Vda. De Mistica vs.

Naguiat
Art. 1182. Potestative Condition

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
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Cannu v Galang

Galang obtained a loan from Fortune Savings & Loan to purchase a house in Las
Pinas Sold to Cannu the house plus the assumption of mortgage obligations After
payment by Cannu, Php45,000 was left of the balance of the purchase price Galang
demanded either payment of the balance or to vacate the property Because
petitioners refused to pay the loan, respondent assumed the mortgage balance.
Respondents alleged that because they paid the balance, it is an initial step in the
rescission of the Deed of Sale CA ruled that the breach of the contract is substantial
and rescission is justified
The SC affirmed that 18%, representing portion of the unpaid balance, is
substantial. Last payment was 18 months before respondent paid mortgage
balance. There was sufficient time for petitioner to pay the balance. There was clear
intention of the petitioners to renege their obligations Failure to fulfill their
obligation gave respondents the right to rescission The contract does not contain
provision authorizing extra-judicial rescission. Respondent should have asked for
judicial intervention SC affirmed the CA ruling and ordered the respondents to
return the partial payment made by the petitioners.
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Pryce Corp vs PAGCOR

FACTS Pryce Corp made representations with PAGCOR on the possibility of setting
up a casino in Pryce Plaza Hotel in Cagayan de Oro City (CDO). Parties executed a
contract of lease on November 11, 1992. The contract had a term of 3 years
beginning December 1, 1992 and ending on November 30, 1995. The Sangguniang
Panlungsod of CDO passed resolutions and ordinances prohibiting the establishment
of a gambling casino in the city. The court subsequently ruled that the ordinances
were unconstitutional. Despite the absence of legal obstacles, PAGCOR's operations

were interrupted by demonstrations and public rallies. PAGCOR decided to stop its
operations upon advice from the Office of the President. PAGCOR asked for a pretermination of the contract and demanded a refund of the reimbursable rent
deposits from Pryce Corp. Pryce Corp is instead demanding damages pursuant to
Art 20 of their contract.
ISSUE: Whether or not Pryce Corp is entitled to the claim of future rentals for the
unexpired period of the contract of lease.
RULING: The actions of the petitioner show that it never intended to rescind the
lease contract, thus there is not need to mutual restitution. There was termination
and not rescission (resolution) of the contract.
Normally, Pryce Corp is not entitled to the collection of future rentals since the
termination of the contract releases PAGCOR from its obligations. But Pryce Corp
can recover or claim rentals corresponding to the remaining term of the
lease pursuant to the contract's penal clause. Such stipulation is valid and since the
parties have voluntarily bound themselves to such compliance, the court has no
choice but to enforce the contract. However, the court reduced the penalty to
Php687,289.50 since the original claim of Php7,037,835.40 is highly iniquitous.
RELEVANT JURISPRUDENCE
Resolution vs. Termination
Effects
Resolution
Termination
Contract
To declare contract as void as
To cancel, put an end in time or
though it never existed
existence; a close or conclusion
Restitution Parties are restored to their
Parties are not restored to their
original situations
original situations
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Deiparine vs CA

FACTS: Spouses Carungay entered into an agreement with Deiparine for the
construction of a 3-storey dormitory. The Carungays agreed to pay Php970K, and
Deiparine bound himself to erect the building in strict accordance to the plans and
specifications. In the General Conditions and Specifications document, the
minimum acceptable compressive strength of the building was set at 3,000 psi
(pounds per square inch). However, the Carungays found out that Deiparine was
deviating from the plans and specifications, thus impairing the strength and safety
of the building. The spouses even issued a memorandum complaining that the
construction works were faulty and done haphazardly mainly due to lax supervision
coupled with inexperienced and unqualified staff. The memorandum was ignored.
After several conferences, the parties agreed to conduct cylinder tests to ascertain
compliance with safety standards. Carungay suggested core testing (a more reliable
test of safety and strength), and although Deiparine was relunctant at first, he
agreed to it and even promised that should the structure fail the test, he would
shoulder the test expenses. The core test was conducted, and the building was
found to be structurally defective. The spouses then filed in the RTC for rescission of
the construction contract and for damages. Deiparine alleged that RTC did not have
jurisdiction for construction contracts are now cognizable by the Philippine
Construction Development Board. RTC declared the contract rescinded, Deiparine to
have forfeited his expenses in the construction, and ordered Deiparine to reimburse
the spouses for the core testing and restore the premises to their former condition
before the construction began.
CA affirmed RTC.

ISSUES:WON RTC had jurisdiction over the case 2. WON rescission is the proper
remedy
HELD: Yes. Firstly, there is no Philippine Construction Development Board in
existence. There is however, a Philippine Domestic Construction Board (PDCB), but
this body has jurisdiction to settle claims and disputes in the implementation of
PUBLIC construction contracts (only), and thus does not have jurisdiction over
private construction contracts. (Deiparines counsel is even held in contempt of
court for changing the wording of the relevant provision in the law, making it appear
that the PDCB had jurisdiction over the instant case.)
2. Yes. The facts show that Deiparine deliberately deviated from the specifications
of the Carungays (changing the minimum strength, concrete mixture, etc.), possibly
to avoid additional expenses so as to avoid reduction in profits. His breach of duty
constituted a substantial violation of the contract, which is correctible by judicial
rescission.
Particularly for reciprocal obligations, Art.1191 CC provides that: The power to
rewind obligations is implied in reciprocal ones, in case one of the obligors should
not comply with what is incumbent upon him.
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Laperal vs. Solid Homes, Inc.

Facts: Filipinas Golf Sales and Development Corporation, predecessor-in-interest of

Filipinas Golf and CountryClub, Inc., represented by its then President, Oliverio
Laperal, entered into a Development and Management Agreement with respondent
Solid Homes, Inc., a registered subdivision developer, involving several parcelsof
land owned by Laperal and FGSDC. Under the terms and conditions of the
aforementioned Agreement and the Supplement, respondent undertook to convert
at its own expense the land subject of the agreement into a first-class residential
subdivision, in consideration of which respondent will get 45% of the lot titles of the
saleable area in the entire project. The aforementioned Agreement was cancelled by
the parties, and, inlieu thereof, two contracts identically denominated Revised
Development and Management Agreement were entered into by respondent with
the two successors-in-interest of FGSDC. Unlike the original agreement, both
Revised Agreements omitted the obligation of petitioners Laperal and FGCCI to
make available torespondent Solid Homes, Inc. the owner s duplicate copies of
the titles covering the subject parcels of land. It appears, however, that even as the
Revised Agreements already provided for the non-surrender of the owner s
duplicate copies of the titles, respondent persisted in its request for the delivery
thereof .Then, petitioners served on respondent notices of rescission of the Revised
Agreements with a demand to vacate the subject properties and yield possession
thereof to them.
Issue: Whether the termination of the Revised Agreement and Addendum, because
of the contractual breachcommitted by respondent Solid Homes, carried with it the
effect provided under Article 1385 of the New Civil Code.
Ruling: Mutual restitution is required in cases involving rescission under Article
1191. Since Article 1385 of the CivilCode expressly and clearly states that
rescission creates the obligation to return t he things which were the object of
the contract, together with their fruits, and the price with its interest, the Court
finds no justification to sustain petitioners position that said Article 1385 does
not apply to rescission under Article 1191.As a consequence of the resolution by
petitioners, rights to the lot should be restored to private respondent or the same
should be replaced by another acceptable lot. Applying the clear language of the

law and the consistent jurisprudence on the matter, therefore, the Court rules that
rescission under Article 1191 in the present case, carries with it the corresponding
obligation of restitution. Fallo: The petition is hereby granted. Accordingly, the
assailed decision and resolution of the Court of Appeals are reversed and set side
and the decision dated December 19, 1991 of the Regional Trial Court is reinstated.
No pronouncement as to costs.
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UNIVERSITY OF THE PHILIPPINES VS. DE LOSANGELES

FACTS: On November 2, 1960, UP and ALUMCO entered into a logging agreement

whereby the latter was granted exclusive authority to cut, collect and remove
timber from the Land Grant for a period starting from the date of agreement to
December 31, 1965, extendible for a period of 5 years by mutual agreement.
ALUMCO incurred an unpaid account of P219,362.94. Despite repeated demands,
ALUMCO still failed to pay, so UP sent a notice to rescind the logging agreement. On
the other hand, ALUMCO executed an instrument entitled Acknowledgment of Debt
and Proposed Manner of Payments. It was approved by the president of UP, which
stipulated the following: 3. In the event that the payments called for are not
sufficient to liquidate the foregoing indebtedness, the balance outstanding after the
said payments have been applied shall be paid by the debtor in full no later than
June 30, 1965. 5. In the event that the debtor fails to comply with any of its
promises, the Debtor agrees without reservation that Creditor shall have the right to
consider the Logging Agreement rescinded, without the necessity of any judicial
suit ALUMCO continued its logging operations, but again incurred an unpaid
account. On July 19,1965, UP informed ALUMCO that it had, as of that date,
considered rescinded and of no further legal effect the logging agreement, and that
UP had already taken steps to have another concessionaire take over the logging
operation. ALUMCO filed a petition to enjoin UP from conducting the bidding. The
lower court ruled in favor of ALUMCO, hence, this appeal.
ISSUE: Can petitioner UP treat its contract with ALUMCO rescinded, and may
disregard the same before any judicial pronouncement to that effect?
RULING: Yes. In the first place, UP and ALUMCO had expressly stipulated that upon
default by the debtor, UP has the right and the power to consider the Logging
Agreement of December 2, 1960 as rescinded without the necessity of any judicial
suit. As to such special stipulation and in connection with Article 1191 of the Civil
Code, the Supreme Court, stated in Froilan vs. Pan Oriental Shipping Co: There is
nothing in the law that prohibits the parties from entering into agreement that
violation of the terms of the contract would cause cancellation thereof, even without
court intervention. In other words, it is not always necessary for the injured party to
resort to court for rescission of the contract.
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Iringan vs CA

FACTS On March 22, 1985 private respondent Antonio Palao sold to petitioner
Alfonso Iringan an undivided portion of Lot No. 992 of the Tuguegarao Cadastre,
located in Poblacion of Tuguegarao.
Parties executed a Deed of Sale on same date with the purchase price of P295K,
payable as follows:
P10K upon execution of this instrument, and vendor acknowledges having received
the amount;

P140K on or before April 30, 1985;

P145K on or before December 31, 1985.
When second payment was due, Iringan paid only P40K. On July 18, 1985, Palao
sent a letter to Iringan stating that he would not accept any further payment
considering that Iringan failed to comply with his obligation to pay full amount of
second installment.
Iringan replied that they were not opposing the revocation of the Deed of Sale, but
asked for the reimbursement of the ff:
P50K cash received;
P3,200geodetic engineers fee;
P500attorneys fee;
Interest on P53,700
Palao declared he was not amenable to the reimbursements claimed by Iringan.
Iringan then proposed that the P50K which he had paid Palao be reimbursed, or
Palao could sell to Iringin an equivalent portion of the land.
Palao replied that Iringans standing obligation had reached P61,600 representing
payment of arrears for rentals from October 1985 to March 1989. Spouses Iringan
alleged that the contract of sale was a consummated contract, hence the remedy
for Palao was for collection of the balance of the purchase price and not rescission.
In addition they declared that they had always been ready and willing to comply
with their obligations to Palao.
RTC ruled in favor of Palao and affirmed the rescission of the contract.
Petitioners Claim: That no rescission was effected simply by virtue of the letter sent
by respondent stating that he considered the contract of sale rescinded. That a
judicial or notarial act is necessary before one party can unilaterally effect a
rescission.
Respondents Comment: The right to rescind is vested by law on the obligee and
since petitioner did not oppose the intent to rescind the contract, Iringan in effect
agreed to it and had the legal effect of a mutually agreed rescission.
ISSUES :WON the contract of sale was validly rescinded;
HELD : The contract of sale between the parties as far as the prescriptive period
applies, can still be, validly rescinded.
Ratio: Art 1592 requires the rescinding party to serve judicial or notarial notice of
his intent to resolve the contract. A judicial and notarial act is necessary before a
valid rescission can take place, whether or not automatic rescission has been
stipulated. The phrase even though emphasizes that when no stipulation is found
on automatic rescission, the judicial or notarial requirement still applies.
The right to resolve reciprocal obligations (Art 1191) is deemed implied in case one
of the obligors shall fail to comply with what is incumbent upon him. But the right
must be invoked judicially. Even if the right to rescind is made available to the
injured party, the obligation is not ipso facto erased by the failure of the other party
to comply with what is incumbent upon him. The party entitled to rescind should
apply to the court for a decree of rescission. The operative act is the decree of the
court.
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SPOUSES WILLIAM AND JEANETTE YAO V. CARLOMAGNO B. MATELA

FACTS: Spouses Yao contracted the services of Matela, a licensed architect, to

manage and supervise the construction of a two-unit townhouse at a total cost of
P5M. The construction started in the first week of April 1997 and was completed in
April 1998, with additional works costing P300K. Matela alleged that the spouses

Yao paid him the amount of P4.6M, thereby leaving a balance of P741k. When his
demand for payment went unheeded, Matela filed a complaint for sum of money
with the RTC. In their answer, the spouses Yao denied that the project was
completed in April 1998. Instead, they alleged that Matela abandoned the project
without notice. They claimed that they paid Matela the sum of P4.7M which should
be considered as sufficient payment considering that Matela used sub-standard
materials causing damage to the project which needed a substantial amount of
money to repair. RTC rendered judgment in favor of Matela, based on documents
issued by the Building Official of Makati City. The Court of Appeals affirmed the
decision of the lower court but modified the amount of actual damages to P391k.
Thereafter, another case was filed by Matela, regarding the collection of the P300k
additional construction cost.
ISSUE: WON MATELA MAY COLLECT ACTUAL DAMAGES AND THE ADDITIONAL
CONSTRUCTION COST? HELD: NO, BOTH PARTIES ARE GUILTY OF BREACH.
Reciprocal obligations are those which are created or established at the same time,
out of the same cause, and which result in mutual relationships of creditor and
debtor between the parties. These obligations are conditional in the sense that the
fulfillment of an obligation by one party depends upon the fulfillment of the
obligation by the other. In reciprocal obligations, the general rule is that fulfillment
by both parties should be simultaneous or at the same time.
The rule then is that in reciprocal obligations, one party incurs in delay from the
moment the other party fulfills his obligation, while he himself does not comply or is
not ready to comply in a proper manner with what is incumbent upon him. If neither
party complies or is ready to comply with what is incumbent upon him, the default
of one compensates for the default of the other. In such case, there can be no legal
delay
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Ong vs Bagnalbal

FACTS: 2 parcels of land under 1 TCT are owned by alfredo and when he died, his
wife julita go ong was appointed administratrix of his estate. Julita thereafter
mortgaged 1 lot to Allied Banking Corp. to secure a loan obtained by JK Exports,
annotated as a lien on the original TCT, with the following notation: mortgagees
consent necessary in case of subsequent alienation or encumbrance of the
property
On the loan there was due a sum and Allied tried to collect it from Julita. Hence, the
complaint alleging nullity of the contract for lack of judicial approval which the bank
had allegedly promised to secure from the court. In response thereto, the bank
averred that it was Julita who promised to secure the courts approval.
Trial court ruled for Julita, stating that the contract is valid. CA affirmed with
modification the lower courts decision
ISSUE: WHETHER OR NOT THE MORTGAGE CONSTITUTED OVER THE PARCEL OF
LAND UNDER PETITIONERS ADMINISTRATION IS NULL AND VOID FOR WANT OF
JUDICIAL APPROVAL.
HELD: contract is valid
Petitioner, asserting that the mortgage is void for want of judicial approval, quoted
Section 7 of Rule 89 of the Rules of Court . The CA aptly ruled that Section 7 of Rule
89 of the Rules of Court is not applicable, since the mortgage was constituted in her
personal capacity and not in her capacity as administratrix of the estate of her
husband. Sec. 7, Art. 89 of the Civil Code applies in a case where judicial approval
has to be sought in connection with, for instance, the sale or mortgage of property

under administration for the payment, say of a conjugal debt, and even here, the
conjugal and hereditary shares of the wife are excluded from the requisite judicial
approval for the reason already adverted to hereinabove, provided of course no
prejudice is caused others, including the government.
Consequently, in the case at bar, the trial court and the CA cannot be faulted in
ruling that the questioned mortgage constituted on the property under
administration, by authority of the petitioner, is valid, notwithstanding the lack of
judicial approval, with respect to her conjugal share and to her hereditary rights.
_____________________________________________________________________________________
ARCO PULP AND PAPER CO., INC. and CANDIDA A. SANTOS, petitioners, vs.
DAN T. LIM, doing business under the name and style of QUALITY PAPERS
& PLASTIC PRODUCTS ENTERPRISES
FACTS: Dan T. Lim (Lim) works in the business of supplying scrap papers, cartons,
and other raw materials, under the name and Quality Paper and Plastic Products,
Enterprises, to factories engaged in the paper mill business. He delivered scrap
papers to Arco Pulp and Paper Company, Inc. (Arco Pulp and Paper) through its CEO
and President, Candida A. Santos. The parties allegedly agreed that Arco Pulp and
Paper would either pay Lim the value of the raw materials or deliver to him their
finish products of equivalent value.
Lim alleged that when he delivered the raw materials, Arco Pulp and Paper issued a
post-dated check, with the assurance that the check would not bounce. When he
deposited the check, it was dishonored for being drawn against a closed account.
On the same day, Arco Pulp and Paper, and a certain Eric Sy executed a
memorandum of agreement where Arco Pulp and Paper bound themselves to deliver
their finished products to Megapack Container Corp., owned by Eric Sy. According to
the memorandum, the raw materials would be supplied by Lim, through his
company, Quality Paper and Plastic Products.
Lim sent a demand letter to Arco Pulp and Paper but no payment was made to him.
Hence, he filed a complaint for collection of sum of money.
The RTC rendered a judgment in favor of Arco Pulp and Paper and dismissed the
complained, holding that when Arco Pulp and Paper and Eric Sy and entered into the
memorandum of agreement, novation took place, which extinguished Arco Pulp and
Paper;s obligation to Lim.
On appeal, Lim argued that novation did not take place since the memorandum of
agreement between Arco Pulp and Paper and Eric Sy was an exclusive and private
agreement between them.
The CA reversed the RTC decision and ruled that the facts and circumstances in this
case clearly showed the existence of an alternative obligation.
ISSUE: Whether the obligation between the parties was an alternative obligation.
HELD: Yes. The obligation between the parties was an alternative obligation. The
rule on alternative obligation is governed by Article 1199 of the Civil Code.
In an alternative obligation, there is more than one object, and the fulfillment of one
is sufficient, determined by the choice of debtor who generally has the right of
election. The right of election is extinguished when the party who may exercise that
option categorically and unequivocally makes his or her choice known. The choice of
the debtor must also be communicated to the creditor who must receive notice of it
since the object of this notice is to give the creditor opportunity to express his
consent, or to impugn the election made by the debtor, and only after said notice

shall the election take legal effect when consented by the creditor, or if impugned
by the latter, when declared proper by a competent court.
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Baldomero Inciong Jr. vs CA

FACTS:In February 1983, Rene Naybe took out a loan from Philippine Bank of
Communications (PBC) in the amount of P50k. For that he executed a promissory
note in the same amount. Naybe was able to convince Baldomero Inciong, Jr. and
Gregorio Pantanosas to co-sign with him as co-makers. The promissory note went
due and it was left unpaid. PBC demanded payment from the three but still no
payment was made. PBC then sue the three but PBC later released Pantanosas from
its obligations. Naybe left for Saudi Arabia hence cant be issued summons and the
complaint against him was subsequently dropped. Inciong was left to face the suit.
He argued that that since the complaint against Naybe was dropped, and that
Pantanosas was released from his obligations, he too should have been released.
ISSUE: Whether or not Inciong should be held liable.
HELD: Yes. Inciong is considering himself as a guarantor in the promissory note.
And he was basing his argument based on Article 2080 of the Civil Code which
provides that guarantors are released from their obligations if the creditors shall
release their debtors. It is to be noted however that Inciong did not sign the
promissory note as a guarantor. He signed it as a solidary co-maker.
A guarantor who binds himself in solidum with the principal debtor does not become
a solidary co-debtor to all intents and purposes. There is a difference between a
solidary co-debtor and a fiador in solidum (surety). The latter, outside of the liability
he assumes to pay the debt before the property of the principal debtor has been
exhausted, retains all the other rights, actions and benefits which pertain to him by
reason of the fiansa; while a solidary co-debtor has no other rights than those
bestowed upon him.
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LAFARGE CEMENT PHILIPPINES, INC vs CONTINENTAL CEMENT
CORPORATION (CCC)
FACTS:On August 11, 1998, a letter of intent was executed by both parties, Lafarge
and CCC. Lafarge agreed to purchase the cement business of CCC. On October 21,
1998, they entered into a Sale and Purchase Agreement (SPA). The petiitioners, at
the time of such transactions were aware of the pending case of CCC with the
Supreme Court entitled Asset Privatization Trust (APT) v. Court of Appeals and
Continental Cement Corporation. In anticipation of the liability that the High Tribunal
might adjudge against CCC, the parties, under Clause 2 (c) of the SPA, allegedly
agreed to retain from the purchase price a portion of the contract price in the
amount of P117,020,846.84 -- the equivalent of US$2,799,140. This amount was to
be deposited in an interest-bearing account in the First National City Bank of New
York (Citibank) for payment to APT.However, petitioners allegedly refused to apply
the sum to the payment to APT, after the finality of the judgment in the case of
CCC. Fearful that nonpayment to APT would result in the foreclosure, of several
properties, CCC filed before the RTC a Complaint with Application for Preliminary
Attachment" against petitioners. The Complaint prayed, that petitioners be directed
to pay the "APT Retained Amount" referred to in Clause 2 (c) of the SPA.
Petitioners moved to dismiss the Complaint on the ground that it violated the
prohibition on forum-shopping. Respondent CCC had allegedly made the same claim
it was raising in another action, which involved the same parties and which was
filed earlier before the International Chamber of Commerce. After the trial court

denied the Motion to Dismiss in its November 14, 2000 Order, petitioners elevated
the matter before the Court of Appeals .
essentially constituted the very issues for resolution in the instant Petition.
RTC ruled that the counterclaims of the petitioners against Lim and Mariano were
not compulsory, that the ruling in Sapugay was not applicable and that the
petitioners answer with counterclaims violated the procedural rules on joinder of
actions.
ISSUES: 1) Whether or not the petitioners answer with counterclaims violated the
procedural rules on joinder of actions. 2) Whether or not CCC has the personality to
move to dismiss the compulsory counter claims on behalf of Lim and Mariano
HELD: 1st issue: The the procedural rules on joinder of actions were not violated.
In joining Lim and Mariano in the compulsory counterclaim, petitioners are being
consistent with the solidary nature of the liability alleged therein. The procedural
rules are founded on practicality and convenience. They are meant to discourage
duplicity and multiplicity of suits.
2nd issue: CCC has no personality to move to dismiss the compulsory counter
claims on behalf of Lim and Mariano.
A perusal of CCCs Motion to Dismiss the counterclaims shows that Respondent CCC
filed it on behalf of Co-respondents Lim and Mariano; it did not pray that the
counterclaim against it be dismissed. While Respondent CCC can move to dismiss
the counterclaims against it by raising grounds that pertain to individual defendants
Lim and Mariano, it lacks the requisite authority to do so. A corporation has a legal
personality entirely separate and distinct from that of its officers and cannot act for
and on their behalf, without being so authorized. Thus, unless expressly adopted by
Lim and Mariano, the Motion to Dismiss the compulsory counterclaim filed by
Respondent CCC has no force and effect as to them.
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Quiombing vs. Court of Appeals

Summary: Spouses Saligo (D) contended that the other solidary creditor must be
included as co-plaintiff being an indispensable party to the claim.
Rule of Law: Either one of the solidary creditors my file a claim against the debtor.
Facts: Spouses Saligo (D) contracted Quiombing (P) and his co-creditor Bischoco to
construct a house for them. The Construction and Service Agreement between the
parties stated that the creditors Quiombing (P) and Bischoco "jointly and severally"
bound themselves to construct a house for the debtors. Upon completion,
Quiombing (P) was paid partially, but was unable to collect the balance after
repeated demands. Quiombing (P) alone filed for recovery of the balance plus
charges and interests.
Issues: (1) May one of the two solidary creditors sue by himself alone for the
recovery of amounts due to both of them without joining the other creditor as a coplaintiff?
(2) In such a case, is the defendant entitled to the dismissal of the complaint on the
ground of non-joinder of the second creditor as an indispensable part? (3) More to
the point, is the second solidary creditor an indispensable party?
Ruling: Yes. The question of who should sue the private respondents was a
personal issue between creditors Quiombing and Biscocho. It did not matter who as
between them filed the complaint because the private respondents were liable to
either of the two as a solidary creditor for the full amount of the debt. Full
satisfaction of a judgment obtained against them by Quiombing would discharge

their obligation to Biscocho, and vice versa; hence, it was not necessary for both
creditors Quiombing and Biscocho to file the complaint. Inclusion of Biscocho as a
co-plaintiff when Quiombing was competent to sue by himself alone, would be a
useless formality.
A joint obligation is one in which each of the debtors is liable only for a
proportionate part of the debt, and each creditor is entitled only to a proportionate
part of the credit.
A solidary obligation is one in which each debtor is liable for the entire obligation,
and each creditor is entitled to demand the whole obligation.
Hence, in the former, each creditor can recover only his share of the obligation, and
each debtor can be made to pay only his part; whereas, in the latter, each creditor
may enforce the entire obligation, and each debtor may be obliged to pay it in full.
____________________________________________________________________________________

Vigilla vs Philippine College of Criminology Inc

FACTS: Philippine College of Criminology (PCCr) is a non-stock educational

institution, while the petitioners were janitors, janitresses and supervisor in the
Maintenance Department of PCCr The petitioners were made to understand, upon
application with respondent school, that they were under MBMSI, a corporation
engaged in providing janitorial services to clients. PCCr later on discovered that
the Certificate of Incorporation of MBMSI had been revoked. Hence, PCCr, through
its President Bautista, citing the revocation, terminated the schools relationship
with MBMSI, resulting in the dismissal of the employees or maintenance personnel
under MBMSI, except Alfonso Bongot (Bongot) who was retired. The dismissed
employees then filed their respective complaints for illegal dismissal against MBMSI,
Atty. Seril (president of MBMSI), and Bautista (president of PCCr). They alleged that
it was really PCCr which was their real employer based on the following grounds:
MBMSIs certification had been revoked PCCr had direct control over MBMSIs
operations There was no contract between MCMSI and PCCr And, the selection
and hiring of employees were undertaken by PCCr Labor Arbiter decision PCCr
was the real principal employer of the petitioners and that MBMSI was a mere
adjunct or alter ego/labor-only contractor The LA explained that PCCr was actually
the one which exercised control over the means and methods of the work of the
petitioners, thru Atty. Seril, who was acting, throughout the time in his capacity as
Senior Vice President for Administration of PCCr, not in any way or time as the
supposed employer/general manager or president of MBMSI. NLRC decision
affirmed LA decision but released PCCr and Bautista from liability by virtue of the
quitclaims executed by petitioners CA decision upheld NLRC decision. Hence, this
petition
ISSUE WON a labor-only contractor is solidarily liable with the employer
Held: Yes MBMSI is solidarily liable with the respondents for the valid claims of
petitioners pursuant to Article 109 of the Labor Code However, as already stated
above, the quitclaims redounded to the benefit of PCCr pursuant to Art. 1217 Civil
Code In conclusion, considering that MBMSI, as the labor-only contractor, is
solidarily liable with the respondents, as the principal employer, then the NLRC and
the CA correctly held that the respondentsE solidary liability was already expunged
by virtue of the releases, waivers and quitclaims executed by each of the petitioners
in favor of MBMSI pursuant to Article 1217 Civil Code which provides that payment
made by one of the solidary debtors extinguishes the obligation. DISPOSITIVE:
Petition denied

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Escao v. Ortigas, Jr.

Facts: On April 28, 1980, Private Development Corporation of the Philippines (PDCP)
entered into a loan agreement with Falcon Minerals, Inc. (Falcon) amounting to
$320,000.00 subject to terms and conditions. [Nagpautang ang PDCP sa Falcon ng
$320K]
On the same day, 3 stockholders-officers of Falcon: Ortigas Jr., George A. Scholey,
and George T. Scholey executed an Assumption of Solidary Liability to assume in
[their] individual capacity, solidary liability with [Falcon] for due and punctual
payment of the loan contracted by Falcon with PDCP.
Two (2) separate guaranties were executed to guarantee payment of the same loan
by other stockholders and officers of Falcon, acting in their personal and individual
capacities. One guaranty was executed by Escao, Silos, Silverio, Inductivo and
Rodriguez.
Two years later, an agreement developed to cede control of Falcon to Escao, Silos
and Matti. Contracts were executed whereby Ortigas, George A. Scholey, Inductivo
and the heirs of then already deceased George T. Scholey assigned their shares of
stock in Falcon to Escao, Silos and Matti. An Undertaking dated June 11, 1982 was
executed by the concerned parties, namely: with Escao, Silos and Matti as
SURETIES and Ortigas, Inductivo and Scholeys as OBLIGORS
Falcon eventually availed of the sum of $178,655.59 from the credit line extended
by PDCP. It would also execute a Deed of Chattel Mortgage over its personal
properties to further secure the loan. However, Falcon subsequently defaulted in its
payments. After PDCP foreclosed on the chattel mortgage, there remained a
subsisting deficiency of Php 5,031,004.07 which falcon did not satisfy despite
demand.
Issue: Whether the obligation to repay is solidary, as contended by respondent and
the lower courts, or merely joint as argued by petitioners.
Held/Ruling:In case, there is a concurrence of two or more creditors or of two or
more debtors in one and the same obligation, Article 1207 of the Civil Code states
that among them, [t]here is a solidary liability only when the obligation expressly
so states, or when the law or the nature of the obligation requires solidarity. Article
1210 supplies further caution against the broad interpretation of solidarity by
providing: The indivisibility of an obligation does not necessarily give rise to
solidarity. Nor does solidarity of itself imply indivisibility. These Civil Code
provisions establish that in case of concurrence of two or more creditors or of two or
more debtors in one and the same obligation, and in the absence of express and
indubitable terms characterizing the obligation as solidary, the presumption is that
the obligation is only joint. It thus becomes incumbent upon the party alleging that
the obligation is indeed solidary in character to prove such fact with a
preponderance of evidence.
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Diamond Builders vs. Country Bankers

Joint/Solidary Obilgation on Surety Contract

Facts: Rogelio Acidre (sole proprietor of Diamond Builders) was sued by Marceliano
Borja for breach of his obligation to construct a residential and commercial building
Rogelio entered into a compromise agreement with Borja Rogelio in order to secure
himself, entered into surety bond with Country Bankers

Under the Surety Bond, Rogelio and his spouse and other petitioners in this case
signed an indemnity agreement consenting to their joint and several liability to
Country Bankers should the surety bond be executed upon Rogelio violated the
compromise agreement A writ of execution was issued against Country Bankers for
violation of Rogelio to the compromise agreement Country bankers payed the surety
bond and ask for reimbursement from petitioners Petitioners refused to pay Country
bankers filed a complaint for sum of money against petitioners.
Issue: W/N Country Bankers is entitled for reimbursement?
Ruling: Yes. Art. 1217 of the Civil Code recognizes the right of reimbursement from
a co-debtor (principal co-debtor in case of suretyship) in favor of one who paid the
surety
Only payments made after the obligation has prescribed or became illegal shall not
entitle a solidary debtor for reimbursement (in accordance with Art. 1218)
_____________________________________________________________________________________

Ouano v Aleanor

Facts: Private respondent International Pharmaceuticals, Inc. (IPI) filed a complaint

before the Regional Trial Court of Cebu City against Mercantile Insurance Company,
Inc. (Mercantile) and petitioner Ouano Arrastre Service, Inc. (OASI) for replacement
of certain equipment imported by IPI which were insured by Mercantile but were lost
on arrival in Cebu City, allegendy because of mishandling by petitioner OASI.
Petitioner OASIs answer was filed by the law firm of Ledesma, Saludo and
Associates (LSA) and signed by Atty. Manuel Trinidad of the Cebu office or branch of
LSA. However, Atty. Fidel Manalo, a partner from the Makati office of LSA filed to
postpone the hearing stating that the case had just been endorsed to him by
petitioner OASI. After trial which Atty. Manalo handled for OASI, the trial court
rendered a decision holding Mercantile and petitioner OASI jointly and severally
liable for the cost of replacement of the damaged equipment plust damages,
totalling P435,000.00. Only Mercantile appealed from the decision. When the IPI
filed a motion for execution of the decision against petitioner OASI which public
respondent granted, the petitioners cousel, through Atty. Catipay of the Cebu
Branch of the LSA, filed a notice of appeal claiming that the decision was
mistakenly sent by the trial court to the law firms Head Office in Makati.
Petitioner, through the same counsel, filed a motion for reconsideration of the order
granting the writ of execution alleging that the failure to file an appeal was due to
excusable neglect and slight oversight claiming that there was
miscommunication between LSA-Cebu and LSA main office as to who would file the
notice of appeal. The respondent judge denied OASI s motion for reconsideration
for lack of merit and ordered that the writ of execution be enforced. On appeal, the
CA dismissed petitioners appeal on the grounds that there had been a valid
service of the decision and that it was final and executor upon OASI. Hence, petition
for review to the Court.
Issue: Whether or not LSA having represented itself to the public as a single firm,
be allowed to contend that its main office and its branch office in effect constitute
separate law firms with separate and distinct personalities and responsibilities.
Held: Petitioners counsel was and is the firm of Ledesma, Saludo and Associates
(and not any particular member or associate of that firm) which firm happens to
have a main office in Makati and a branch office in Cebu City. The Court notes that
both the main and branch offices operate under one and the same name, Saludo
Ledesma and Associates. Having represented itself to the public as comprising a
single firm, LSA should not be allowed at this point to pretend that its main office

and its branch office in effect constitute separate law firms with separate and
distinct personalities.
_____________________________________________________________________________________

Capalla vs Comelec

FACTS: Comelec and Smartmatic-TIM entered into a Contract for the Provision of an
Automated Election System for the May 10, 2010 Synchronized National and Local
Elections (AES Contract) which is a Contract of Lease with Option to Purchase (OTP)
the goods listed therein consisting of the Precinct Count Optical Scan (PCOS), both
software and hardware. The parties agreed that the AES Contract shall remain
effective until the release of the performance security posted by the Comelec. The
Comelec was given until December 31, 2010 within which to exercise the option to
purchase. The option was, however, not exercised within said period. The parties
later entered into an extension agreement giving the Comelec until March 31, 2012
within which to exercise it.
Herein petitioners, however, assailed the validity of such agreement on the ground
that the same requires another public bidding since it substantially amended the
terms of the contract. They also averred that such extension to exercise the option
will prejudice the governments interest.
In the assailed June 13, 2012 decision of the Supreme Court, the Court upheld the
validity of the transaction. Hence, the petitioners moved for reconsideration.
ISSUE: Whether or not the extension of the OTP in favor of Comelec is valid?
HELD: The motions for reconsideration are denied.

In our June 13, 2012 Decision, we decided in favor of respondents and placed a
stamp of validity on the assailed resolutions and transactions entered into. Based on
the AES Contract, we sustained the parties right to amend the same by extending
the option period. Considering that the performance security had not been released
to Smartmatic-TIM, the contract was still effective which can still be amended by the
mutual agreement of the parties, such amendment being reduced in writing.
In this case, the contract is still effective because the performance security has not
been released. Thus, not only the option and warranty provisions survive but the
entire contract as well. In light of the contractual provisions, we, therefore, sustain
the amendment of the option period. The amendment of a previously bidded
contract is not per se invalid. For it to be nullified, the amendment must be
substantial such that the other bidders were deprived of the terms and
opportunities granted to the winning bidder after it won the same and that it is
prejudicial to public interest.
Here, the extension of the option period means that the Comelec had more time to
determine the propriety of exercising the option.With the extension, the Comelec
could acquire the subject PCOS machines under the same terms and conditions as
earlier agreed upon. The end result is that the Comelec acquired the subject PCOS
machines with its meager budget and was able to utilize the rentals paid for the

2010 elections as part of the purchase price.

The motions for reconsideration are DENIED for lack of merit.
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