Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No.

3308 January 19, 1907

FAUSTINO LICHAUCO, plaintiff-appellee, vs. FIGUERAS HERMANOS, defendants-appellants. Coudert Brothers for appellants. W. A. Kincaid for appellee. CARSON, J.: This is an appeal from a judgment in favor of the plaintiff who brought an action to recover the hire for two lorchascalle the Chata and the Lolin for the month of August, 1905. The defendants admitted their responsibility for the rental of these lorchas for the days of that month upon which they were actual use that is, for twenty-three and twenty-seven days, respectively and on demand made formal tender of the amount of the rental claimed for those days; but they deny their responsibility for those days of the month during which they did not make use oflorchas and left them at the disposal of the plaintiff. The Quartermaster's Department of the Army of the United States advertises semiannually for proposals to furnishlighterage for its use in the port of Manila. The service required is divided into two classes, regular and emergency, the former including the tonnage for which the department has continuous need the year round, and the latter the tonnage which the contractor obligates himself to furnish on demand, when the necessity thereof arises. The price paid for emergency service is naturally higher than that paid for regular service wherein the lorcha are steadily employed for the entire contract period of six months. The aggregate tonnage required by the department is so great that no single lorcha owner could fill the entire contract without the aid of other owners, and the defendants, who had at that time a bid for the contract for the semiannual period from July 1 to December 31, 1905, entered into the following contract with the plaintiff on the 20th of April, 1905: The defendants submitted a bid for the quartermaster's contract of lighterage for the semiannual period from the 1st of July to the 31st of December, 1905, but when the proposals were opened on the 2d of May, 1905, their bid and all others were rejected. On the 16th of May, 1905, the letting of the contract was again advertised, and the defendant and other submitted new proposals which were opened on the 27th of May, 1905, and on this occasion the contract was divided and the defendants bid for the emergency service was accepted, while a third party was awarded the contract for the regular service. So far as appears from the record before us, there were no new negotiations entered into between the plaintiff and the defendants after the failure of defendants to secure the contract at the opening of the bids on May 2, 1905, but on the 1st of July the plaintiff lorchas Chata and Lolin were furnished to the quartermaster under the defendants' contract for the emergency service, and were thus employed in that service for the first twenty-three and twenty-seven days of August, when they were released by the quartermaster, and the plaintiff immediately notified by the defendants that they were at his disposal. Plaintiff claims that defendants made use of these lorchas, under the terms of the above set out contract of April 20, as amended by the contract of April 29, and therefore that defendants are responsible to him for hire of thelorchas for every day of the month at the per diem emergency rate paid by the quartermaster on the days when the boat was in use.

We do not think that the plaintiff, on whom rests the burden of proof, succeeded in establishing this contention. The amendment to the contract between the plaintiff and defendant was expressly conditioned on defendants' being the successful bidders at the letting of May 2, 1905, and it can not be doubted that the amendment became of no force or effect when the result of the letting was announced, for it is manifest that thereafter neither party could base a claim against the other on a failure to execute its terms, unless it was given new life by a new agreement, either express or implied. And even it if were possible to construe the terms of the amendment so as to make it applicable to the second letting on May 27, we think that it was plainly conditioned upon the defendants' securing the entire contract of lighterage and not upon their securing a part thereof. There is nothing in the contract between the parties to indicate that either one had in mind the division of the lighterage contract and indeed the language of the entire amendment suggests that both parties had in contemplation no other thing that the complete success or the complete failure of defendants to secure the lighterage contract with the Government. It is easy to understand how the defendants might venture to obligate themselves to pay the emergency rate for the entire period of the contract even though they might anticipate a lack of continuous employment of these boats in the emergency service throughout the entire term, provided they were certain of employment in the regular service on the days when the quartermaster had no use for them in the better-paid emergency service; because the possible loss under such circumstances could only affect the size of their profits, whereas if they failed to secure the contract for the regular service, together with the emergency service they would be exposed to a loss of the total hire of the lorchas on the days when the quartermaster did not call for them. In conditional obligations, the acquisition of rights, as well as the extinction or loss of those already acquired, shall depend upon the event constituting the condition. (Art. 1114 of the Civil Code.) It is said, however, that even though the obligation of the conditional amendment was extinguished by defendants' failure to secure the entire lighterage contract or to secure it at the time specified in the condition, nevertheless the defendants, by taking and using these lorchas for the purpose of carrying out their contract with the quartermaster without any new agreement the obligation with the plaintiffs, impliedly and tacitly assumed the obligation of the original contract together with the amendment, so that their use of the lorcha was subject to its terms. We do not think we are entitled to draw such an inference from the use of these boats in the months of July and August. An examination of the original contract between the parties which was not affected by the failure of the defendants to secure the lighterage contract shows that it was a contract of agency (consignacion), by the terms of which the defendants were fully authorized to make use of these lorchas during the months of June, July, and August, 1905, in the manner and form in which they did, in fact, make use of them. They required no new contract with the plaintiff, express or implied, to authorize them to do so, and no sufficient reason has been suggested to justify the inference that they assumed an oppressive and dangerous risk when all that they did was in exact compliance with a written contract securing to them the right to use these lorchas on favorable and reasonable terms. The judgment of the trial court should be and is hereby reversed, without special condemnation of costs in this instance, and after the expiration of twenty days the cause will be returned to the trial court wherein it originated, where judgment will be entered for the amount tendered by the defendants with legal interest from the date of such judgment, and with the costs in the first instance in favor of the defendants. So ordered. Arellano, C.J. Torres, Willard and Tracey, JJ., concur.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. L-29900 June 28, 1974 IN THE MATTER OF THE INTESTATE ESTATE OF JUSTO PALANCA, Deceased, GEORGE PAY, petitioner-appellant, vs. SEGUNDINA CHUA VDA. DE PALANCA, oppositor-appellee. Florentino B. del Rosario for petitioner-appellant. Manuel V. San Jose for oppositor-appellee.

FERNANDO, J.:p There is no difficulty attending the disposition of this appeal by petitioner on questions of law. While several points were raised, the decisive issue is whether a creditor is barred by prescription in his attempt to collect on a promissory note executed more than fifteen years earlier with the debtor sued promising to pay either upon receipt by him of his share from a certain estate or upon demand, the basis for the action being the latter alternative. The lower court held that the ten-year period of limitation of actions did apply, the note being immediately due and demandable, the creditor admitting expressly that he was relying on the wording "upon demand." On the above facts as found, and with the law being as it is, it cannot be said that its decision is infected with error. We affirm. From the appealed decision, the following appears: "The parties in this case agreed to submit the matter for resolution on the basis of their pleadings and annexes and their respective memoranda submitted. Petitioner George Pay is a creditor of the Late Justo Palanca who died in Manila on July 3, 1963. The claim of the petitioner is based on a promissory note dated January 30, 1952, whereby the late Justo Palanca and Rosa Gonzales Vda. de Carlos Palanca promised to pay George Pay the amount of P26,900.00, with interest thereon at the rate of 12% per annum. George Pay is now before this Court, asking that Segundina Chua vda. de Palanca, surviving spouse of the late Justo Palanca, he appointed as administratrix of a certain piece of property which is a residential dwelling located at 2656 Taft Avenue, Manila, covered by Tax Declaration No. 3114 in the name of Justo Palanca, assessed at P41,800.00. The idea is that once said property is brought under administration, George Pay, as creditor, can file his claim against the administratrix." 1 It then stated that the petition could not prosper as there was a refusal on the part of Segundina Chua Vda. de Palanca to be appointed as administratrix; that the property sought to be administered no longer belonged to the debtor, the late Justo Palanca; and that the rights of petitionercreditor had already prescribed. The promissory note, dated January 30, 1962, is worded thus: " `For value received from time to time since 1947, we [jointly and severally promise to] pay to Mr. [George Pay] at his office at the China Banking Corporation the sum of [Twenty Six Thousand Nine Hundred Pesos] (P26,900.00), with interest thereon at the rate of 12% per annum upon receipt by either of the undersigned of cash payment from the Estate of the late Don Carlos Palanca or upon demand'. . . . As stated, this promissory note is signed by Rosa Gonzales Vda. de Carlos Palanca and Justo Palanca." 2 Then came this paragraph: "The Court has inquired whether any cash payment has been received by either of the signers of this promissory note from the Estate of the late Carlos Palanca. Petitioner informed that he does not insist on this provision but that petitioner is only claiming on his right under the promissory note ." 3 After which, came the ruling that the wording of the promissory note being "upon demand," the obligation was immediately due. Since it was dated January 30, 1952, it was clear that more "than ten (10)

years has already transpired from that time until to date. The action, therefore, of the creditor has definitely prescribed." 4 The result, as above noted, was the dismissal of the petition. In an exhaustive brief prepared by Attorney Florentino B. del Rosario, petitioner did assail the correctness of the rulings of the lower court as to the effect of the refusal of the surviving spouse of the late Justo Palanca to be appointed as administratrix, as to the property sought to be administered no longer belonging to the debtor, the late Justo Palanca, and as to the rights of petitioner-creditor having already prescribed. As noted at the outset, only the question of prescription need detain us in the disposition of this appeal. Likewise, as intimated, the decision must be affirmed, considering the clear tenor of the promissory note. From the manner in which the promissory note was executed, it would appear that petitioner was hopeful that the satisfaction of his credit could he realized either through the debtor sued receiving cash payment from the estate of the late Carlos Palanca presumptively as one of the heirs, or, as expressed therein, "upon demand." There is nothing in the record that would indicate whether or not the first alternative was fulfilled. What is undeniable is that on August 26, 1967, more than fifteen years after the execution of the promissory note on January 30, 1952, this petition was filed. The defense interposed was prescription. Its merit is rather obvious. Article 1179 of the Civil Code provides: "Every obligation whose performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties, is demandable at once." This used to be Article 1113 of the Spanish Civil Code of 1889. As far back as Floriano v. Delgado, 5 a 1908 decision, it has been applied according to its express language. The well-known Spanish commentator, Manresa, on this point, states: "Dejando con acierto, el caracter mas teorico y grafico del acto, o sea la perfeccion de este, se fija, para determinar el concepto de la obligacion pura, en el distinctive de esta, y que es consecuencia de aquel: la exigibilidad immediata." 6 The obligation being due and demandable, it would appear that the filing of the suit after fifteen years was much too late. For again, according to the Civil Code, which is based on Section 43 of Act No. 190, the prescriptive period for a written contract is that of ten years. 7 This is another instance where this Court has consistently adhered to the express language of the applicable norm. 8 There is no necessity therefore of passing upon the other legal questions as to whether or not it did suffice for the petition to fail just because the surviving spouse refuses to be made administratrix, or just because the estate was left with no other property. The decision of the lower court cannot be overturned. WHEREFORE, the lower court decision of July 24, 1968 is affirmed. Costs against George Pay. Zaldivar (Chairman), Barredo, Antonio, Fernandez and Aquino, JJ., concur.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 179653 July 31, 2009

UNITED MUSLIM AND CHRISTIAN URBAN POOR ASSOCIATION, INC. represented by its President, MANUEL V. BUEN, Petitioner, vs. BRYC-V DEVELOPMENT CORPORATION represented by its President, BENJAMIN QUIDILLA; and SEA FOODS CORPORATION, represented by its Executive Vice President, VICENTE T. HERNANDEZ,Respondents. DECISION NACHURA, J.: This petition for review on certiorari seeks to set aside the Decision 1 of the Court of Appeals (CA) in CA G.R. CV No. 62557 which affirmed in toto the Decision 2 of the Regional Trial Court (RTC), Branch 16, Zamboanga City in Civil Case No. 467(4544). The facts are simple. Respondent Sea Foods Corporation (SFC) is the registered owner of Lot No. 300 located in Lower Calainan, Zamboanga City and covered by Transfer Certificate of Title (TCT) No. 3182 (T-576). Sometime in 1991, petitioner United Muslim and Christian Urban Poor Association, Inc. (UMCUPAI), an organization of squatters occupying Lot No. 300, through its President, Carmen T. Diola, initiated negotiations with SFC for the purchase thereof. UMCUPAI expressed its intention to buy the subject property using the proceeds of its pending loan application with National Home Mortgage Finance Corporation (NHMF). Thereafter, the parties executed a Letter of Intent to Sell by [SFC] and Letter of Intent to Purchase by UMCUPAI, providing, in pertinent part: WHEREAS, [SFC] is the registered owner of a parcel [of] land designated as Lot No. 300 situated in Lower Calarian, Zamboanga City, consisting of 61,736 square meters, and more particularly described in Transfer Certificate of Title No. 576 of the Registry of Deeds of Zamboanga City; WHEREAS, UMCUPAI, an association duly registered with the SEC (Registration No. 403410) and duly accredited with the Presidential Commission for the Urban Poor, has approached [SFC] and negotiated for the ACQUISITION of the above-described property of [SFC]; WHEREAS, in pursuance to the negotiations between [SFC] and UMCUPAI, the latter has taken steps with the proper government authorities particularly the Mayor of Zamboanga City and its City Housing Board which will act as "Originator" in the acquisition of said property which will enable UMCUPAI to avail of its Community Mortgage Program; WHEREAS, it appears that UMCUPAI will ultimately apply with the Home Mortgage and Finance Corporation for a loan to pay the acquisition price of said land; WHEREAS, as one of the steps required by the government authorities to initiate proceedings is to receive a formal manifestation of Intent to Sell from [SFC];

NOW, THEREFORE, for and in consideration of the foregoing premises, the parties hereto agree as follows: 1. [SFC] expressly declares its intention to sell Lot No. 300 with an area of 61,736 square meters situated in Lower Calarian, Zamboanga City and covered by TCT No. 576 of the Registry of Deeds of Zamboanga City to UMCUPAI at the price of P105.00 per square meter, free from all liens, charges and encumbrances; 2. That UMCUPAI hereby expressly declares its intention to buy the aforesaid property and shall endeavor to raise the necessary funds to acquire same at the abovementioned price of P105.00 per square meter; 3. That the Absolute Deed of Sale shall be executed, signed and delivered together with the title and all other pertinent documents upon full payment of the purchase price; 4. That [SFC] shall pay the capital gains tax and documentary stamps, Registration, transfer tax and other expenses shall be paid by the UMCUPAI. 3 However, the intended sale was derailed due to UMCUPAIs inability to secure the loan from NHMF as not all its members occupying Lot No. 300 were willing to join the undertaking. Intent on buying the subject property, UMCUPAI, in a series of conferences with SFC, proposed the subdivision of Lot No. 300 to allow the squatter-occupants to purchase a smaller portion thereof. Consequently, sometime in December 1994, Lot No. 300 was subdivided into three (3) parts covered by separate titles: 1. Lot No. 300-A with an area of 41,460 square meters under TCT No. T-117,448; 2. Lot No. 300-B with an area of 1,405 square meters under TCT No. T-117,449; and 3. Lot No. 300-C with an area of 18,872 square meters under TCT No. T-117,450. On January 11, 1995, UMCUPAI purchased Lot No. 300-A for P4,350,801.58. In turn, Lot No. 300-B was constituted as road right of way and donated by SFC to the local government. UMCUPAI failed to acquire Lot No. 300-C for lack of funds. On March 5, 1995, UMCUPAI negotiated anew with SFC and was given by the latter another three months to purchase Lot No. 300-C. However, despite the extension, the three-month period lapsed with the sale not consummated because UMCUPAI still failed to obtain a loan from NHMF. Thus, on July 20, 1995, SFC sold Lot No. 300-C for P2,547,585.00 to respondent BRYC-V Development Corporation (BRYC). A year later, UMCUPAI filed with the RTC a complaint against respondents SFC and BRYC seeking to annul the sale of Lot No. 300-C, and the cancellation of TCT No. T-121,523. UMCUPAI alleged that the sale between the respondents violated its valid and subsisting agreement with SFC embodied in the Letter of Intent. According to UMCUPAI, the Letter of Intent granted it a prior, better, and preferred right over BRYC in the purchase of Lot No. 300-C. In refutation, BRYC said that UMCUPAIs complaint did not state a cause of action since UMCUPAI had unequivocally recognized its ownership of Lot No. 300-C when UMCUPAI likewise sent BRYC a Letter of Intent dated August 18, 1995 imploring BRYC to re-sell the subject lot. In a separate Answer, SFC countered that the Letter of Intent dated October 4, 1991 is not, and cannot be considered, a valid and subsisting contract of sale. On the contrary, SFC averred that the document was drawn and executed merely to accommodate UMCUPAI and enable it to comply with the loan documentation requirements of NHMF. In all, SFC maintained that the Letter of Intent dated October 4,

1991 was subject to a condition i.e., payment of the acquisition price, which UMCUPAI failed to do when it did not obtain the loan from NHMF. After trial, the RTC dismissed UMCUPAIs complaint. The lower court found that the Letter of Intent was executed to facilitate the approval of UMCUPAIs loan from NHMF for its intended purchase of Lot No. 300. According to the RTC, the Letter of Intent was simply SFCs declaration of intention to sell, and not a promise to sell, the subject lot. On the whole, the RTC concluded that the Letter of Intent was neither a promise, nor an option contract, nor an offer contemplated under Article 1319 of the Civil Code, or a bilateral contract to sell and buy. As previously adverted to, the CA, on appeal, affirmed in toto the RTCs ruling. Hence, this recourse by UMCUPAI positing a sole issue for our resolution: IS THE LETTER OF INTENT TO SELL AND LETTER OF INTENT TO BUY A BILATERAL RECIPROCAL CONTRACT WITHIN THE MEANING OR CONTEMPLATION OF ARTICLE 1479, FIRST PARAGRAPH, CIVIL CODE OF THE PHILIPPINES?4 The petition deserves scant consideration. We completely agree with the lower courts rulings. Well-entrenched in jurisprudence is the rule that factual findings of the trial court, especially when affirmed by the appellate court, are accorded the highest degree of respect and are considered conclusive between the parties.5A review of such findings by this Court is not warranted except upon a showing of highly meritorious circumstances, such as: (1) when the findings of a trial court are grounded entirely on speculation, surmises or conjectures; (2) when a lower courts inference from its factual findings is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion in the appreciation of facts; (4) when the findings of the appellate court go beyond the issues of the case, or fail to notice certain relevant facts which, if properly considered, would justify a different conclusion; (5) when there is a misappreciation of facts; (6) when the findings of fact are conclusions without mention of the specific evidence on which they are based, or are premised on the absence of evidence, or are contradicted by evidence on record.6 None of the foregoing exceptions necessitating a reversal of the assailed decision obtain in this instance. UMCUPAI is adamant, however, that the CA erred when it applied the second paragraph of Article 1479 of the Civil Code instead of the first paragraph thereof. UMCUPAI urges us that the first paragraph of Article 1479 contemplates a bilateral reciprocal contract which is binding on the parties. Yet, UMCUPAI is careful not to designate the Letter of Intent as a Contract to Sell. UMCUPAI simply insists that the Letter of Intent is not a unilateral promise to sell or buy which has to be supported by a consideration distinct from the price for it to be binding on the promissor. In short, UMCUPAI claims that the Letter of Intent did not merely grant the parties the option to respectively sell or buy the subject property. Although not stated plainly, UMCUPAI claims that the Letter of Intent is equivalent to a conditional contract of sale subject only to the suspensive condition of payment of the purchase price. UMCUPAI appears to labor under a cloud of confusion. The first paragraph of Article 1479 contemplates the bilateral relationship of a contract to sell as distinguished from a contract of sale which may be absolute or conditional under Article 1458 7 of the same code. It reads: Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price. The case of Coronel v. Court of Appeals 8 is illuminating and explains the distinction between a conditional contract of sale under Article 1458 of the Civil Code and a bilateral contract to sell under Article 1479 of the same code:

A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price. A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where the seller may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition, because in a conditional contract of sale, the first element of consent is present, although it is conditioned upon the happening of a contingent event which may or may not occur. If the suspensive condition is not fulfilled, the perfection of the contract of sale is completely abated. However, if the suspensive condition is fulfilled, the contract of sale is thereby perfected, such that if there had already been previous delivery of the property subject of the sale to the buyer, ownership thereto automatically transfers to the buyer by operation of law without any further act having to be performed by the seller. In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, ownership will not automatically transfer to the buyer although the property may have been previously delivered to him. The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale. It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the subject property is sold by the owner not to the party the seller contracted with, but to a third person, as in the case at bench. In a contract to sell, there being no previous sale of the property, a third person buying such property despite the fulfillment of the suspensive condition such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property. There is no double sale in such case. Title to the property will transfer to the buyer after registration because there is no defect in the owner-sellers title per se, but the latter, of course, may be sued for damages by the intending buyer. In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes absolute and this will definitely affect the sellers title thereto. In fact, if there had been previous delivery of the subject property, the sellers ownership or title to the property is automatically transferred to the buyer such that, the seller will no longer have any title to transfer to any third person. Applying Article 1544 of the Civil Code, such second buyer of the property who may have had actual or constructive knowledge of such defect in the sellers title, or at least was charged with the obligation to discover such defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyers title. In case a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the sale. In the instant case, however, the parties executed a Letter of Intent, which is neither a contract to sell nor a conditional contract of sale. As found by the RTC, and upheld by the CA, the Letter of Intent was executed to accommodate UMCUPAI and facilitate its loan application with NHMF. The 4th and 5th paragraphs of the recitals (whereas clauses) specifically provide: WHEREAS, it appears that UMCUPAI will ultimately apply with the Home Mortgage and Finance Corporation for a loan to pay the acquisition price of said land; WHEREAS, as one of the steps required by the government authorities to initiate proceedings is to receive a formal manifestation of Intent to Sell from [SFC]. Nowhere in the Letter of Intent does it state that SFC relinquishes its title over the subject property, subject only to the condition of complete payment of the purchase price; nor, at the least, that SFC, although expressly retaining ownership thereof, binds itself to sell the property exclusively to UMCUPAI. The Letter of Intent to Buy and Sell is just that a manifestation of SFCs intention to sell the property and UMCUPAIs intention to acquire the same. This is quite obvious from the reference to the execution of an Absolute Deed of Sale in paragraph three 9 of the Letter of Intent.

As the CA did, we quote with favor the RTCs disquisition: The Decision in this case hinges on the legal interpretation of the Agreement entered into by SFC and UMCUPAI denominated as "Letter of Intent to Sell by Landowner and Letter of Intent to Purchase by United Muslim and Christian Urban Poor Association, Inc." Blacks Law Dictionary says that a Letter of Intent is customarily employed to reduce to writing a preliminary understanding of parties who intend to enter into contract. It is a phrase ordinarily used to denote a brief memorandum of the preliminary understanding of parties who intend to enter into a contract. It is a written statement expressing the intention of the parties to enter into a formal agreement especially a business arrangement or transaction. In their Agreement, SFC expressly declared its "intention" to sell and UMCUPAI expressly declared its "intention" to buy subject property. An intention is a mere idea, goal, or plan. It simply signifies a course of action that one proposes to follow. It simply indicates what one proposes to do or accomplish. A mere "intention" cannot give rise to an obligation to give, to do or not to do (Article 1156, Civil Code). One cannot be bound by what he proposes or plans to do or accomplish. A Letter of Intent is not a contract between the parties thereto because it does not bind one party, with respect to the other, to give something, or to render some service (Art. 1305, Civil Code). xxx xxx xxx

The Letter of Intent/Agreement between SFC and UMCUPAI is merely a written preliminary understanding of the parties wherein they declared their intention to enter into a contract of sale. It is subject to the condition that UMCUPAI will "apply with the Home Mortgage and Finance Corporation for a loan to pay the acquisition price of said land." One of the requirements for such loan is "a formal manifestation of Intent to Sell" from SFC. Thus, the Letter of Intent to Sell fell short of an "offer" contemplated in Article 1319 of the Civil Code because it is not a certain and definite proposal to make a contract but merely a declaration of SFCs intention to enter into a contract. UMCUPAIs declaration of intention to buy is also not certain and definite as it is subject to the condition that UMCUPAI shall endeavor to raise funds to acquire subject land. The acceptance of the offer must be absolute; it must be plain and unconditional. Moreover, the Letter of Intent/Agreement does not contain a promise or commitment to enter into a contract of sale as it merely declared the intention of the parties to enter into a contract of sale upon fulfillment of a condition that UMCUPAI could secure a loan to pay for the price of a land. The Letter of Intent/Agreement is not an "option contract" because aside from the fact that it is merely a declaration of intention to sell and to buy subject to the condition that UMCUPAI shall raise the necessary funds to pay the price of the land, and does not contain a binding promise to sell and buy, it is not supported by a distinct consideration distinct from the price of the land intended to be sold and to be bought x x x No option was granted to UMCUPAI under the Letter of Intent/Agreement to buy subject land to the exclusion of all others within a fixed period nor was SFC bound under said Agreement to Sell exclusively to UMCUPAI only the said land within the fixed period.
lavvph!l

Neither can the Letter of Intent/Agreement be considered a bilateral reciprocal contract to sell and to buy contemplated under Article 1479 of the Civil Code which is reciprocally demandable. The Letter of Intent/Agreement does not contain a PROMISE to sell and to buy subject property. There was no promise or commitment on the part of SFC to sell subject land to UMCUPAI, but merely a declaration of its intention to buy the land, subject to the condition that UMCUPAI could raise the necessary funds to acquire the same at the price of P105.00 per square meter x x x While UMCUPAI succeeded in raising funds to acquire a portion of Lot No. 300-A, it failed to raise funds to pay for Lot No. 300-C. From October 4, 1991 when the Letter of Intent was signed to June, 1995, UMCUPAI had about three (3) years and eight (8) months within which to pursue its intention to buy subject land from SFC. Within that period, UMCUPAI had ample time within which to acquire Lot No. 300C, as in fact it had acquired Lot No. 300-A which is much bigger than Lot No. 300-C and occupied by more members of UMCUPAI. The failure of UMCUPAI to acquire Lot No. 300-C before it was sold to BRYC-V

cannot be blamed on SFC because all that UMCUPAI had to do was to raise funds to pay for Lot No. 300C which it did with respect to Lot No. 300-A. SFC had nothing to do with SFCs unilateral action through Mrs. Antonina Graciano to "postpone" the processing of the acquisition of Lot No. 300-C, which it referred to as Phase II, until after the payment to SFC of the acquisition price for Lot No. 300-A or Phase I x x x WHEREFORE, premises considered, the petition is hereby DENIED. The Decision of the Court of Appeals in CA G.R. CV No. 62557 and the Regional Trial Court in Civil Case No. 467(4544) are AFFIRMED. Costs against the petitioner. SO ORDERED. ANTONIO EDUARDO B. NACHURA Associate Justice WE CONCUR:

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-11073 February 21, 1918

WISE & CO. (Ltd.), plaintiff-appellant, vs. JAMES KELLY and MARIANO LIM, defendants-appellees. Lawrence, Ross and Block for appellant. Cosme Ferrer for appellees. FISHER, J.: This action was brought in the Court of First Instance of Manila against the appellee, Mariano Lim, and one James Kelly, the former as surety and the latter as principal, to recover the amount of a promissory note. The note upon which the action was brought is in the following terms: Be it known that we guarantee unto the firm of Wise and Co. (Ltd.) the payment of the sum of thirteen thousand seven hundred and forty-nine pesos and nine centavos (P13,749.09) which James Kelly, a merchant, owes to the said firm of Wise and Co. (Ltd.) at the end of each month all sums which he may receive from the sale of said goods and merchandise, and that in the contrary event we, the sureties, undertake to pay the firm of Wise and Co. (Ltd.) such sums as Mr. James Kelly may fail to turn in as above stated. In witness whereof we have signed this instrument, Manila, P. I., December 12, 1912. (Sgd.) JAMES KELLY. (Sgd.) MARIANO LIM. In his answer to the complaint the appellee, Mariano Lim, interposed, among others, the defense that the obligation was conditional as to him, and that the fact constituting the condition had occurred. The trial judge in his decision said, concerning the construction which in his opinion should be placed upon note in suit: It will be seen that the said document obliges Lim to respond for the payment to the firm of Wise and Co. (Ltd.) of the sum of P13,749.09 which the principal obligor Kelly owes to it for goods and merchandise received and purchased prior thereto, to be sold in his establishment, to the extent that Kelly fails to comply with the condition of paying in at the end of each month all sums which he may collect from the sale of such goods and merchandise, it appearing that he has only undertaken to pay such sums as have been received from the sale of merchandise by the principal obligor which have not been paid in by the latter. Upon the evidence submitted the court below held that plaintiff had not proven that the principal obligor Kelly had failed to turn over any money whatever received from the sale of the merchandise for which the note was given, and establishes the conclusion that Lim had therefore incurred no liability, and that plaintiff has no cause of action against him.

In accordance with this conclusion, judgment was rendered against the principal debtor Kelly for the full amount of the note in suit, with interest, and the action was dismissed as to Lim. From this judgment plaintiff appealed and has assigned as error the conclusion of the trial court with regard to the conditional nature of the obligation assumed by Lim. Upon an examination of the document in question it becomes evident that Lim, as surety, did not undertake absolutely to pay the sum of P13,749.09, in which the principal debtor admits himself to be indebted to the creditor firm. His agreement was limited to respond for the performance by Kelly of one of the accessory pacts of the contract evidenced by that document, namely, the undertaking to deliver to the plaintiff firm the total proceeds of the sales of the merchandise for the invoice value of which the promissory note was given. It not having been stipulated that the merchandise was to be sold at a price not less than cost, it follows that even were Kelly to pay in the total amount derived from its sale, part of his obligation to the sellers might remain undischarged. He, unquestionably, is liable for the payment of the note whatever may be the price at which the merchandise might be sold; but this obligation is not extended to Lim. It having been terminated by the court, in its findings, which we regard as fully supported by the evidence of record, that plaintiff has not proved that it has the merchandise mentioned in the note, it follows that there is no evidence of the existence of the condition the acquisitions of the right on the part of the creditor depends upon the occurrence of the event constituting the condition. (Civil Code, art. 1114.) For the reason stated, we affirm the judgment appealed with costs of this instance to the appellant. So ordered. Arellano, C.J., Torres, Johnson, Carson, Araullo, Street, Malcolm, and Avancea, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-16570 March 9, 1922

SMITH, BELL & CO., LTD., plaintiff-appellant, vs. VICENTE SOTELO MATTI, defendant-appellant. Ross and Lawrence and Ewald E. Selph for plaintiff-appellant. Ramon Sotelo for defendant-appellant. ROMUALDEZ, J.: In August, 1918, the plaintiff corporation and the defendant, Mr. Vicente Sotelo, entered into contracts whereby the former obligated itself to sell, and the latter to purchase from it, two steel tanks, for the total price of twenty-one thousand pesos (P21,000), the same to be shipped from New York and delivered at Manila "within three or four months;" two expellers at the price of twenty five thousand pesos (P25,000) each, which were to be shipped from San Francisco in the month of September, 1918, or as soon as possible; and two electric motors at the price of two thousand pesos (P2,000) each, as to the delivery of which stipulation was made, couched in these words: "Approximate delivery within ninety days. This is not guaranteed." The tanks arrived at Manila on the 27th of April, 1919: the expellers on the 26th of October, 1918; and the motors on the 27th of February, 1919. The plaintiff corporation notified the defendant, Mr. Sotelo, of the arrival of these goods, but Mr. Sotelo refused to receive them and to pay the prices stipulated. The plaintiff brought suit against the defendant, based on four separate causes of action, alleging, among other facts, that it immediately notified the defendant of the arrival of the goods, and asked instructions from him as to the delivery thereof, and that the defendant refused to receive any of them and to pay their price. The plaintiff, further, alleged that the expellers and the motors were in good condition. (Amended complaint, pages 16-30, Bill of Exceptions.) In their answer, the defendant, Mr. Sotelo, and the intervenor, the Manila Oil Refining and By-Products Co., Inc., denied the plaintiff's allegations as to the shipment of these goods and their arrival at Manila, the notification to the defendant, Mr. Sotelo, the latter's refusal to receive them and pay their price, and the good condition of the expellers and the motors, alleging as special defense that Mr. Sotelo had made the contracts in question as manager of the intervenor, the Manila Oil Refining and By-Products Co., Inc which fact was known to the plaintiff, and that "it was only in May, 1919, that it notified the intervenor that said tanks had arrived, the motors and the expellers having arrived incomplete and long after the date stipulated." As a counterclaim or set-off, they also allege that, as a consequence of the plaintiff's delay in making delivery of the goods, which the intervenor intended to use in the manufacture of cocoanut oil, the intervenor suffered damages in the sums of one hundred sixteen thousand seven hundred eighty-three pesos and ninety-one centavos (P116,783.91) for the nondelivery of the tanks, and twenty-one thousand two hundred and fifty pesos (P21,250) on account of the expellers and the motors not having arrived in due time. The case having been tried, the court below absolved the defendants from the complaint insofar as the tanks and the electric motors were concerned, but rendered judgment against them, ordering them to "receive the aforesaid expellers and pay the plaintiff the sum of fifty thousand pesos (P50,00), the price of the said goods, with legal interest thereon from July 26, 1919, and costs."

Both parties appeal from this judgment, each assigning several errors in the findings of the lower court. The principal point at issue in this case is whether or not, under the contracts entered into and the circumstances established in the record, the plaintiff has fulfilled, in due time, its obligation to bring the goods in question to Manila. If it has, then it is entitled to the relief prayed for; otherwise, it must be held guilty of delay and liable for the consequences thereof. To solve this question, it is necessary to determine what period was fixed for the delivery of the goods. As regards the tanks, the contracts A and B (pages 61 and 62 of the record) are similar, and in both of them we find this clause: To be delivered within 3 or 4 months The promise or indication of shipment carries with it absolutely no obligation on our part Government regulations, railroad embargoes, lack of vessel space, the exigencies of the requirement of the United States Government, or a number of causes may act to entirely vitiate the indication of shipment as stated. In other words, the order is accepted on the basis of shipment at Mill's convenience, time of shipment being merely an indication of what we hope to accomplish. In the contract Exhibit C (page 63 of the record), with reference to the expellers, the following stipulation appears: The following articles, hereinbelow more particularly described, to be shipped at San Francisco within the month of September /18, or as soon as possible. Two Anderson oil expellers . . . . And in the contract relative to the motors (Exhibit D, page 64, rec.) the following appears: Approximate delivery within ninety days. This is not guaranteed. This sale is subject to our being able to obtain Priority Certificate, subject to the United States Government requirements and also subject to confirmation of manufactures. In all these contracts, there is a final clause as follows: The sellers are not responsible for delays caused by fires, riots on land or on the sea, strikes or other causes known as "Force Majeure" entirely beyond the control of the sellers or their representatives. Under these stipulations, it cannot be said that any definite date was fixed for the delivery of the goods. As to the tanks, the agreement was that the delivery was to be made "within 3 or 4 months," but that period was subject to the contingencies referred to in a subsequent clause. With regard to the expellers, the contract says "within the month of September, 1918," but to this is added "or as soon as possible." And with reference to the motors, the contract contains this expression, "Approximate delivery within ninety days," but right after this, it is noted that "this is not guaranteed." The oral evidence falls short of fixing such period. From the record it appears that these contracts were executed at the time of the world war when there existed rigid restrictions on the export from the United States of articles like the machinery in question, and maritime, as well as railroad, transportation was difficult, which fact was known to the parties; hence clauses were inserted in the contracts, regarding "Government regulations, railroad embargoes, lack of vessel space, the exigencies of the requirements of the United States Government," in connection with the tanks and "Priority Certificate, subject to the United State Government requirements," with respect to the motors. At the time of the execution of the contracts, the parties were not unmindful of the contingency of the United States Government not allowing the export of the goods, nor of the fact that the other foreseen circumstances therein stated might prevent it.

Considering these contracts in the light of the civil law, we cannot but conclude that the term which the parties attempted to fix is so uncertain that one cannot tell just whether, as a matter of fact, those articles could be brought to Manila or not. If that is the case, as we think it is, the obligations must be regarded as conditional. Obligations for the performance of which a day certain has been fixed shall be demandable only when the day arrives. A day certain is understood to be one which must necessarily arrive, even though its date be unknown. If the uncertainty should consist in the arrival or non-arrival of the day, the obligation is conditional and shall be governed by the rules of the next preceding section. (referring to pure and conditional obligations). (Art. 1125, Civ. Code.) And as the export of the machinery in question was, as stated in the contract, contingent upon the sellers obtaining certificate of priority and permission of the United States Government, subject to the rules and regulations, as well as to railroad embargoes, then the delivery was subject to a condition the fulfillment of which depended not only upon the effort of the herein plaintiff, but upon the will of third persons who could in no way be compelled to fulfill the condition. In cases like this, which are not expressly provided for, but impliedly covered, by the Civil Code, the obligor will be deemed to have sufficiently performed his part of the obligation, if he has done all that was in his power, even if the condition has not been fulfilled in reality. In such cases, the decisions prior to the Civil Code have held that the obligee having done all that was in his power, was entitled to enforce performance of the obligation. This performance, which is fictitious not real is not expressly authorized by the Code, which limits itself only to declare valid those conditions and the obligation thereby affected; but it is neither disallowed, and the Code being thus silent, the old view can be maintained as a doctrine. (Manresa's commentaries on the Civil Code [1907], vol. 8, page 132.) The decisions referred to by Mr. Manresa are those rendered by the supreme court of Spain on November 19, 1896, and February 23, 1871. In the former it is held: First. That when the fulfillment of the conditions does not depend on the will of the obligor, but on that of a third person who can in no way be compelled to carry it out, and it is found by the lower court that the obligor has done all in his power to comply with the obligation, the judgment of the said court, ordering the other party to comply with his part of the contract, is not contrary to the law of contracts, or to Law 1, Tit. I, Book 10, of the "Novsima Recopilacin," or Law 12, Tit. 11, of Partida 5, when in the said finding of the lower court, no law or precedent is alleged to have been violated. (Jurisprudencia Civil published by the directors of the Revista General de Legislacion y Jurisprudencia [1866], vol. 14, page 656.) In the second decision, the following doctrine is laid down: Second. That when the fulfillment of the condition does not depend on the will of the obligor, but on that of a third person, who can in no way be compelled to carry it out, the obligor's part of the contract is complied withalf Belisario not having exercised his right of repurchase reserved in the sale of Basilio Borja mentioned in paragraph (13) hereof, the affidavit of Basilio Borja for the consolidacion de dominio was presented for record in the registry of deeds and recorded in the registry on the same date. (32) The Maximo Belisario left a widow, the opponent Adelina Ferrer and three minor children, Vitaliana, Eugenio, and Aureno Belisario as his only heirs.

(33) That in the execution and sales thereunder, in which C. H. McClure appears as the judgment creditor, he was represented by the opponent Peter W. Addison, who prepared and had charge of publication of the notices of the various sales and that in none of the sales was the notice published more than twice in a newspaper. The claims of the opponent-appellant Addison have been very fully and ably argued by his counsel but may, we think, be disposed of in comparatively few words. As will be seen from the foregoing statement of facts, he rest his title (1) on the sales under the executions issued in cases Nos. 435, 450, 454, and 499 of the court of the justice of the peace of Dagupan with the priority of inscription of the last two sales in the registry of deeds, and (2) on a purchase from the Director of Lands after the land in question had been forfeited to the Government for non-payment of taxes under Act No. 1791. The sheriff's sales under the execution mentioned are fatally defective for what of sufficient publication of the notice of sale. Section 454 of the Code of civil Procedure reads in part as follows: SEC. 454. Before the sale of property on execution, notice thereof must be given, as follows: 1. In case of perishable property, by posing written notice of the time and place of the sale in three public places of the municipality or city where the sale is to take place, for such time as may be reasonable, considering the character and condition of the property; 2. * * * * * * *

3. In cases of real property, by posting a similar notice particularly describing the property, for twenty days in three public places of the municipality or city where the property is situated, and also where the property is to be sold, and publishing a copy thereof once a week, for the same period, in some newspaper published or having general circulation in the province, if there be one. If there are newspaper published in the province in both the Spanish and English languages, then a like publication for a like period shall be made in one newspaper published in the Spanish language, and in one published in the English language: Provided, however, That such publication in a newspaper will not be required when the assessed valuation of the property does not exceed four hundred pesos; 4. * * * * * * *

Examining the record, we find that in cases Nos. 435 and 450 the sales took place on October 14, 1916; the notice first published gave the date of the sale as October 15th, but upon discovering that October 15th was a Sunday, the date was changed to October 14th. The correct notice was published twice in a local newspaper, the first publication was made on October 7th and the second and last on October 14th, the date of the sale itself. The newspaper is a weekly periodical published every Saturday afternoon. In case No. 454 there were only two publications of the notice in a newspaper, the first publication being made only fourteen days before the date of the sale. In case No. 499, there were also only two publications, the first of which was made thirteen days before the sale. In the last case the sale was advertised for the hours of from 8:30 in the morning until 4:30 in the afternoon, in violation of section 457 of the Code of Civil Procedure. In cases Nos. 435 and 450 the hours advertised were from 9:00 in the morning until 4.30 in the afternoon. In all of the cases the notices of the sale were prepared by the judgment creditor or his agent, who also took charged of the publication of such notices. In the case of Campomanes vs. Bartolome and Germann & Co. (38 Phil., 808), this court held that if a sheriff sells without the notice prescribe by the Code of Civil Procedure induced thereto by the judgment creditor and the purchaser at the sale is the judgment creditor, the sale is absolutely void and not title passes. This must now be regarded as the settled doctrine in this jurisdiction whatever the rule may be elsewhere.

It appears affirmatively from the evidence in the present case that there is a newspaper published in the province where the sale in question took place and that the assessed valuation of the property disposed of at each sale exceeded P400. Comparing the requirements of section 454, supra, with what was actually done, it is self-evident that notices of the sales mentioned were not given as prescribed by the statute and taking into consideration that in connection with these sales the appellant Addison was either the judgment creditor or else occupied a position analogous to that of a judgment creditor, the sales must be held invalid. The conveyance or reconveyance of the land from the Director of Lands is equally invalid. The provisions of Act No. 1791 pertinent to the purchase or repurchase of land confiscated for non-payment of taxes are found in section 19 of the Act and read: . . . In case such redemption be not made within the time above specified the Government of the Philippine Islands shall have an absolute, indefeasible title to said real property. Upon the expiration of the said ninety days, if redemption be not made, the provincial treasurer shall immediately notify the Director of Lands of the forfeiture and furnish him with a description of the property, and said Director of Lands shall have full control and custody thereof to lease or sell the same or any portion thereof in the same manner as other public lands are leased or sold: Provided, That the original owner, or his legal representative, shall have the right to repurchase the entire amount of his said real property, at any time before a sale or contract of sale has been made by the director of Lands to a third party, by paying therefore the whole sum due thereon at the time of ejectment together with a penalty of ten per centum . . . . The appellant Addison repurchased under the final proviso of the section quoted and was allowed to do so as the successor in interest of the original owner under the execution sale above discussed. As we have seen, he acquired no rights under these sales, was therefore not the successor of the original owner and could only have obtained a valid conveyance of such titles as the Government might have by following the procedure prescribed by the Public Land Act for the sale of public lands. he is entitled to reimbursement for the money paid for the redemption of the land, with interest, but has acquired no title through the redemption. The question of the priority of the record of the sheriff's sales over that of the sale from Belisario to Borja is extensively argued in the briefs, but from our point of view is of no importance; void sheriff's or execution sales cannot be validated through inscription in the Mortgage Law registry. The opposition of Adelina Ferrer must also be overruled. She maintained that the land in question was community property of the marriage of Eulalio Belisario and Paula Ira: that upon the death of Paula Ira inealed from is modified, and the defendant Mr. Vicente Sotelo Matti, sentenced to accept and receive from the plaintiff the tanks, the expellers and the motors in question, and to pay the plaintiff the sum of ninety-six thousand pesos (P96,000), with legal interest thereon from July 17, 1919, the date of the filing of the complaint, until fully paid, and the costs of both instances. So ordered. Araullo, C.J., Johnson, Street, Malcolm, Avancea, Villamor, Ostrand, and Johns, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-7637 December 29, 1956

INMA ROHDE SHOTWELL, assisted by her husband, ANSELMO M. SHOTWELL, petitioner, vs. MANILA MOTOR CO., INC. and CHARTERED BANK OF INDIA, AUSTRALIA AND CHINA, respondents. Nicolas Belmonte and Leonardo Abola for petitioner. Allison J. Gibbs and Zafra, Lara, De Leon and Veneracion for the respondent Manila Motors Co., Inc. William H, Quasha and Associates for the respondent Chartered Bank of India, Australia and China.

PADILLA, J.: This is an appeal by certiorari under Rule 46 from a judgment of the Court of Appeals. On 8 November 1948 Inma Rohde Shotwell, successor-in-interest of the late William H. Rohde, the lessor, sued the lessee and the assignee in the Court of First Instance of Manila to recover from them allegedly due and unpaid rentals from 1 January 1942 to 30 November 1945. After hearing, the Court rendered judgment . . . in favor of the plaintiff and against the defendant Manila Motor Co., Inc., ordering the latter to pay the former the sum of P175.00 (rental for the month of January 1945), with interest at the rate of six per centum per annum from the date of the filing of the complaint until fully paid; and declaring the contract of lease terminated as of the destruction of the buildings in February, 1945. The case against the defendant Chartered Bank of Australia and China is dismissed for lack of evidence. The payment of the rental due from the defendant Manila Motor Co., Inc., is suspended until the Moratorium Law has been lifted, unless the said defendant waives its right under said Law. With costs against the above named defendant. From this judgment the plaintiff appealed to the Court of Appeals. The judgment appealed from was affirmed, . . . with the only modification that the payment of the amount of P175.00 as rental of the property involved in this litigation for the month of January, 1945, is not suspended and should not be made as soon as this decision becomes final. The costs are taxed against the appellants. The findings of the Court of appeals are, as follows: . . . on September 1, 1937, William H. Rhode, now deceased, father of the plaintiff Inma Rohde Shotwell, and the Manila Motor Co., Inc., entered into a contract of lease for 14 years, covering three parcels of land together with all buildings and improvements thereon, situated on Ongpin, Manila, the buildings fronting on Tambakan alley (Exh. A same as Exh. 10), at a monthly rental of P1,050.00 for the first four years and P1,100.00 for the succeeding years. Two months and five days later, or on November 6, 1937, the Manila Motor Co., Inc. assigned, with the express consent of William H. Rohde (Exh. B), said lease to the defendant Chartered Bank of India, Australia and China under the following reservations:

1. That this assignment does not carry with it any of the liabilities and obligations undertaken and assumed by the Manila Motor Co., Inc. in said lease; but the Chartered Bank of India, Australia and China has the option at any time to undertake and assume the said liabilities and obligations upon written notice by registered mail to the lessor, William H. Rohde; 2. That this assignment shall in no way absolve or release the Manila Motor Co., Inc. from the obligations and liabilities it has contracted in said lease. (Exhibit B) There is no denial that the defendant Chartered Bank of India, Australia and China never exercised its option on said lease, and in accordance with paragraphs 1 and 2 of the contract aforequoted, We declare that the assignment thereof was made just to benefit said defendant Bank and not to work against it unless said Bank would have exercised the option. Consequently, the dismissal of the complaint with regard to this defendant was proper and is hereby affirmed. As to the other defendant, the Manila Motor Co., Inc., the questions at issue to be determined are whether or not (1) the lease contract (Exh. A) was novated; (2) the destruction of the building of the leased property during the battle of liberation in february of 1945, caused the termination of the lease; (3) the Executive Order on moratorium still affects the payment of any of the rentals that might be due the plaintiffs; and (4) there is any balance of the accumulated rentals of the premises that the Manila Motor Co., Inc. is bound to pay to the plaintiffs, with interest thereon from the filing of the action.

As held by the court a quo, "the main portion of the leased premises was sealed by the Japanese military forces, such that the defendant Manila Motor Co., Inc., was not able to continue engaging in automobile business during the Japanese occupation, and that the said main portion of the ground floor was occupied by the Central Garage which belong to the then puppet government. A small portion of the ground floor was occupied by the Manila Food Industry which was owned and operated by the defendant Manila Motor Co., Inc., through its president, Mr. Bachrach." It is part of the history of said occupation days that the rentals of all buildings in general were reduced at least to half, and the amount of P125.00 or P175.00 paid monthly by the defendant Manila Motor Co., Inc. must have been accepted by the lessor in full payment of said rentals, not only because the reduction thereof was in consonance with the general policy on rentals then prevailing, but because the lessor was unable to maintain the lessee in its right to occupy without hindrance the whole premises leased to the latter. Anyway, the plaintiffs have not proved that defendant Manila Motor Co., Inc. and plaintiff's predecessor in interest, or Isabel Salgado de Rohde, agreed that the reduced monthly rental of P125.00 or P175.00 that said defendant continued paying during the Japanese occupation was only in partial satisfaction of the monthly rental stipulated in the contract (Exhibit A), with the understanding that the balance would be fully liquidated after the war. It has been stated before that the buildings on the property leased were totally destroyed in the battle for the liberation of Manila in February of 1945, and the next question for Us to pass upon and decide is whether such destruction caused the termination of the lease. The old civil Code prescribes: ART. 1543. In the lease of things one of the parties thereto binds himself to give to the other the enjoyment or use of a thing for a definite period and for a certain price, and two of the duties or obligations of the lessor are; 2. To make thereon, during the lease, all repairs necessary in order to keep it in serviceable condition for the purpose for which it was intended; and

3. To maintain the lessee in the peaceful enjoyment of the lease during the entire term of the contract. (Art. 1554.).
lawphil.net

When the contract of lease (Exhibit A) was entered into between William H. Rohde and the Manila Motor Co., Inc., there were already buildings on the land, and We believe with the trial judge that said defendant would not have entered into the contract were it not for the suitableness of those buildings which it could and did use in its automobile business, and that the conditions of the lease would have been different if there were no such buildings thereon. As the records shows, the reason on the part of the Manila Motor Co., Inc. to enter into that contract on September 1, 1937, was "that these buildings were substantial and the improvements were suitable for the business in which we were going into, selling and repairing automobiles" (t.s.n. p. 908). It is true that according to the terms of the contract (Exhibit A), the lessee had the right to make alterations and improvements in the building now situated on the above described premises, as it may desire and replace all or any of said buildings with a new building or buildings of equal or greater value, and that all therepairs and renewals shall be for the account of the leasee which shall keep the premises in reasonable good repair, but this covenant which certainly were made for the benefit of the Manila Motor Co., Inc., do not and could not bind the lease to make any renewals if the latter did not so desire. Moreover, the repairs and the renewals referred to in the contract were those to be carried out before the expiration of the term or other determination of the lease, which were to become the property of the lessor, and it certainly would be most unfair to give any other interpretation to the contract, for it would be tantamount to transferring the losses of the owner and the lessor for the destruction of the buildings, which he or his successors-in-interest could have claimed from the War damage Commission, to the shoulders of the lessee that was not at fault in the devastation caused by the ravages of war, If under the obligation "to make all repairs necessary in order to keep the property leased in serviceable condition for the purpose for which it was intended" (Art. 1554, No. 2, of the Civil Code), the lessor cannot be compelled to rebuild the property destroyed by fortuitous event (Lizares vs. Hernaez, 40 Phil., 981), We do not see any reason why the lessee could be obliged to make the renewal, replacement or rebuilding of the improvements for the benefit of the lessor in order to make the lease continue in operation under circumstances that might be disadvantageous to the lessee, when the contract itself left that reconstruction or replacement at the will of the latter. Article 1568 of the old Civil Code prescribes that: If the thing leased should be lost of either the contracting parties fails to comply with his undertaking, the provisions of Articles 1182 and 1183 and of Articles 1101 and 1124 respectively shall be observed, and Article 1182 provides that: An obligation which consists in the delivery of a determinate thing shall be extinguished if such thing should be lost or destroyed without fault on the part of the debtor and before he is in default (mora). In this connection appellees' counsel quotes the following from Manresa: "There is no room for doubt that the loss of the thing extinguishes the lease contract. . ." and that "by loss of the thing shall be understood not only its material and complete destruction, but also such essential change of condition or state that renders it unfit for the purpose to which it was being used" (TranslationAppellees' brief, p. 111). Such being the case, we cannot declare that the lower court committed the second of the errors assigned to it, and, consequently, the defendant-appellee, the Manila Motor Co., Inc., cannot be held liable for any rents after the liberation of the City of Manila, or from February 1 to November 30, 1945, as pretended by appellees. The part of the decision that suspends the payment of the rental due from the defendant Manila Motor Co., Inc., until the moratorium would be lifted, unless the said defendant waives its right under such law, was in accordance with previous decisions of the Supreme Court, but the doctrine

has been recently changed (Royal L. Rutter vs. Placido J. Esteban SC G. R. L-3708, May 18, 1953, and other decisions that followed), and there is now no reason for such suspension. Defendant-appellee Manila Motor Co., Inc. is, therefore, in duty bound to pay the sum of P175.00 as rental of the premises for the month of January, 1945. Anyway, said defendant in its answer admits its obligation to pay that rental for said month. The Court of Appeals found that there were buildings on the land when the contract of lease (Exhibit A) was entered into between William H. Rohde and the Manila Motor Co. Inc., and that the reason the latter entered into such leased contract was "that these buildings were substantial and the improvements were suitable for the business in which we are going into, selling and repairing automobiles;" and both the trial and appellate Courts are of the opinion "that said defendant would not have entered into the contract were it not for the suitableness of those buildings which it could and did use in its automobile business, and that the conditions of the lease would have been different if there were no such buildings thereon." The destruction of the buildings during the battle for liberation in February 1945 terminated the lease contract. Article 1568 of the Civil Code provides: If the thing leased should be lost or either of the contracting parties fails to comply with his undertaking, the provisions of Articles 1182 and 1183 and of Articles 1101 and 1124 respectively shall be observed. Article 1182 of the same Code provides: An obligation which consists in the delivery of a determinate thing shall be extinguished if such thing should be lost or destroyed without fault on the part of the debtor and before he is in default (mora). The petitioner contends that the destruction of the buildings has not terminated the lease contract because not only the buildings but also the land on which they had been erected formed part of the consideration or causa of the contract of lease. But the buildings and the land constitute an invisible unit and the destruction of the buildings has extinguished the obligation or terminated the lease contract. The stipulation on the rebuilding of the destroyed improvements is potestative on the part of the lessee. The latter, is not bound to do so. The Court of Appeals found that in view of the sealing of a large part of the leased premises by the Japanese military forces; occupation of the large part of the ground floor by the Central Garage owned and operated by then puppet Government, a small part only of the ground floor having been left in possession of the Manila Food Industry which was owned and operated by the Manila Motor Co., Inc.; and the reduction at least to half of the rentals then prevailing, the amount of P125 or P175 paid monthly by the defendant Manila Motor Co., Inc. must have been accepted by the lessor in full payment of the rentals. The trial court found "that the monthly rental during the Japanese occupation was reduced by mutual agreement between the lessor and the lessee from P1,100 to P125 or P175." On appeal, the Court of Appeals found that "the evidence on record fully justifies the conclusions arrived at by the trial judge as stated in the paragraph preceding the dispositive part of the decision quoted above." In the view of this agreement the point whether the sealing and occupation of a large part of the leased premises by the Imperial Japanese Army and by the Central Garage of the Japanese-sponsored Government was just a mere trespass ( perturbacion de mero hecho) or juridical disturbance ( pertubacion de derecho) need not be passed upon. The Court of Appeals found that, with the express consent of William H. Rohde, the lessor, the Manila Motor Co., Inc., the lessee, assigned said lease to the defendant Chartered Bank of India, Australia and China, under the following terms and conditions:
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1. That this assignment does not carry with it any of the liabilities and obligations undertaken and assumed by the Manila Motor Co., Inc. in said lease; but the Chartered Bank of India, Australia

and China has the option at any time to undertake and assume the said liabilities and obligations upon written notice by registered mail to the lessor, William H. Rohde; 2. That this assignment shall in no way absolve or release the Manila MotorCo., Inc., from the obligations and liabilities it has contracted in saidlease. (Exhibit B.) and that the Bank did not exercise its option to undertake and assume the liabilities and obligations of the Manila Motor Co. For that reason the Bank cannot be held liable for any amount of rental allegedly due from and unpaid by the lessee to the lessor or his successor-in-interest. Finding no error in the judgment under review we affirm it, with costs against the petitioner. Paras, C.J., Bengzon, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L. and Endencia, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-45993 May 11, 1939

GERONIMO SANTIAGO, JR., plaintiff-appellee, vs. FABIAN R. MILLAR, as Manager of the Philippine Charity Sweepstakes, defendant-appellant. Ramon Diokno for appellant. J.E. Blanco for appellee. LAUREL, J.: This is an appeal from a judgment of the Court of First Instance of Manila ordering the defendant Fabian R. Millar, as manager of the Philippine Charity Sweepstakes to pay to the plaintiff, Geronimo Santiago, Jr., the sum of P470.59 corresponding to two units of ticket No. 0293020 which won a prize of P941.18 in the sweepstake draw held in the City of Manila on May 16, 1937. It is admitted that the defendant, Fabian R. Millar, was at the time the general manager of the Philippine Charity Sweepstake Office; that on February 15, 1937 the plaintiff, Geronimo Santiago, Jr., as agent No. 396, purchased from the treasurer of the Philippine Charity Sweepstake Office ten booklets of tickets numbered serially from 0292908 to 0293027, both inclusive, for the sweepstake draw and race held on May 16, 1937; that among the winning tickets in the said draw was ticket No. 0293020, included in those bought by the plaintiff, its prize being P941.18; that the payment of the prizes won by certain tickets, including said ticket No. 0293020, was set for May 21, 1937; that the tickets for the said sweepstake draw and race contained a condition that "prizes of tickets sold locally will be paid to holder of ticket upon surrender of same." The proof for the plaintiff tends to establish that Carmen B. Garcia, an employee in the National Drug Store where the plaintiff offered for sale his sweepstake tickets, bought two units (or one-half) of ticket No. 0293020 and, on February 20, 1937, presented the plaintiff with them on the occasion of the latter's birthday, and that thereafter, or on May 18, 1937, the said two units were lost. The fact is further admitted in this case that on May 20, 1937, the defendant received a letter from the attorney of the plaintiff giving notice of the loss. On the same day, May 20, 1937, the plaintiff filed the present complaint in the Court of First Instance of Manila (civil case No. 51350), praying for the issuance of a writ of preliminary injunction to restrain the defendant and his agents from paying the prize corresponding to the two units of the ticket in question (No. 0293020) to any person until further order of said court, and seeking a judicial declaration that the plaintiff is the owner of said two units and, consequently, solely entitled to collect the corresponding prize of P 470.59. Thereupon, a bond in the sum of P100 having been filed by the plaintiff, the Court of First Instance of Manila issued the writ of preliminary injunction prayed for. The defendant did not introduce any evidence, oral or documentary, and evidently relied on the legal defense set up in his amended answer that the surrender of the sweepstake ticket was a condition precedent to the payment of its prize to the holder of said ticket, and that "no alegandose en la demanda que el demandante ha presentado el ticket para su cobro, el demandante carece de causa de accion." After trial, the Court of First Instance of Manila rendered, on November 20, 1937, the judgment which is the subject of the present appeal.

The question thus presented is new in this jurisdiction and no enlightenment could be had from foreign sources. We are of the opinion, however, that the present controversy may be disposed of by the application of general principles, having in view the difficulties pointed out in his decision by the trial court. Ticket No. 0293020 bears the notation therein that "prizes of tickets sold locally will be paid to holder of ticket upon surrender of same." This means that to collect the prize the ticket must be presented. The presentation or surrender of the ticket is a condition precedent of payment. The contract is aleatory in nature (art. 1790, Civil Code), and the contracting parties may establish any agreements, terms and conditions they may deem advisable, provided they are not contrary to law, morals, or public order (art. 1255, Civil Code). Obligations arising from contract shall have the force of law between the contracting parties and must be performed in accordance with their stipulations (art. 1091, Civil Code; Hanlon vs. Hausserman and Beam, 41 Phil., 276). The judgment of the lower court is hereby reversed, without pronouncement regarding costs. So ordered. Avancea, C.J., Imperial, Diaz, Concepcion, and Moran, JJ., concur.

Separate Opinions VILLA-REAL, J., dissenting: The fact that the sweepstake ticket in question bears on its face the notation that "prizes of tickets sold locally will be paid to holder of ticket upon surrender of same" does not increase the obligation of the holder to produce the ticket when demanding payment of the prize won by it, inasmuch as the ticket itself is the best evidence of the obligation of the Philippine Charity Sweepstakes to pay the said prize, and it must be surrendered whether the surrender thereof be stipulated or not. After the drawing of lots, the holder of the winning ticket becomes a creditor and the party who has issued said ticket a debtor for the money won. In good conscience and in law the loss of the evidence of indebtedness does not deprive the creditor of his right to collect the amount due, nor does it relieve the debtor from his obligation to pay. It is on this principle of equity that the law has established the best and secondary evidence rule. The result of the decision of the majority will be that in the case of a debt arising from a lottery venture, the holder of the winning ticket cannot establish by secondary evidence its contents in case it should be lost or destroyed against the will of the holder; which is at variance with the rule obtaining in the collection of ordinary debts evidenced by written instruments, in which creditors may establish the contents of the instruments by means of secondary evidence and collect the amounts due in case the original is lost or destroyed. The loss or unintentional destruction of a written instrument in no way affects the liabilities of the parties to it, or the validity or sufficiency of the transaction of which it is the evidence, even though due to the negligence of the owner; nor does it change the nature of the demand, except where the receipt or mailing of the lost instrument constituted payment. The person liable thereon is not relieved from his liabilities by the loss of the instrument. . . . (38 Corpus Juris, sec. 2, page 249.) I am therefore of the opinion that the contents of a sweepstake ticket which has been lost or destroyed before the prize is collected, may be established by secondary evidence and the holder thereof collect the prize.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-24190 July 13, 1926

GEORGE L. PARKS, plaintiff-appellant, vs. PROVINCE OF TARLAC, MUNICIPALITY OF TARLAC, CONCEPCION CIRER, and JAMES HILL, her husband,defendants-appellees. Jos. N. Wolfson for appellant. Provincial Fiscal Lopez de Jesus for the Province and Municipality of Tarlac. No appearance for the other appellees. AVANCEA, C. J.: On October 18, 1910, Concepcion Cirer and James Hill, the owners of parcel of land No. 2 referred to in the complaint, donated it perpetually to the municipality of Tarlac, Province of Tarlac, under certain conditions specified in the public document in which they made this donation. The donation was accepted by Mr. Santiago de Jesus in the same document on behalf of the municipal council of Tarlac of which he was the municipal president. The parcel thus donated was later registered in the name of the donee, the municipality of Tarlac. On January 15, 1921, Concepcion Cirer and James Hill sold this parcel to the herein plaintiff George L. Parks. On August 24, 1923, the municipality of Tarlac transferred the parcel to the Province of Tarlac which, by reason of this transfer, applied for and obtained the registration thereof in its name, the corresponding certificate of title having been issued to it. The plaintiff, George L. Parks, alleging that the conditions of the donation had not been complied with and invoking the sale of this parcel of land made by Concepcion Cirer and James Hill in his favor, brought this action against the Province of Tarlac, the municipality of Tarlac, Concepcion Cirer and James Hill and prayed that he be declared the absolute owner entitled to the possession of this parcel, that the transfer of the same by the municipality of Tarlac to the Province of Tarlac be annulled, and the transfer certificate issued to the Province of Tarlac cancelled. The lower court dismissed the complaint. The plaintiff has no right of action. If he has any, it is only by virtue of the sale of this parcel made by Concepcion Cirer and James Hill in his favor on January 15, 1921, but that sale cannot have any effect. This parcel having been donated by Concepcion Cirer and James Hill to the municipality of Tarlac, which donation was accepted by the latter, the title to the property was transferred to the municipality of Tarlac. It is true that the donation might have been revoked for the causes, if any, provided by the law, but the fact is that it was not revoked when Concepcion Cirer and James Hill made the sale of this parcel to the plaintiff. Even supposing that causes existed for the revocation of this donation, still, it was necessary, in order to consider it revoked, either that the revocation had been consented to by the donee, the municipality of Tarlac, or that it had been judicially decreed. None of these circumstances existed when Concepcion Cirer and James Hill sold this parcel to the plaintiff. Consequently, when the sale was made Concepcion Cirer and James Hill were no longer the owners of this parcel and could not have sold it to the plaintiff, nor could the latter have acquired it from them. But the appellant contends that a condition precedent having been imposed in the donation and the same not having been complied with, the donation never became effective. We find no merit in this contention. The appellant refers to the condition imposed that one of the parcels donated was to be used absolutely and exclusively for the erection of a central school and the other for a public park, the work to commence in both cases within the period of six months from the date of the ratification by the partes of the document

evidencing the donation. It is true that this condition has not been complied with. The allegation, however, that it is a condition precedent is erroneous. The characteristic of a condition precedent is that the acquisition of the right is not effected while said condition is not complied with or is not deemed complied with. Meanwhile nothing is acquired and there is only an expectancy of right. Consequently, when a condition is imposed, the compliance of which cannot be effected except when the right is deemed acquired, such condition cannot be a condition precedent. In the present case the condition that a public school be erected and a public park made of the donated land, work on the same to commence within six months from the date of the ratification of the donation by the parties, could not be complied with except after giving effect to the donation. The donee could not do any work on the donated land if the donation had not really been effected, because it would be an invasion of another's title, for the land would have continued to belong to the donor so long as the condition imposed was not complied with. The appellant also contends that, in any event, the condition not having been complied with, even supposing that it was not a condition precedent but subsequent, the non-compliance thereof is sufficient cause for the revocation of the donation. This is correct. But the period for bringing an action for the revocation of the donation has prescribed. That this action is prescriptible, there is no doubt. There is no legal provision which excludes this class of action from the statute of limitations. And not only this, the law itself recognizes the prescriptibility of the action for the revocation of a donation, providing a special period of five years for the revocation by the subsequent birth of children (art. 646, Civil Code), and one year for the revocation by reason of ingratitude. If no special period is provided for the prescription of the action for revocation for noncompliance of the conditions of the donation (art. 647, Civil Code), it is because in this respect the donation is considered onerous and is governed by the law of contracts and the general rules of prescription. Under the law in force (sec. 43, Code of Civ. Proc.) the period of prescription of this class of action is ten years. The action for the revocation of the donation for this cause arose on April 19, 1911, that is six months after the ratification of the instrument of donation of October 18, 1910. The complaint in this action was presented July 5, 1924, more than ten years after this cause accrued. By virtue of the foregoing, the judgment appealed from is affirmed, with the costs against the appellant. So ordered. Street, Villamor, Ostrand, Johns, Romualdez and Villa-Real, JJ., concur.