caseda will pay the balance of
the mortgage in the bank, real estate taxes and the
electric
and
water
bills.
The
Casedas
complied with the bank mortgage and the
bills. The Santoses, seeing tha the Casedas
lacked
them e a n s t o p a y t h e r e m a i n i n g i n s t a l l m e
nts and/or amortization of the loan, repo
s s e s s e d t h e p r o p e r t y. T h e Santoses
then collected the rentals from the tenants.
Carmen approached petitioners and off ered
to pay the balance of the purchase price for
the house and lot. The parties, however, could
not agree, and the deal could not push through
because the Santoses wanted a higher price. Carmen
is now praying that the Santoses execute the final
deed of conveyance over the property.
Issue:
WON there was a perfected contract of sale? NO
Held:
A contract is what the law defi nes it to be,
taking
into
consideration
its
essential

elements, and not what the contracting parties


call it. Article 1458 expressly obliges the vendor to
transfer ownership of the thing sold as an essential
element of a contract of sale. This is because the
transfer of ownership in exchange for a price paid
or promised is the very essence of a contract of sale.
There
was
no
transfer
of
ownership
simultaneously with the delivery of the
property
purportedly
sold.
The
records
clearly show that, notwithstanding the
f a c t t h a t t h e C a s e d a s fi r s t t o o k t h e n l o s t
p o s s e s s i o n o f t h e disputed house and lot, the
title to the property has remained always in the name
of Rosalinda Santos. Although the parties had agreed
that the Casedas would assume the mortgage, all
amortization payments made by Carmen Caseda to
the bank were in the name of Rosalinda
Santos.
The
foregoing
circumstances
categorically and clearly show that no valid
transfer of ownership was made by the Santoses to
the Casedas. Absent this essential element, their
agreement cannot be deemed a contract of sale.
It was a contract to sell.
Ownership is reserved by the vendor and is
not to pass until full payment of the purchase
price. This
we
find
fully
applicable
and
understandable in this case, given that the property
involved is a titled realty under mortgage to a bank
and would require notarial and other formalities of
law before transfer thereof could be validly effected.
The CA cannot order rescission.
If the vendor should eject the
for
failure
to
meet
condition precedent, he is

vendee
the

enforcing the contract and not rescinding


it.
When the petitioners in the instant case
repossessed the disputed house and lot for failure of
private respondents to pay the purchase price in full,
they were merely enforcing the contract and not
rescinding it.

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