Beruflich Dokumente
Kultur Dokumente
COURT OF APPEALS
(Remedies for Breach – Performance – To deliver all its accessions) PETITIONER’S ARGUMENTS:
February 12, 1998 - If Keng Hua accepted the shipment, it would be violating Central Bank rules and
Ponente: J. Panganiban regulations and custom and tariff laws. It would be tantamount to smuggling. It
would make Keng Hua vulnerable to legal sanctions.
- Sea-Land has no cause of action against Keng Hua because Keng Hua did not
FACTS: hire Sea-Land. The cause of action should be against the shipper, Ho Kee. The
- Characters: demurrage was a consequence of the shipper’s mistake of shipping more than
a) Keng Hua Paper Products – consignee, receiver of shipment wahat was bought.
b) Sea-Land Service Inc. – shipping company, transporter of waste paper - Keng Hua duly notified Sea-Land about the wrong shipment through a letter
c) Ho Kee Waste Paper – shipper dated January 24, 1983.
- Definitions: - Keng Hua is not bound by the bill of lading because it never gave its consent. It
a) Bill of lading - document issued by a carrier to a shipper, admits “physical acceptance” of the bill of lading, but argues that its subsequent
acknowledging that specified goods have been received on board as cargo actions belie the finding that it accepted the terms.
for conveyance to a named place for delivery to the consignee who is usually - Notice of Refused or On Hand Freight: proof that Keng Hua declined to accept
identified. the shipment.
b) Demurrage – an allowance or compensation for the delay or detention
of a ship/vessel; has reference to the ship’s expenses, wear and tear, and RESPONDENT’S ARGUMENTS:
common employment. - None really, just that Keng Hua should pay demurrage charges since it delayed
Sea-Land’s vessel by failing to unload the shipment during the free time period.
- Keng Hua purchased from Ho Kee fifty tons of waste paper, with partial
shipment permitted. RATIO:
- On June 29, 1982, Sea-Land received at its Hong Kong terminal a sealed 1) YES, Keng Hua accepted and is thus bound by the bill of lading.
container containing 67 bales of unsorted waste paper for shipment to Keng Hua - A bill of lading has two functions:
in Manila. A bill of lading to cover the shipment was issued by Sea-Land. a) receipt for the goods shipped,
- However, the June 29 shipment was 10 tons more than the remaining b) a contract by which three parties (shipper, carrier, and consignee)
balance of the purchase/order, as manifested under the letter of credit. (Keng undertake specific responsibilities and assume stipulated obligations.
Hua ordered 50 tons. 10 tons na lang dapat yung kulang/balance. Pero yung June - A bill of lading delivered and accepted constitutes the contract of carriage even
29 shipment, 20 tons of waste paper.) though not signed because the acceptance of a paper containing the terms of a
- On July 9, 1982, the shipment was discharged at the Manila International proposed contract generally constitutes an acceptance of the contract and of all its
Container Port. Notices of arrival were transmitted to Keng Hua but it failed to terms and conditions of which the acceptor has actual or constructive notice.
discharge the shipment from the container during the “free time” or grace period. - Acceptance = perfect and binding contract
The waste paper remained inside Sea-Land’s container from the expiration of the - The bill of lading between Ho Kee, Keng Hua, and Sea-Land was a valid and
free time period (July 29) until the shipment was unloaded on November 22, PERFECTED contract. Section 17 of the bill of lading provides that the shipper
1983 (481 days). and consignee were liable for demurrage charges for the failure to discharge the
- During the 481-day period, demurrage charges accrued. Numerous demands shipment within the grace period.
for Keng Hua to pay but it refused to settle its obligation. - SC not persuaded by Keng Hua’s arguments. Keng Hua did not immediately
object to or dissent from any term or stipulated in the bill of lading. It waited for
PROCEDURAL HISTORY: SIX MONTHS to send a letter to Sea-Land saying that it would not accept the
- Sea-Land sued Keng Hua for collection and damages. shipment.
- The Regional Trial Court of Manila rendered judgment in favor of Sea-Land, and - The inaction for such a long period conveys the clear inference that it
ordered Keng Hua to pay P67,340 as demurrage charges with interest at the legal accepted the terms and conditions of the bill of lading.
rate from the date of the extrajudicial demand. Also, Keng Hua must pay 10% of - Re: Notice of Refused or On Hand Freight: said notice was not written by Keng
the total amount due as attorney’s fees/litigation expenses. Hua; it was sent by Sea-Land to Keng Hua four months after it received the bill of
- Court of Appeals affirmed in toto the RTC. lading. Its only significance is to highlight Keng Hua’s prolonged failure to object
to the bill of lading.
ISSUES: - Issue of WoN Keng Hua accepted the bill of lading is raised for the first time in
1) WoN Keng Hua accepted the bill of lading. the SC (not raised in the lower courts). Hence, it is barred by estoppel.
2) WoN the award of P67,340 to Sea-Land was proper - Prolonged failure to receive and discharge cargo -> violation of terms of bill of
3) WoN Keng Hua was correct in not accepting the overshipment lading -> liability for demurrage
4) WoN the award of legal interest from the date of Sea-Land’s extrajudicial
demand was proper 2) YES, it is proper
- Keng Hua argued that Sea-Land made no demand for the sum of P67,340. Also, that some parts and screws was lost. That on October 29, 1963 the plaintiff sent a
Sea-Land’s loss and prevention manager (P50,260) and its counsel (P37,800) letter to the defendant for the return of the missing parts, the interior cover and
asked for different amounts. the sum of P6.00 (Exhibit D). The following day, the defendant returned to the
- The amount fo P67,340 was a factual conclusion of the trial court, affirmed by plaintiff some of the missing parts, the interior cover and the P6.00. The plaintiff
the Court of Appeals, and is therefore binding on the SC. Such finding is supported brought his typewriter to Freixas Business Machines and the repair cost the
by extant evidence. amount of P89.85. He commenced this action on August 23, 1965 in the City
- Re: discrepancy in amounts demanded: result of the variance of dates when the Court of Manila, demanding from the defendant the payment of P90.00 as actual
demands were made. The longer the cargo remained unclaimed, the higher the and compensatory damages, P100.00 for temperate damages, P500.00 for moral
demurrage. Thus when counsel demanded on April 24, 1983 P37,800, it already damages, and P500.00 as attorney’s fees. The defendant made no denials of the
ballooned to P67,340 by November 22. facts narrated above, except the claim of the plaintiff that the cost of the repair
made by Freixas Business Machines be fully chargeable against him.
3) NO.
- Re: violation of laws: mere apprehension of violating said laws, without a clear
demonstration that taking delivery of the shipment has become legally impossible, Issue: Whether or not the defendant is liable for the total cost of the repair made
cannot defeat Keng Hua’s obligations under the bill of lading. by Freixas Business Machines with the plaintiff typewriter?
4) NO.
- Based on NCC 2209: interest rate is six percent per annum. Ruling: No, he is not liable for the total cost of the repair made by Freixas
- Bill of lading did not specify the amount of demurrage; this was only established Business Machines instead he is only liable for the cost of the missing parts and
during the trial court decision. Hence, the rate is 6% to be computed from the trial screws. The defendant contravened the tenor of his obligation in repairing the
court decision (Sept. 28, 1990), plus 12% on the total then outstanding from the typewriter of the plaintiff that he fails to repair it and returned it with the missing
time judgment becomes final and executory until its satisfaction. parts, he is liable under “ART. 1167. If a person obliged to do something fails to
do it, the same shall be executed at his cost.
* In a letter of credit, there are three distinct and independent contracts:
a) contract of sale between buyer and seller
b) contract of buyer with issuing bank
This same rule shall be observed if he does it in contravention of the tenor of the
c) letter of credit proper where bank promises to pay seller
obligation. Furthermore it may be decreed that what has been poorly done he
- These three are to be maintained in perpetual separation.
undone.”
- The contract of carriage in the bill of lading must be TREATED INDEPENDENTLY
of the contract of sale and contract with issuing bank. Any discrepancy between
the contract of sale and letter of credit will NOT AFFECT the validity of the contract
of carriage in the bill of lading. TANGUILIG vs. CA
- The carrier cannot be expected to go beyond the representation of the shipper in
the bill of lading and to verify their accuracy vis-à-vis the contract of sale and the
letter of credit. FACTS: Herce contracted Tanguilig to construct a windmill system for him, for
- Carrier had no knowledge of the contents of the container. consideration of 60,000.00. Pursuant to the agreement Herce paid the
downpayment of 30,000.00 and installment of 15,000.00 leaving a 15,000.00
DISPOSITIVE: balance.
- CA decision is AFFIRMED, legal interest MODIFIED to 6% to be computed from
the trial court decision (Sept. 28, 1990), plus 12% on the total then outstanding
from the time judgment becomes final and executory until its satisfaction Herce refused to pay the balance because he had already paid this amount to
SPGMI which constructed a deep well to which the windmill system was to be
G.R. No. L-27454 April 30, 1970 connected since the deepwell, and assuming that he owed the 15,000.00 this
Rosendo O. Chavez, plaintiff-appellant vs. Fructuoso Gonzales, defendant-appellee should be offset by the defects in the windmill system which caused the structure
REYES, J.B.L., J.: to collapse after strong winds hit their place. According to Tanguilig, the
60,000.00 consideration is only for the construction of the windmill and the
Facts: On July 1963, Rosendo Chavez brought his typewriter to Fructuoso construction of the deepwell was not part of it. The collapse of the windmill cannot
Gonzales a typewriter repairman for the cleaning and servicing of the said be attributed to him as well, since he delivered it in good and working condition
typewriter but the latter was not able to finish the job. During October 1963, the and Herce accepted it without protest. Herce contested that the collapse is
plaintiff gave the amount of P6.00 to the defendant which the latter asked from attributable to a typhoon, a force majeure that relieved him of liability.
the plaintiff for the purchase of spare parts, because of the delay of the repair the
plaintiff decided to recover the typewriter to the defendant which he wrapped it
like a package. When the plaintiff reached their home he opened it and examined
The RTC ruled in favor of Tanguilig, but this decision was overturned by the Court
of Appeals which ruled in favor of Herce Hawaiian-Philippine Co (HPC) entered into a contract with Song Fo and
Co where it would deliver molasses to the latter.
ISSUES OF THE CASE: Can the collapse of the windmill be attributed to force A letter addressed by the administrator of the HPC to SFC on December
majeure? Thus, extinguishing the liability of Tanguilig? 13, 1922 contains their contract in writing. It states the ff:
o Mr. Song Fo agreed to the delivery of 300,000 gallons of
- Yes, in order for a party to claim exemption from liability by reason of fortuitous molasses
event under Art 1174 of the Civil Code the event should be the sole and proximate
cause of the loss or destruction of the object of the contract. o Mr. Song Fo also asked if HPC could supply him with another
- In Nakpil vs. Court of Appeals, the S.C. held that 4 requisites must concur that believe it is possible and that they will do their best to let Mr.
there must be a (a) the cause of the breach of the obligation must be independent
Song Fo have the extra 100,000 gallons during the next year.
of the will of debtor (b) the event must be either unforeseeable or unavoidable;
(c) the event be such to render it impossible for the debtor to fulfill his obligation HPC was able to deliver 55,006 gallons of molasses before the breach of
in a normal manner; and (d) the debtor must be free from any participation in or
aggravation of the injury to the creditor. contract.
SFC filed a complaint with two causes of action for breach of contract
- Tanguilig merely stated that there was a strong wind, and a strong wind in this against the HPC and asked for P70,369.50
case is not fortuitous, it was not unforeseeable nor unavoidable, places with HPC answered that there was a delay in the payment from SFC and that
strong winds are the perfect locations to put up a windmill, since it needs strong
winds for it to work. HPC has the right to rescind the contract due to that and claims it as a
special defense.
HELD: WHEREFORE, the appealed decision is MODIFIED. Respondent VICENTE The judgment of the trial court condemned HPC to pay SFC a total of
HERCE JR. is directed to pay petitioner JACINTO M. TANGUILIG the balance of
P15,000.00 with interest at the legal rate from the date of the filing of the P35,317.93, with legal interest from the date of the presentation of the
complaint. In return, petitioner is ordered to "reconstruct subject defective complaint, and with costs.
windmill system, in accordance with the one-year guaranty" and to complete the
same within three (3) months from the finality of this decision.
Issues and Ruling:
Obligations and Contracts Terms: Did HPC agree to sell 400,000 gallons of molasses or 300,000 gallons of
molasses?
Fortuitous Events- Refers to an occurrence or happening which could not be Only 300,000 gallons of molasses was agreed to by HPC as seen in the
foreseen, or even if foreseen, is inevitable. It is necessary that the obligor is free
documents presented in court. HPC also believed it possible to
from negligence. Fortuitous events may be produced by two (2) general causes:
(1) by Nature, such as but not limited to, earthquakes, storms, floods, epidemics, accommodate SFC by supplying the latter company with an extra
fires, and (2) by the act of man, such as but not limited to, armed invasion, attack
by bandits, governmental prohibitions, robbery, provided that they have the force 100,000 gallons. However, the language used with reference to the
of an imposition which the contractor or supplier could not have resisted. additional 100,000 gallons was not a definite promise. Still less did it
constitute an obligation
was supposed to make the payments for the delivery of molasses as 3.5 cents per gallon. This meant a loss of approximately
shown in the documents presented by the parties. It was ultimately P2,174.91
settled that payment had to be made upon presentation of accounts at The second cause of action was based on the lost profits on account of
the end of each month the breach of contract. Supreme Court said that SFC is not entitled to
FACT: SFC should have paid for the molasses delivered in December recover anything under the second cause of action because
1922, not later than January 31 1923. Instead payment was not made the testimony of Mr. Song Heng will follow the same line of thought as
until February 20, 1923. All the rest of the molasses was paid for either that of the trial court which in unsustainable and there was no means for
on time or ahead of time. the court to find out what items make up the P14,000 of alleged lost
HPC does not have the right to rescind the contract. It should be noted profits.
that the time of payment stipulated for in the contract should be treated
as of the essence of the contract.
REMEDIES IN RECIPROCAL OBLIGATIONS – Whether or not Defendants are
There was only a slight breach of contract when the payment was liable for breach of contract to Plaintiff
delayed for 20 days after which HPC accepted the payment of the
FACTS:
overdue accounts and continued with the contract, waiving its -
right to rescind the contract. The delay in the payment of SFC was not
a) Plaintiff-Appellant’s Arguments (Boysaw and Yulo – Lost)
such a violation for the contract. - Filed a case against Defendants for breach of contract
-Argued that Plaintiff and Defendant entered into a contract to engage Gabriel
GENERAL RULE: rescission will not be permitted for a slight or casual "Flash" Elorde in a boxing contest against Boysaw. However, Defendant, refused
breach of the contract, but only for such breaches as are so substantial to honor their commitments under the boxing contract
-Appealed to SC the decision of CA
and fundamental.
b) Defendant-Appellee’s Arguments (Interphil Promotions Inc., et al. –
Win)
On the basis first, of a contract for 300,000 gallons of molasses, and second, of a -Argued that they need to postpone the boxing fight under the contract due to the
injuries suffered by Gabriel "Flash" Elorde in his previous fight
contract imprudently breached by HPC, what is the measure of damages? - Trial court rendered a decision in their favor
The first cause of action of SFC is based on the greater expense to which
ISSUE:
it was put in being compelled to secure molasses from other sources to - Whether or not Defendants are liable for breach of contract to Plaintiff
which Supreme Court ruled that P3,000 should be paid by HPC with legal
RULING:
interest from October 2, 1923 until payment. Conclusion:
- Defendants are not liable. The appeal is dismissed.
o 55,006 gallons were delivered before the breach. (This leaves
Rule:
244,994 gallon) - The power to rescind obligations is implied, in reciprocal ones, in case one of the
obligors should not comply with what is incumbent upon him. [Part 1, Art. 1191,
o 100,000 gallons of molasses were secured from the Central Civil Code].
-"Reciprocal obligations are those which arise from the same cause, and in which
North Negros Sugar Co., Inc at 2 cents a gallon, so plaintiff
each party is a debtor and a creditor of the other, such that the obligation of one
suffered no material loss in having to make this purchase. (this is dependent upon the obligation of the other. They are to be performed
simultaneously, so that the performance of one is conditioned upon the
leaves as a result 144,994 gallons) simultaneous fulfillment of the other"
- The power to rescind is given to the injured party. "Where the plaintiff is the profits, P33,369.72 as actual damages and P5,000.00 as attorney's fees; and
party who did not perform the undertaking which he was bound by the terms of defendant-appellee Lope Sarreal, Sr., the additional amount of P20,000.00 as
the agreement to perform 4 he is not entitled to insist upon the performance of moral damages aside from costs.
the contract by the defendant, or recover damages by reason of his own breach "
Application:
The antecedent facts of the case are as follows:
- In this case, the evidence established that the contract was violated by appellant
Boysaw himself when, without the approval or consent of Interphil, he fought
Louis Avila on June 19, 1961 in Las Vegas Nevada. Appellant Yulo admitted this On May 1, 1961, Solomon Boysaw and his then Manager, Willie Ketchum, signed
fact during the trial. with Interphil Promotions, Inc. represented by Lope Sarreal, Sr., a contract to
- Another violation of the contract in question was the assignment and transfer, engage Gabriel "Flash" Elorde in a boxing contest for the junior lightweight
first to J. Amado Araneta, and subsequently, to appellant Yulo, Jr., of the championship of the world.
managerial rights over Boysaw without the knowledge or consent of Interphil.
Conclusion: It was stipulated that the bout would be held at the Rizal Memorial Stadium in
- Thus, Defendants are not liable. The appeal is dismissed. Manila on September 30, 1961 or not later than thirty [30] days thereafter should
a postponement be mutually agreed upon, and that Boysaw would not, prior to
Republic of the Philippines the date of the boxing contest, engage in any other such contest without the
SUPREME COURT written consent of Interphil Promotions, Inc.
Manila
On May 3, 1961, a supplemental agreement on certain details not covered by the
SECOND DIVISION principal contract was entered into by Ketchum and Interphil. Thereafter, Interphil
signed Gabriel "Flash" Elorde to a similar agreement, that is, to engage Boysaw in
a title fight at the Rizal Memorial Stadium on September 30, 1961.
G.R. No. L-22590 March 20, 1987
On June 19, 1961, Boysaw fought and defeated Louis Avila in a ten-round non-
SOLOMON BOYSAW and ALFREDO M. YULO, JR., plaintiffs-appellants,
title bout held in Las Vegas, Nevada, U.S.A. [pp. 26-27, t.s.n., session of March
vs.
14, 1963].
INTERPHIL PROMOTIONS, INC., LOPE SARREAL, SR., and MANUEL NIETO,
JR., defendants-appellees.
On July 2, 1961, Ketchum on his own behalf and on behalf of his associate Frank
Ruskay, assigned to J. Amado Araneta the managerial rights over Solomon
Felipe Torres and Associates for plaintiffs-appellants.
Boysaw.
On September 5, 1961, Alfredo Yulo, Jr. wrote to Sarreal informing him of his
FERNAN, J.:
acquisition of the managerial rights over Boysaw and indicating his and Boysaw's
readiness to comply with the boxing contract of May 1, 1961. On the same date,
This is an appeal interposed by Solomon Boysaw and Alfredo Yulo, Jr., from the on behalf of Interphil Sarreal wrote a letter to the Games and Amusement Board
decision dated July 25, 1963 and other rulings and orders of the then Court of [GAB] expressing concern over reports that there had been a switch of managers
First Instance [CFI] of Rizal, Quezon City, Branch V in Civil Case No. Q-5063, in the case of Boysaw, of which he had not been formally notified, and requesting
entitled "Solomon Boysaw and Alfredo M. Yulo, Jr., Plaintiffs versus Interphil that Boysaw be called to an inquiry to clarify the situation.
Promotions, Inc., Lope Sarreal, Sr. and Manuel Nieto, Jr., Defendants," which,
among others, ordered them to jointly and severally pay defendant-appellee
The GAB called a series of conferences of the parties concerned culminating in the
Manuel Nieto, Jr., the total sum of P25,000.00, broken down into P20,000.00 as
issuance of its decision to schedule the Elorde-Boysaw fight for November 4,
moral damages and P5,000.00 as attorney's fees; the defendants-appellees
Interphil Promotions, Inc. and Lope Sarreal, Sr., P250,000.00 as unrealized
1961. The USA National Boxing Association which has supervisory control of all After the lower court rendered its judgment dismissing the plaintiffs' complaint,
world title fights approved the date set by the GAB the plaintiffs moved for a new trial. The motion was denied, hence, this appeal
taken directly to this Court by reason of the amount involved.
Yulo, Jr. refused to accept the change in the fight date, maintaining his refusal
even after Sarreal on September 26, 1961, offered to advance the fight date to From the errors assigned by the plaintiffs, as having been committed by the lower
October 28, 1961 which was within the 30-day period of allowable postponements court, the following principal issues can be deduced:
provided in the principal boxing contract of May 1, 1961.
1. Whether or not there was a violation of the fight contract of
Early in October 1961, Yulo, Jr. exchanged communications with one Mamerto May 1, 1961; and if there was, who was guilty of such violation.
Besa, a local boxing promoter, for a possible promotion of the projected Elorde-
Boysaw title bout. In one of such communications dated October 6, 1961, Yulo
2. Whether or not there was legal ground for the postponement
informed Besa that he was willing to approve the fight date of November 4,1961
of the fight date from September 1, 1961, as stipulated in the
provided the same was promoted by Besa.
May 1, 1961 boxing contract, to November 4,1961,
While an Elorde-Boysaw fight was eventually staged, the fight contemplated in the
3. Whether or not the lower court erred in the refusing a
May 1, 1961 boxing contract never materialized.
postponement of the July 23, 1963 trial.
As a result of the foregoing occurrences, on October 12, 1961, Boysaw and Yulo,
4. Whether or not the lower court erred in denying the
Jr. sued Interphil, Sarreal, Sr. and Manuel Nieto, Jr. in the CFI of Rizal [Quezon
appellant's motion for a new trial.
City Branch] for damages allegedly occasioned by the refusal of Interphil and
Sarreal, aided and abetted by Nieto, Jr., then GAB Chairman, to honor their
commitments under the boxing contract of May 1,1961. 5. Whether or not the lower court, on the basis of the evidence
adduced, erred in awarding the appellees damages of the
character and amount stated in the decision.
On the first scheduled date of trial, plaintiff moved to disqualify Solicitor Jorge
Coquia of the Solicitor General's Office and Atty. Romeo Edu of the GAB Legal
Department from appearing for defendant Nieto, Jr. on the ground that the latter RULING
had been sued in his personal capacity and, therefore, was not entitled to be
represented by government counsel. The motion was denied insofar as Solicitor On the issue pertaining to the violation of the May 1, 1961 fight contract, the
General Coquia was concerned, but was granted as regards the disqualification of evidence established that the contract was violated by appellant Boysaw himself
Atty. Edu. when, without the approval or consent of Interphil, he fought Louis Avila on June
19, 1961 in Las Vegas Nevada. Appellant Yulo admitted this fact during the trial.
The case dragged into 1963 when sometime in the early part of said year, plaintiff [pp. 26-27, t.s.n., March 14, 1963].
Boysaw left the country without informing the court and, as alleged, his counsel.
He was still abroad when, on May 13, 1963, he was scheduled to take the witness While the contract imposed no penalty for such violation, this does not grant any
stand. Thus, the lower court reset the trial for June 20, 1963. Since Boysaw was of the parties the unbridled liberty to breach it with impunity. Our law on contracts
still abroad on the later date, another postponement was granted by the lower recognizes the principle that actionable injury inheres in every contractual breach.
court for July 23, 1963 upon assurance of Boysaw's counsel that should Boysaw Thus:
fail to appear on said date, plaintiff's case would be deemed submitted on the
evidence thus far presented.
Those who in the performance of their obligations are guilty of
fraud, negligence or delay, and those who in any manner
On or about July 16, 1963, plaintiffs represented by a new counsel, filed an urgent contravene the terms thereof, are liable for damages. [Art.
motion for postponement of the July 23, 1963 trial, pleading anew Boysaw's 1170, Civil Code].
inability to return to the country on time. The motion was denied; so was the
motion for reconsideration filed by plaintiffs on July 22, 1963.
Also:
The trial proceeded as scheduled on July 23, 1963 with plaintiff's case being
deemed submitted after the plaintiffs declined to submit documentary evidence The power to rescind obligations is implied, in reciprocal ones, in
when they had no other witnesses to present. When defendant's counsel was case one of the obligors should not comply with what is
about to present their case, plaintiff's counsel after asking the court's permission, incumbent upon him. [Part 1, Art. 1191, Civil Code].
took no further part in the proceedings.
There is no doubt that the contract in question gave rise to reciprocal obligations. Thus, in a contract where x is the creditor and y is the debtor, if
"Reciprocal obligations are those which arise from the same cause, and in which y enters into a contract with z, under which he transfers to z all
each party is a debtor and a creditor of the other, such that the obligation of one his rights under the first contract, together with the obligations
is dependent upon the obligation of the other. They are to be performed thereunder, but such transfer is not consented to or approved by
simultaneously, so that the performance of one is conditioned upon the x, there is no novation. X can still bring his action against y for
simultaneous fulfillment of the other" [Tolentino, Civil Code of the Philippines, Vol. performance of their contract or damages in case of breach.
IV, p. 175.1 [Tolentino, Civil Code of the Philippines, Vol. IV, p. 3611.
The power to rescind is given to the injured party. "Where the plaintiff is the party From the evidence, it is clear that the appellees, instead of availing themselves of
who did not perform the undertaking which he was bound by the terms of the the options given to them by law of rescission or refusal to recognize the
agreement to perform 4 he is not entitled to insist upon the performance of the substitute obligor Yulo, really wanted to postpone the fight date owing to an injury
contract by the defendant, or recover damages by reason of his own breach " that Elorde sustained in a recent bout. That the appellees had the justification to
[Seva vs. Alfredo Berwin 48 Phil. 581, Emphasis supplied]. renegotiate the original contract, particularly the fight date is undeniable from the
facts aforestated. Under the circumstances, the appellees' desire to postpone the
fight date could neither be unlawful nor unreasonable.
Another violation of the contract in question was the assignment and transfer, first
to J. Amado Araneta, and subsequently, to appellant Yulo, Jr., of the managerial
rights over Boysaw without the knowledge or consent of Interphil. We uphold the appellees' contention that since all the rights on the matter rested
with the appellees, and appellants' claims, if any, to the enforcement of the
contract hung entirely upon the former's pleasure and sufferance, the GAB did not
The assignments, from Ketchum to Araneta, and from Araneta to Yulo, were in
act arbitrarily in acceding to the appellee's request to reset the fight date to
fact novations of the original contract which, to be valid, should have been
November 4, 1961. It must be noted that appellant Yulo had earlier agreed to
consented to by Interphil.
abide by the GAB ruling.
The refusal of appellants to accept a postponement without any other reason but
That appellant Yulo, Jr., through a letter, advised Interphil on September 5, 1961
the implementation of the terms of the original boxing contract entirely overlooks
of his acquisition of the managerial rights over Boysaw cannot change the fact
the fact that by virtue of the violations they have committed of the terms thereof,
that such acquisition, and the prior acquisition of such rights by Araneta were
they have forfeited any right to its enforcement.
done without the consent of Interphil. There is no showing that Interphil, upon
receipt of Yulo's letter, acceded to the "substitution" by Yulo of the original
principal obligor, who is Ketchum. The logical presumption can only be that, with On the validity of the fight postponement, the violations of the terms of the
Interphil's letter to the GAB expressing concern over reported managerial changes original contract by appellants vested the appellees with the right to rescind and
and requesting for clarification on the matter, the appellees were not reliably repudiate such contract altogether. That they sought to seek an adjustment of one
informed of the changes of managers. Not being reliably informed, appellees particular covenant of the contract, is under the circumstances, within the
cannot be deemed to have consented to such changes. appellee's rights.
Under the law when a contract is unlawfully novated by an applicable and While the appellants concede to the GAB's authority to regulate boxing contests,
unilateral substitution of the obligor by another, the aggrieved creditor is not including the setting of dates thereof, [pp. 44-49, t.s.n., Jan. 17, 1963], it is their
bound to deal with the substitute. contention that only Manuel Nieto, Jr. made the decision for postponement,
thereby arrogating to himself the prerogatives of the whole GAB Board.
The consent of the creditor to the change of debtors, whether in
expromision or delegacion is an, indispensable requirement . . . The records do not support appellants' contention. Appellant Yulo himself admitted
Substitution of one debtor for another may delay or prevent the that it was the GAB Board that set the questioned fight date. [pp. 32-42, t.s.n.,
fulfillment of the obligation by reason of the inability or Jan. 17, 1963]. Also, it must be stated that one of the strongest presumptions of
insolvency of the new debtor, hence, the creditor should agree law is that official duty has been regularly performed. In this case, the absence of
to accept the substitution in order that it may be binding on him. evidence to the contrary, warrants the full application of said presumption that the
decision to set the Elorde-Boysaw fight on November 4, 1961 was a GAB Board
decision and not of Manuel Nieto, Jr. alone.
Anent the lower court's refusal to postpone the July 23, 1963 trial, suffice it to say On the issue pertaining to the award of excessive damages, it must be noted that
that the same issue had been raised before Us by appellants in a petition for because the appellants wilfully refused to participate in the final hearing and
certiorari and prohibition docketed as G.R. No. L-21506. The dismissal by the refused to present documentary evidence after they no longer had witnesses to
Court of said petition had laid this issue to rest, and appellants cannot now hope present, they, by their own acts prevented themselves from objecting to or
to resurrect the said issue in this appeal. presenting proof contrary to those adduced for the appellees.
On the denial of appellant's motion for a new trial, we find that the lower court did On the actual damages awarded to appellees, the appellants contend that a
not commit any reversible error. conclusion or finding based upon the uncorroborated testimony of a lone witness
cannot be sufficient. We hold that in civil cases, there is no rule requiring more
than one witness or declaring that the testimony of a single witness will not suffice
The alleged newly discovered evidence, upon which the motion for new trial was
to establish facts, especially where such testimony has not been contradicted or
made to rest, consists merely of clearances which Boysaw secured from the clerk
rebutted. Thus, we find no reason to disturb the award of P250,000.00 as and for
of court prior to his departure for abroad. Such evidence cannot alter the result of
unrealized profits to the appellees.
the case even if admitted for they can only prove that Boysaw did not leave the
country without notice to the court or his counsel.
On the award of actual damages to Interphil and Sarreal, the records bear
sufficient evidence presented by appellees of actual damages which were neither
The argument of appellants is that if the clearances were admitted to support the
objected to nor rebutted by appellants, again because they adamantly refused to
motion for a new trial, the lower court would have allowed the postponement of
participate in the court proceedings.
the trial, it being convinced that Boysaw did not leave without notice to the court
or to his counsel. Boysaw's testimony upon his return would, then, have altered
the results of the case. The award of attorney's fees in the amount of P5,000.00 in favor of defendant-
appellee Manuel Nieto, Jr. and another P5,000.00 in favor of defendants-appellees
Interphil Promotions, Inc. and Lope Sarreal, Sr., jointly, cannot also be regarded
We find the argument without merit because it confuses the evidence of the
as excessive considering the extent and nature of defensecounsels' services which
clearances and the testimony of Boysaw. We uphold the lower court's ruling that:
involved legal work for sixteen [16] months.
4) Adultery or concubinage;
The testimony of Boysaw cannot be considered newly discovered evidence for as
appellees rightly contend, such evidence has been in existence waiting only to be
elicited from him by questioning. 5) Illegal or arbitrary detention or arrest;
We cite with approval appellee's contention that "the two qualities that ought to 6) Illegal search;
concur or dwell on each and every of evidence that is invoked as a ground for new
trial in order to warrant the reopening . . . inhered separately on two unrelated 7) Libel, slander or any other form of defamation;
species of proof" which "creates a legal monstrosity that deserves no recognition."
8) Malicious prosecution;
9) Acts mentioned in Art. 309. “Acknowledgment of Debt and Proposed Manner of
Payments. It was approved by the president of UP, which
stipulated the following:
10) Acts and actions referred to in Arts., 21, 26, 27, 28, 29, 30,
3. In the event that the payments called for are not
32, 34 and 35.
sufficient to liquidate the foregoing indebtedness,
the balance outstanding after the said payments
The award of moral damages in the instant case is not based on any of the cases have been applied shall be paid by the debtor in
enumerated in Art. 2219 of the Civil Code. The action herein brought by plaintiffs- full no later than June 30, 1965.
appellants is based on a perceived breach committed by the defendants-appellees 5. In the event that the debtor fails to comply with
of the contract of May 1, 1961, and cannot, as such, be arbitrarily considered as a any of its promises, the Debtor agrees without
case of malicious prosecution. reservation that Creditor shall have the right to
consider the Logging Agreement rescinded,
Moral damages cannot be imposed on a party litigant although such litigant without the necessity of any judicial suit…
exercises it erroneously because if the action has been erroneously filed, such ALUMCO continued its logging operations, but
litigant may be penalized for costs. again incurred an unpaid account. On July 19,1965, UP
informed ALUMCO that it had, as of that date, considered
rescinded and of no further legal effect the logging
The grant of moral damages is not subject to the whims and agreement, and that UP had already taken steps to have
caprices of judges or courts. The court's discretion in granting or another concessionaire take over the logging operation.
refusing it is governed by reason and justice. In order that a ALUMCO filed a petition to enjoin UP from conducting the
person may be made liable to the payment of moral damages, bidding. The lower court ruled in favor of ALUMCO,
the law requires that his act be wrongful. The adverse result of hence, this appeal.
an action does not per se make the act wrongful and subject the
actor to the payment of moral damages. The law could not have ISSUE:
meant to impose a penalty on the right to litigate; such right is Can petitioner UP treat its contract with ALUMCO
so precious that moral damages may not be charged on those rescinded, and may disregard the same before any judicial
who may exercise it erroneously. For these the law taxes costs. pronouncement to that effect?
[Barreto vs. Arevalo, et. al. No. L-7748, Aug. 27, 1956, 52 O.G.,
No. 13, p. 5818.] RULING:
Yes. In the first place, UP and ALUMCO had
WHEREFORE, except for the award of moral damages which is herein deleted, the expressly stipulated that upon default by the debtor, UP
decision of the lower court is hereby affirmed. has the right and the power to consider the Logging
Agreement of December 2, 1960 as rescinded without the necessity of any judicial
suit. As to such special stipulation
SO ORDERED. and in connection with Article 1191 of the Civil Code, the
Supreme Court, stated in Froilan vs. Pan Oriental Shipping
UNIVERSITY OF THE PHILIPPINES VS. DE LOS Co:
ANGELES “There is nothing in the law that prohibits the
35 SCRA 102 parties from entering into agreement that violation
of the terms of the contract would cause
FACTS: cancellation thereof, even without court
On November 2, 1960, UP and ALUMCO entered intervention. In other words, it is not always
into a logging agreement whereby the latter was granted necessary for the injured party to resort to court
exclusive authority to cut, collect and remove timber from for rescission of the contract.”
the Land Grant for a period starting from the date of
agreement to December 31, 1965, extendible for a period of ANGELES VS. CALASANZ
5 years by mutual agreement. 135 SCRA 323
c) P145K on or before December 31, 1985. The right to resolve reciprocal obligations (Art 1191) is deemed implied in case
one of the obligors shall fail to comply with what is incumbent upon him. But the
3. When second payment was due, Iringan paid only P40K. On July 18, right must be invoked judicially. Even if the right to rescind is made available to
1985, Palao sent a letter to Iringan stating that he would not accept any further the injured party, the obligation is not ipso facto erased by the failure of the other
payment considering that Iringan failed to comply with his obligation to pay full party to comply with what is incumbent upon him. The party entitled to rescind
amount of second installment. should apply to the court for a decree of rescission. The operative act is the
4. On August 20, 1985, Iringan replied that they were not opposing the decree of the court.
revocation of the Deed of Sale, but asked for the reimbursement of the ff:
a) P50K –cash received;
b) P3,200—geodetic engineer’s fee; 2 .The award of moral and exemplary damages is proper.
c) P500—attorney’s fee;
d) Interest on P53,700
Ratio: Petitioner claimed he was ready to pay but never actually paid respondent, - Eulalio Mistica, Fidela’s predecessor-in-interest, is the owner of a parcel of land
even when he knew that the reason for selling the lot was for Palao to needed to in Malhacan, Meycauayan, Bulacan. A portion thereof was leased to Bernardino
raise money to pay his SSS loan. Naguiat (Naguiat) sometime in 1970.
- On 5 April 1979, Eulalio entered into a contract to sell with Naguiat over a
1) Iringan knew Palao’s reason for selling the property, and still he did not portion of the aforementioned lot containing an area of 200 m2. This agreement
pay Palao. was reduced to writing in a document entitled Kasulatan sa Pagbibilihan.
2) Petitioner refused to formally execute an instrument showing their `Na ang natitirang halagang LABING WALONG LIBONG PISO (P18,000.00)
mutual agreement to rescind the contract of sale, even when it was Iringan who Kualtang Pilipino, ay babayaran ng BUM[I]BILI sa loob ng Sampung (10) taon, na
breached the terms of their contract, leaving Palao desperate to find other sources magsisimula sa araw din ng lagdaan ang kasulatang ito.
of funds to pay off the loan. `Sakaling hindi makakabayad ang Bumibili sa loob ng panahon pinagkasunduan,
3) Petitioner did not substantiate by clear and convincing proof that he was an[g] BUMIBILI ay magbabayad ng pakinabang o interes ng 12% isang taon, sa
ready and willing to pay respondent. It was more of an afterthought to evade the taon nilakaran hanggang sa ito'y mabayaran tuluyan ng Bumibili
consequence of the breach. - Naguiat gave a downpayment of P2,000.00. He made another partial payment of
P1,000.00 on 7 February 1980. He failed to make any payments thereafter.
Vda. De Mistica vs. Naguiat - Eulalio Mistica died sometime in October 1986.
418 SCRA 73 - On 4 December 1991, Fidela filed a complaint for rescission alleging: that
Art. 1182. Potestative Condition Naguiats’ failure and refusal to pay the balance of the purchase price constitutes a
violation of the contract which entitles her to rescind the same.
Issue/Scope - Naguiats contended that the contract cannot be rescinded on the ground that it
Potestative Condition under Art. 1182 in relation to Art. 1191 of Civil Code clearly stipulates that in case of failure to pay the balance as stipulated, a yearly
interest of 12% is to be paid. Naguiat likewise alleged that sometime in October
Facts 1986, during Eualalio’s wake, he offered to pay the remaining balance to Fidela
Predecessor-in-interest of Petitioner and herein Defendants entered into a contract but the latter refused and hence, there is no breach or violation committed by
to sell in which the latter prayed the initial payment and undertake to pay the them and no damages could yet be incurred by the late Eulalio, his heirs or
remaining by installment within 10 years subject to 12% interest per annum assigns pursuant to the said document.
Petitioner filed a complaint for rescission alleging failure and refusal of Defendants - RTC disallowed rescission. CA affirmed. It held that the conclusion of the ten-
to pay the balance constitutes a violation of the contract which entitles her to year period was not a resolutory term, because the Contract had stipulated that
rescind the same payment with interest of 12% could still be made if Naguiats failed to pay within
Petitioner argues that period for performance of obligation cannot be extended to the period. Fidela did not disprove the allegation of Naguiats that they had
10 years because to do so would convert the obligation to purely potestative tendered payment of the balance of the purchase price during her husband's
funeral, which was well within the ten-year period. Moreover, rescission would be
Held unjust to Naguiats, because they had already transferred the land title to their
Under Art. 1191 of Civil Code, the right to rescind an obligation is predicated on names. The proper recourse, the CA held, was to order them to pay the balance of
violation between parties brought about by breach of faith by one of them. the purchase price, with 12% interest.
Rescission, however, is allowed only when the breach is substantial and - Before SC, Fidela claimed that she is entitled to rescind the Contract under
fundamental to the fulfillment of the obligation A1191, because Naguiats committed a substantial breach when they did not pay
In this case, no substantial breach – in the Kasulatan, it was stipulated that the balance of the purchase price within the 10-year period.
payment could be made even after 10 years from execution of contract, provided ISSUES:
they will pay the 12% interest • WON there is a breach of obligation that warrants rescission under A1191
Civil Code prohibits purely potestative, suspensive, conditional obligation that o NO. The transaction between Eulalio and Naguiats, as evidenced by the
depend on the whims of the debtor. Nowhere in the deed that payment of Kasulatan, was clearly a Contract of Sale. A deed of sale is considered absolute in
purchase price is dependent whether respondents want to pay it or not, the fact nature when there is neither a stipulation in the deed that title to the property
that they already made partial payment shows that parties intended to be bound sold is reserved to the seller until the full payment of the price; nor a stipulation
by the Kasulatan. giving the vendor the right to unilaterally resolve the contract the moment the
buyer fails to pay within a fixed period.
Vda. de Mistica v. Sps. Naguiat (2003) o In a contract of sale, the remedy of an unpaid seller is either specific
Petitioners: FIDELA DEL CASTILLO VDA. DE MISTICA performance or rescission. Under A1191, the right to rescind an obligation is
Respondents: SPOUSES BERNARDINO NAGUIAT AND MARIA PAULINA GERONA- predicated on the violation of the reciprocity between parties, brought about by a
NAGUIAT breach of faith by one of them. Rescission, however, is allowed only where the
Ponente: PANGANIBAN breach is substantial and fundamental to the fulfillment of the obligation.
Topic: Remedies for Breach o Naguiats’ failure to pay the balance of the purchase price within 10 years
SUMMARY: (1-2 sentence summary of facts, issue, ratio and ruling) from the execution of the Deed did not amount to a substantial breach. In the
FACTS: Kasulatan, it was stipulated that payment could be made even after ten years
from the execution of the Contract, provided the vendee paid 12 percent interest.
The stipulations of the contract constitute the law between the parties; thus,
courts have no alternative but to enforce them as agreed upon and written.
o Moreover, it is undisputed that during the ten-year period, Fidela and her
deceased husband never made any demand for the balance of the purchase price.
Fidela even refused the payment tendered by Naguiats during her husband's
funeral, thus showing that she was not exactly blameless for the lapse of the ten-
year period. Had she accepted the tender, payment would have been made well
within the agreed period.
NOTES: The issuance of a certificate of title in favor of Naguiats does not
determine whether Fidela is entitled to rescission.