Short answer. It depends on whether the deal is reciprocal. Under Article 1187, if the obligation imposes reciprocal prestations, the fruits and interests during the wait shall be deemed to have been mutually compensated. If it is unilateral, the debtor keeps the fruits and interests he received.
What the law says
when the obligation imposes reciprocal prestations upon the parties, the fruits and interests during the pendency of the condition shall be deemed to have been mutually compensated. If the obligation is unilateral, the debtor shall appropriate the fruits and interests received
Civil Code, Article 1187 — Retroactivity of Conditions. Read the full provision →
The starting point: fulfilment reaches back
Article 1187 begins by making a fulfilled condition retroactive. It says the effects of a conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the constitution of the obligation. In principle, then, the parties are treated as if bound from the beginning, not just from the day the condition happened. Left there, that rule might suggest whoever ends up entitled to the thing should also get everything it produced during the wait. But the law does not push retroactivity that far for the fruits — it sets separate rules depending on the kind of obligation.
Reciprocal deals: the fruits wash out
Where each side owes the other something — the typical give-and-take contract — the law avoids a messy accounting. It provides that when the obligation imposes reciprocal prestations upon the parties, the fruits and interests during the pendency of the condition shall be deemed to have been mutually compensated. In other words, each party is treated as having kept what its own property earned, on the assumption that both sides gained comparable benefits while waiting. Nobody has to hand over the harvests, rents or interest collected during the pendency; they are considered offset against each other, and the matter is closed.
Unilateral obligations: the debtor keeps them
When only one side is bound — a gratuitous promise, for instance — there is nothing to offset. Here the law lets the one still in possession keep what he earned: the debtor shall appropriate the fruits and interests received. The reasoning is that until the condition was fulfilled, the thing and its produce were still his. The article adds one qualification: this yields unless from the nature and circumstances of the obligation it should be inferred that the intention of the person constituting the same was different. So a clear contrary intention can change the result, but the default is that the debtor keeps the fruits.
Obligations to do or not to do
The rules above are written for obligations to give a thing. Article 1187 handles the remaining category separately: for obligations to do and not to do, the courts shall determine, in each case, the retroactive effect of the condition that has been complied with. There is no fixed formula, because such obligations do not produce fruits in the same way property does, and forcing a single rule would fit poorly. So if your deal is about performing or refraining from an act rather than delivering a thing, the retroactive effect is left to be assessed on the specific facts rather than settled automatically by the article.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Fernando Carrascoso Jr. vs. The Honorable Court of Appeals, et al, G.R. No. 123672, December 14, 2005 — read the decision on LawPhil →