HELD: This stipulation is valid because it is simply an alternative obligation, which is expressly allowed by law. The agreement to convey the house and lot on an appraised value in the event of failure to pay the debt in money at its maturity is valid. It is simply an undertaking that if debt is not paid in money, it will be paid in another way. The agreement is not open to the objection that the agreement is pacto comisorio. It is not an attempt to permit the creditor to declare the forfeiture of the security upon the failure of the debtor to pay at its maturity. It is simply provided that if the debt is not paid in money, it shall be paid by the transfer of the property at a valuation. Such an agreement unrecorded, creates no right in rem, but as between the parties, it is perfectly valid and specific performance by its terms may be enforced unless prevented by the creation of superior rights in favor of third persons. The contract is not susceptible of the interpretation that the title to the house and lot in question was to be transferred to the creditor ipso facto upon the mere failure of the debtors to pay the debt at its maturity. The obligations assumed by the debtors were in the alternative, and they had the right to elect which they would perform. The conduct of parties shows that it was not their understanding that the right to discharge the obligation by the payment of the money was lost to the debtors by their failure to pay the debt at its maturity. The plaintiff accepted the payment from Anastacio in 1908, several years after the debt matured. It is quite clear therefore that under the terms of the contract, and the parties themselves have interpreted it, the liability of the defendant as to the conveyance of the house and lot is subsidiary and conditional, being dependent upon their failure to pay the debt in money. It must follow therefore that if the action to recover the debt was prescribed, the action to compel a conveyance of the house and lot is likewise barred, as the agreement to make such conveyance was not an independent principal undertaking, but merely a subsidiary alternative pact relating to the method by which the debt must be paid. Ong Guan Can vs. The Century Insurance Company, Ltd. G.R. No. 21196, February 6, 1924 46 Phil 592 FACTS: A building of the plaintiff was insured against fire by the defendant in the sum of P30,000.00 as well as the goods and merchandise therein contained in the sum of P15,000.00. Page 187 of 747
The house and merchandise insured were burnt early in the morning of February 28, 1923 while the policies issued by the defendant in favor of the plaintiff were in force. The appellants contend that under clause 14 of the conditions of the policies, it amay rebuild the house burnt and although the house may be smaller, yet it would be sufficient indemnity to the insured for the actual loss suffered by him.
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