1.) Chavez vs. Gonzales, 32 SCRA 547 Held: Yes.
Held: Yes. For such contravention, he is liable under Article 1167 of the Civil
February 19, 2017
Facts: July 1963, Rosendo Chavez, plaintiff, brought his typewriter to
Fructuoso Gonzales, defendant, a typewriter repairman for the cleaning and
servicing of the said typewriter. Three months later, the plaintiff paid P6.00
to the defendant for the purchase of spare parts. Because of the delay of
the repair the plaintiff decided to recover the typewriter from the
defendant which was wrapped like a package. When he opened and
examined it, the interior cover and some parts and screws were missing.
October 29, 1963 the plaintiff sent a letter to the defendant for the return
of the missing parts, the interior cover and the sum of P6.00. The following
day, the defendant returned to the plaintiff only some of the missing parts,
the interior cover and the P6.00. August 29, 1964, the plaintiff had his
typewriter repaired by Freixas Business Machines, that cost him a total of
P89.85. A year later, the plaintiff filed an action before the City Court of
Manila, demanding from the defendant the payment for total of P1,190.00
for damages including attorney’s fees. The defendant made no denials. The
repair invoice shows that the missing parts had a total value of P31.10 only.
Wherefore, judgment is hereby rendered ordering the defendant to pay the
plaintiff the sum of P31.10, and the costs of suit. Chaves appealed, because
it only awarded the value of the missing parts of the typewriter, instead of
the whole cost of labor and materials that went into the repair of the
machine. It is clear that the defendant-appellee contravened the tenor of
his obligation because not only did he not repair the typewriter but
returned it “in shambles”. IN VIEW OF THE FOREGOING REASONS, the
appealed judgment is hereby modified, by ordering the defendant-appellee
to pay, as he is hereby ordered to pay, the plaintiff-appellant the sum of
P89.85, with interest at the legal rate from the filing of the complaint. Costs
in all instances against appellee Fructuoso Gonzales.
Issue: Whether or not the defendant is liable for the total cost of repair.
Code. For the cost of executing the obligation in a proper manner. The cost
of the execution of the obligation in this case should be the cost of the labor
or service expended in the repair of the typewriter.
2.) Tanguilig v CA
FACTS OF THE CASE:
Herce contracted Tanguilig to construct a windmill system for him, for
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 balance.
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 connected since the deepwell, and assuming that he owed the
15,000.00 this should be offset by the defects in the windmill system which
caused the structure 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 construction of the deepwell was not part of it. The
collapse of the windmill cannot be attributed to him as well, since he
delivered it in good and working condition and Herce accepted it without
protest. Herce contested that the collapse is attributable to a typhoon, a
force majeure that relieved him of liability.
The RTC ruled in favor of Tanguilig, but this decision was overturned by the
Court of Appeals which ruled in favor of Herce
ISSUES OF THE CASE:
Can the collapse of the windmill be attributed to force majeure? Thus,
extinguishing the liability of Tanguilig?
- Yes, in order for a party to claim exemption from liability by reason of
fortuitous 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.
- In Nakpil vs. Court of Appeals, the S.C. held that 4 requisites must concur
that there must be a (a) the cause of the breach of the obligation must be
independent of the will of debtor (b) the event must be either
unforeseeable or unavoidable; (c) the event be such to render it impossible 3.) Mackay v Caswell
for the debtor to fulfill his obligation in a normal manner; and (d) the debtor
must be free from any participation in or aggravation of the injury to the
creditor.
- Tanguilig merely stated that there was a strong wind, and a strong wind in
this case is not fortuitous, it was not unforeseeable nor unavoidable, places
with strong winds are the perfect locations to put up a windmill, since it
needs strong winds for it to work.

HELD:
WHEREFORE, the appealed decision is MODIFIED. Respondent VICENTE
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
complaint. In return, petitioner is ordered to "reconstruct subject defective
windmill system, in accordance with the one-year guaranty" and to
complete the same within three (3) months from the finality of this decision.

Obligations and Contracts Terms:

Fortuitous Events- Refers to an occurrence or happening which could not be
foreseen, or even if foreseen, is inevitable. It is necessary that the obligor is
free 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, 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 of an imposition which the contractor or
supplier could not have resisted.
4.) Nakpil v Manila Towers Development Corp
A 14-storey high rise building 777 Ongpin St., Sta. Cruz, Manila Owned by Cheon
Kiao Ang Leased to 200 Filipino Chinese tenants Among those tenants was Atty.
Bonifacio Nakpil (Petitioner) Property was mortgaged to Government Service
Insurance System (GSIS) as security for loan Ang obtained Ang failed to pay the
loan, so the real estate mortgage was foreclosed and sold at public auction where
GSIS was the winning bidder GSIS sold the property to Centertown Marketing
Corporation (CMC) CMC assigned all its rights to sister-corporation Manila Tower
Development Corporation (MTDC)

Tenants formed House International Building Tenants Association (HIBTAI) HIBTAI

protested the auction, claiming that they had priority to buy the property
Tenants refused to pay their rentals and instead remitted them to HIBTAI City
Engineer wrote to MTDC requesting that the defects of the building be corrected
City Engineer warned that the defects were serious and would endanger the lives of
the tenants Before MTDC could make the necessary repairs, HIBTAI filed a
complaint v. GSIS for injunction and damages – it was dismissed Filed another
complaint for annulment of contract and damages- likewise dismissed HIBTAI
appealed the decision – also dismissed HIBTAI assailed the decision before the
SC - dismissed
HIBTAI 8 years later, new request was made for the an immediate ocular inspection
of the building City Building Official granted the request and scheduled an ocular
inspection Tenants were illegally occupying the building Tenants were
ordered to vacate and for the building to be repaired A Group of men entered
the building and commenced the repairs and tore down some of the structure At
the time Atty. Nakpil was overseas and upon his return, he discovered his room was
destroyed, the walls were hammered down, and his electricity was cut off He
then filed a complaint against MTDC RTC dismissed the complaint and ruled in
favor of MTDC Nakpil failed to prove that MTDC had anything to do with the
demolition/repairs and the loss of his personal property It was done by the
employees of the cityengineer of manila not the MTDC Nakpil appealed to the
CA which reversed the decision of the TC
RESPONDENT’S MAIN ARGUMENT Respondent in a separate civil action avers that
it cannot be made liable for actual, moral and exemplary damages because it had
not been remiss in its duty to make the necessary repairs; it was prohibited from
taking possession of the property by the tenants who had filed several suits against
it. It alleged that it acquired the building from the GSIS in 1981, and it was the
HIBTAI that had been managing the affairs of the said building and collected the
rentals from the tenants. It pointed out that in CA-G.R. No. 04393, the CA ruled that
the HIBTAI had no right to collect the rentals. Moreover, HIBTAI did not use the
rentals to make the necessary repairs but used it instead to pay its accounts and
obligations. By their own actions, the tenants of the subject building prevented
MTDC from performing its duty to maintain them in their peaceful possession and
enjoyment of the property. Moreover, Nakpil failed to prove that it had anything to
do with the demolition/repairs and the loss of his personal property.
ISSUES: Whether or not Nakpil is entitiled to damages
HELD: NO. SC do not agree with the ruling of the CA that the MTDC committed a
breach of its lease contract with Nakpil when it failed to comply with its obligation
as lessor, and that the MTDC is liable for nominal damages. Breach of contract is
the failure without legal reason to comply with the terms of a contract. It is also
defined as the failure, without legal excuse, to perform any promise which forms
the whole or part of the contract. There is no factual and legal basis for any
award for damages to respondent. The duty to maintain the lessee in the
peaceful and adequate enjoyment of the lease for the duration of the contract is
merely a warranty that the lessee shall not be disturbed in his legal, and not
physical, possession. In the early case of Goldstein v. Roces, the court pointed out
that the obligation to maintain the lessee in the peaceful and adequate enjoyment
of the leased property seeks to protect the lessee not only from acts of third
persons but also from the acts of the lessor, thus: The lessor must see that the
enjoyment is not interrupted or disturbed, either by others' acts [save in the case
provided for in the article 1560 (now Article 1664)], or by his own. By his own acts,
because, being the person principally obligated by the contract, he would openly
violate it if, in going back on his agreement, he should attempt to render ineffective
in practice the right in the thing he had granted to the lessee; and by others' acts,
because he must guarantee the right he created, for he is obliged to give warranty
in the manner we have set forth in our commentary on article 1553, and, in this
sense, it is incumbent upon him to protect the lessee in the latter's peaceful
enjoyment. When the act of trespass is done by third persons, it must be
distinguished whether it is trespass in fact or in law because the lessor is not liable
for a trespass in fact or a mere act of trespass by a third person. In the Goldstein
case, trespass in fact was distinguished from legal trespass, thus: if the act of
trespass is not accompanied or preceded by anything which reveals a juridic
intention on the part of the trespasser, in such wise that the lessee can only
distinguish the material fact, stripped of all legal form or reasons, we understand it
to be trespass in fact only (de mero hecho). Further, the obligation under Article
1654(3) arises only when acts, termed as legal trespass (perturbacion de derecho),
disturb, dispute, object to, or place difficulties in the way of the lessee's peaceful
enjoyment of the premises that in some manner cast doubt upon the right of the
lessor by virtue of which the lessor himself executed the lease. What is evident in
the present case is that the disturbance on the leased premises on July 19, 1996
was actually done by the employees under the City Engineer of Manila and the City
Building Official on orders of the City Mayor without the participation of the MTDC.
DISPOSITION Petition Denied. Reversed the CA decision
5.) Cetus v CA
FACTS: The private respondents were the lessees of the premises originally owned
by the Susana Realty. These individual verbal leases were on a month-to-month
basis and were paying to a collector of the Susana Realty who went to the premises
monthly. Sometime on March 1984, Susana Realty sold the leased premises to the
petitioner, Cetus Development, Inc. From April to June 1984, the respondents
continued to pay their monthly rentals to a collector sent by the petitioner, but in
the succeeding months, they failed to pay as no collector came.
On October 9, 1984, the petitioner sent a letter to each of the private respondents
demanding that they vacate the subject premises and to pay the back rentals for
the unpaid monthly rentals. Immediately upon receipt thereof, the private
respondents paid their respective arrearages in rent which were accepted by the
petitioner. However, private respondents did not vacate the leased premises.
Hence, petitioner filed with the Metropolitan Trial Court of Manila complaints for
ejectment against the private respondents.
The private respondents, in their respective answers assailed that they were paying
their monthly rental regularly since they occupied such premises, that their non-
payment of the rentals was due to the failure of the petitioner to send its collector,
that they were at a loss as to where they should pay their rentals, that one of them
called the office of the petitioner to inquire as to where they would make payment
and was told that a collector would be sent to receive the same, that no collector
was subsequently sent, and that instead they received a uniform demand letter.
The trial court rendered its decision dismissing the six cases. It held that the plaintiff
cannot eject the defendants from the leased premises because at the time cases
were instituted, there are no rentals in arrears. The alleged rental arrearages were
paid immediately after receipt of the demand letter and that the rentals of the
tenants are relatively small to which the ejectment may not lie on grounds of equity
and for humanitarian reasons. Petitioner appealed to the Regional Trial Court and
the Court of Appeals, but both dismissed the appeal for lack of merit, affirming the
decision of the trial court. Hence, this case.
ISSUE: Whether or not there exists a cause of action when the complaints for
unlawful detainer were filed considering the fact that upon demand by petitioner
from private respondents for payment of their back rentals, the latter immediately
tendered payment which was accepted by petitioner.
RULING: No, there is lack of cause of action. We held that the demand required and
contemplated by law is a jurisdictional requirement for the purpose of bringing an
unlawful detainer suit for failure to pay rent or comply with the conditions of the
lease. It partakes of an extrajudicial remedy that must be pursued before resorting
for judicial action so much so that when there is full compliance with the demand,
there arises no necessity for court action.
For the purpose of bringing an ejectment suit, two requisites must concur, namely:
(1) there must be failure to pay rent or comply with the conditions of the lease and
(2) there must be demand both to pay or to comply and vacate within the periods
specified by law.
In the case at bar, it is very clear that no cause of action for ejectment has accrued.
There was no failure yet on the part of the private respondents to pay rents for
three consecutive months. As the terms of the individual verbal leases which were
on a month-to- month basis were not alleged and proved, the general rule on
necessity of demand applies, to wit: there is default in the fulfillment of an
obligation when the creditor demands payment at the maturity of the obligation or
at anytime thereafter.
6.) Santos Foundation v Santos
There are several civil cases between herein respondent (then petitioner, Ernesto
Santos) and petitioner (then respondent, Santos Ventura Hocorma Foundation, Inc.,
SVHFI for brevity). On October 26, 1990, Santos and SVHFI executed a Compromise
Agreement which amicable ended all their pending litigations.Pertinent portions of
the agreement read as follows:
SVHFI shall pay Santos P14.5 million in the following manner: P 1.5 million
immediately upon the execution of this agreement; The balance of P13 million shall
be paid, whether in one lump rum or in installments, at the discretion of the
Foundation, within a period of not more than two (2) years from the execution of
this agreement.… Santos shall cause the dismissal with prejudice of Civil Cases….
and for immediate lifting of the aforesaid various notices of lis pendens on the real
properties aforementioned; … in the event that SVHFI shall sell or dispose of any of
the lands previously subject of lis pendens, the proceeds of any such sale, or any
part thereof as may be required, shall be partially devoted to the payment of the
Foundations obligations under this agreement as may still be subsisting and payable
at the time of any such sale or sales.
Failure of compliance of any of the foregoing terms and conditions by either or both
parties to this agreement shall ipso facto and ipso jure automatically entitle the
aggrieved party to a write of execution for the enforcement of this agreement.
Santos move for the dismissal of the aforesaid cases and caused the lifting of the
notices of lis pendens on the real properties involved. SVHFI, paid P1.5 million to
Santos, leaving a balance of P13 million.
On September 30, 1991, the RTC of Makati approved the compromise agreement.
SVHFI sold two real properties, which were previously subjects of lis pendens.
Santos then sent a letter to the SVHFI demanding the payment of the remaining P13
million, which the latter ignored.
On October 28, 1992, Santos send another letter to SVHFI inquiring when it would
pay the balance. There was no response from SVHFI.
Santos applied for the issuance of the writ of execution of its compromise
agreement. Granted by the RTC.
Sheriff levied on the real properties petitioner, which were formerly subjects of the
lis pendens.
On November 22, 1994, the real properties were auctioned. Riverland, Inc. was the
highest bidder and issued a Certificate of Sale covering the real properties subject
of the auction sale, provided for the right of redemption within one year from the
date of registration of properties.
Santos and Riverland, Inc. filed a Complaint for Declaratory Relief and Damages
alleging that there was delay on the part of the petitioner in paying the balance of
P13 million. They prayed that petitioner be ordered to pay legal interest and for the
sales be declared final and not subject to legal redemption.
SVHFI was able to fully settle its outstanding balance on February 8, 1995.
Issue/s:
Whether or not the respondent are entitled to legal interest considering that the
compromise agreement does not provide for the payment of interest.
Whether or not the petitioner is in default (mora).
Ruling: Yes. In the absence of agreement, the legal rate of interest shall prevail. The
legal interest for loan as forbearance of money is 12% per annum to be computed
from default.
Yes. A compromise has upon the parties the effect and authority of res judicata,
with respect to the matter definitely stated therein, or which by implication from its
terms should be deemed to have been included therein. This holds true even if the
agreement has not been judically approved.
In the present case, Compromise Agreement was entered into by the parties on
October 26, 1990. it was judicially approved on September 30, 1991. The
compromise agreement as a consensual contract became binding between the
parties upon its execution and not upon its court approval. From the time a
compromise is validly entered into, it becomes the source of the rights and
obligation of the parties thereto.
The two-year period must be counted from October 26, 1990, the date of execution
of the compromise agreement, and not on the judicial approval of the compromise
agreement on September 30, 1991. When the respondents wrote a demand letter
to petitioner on October 28, 1992, the obligation was already due and demandable.
When the petitioner failed to pay its due obligation after the demand was made, it
incurred delay.
The two-year period ended on October 26, 1992. The respondent gave a demand
letter on October 29, 1992, to the petitioner. The obligation is liquidated because
the debtor knows precisely how much he is to pay and when he is to py it. The
petitioner delayed in the performance, it was able to fully settle its outstanding
balance only on February 8, 1995.
Notes/Doctrine:
Art. 1169. Those obliged to deliver or to something incur in delay from the time the
obligee judicially or extrajudicially demands from them the fulfillment of their
obligation.
Requisites for a debtor to be in default (mora):
The obligation be demandable and already liquidated;

the debtor delays performance; and ISSUE: Whether or not respondent incurred default or delay in the fulfillment of its
obligation.
the creditor requires the performance judicially and extrajudicially.
HELD:
The Compromise Agreement as a consensual contract became binding between the
parties UPON ITS EXECUTION and not upon its court approval. No. In order that the debtor may be in default it is necessary that the following
requisites be present: (1) that the obligation be demandable and already liquidated;
7.) Vasquez v Ayala (2) that the debtor delays performance; and (3) that the creditor requires the
performance judicially or extrajudicially. Under Article 1193 of the Civil Code,
On April 23, 1981, spouses Vasquez entered into a MOA with Ayala Corp. with Ayala
obligations for whose fulfillment a day certain has been fixed shall be demandable
buying from the Vazquez spouses all of the latter's shares of stock in Conduit
only when that day comes. However, no such day certain was fixed in the MOA.
Development, Inc. The main asset was a property in Ayala Alabang which was then
Petitioners, therefore, cannot demand performance after the 3 year period fixed by
being developed by Conduit under a development plan where the land was divided
the MOA for the development of the first phase of the property since this is not the
into Villages 1, 2 and 3. The development was then being undertaken by G.P.
same period contemplated for the development of the subject lots. Since the MOA
Construction and Development Corp. Under the MOA, Ayala was to develop the
does not specify a period for the development of the subject lots, petitioners
entire property, less what was defined as the "Retained Area". This "Retained Area"
should have petitioned the court to fix the period in accordance with Article 1197 of
was to be retained by the Vazquez spouses. The area to be developed by Ayala was
the Civil Code. As no such action was filed by petitioners, their complaint for specific
called the "Remaining Area". In this "Remaining Area" were 4 lots adjacent to the
performance was premature, the obligation not being demandable at that point.
"Retained Area" and Ayala agreed to offer these lots for sale to the spouses at the
Accordingly, Ayala Corp. cannot likewise be said to have delayed performance of
prevailing price at the time of purchase. After the execution of the MOA, Ayala
the obligation. Even assuming that the MOA imposes an obligation on Ayala Corp.
caused the suspension of work on Village 1 of the project. Ayala then received a
to develop the subject lots, within 3 years from date thereof, Ayala Corp. could still
letter from Lancer General Builder Corp. in which the latter was claiming a certain
not be held to have been in delay since no demand was made by petitioners for the
amount as subcontractor. G.P. Construction not being able to reach an amicable
performance of its obligation. Moreover, the letters were mere reminders and not
settlement with Lancer, Lancer sued G.P. Construction, Conduit and Ayala in the
categorical demands to perform. These letters were sent before the obligation
court. G.P. Construction and Lancer both tried to enjoin Ayala from undertaking the
could become legally demandable. More importantly, petitioners waived the 3 year
development of the property. The suit was terminated only on 1987. Taking the
period as evidenced by their agent's letter to the effect that petitioners agreed that
position that Ayala was obligated to sell the 4 lots adjacent to the "Retained Area"
the 3 year period should be counted from the termination of the case filed by
within 3 years from the date of the MOA, the Vasquez spouses sent several
Lancer.
"reminder" letters of the approaching so-called deadline. However, no demand
after 1984, was ever made by the Vasquez spouses for Ayala to sell the 4 lots. On 8.) SSS v Moonwalk
the contrary, one of the letters signed by their authorized agent categorically stated
that they expected development of Phase 1 to be completed 3 years from the Plaintiff (SSS) approved the application of the defendant (Moonwalk) for an interim
settlement of the legal problems with the previous contractor. By early 1990, Ayala loan. The loan was released to the Moonwalk. Moonwalk made a payment to SSS
finished the development of the vicinity. The 4 lots were then offered to be sold to for the loan principal released to it. The last payment made by Moonwalk was
the Vasquez spouses at the prevailing price in 1990. This was rejected by the based on the Statement of Account prepared by the SSS. After the settlement of the
Vasquez spouses who wanted to pay at 1984 prices, thereby leading to the suit account, SSS issued to Moonwalk the Release of Mortgage of Moonwalk’s
below. mortgaged properties. In the letters to Moonwalk, SSS alleged that it committed an
honest mistake in releasing Moonwalk (in the mortgage). Moonwalk replied in a
letter that it had completely paid its obligations to SSS.
Issue/s: Whether or not the 12% penalty demandable even after the
extinguishment of the principal obligation. Whether or not Moonwalk was in
default (mora)
Ruling: No. Obligation was already extinguished by the payment by Moonwalk of its
indebtedness to SSS and by the latter’s act of cancelling the real estate mortgages
executed in its favor by defendant moonwalk.
What is sought to be recovered in this case is not the 12% interest on the loan but
the 12% penalty for failure to pay on time the amortization. What is sought to be
enforced therefore is a penal clause of the contract entered into between the
parties. Penal clause is an accessory obligation which the parties attach to a
principal obligation for the purpose of insuring the performance thereof by
imposing on the debtor a special presentation in case the obligation is not fulfilled
or is irregularly or inadequately fulfilled. Accessory obligation is dependent for its
existence on the existence of a principal obligation. In the present case, the
principal obligation is the loan between the parties. The accessory obligation of a
penal clause is to enforce the main obligation of payment of the loan. If therefore
the principal obligation does not exist the penalty being accessory cannot exist.
No. A penalty is demandable in case of non performance or late performance of the
main obligation. There must be a breach of the obligation either by total or partial
non fulfillment or there is non-fulfillment in the point of time which is called mora
or delay. There is no mora or delay unless there is a demand. In the present case,
during all the period when the principal obligation was still subsisting, although
there was late amortizations there was no demand made by the creditor, for the
payment of the penalty. Therefore up to the time of the letter of SSS there was no
demand for the payment of the penalty, hence the debtor was no in mora in the
payment of the penalty. SSS issued its statement of account showing total
obligation of Moonwalk, and forthwith demanded payment from Moonwalk.
Because of the demand for payment, Moonwalk made a complete payment of its
obligation. Because of this payment the obligation of Moonwalk was considered
extinguished, and pursuant to said extinguishment, the real estate mortgages given
by Moonwalk were released. For all purposes therefor the principal obligation of
Moonwalk was deemed extinguished as well as the accessory obligation of real
estate mortgages. The demand for payment of the penal clause made by SSS in its
demand letter (November 28, 1989) are therefore ineffective as there was nothing
to demand. If the demand for the payment of the penalty was made prior to the
extinguishment because then the obligation of Moonwalk would consist of (1)
principal obligation, (2) an interest of 12% on the principal obligation, and (3) the
penalty of 12% for the late payment for after demand. Moonwalk is not in default
since there was no mora prior to the demand.
Notes/Doctrine: Art. 1229. The judge shall equitably reduce the penalty when the
principal obligation has been partly or irregularly complied with by the debtor. Even
if there has been no performance, the penalty may be also be reduced by the courts
if it is iniquitous.If the penalty can be reduced after the principal obligation has
been partly or irregularly complied with by the debtor which is nonetheless a
breach of the obligation, with more reason the penal clause is not demandable
when full obligation has been complied with since in that case there is no breach of
obligation.
Art. 1226. In obligations with a penal clause, the penalty shall substitute the
indemnity for damages and the payment of interest in case of noncompliance, if
there is no stipulation to the contrary. Nevertheless, damages shall be paid if the
obligor refuses to pay the payment or is guilty of fraud in the fulfillment of the
obligation.
Function of a Penal Clause: to provide for liquidated damages, and strengthen the
coercive force of the obligation by the threat of greater responsibility in the event
of breach. Art. 1169. Those obliged to deliver or to something incur in delay from
the time the obligee judicially or extrajudicially demands from them the fulfillment
of their obligation.
Requisites for a debtor to be in default (mora): The obligation be demandable and
already liquidated; the debtor delays performance; and the creditor requires the
performance judicially and extrajudicially. Instances when demand is not necessary:
When the obligation or the law expressly so declares; When from the nature and
the circumstances of the obligation it appears that the designation of the time
when the thing is to be delivered or the service is to be rendered was a controlling
motive for the establishment of the contract; or When the demand would be
useless, as when the obligor has rendered it beyond his power to perform.
9.) Rivera v Sps Chua

Petitioner Rodrigo Rivera obtained a load from his friends Spouses Salvador and
Violeta Chua: PROMISSORY NOTE 120,000.00
In October 1998, Rivera issued and delivered to the Spouses Chua, as payee, a
check numbered 012467, dated 30 December 1998, in the amount of 25,000.00 and
on 21 December 1998, another check numbered 013224, duly signed and dated,
but blank as to payee. The second check was issued, as per understanding by the
parties, n the amount of 133,454.00 with “cash” as payee. Both checks were
dishonored for the reason “account closed.”
Due to Rivera’s unjustified refusal to pay, respondents were constrained to file a
suit on 11 June 1999.
In his Answer with Compulsory Counterclaim, Rivera countered, among others, that
the subject Promissory Note was forged and that here was no demand for payment
of the amount of 120,000.00 prior to the encashment of PCIB Check No. 0132224.
Respondents presented documentary and oral evidence of NBI Senior Document
Examiner Antonio Magbojos who concluded that the questioned signature
appearing in the Promissory Note and the Rivera’s specimen signatures on other
documents written by one and the same person.
The MeTC ruled in Spouses Chua’s favor. On appeal, the RTC affirmed the MeTC
decision but deleted the award of attorney’s fees. The CA also affirmed Rivera’s
liability under the Promissory Note but reduced the imposition of interest on the
loan from 60% to 12% per annum.
Both parties appealed before the SC. Respondent’s petition for review on certiorari
was denied for failure to show any reversible on the CA ruling concerning the
correct rate of interest on Rivera’s indebtnesses under the Promissory Note. Rivera
continued to deny that he executed the Promissory Note and alleged that the
Spouses Chua “never demanded payment for the loan nor interest thereof (sic)
from [Rivera] for almost four (4) years from the time of the alleged default in
payment.
ISSUES:
1. Whether the CA erred in ruling that there was a valid promissory note.
2. Whether the promissory note is negotiable instrument, thus the Negotiable
Instruments Law (NIL) applies to this case.
3. Whether Rivera is still liable under the terms of the Promissory Note assuming
that it is not a negotiable instrument.
4. Whether the CA erred in reducing the interest rate from 60% to 12% per annum.
HELD:
1. Yes.
First, [the court] cannot give credence to such a naked claim of forgery over the
testimony of the National Bureau of Investigation (NBI) handwriting expert on the
integrity of the promissory note.
Indeed, Rivera had the burden of proving the material allegations which he sets up
in his Answer to the plaintiff’s claim or cause of action, upon which issue is joined,
whether they relate to the whole case or only to certain issues in the case.
In this case, Rivera’s bare assertion is unsubstantiated and directly disputed by the
testimony of a handwriting expert from the NBI. While it is true that resort to
experts is not mandatory or indispensable to the examination or the comparison of
handwriting, the trial courts in this case, on its own, using the handwriting expert
testimony only as an aid, found the disputed document valid.
In all, Rivera’s evidence or lack thereof consisted only of a barefaced claim of
forgery and a discordant defense to assail the authenticity and validity of the
Promissory Note. Although the burden of proof rested on the Spouses Chua having
instituted the civil case and after they established a prima facie case against Rivera,
the burden of evidence shifted to the latter to establish his defense. Consequently,
Rivera failed to discharge the burden of evidence, refute the existence of the
Promissory Note duly signed by him and subsequently, that he did not fail to pay his
obligation thereunder. On the whole, there was no question left on where the
respective evidence of the parties preponderated—in favor of plaintiffs, the
Spouses Chua.
2. No. The subject promissory note is not a negotiable instrument and the
provisions of the NIL do not apply to this case. Section 1 of the NIL requires the
concurrence of the following elements to be a negotiable instrument:
(a)It must be in writing and signed by the maker or drawer;
(b)Must contain an unconditional promise or order to pay a sum certain in money;
(c)Must be payable on demand, or at a fixed or determinable future time;
(d)Must be payable to order or to bearer; and
(e)Where the instrument is addressed to a drawee, he must be named or otherwise
indicated therein with reasonable certainty
On the other hand, Section 184 of the NIL defines what negotiable promissory note
is:
SECTION 184. Promissory Note, Defined. – A negotiable promissory note within the
meaning of this Act is an unconditional promise in writing made by one person to
another, signed by the maker, engaging to pay on demand, or at a fixed or
determinable future time, a sum certain in money to order or to bearer. Where a
note is drawn to the maker’s own order, it is not complete until indorsed by him.
The Promissory Note in this case is made out to specific persons, herein
respondents, the Spouses Chua, and not to order or to bearer, or to the order of the
Spouses Chua as payees.
3. Yes, even if Rivera’s Promissory Note is not a negotiable instrument and
therefore outside the coverage of Section 70 of the NIL which provides that
presentment for payment is not necessary to charge the person liable on the
instrument, Rivera is still liable under the terms of the Promissory Note that he
issued.
The Promissory Note is unequivocal about the date when the obligation falls due
and becomes demandable—31 December 1995. As of 1 January 1996, Rivera had
already incurred in delay when he failed to pay the amount of 120,000.00 due to
the Spouses Chua on 31 December 1995 under the Promissory Note
Article 1169 of the Civil Code explicitly provides:
Art. 1169. Those obliged to deliver or to do something incur in delay from the time
the obligee judicially or extrajudicially demands from them the fulfillment of their
obligation.
However, the demand by the creditor shall not be necessary in order that delay
may exist:
(1) When the obligation or the law expressly so declare; or
(2) When from the nature and the circumstances of the obligation it appears that
the designation of the time when the thing is to be delivered or the service is to be
rendered was a controlling motive for the establishment of the contract; or
(3) When demand would be useless, as when the obligor has rendered it beyond his
power to perform.
In reciprocal obligations, neither party incurs in delay if the other does not comply
or is not ready to comply in a proper manner with what is incumbent upon him.
From the moment one of the parties fulfills his obligation, delay by the other
begins.
There are four instances when demand is not necessary to constitute the debtor in
default: (1) when there is an express stipulation to that effect; (2) where the law so
provides; (3) when the period is the controlling motive or the principal inducement
for the creation of the obligation; and (4) where demand would be useless. In the
first two paragraphs, it is not sufficient that the law or obligation fixes a date for
performance; it must further state expressly that after the period lapses, default
will commence.
The date of default under the Promissory Note is 1 January 1996, the day following
31 December 1995, the due date of the obligation. On that date, Rivera became
liable for the stipulated interest which the Promissory Note says is equivalent to 5%
a month. In sum, until 31 December 1995, demand was not necessary before Rivera
could be held liable for the principal amount of 120,000.00. Thereafter, on 1
January 1996, upon default, Rivera became liable to pay the Spouses Chua
damages, in the form of stipulated interest.
The liability for damages of those who default, including those who are guilty of
delay, in the performance of their obligations is laid down on Article 1170 of the
Civil Code.
Corollary thereto, Article 2209 solidifies the consequence of payment of interest as
an indemnity for damages when the obligor incurs in delay:
Art. 2209. If the obligation consists in the payment of a sum of money, and the
debtor incurs in delay, the indemnity for damages, there being no stipulation to the
contrary, shall be the payment of the interest agreed upon, and in the absence of
stipulation, the legal interest, which is six percent per annum.
4. No.
At the time interest accrued from 1 January 1996, the date of default under the
Promissory Note, the then prevailing rate of legal interest was 12% per annum
under Central Bank (CB) Circular No. 416 in cases involving the loan or forbearance
of money. Thus, the legal interest accruing from the Promissory Note is 12% per
annum from the date of default on 1 January 1996.
However, the 12% per annum rate of legal interest is only applicable until 30 June
2013, before the advent and effectivity of Bangko Sentral ng Pilipinas (BSP) Circular
No. 799, Series of 2013 reducing the rate of legal interest to 6% per
annum. Pursuant to our ruling in Nacar v. Gallery Frames, BSP Circular No. 799 is
prospectively applied from 1 July 2013. In short, the applicable rate of legal interest
from 1 January 1996, the date when Rivera defaulted, to date when this Decision
becomes final and executor is divided into two periods reflecting two rates of legal
interest: (1) 12% per annum from 1 January 1996 to 30 June 2013; and (2) 6% per
annum FROM 1 July 2013 to date when this Decision becomes final and executory.
refused. Maybank commenced extrajudicial foreclosure proceedings The subject
property was eventually sold in a public auction Sps. Tarrosa filed a complaint for
declaration of nullity and invalidity of the foreclosure of real estate and of public
auction sale proceedings and damages with prayer for preliminary injunction
against Maybank They averred among others that Maybank's right to foreclose had
prescribed or is barred by laches. Maybank and PPI countered that the loan became
past due and the spouses failed to pay despite demand. They also averred that
acknowledgment of their indebtedness controverts the defense of prescription.
Issue: Was there delay on the part of the spouses? Ruling: Yes. In the absence of
showing that demand is unnecessary for the loan obligation to become due and
demandable, Maybank's right to foreclose the real estate mortgage accrued only
after the lapse of the period indicated in its final demand letter for Sps. Tarrosa to
pay, i.e., after the lapse of five (5) days from receipt of the final demand letter
dated March 4, 1998. In order that the debtor may be in default, it is necessary
that: (a) the obligation be demandable and already liquidated; (b) the debtor delays
performance; and (c) the creditor requires the performance judicially or
extrajudicially, unless demand is not necessary - i.e., when there is an express
stipulation to that effect; where the law so provides; when the period is the
controlling motive or the principal inducement for the creation of the obligation;
and where demand would be useless. Moreover, it is not sufficient that the law or
obligation fixes a date for performance; it must further state expressly that after
the period lapses, default will commence. Thus, it is only when demand to pay is
unnecessary in case of the aforementioned circumstances, or when required, such
demand is made and subsequently refused that the mortgagor can be considered in
default and the mortgagee obtains the right to file an action to collect the debt or
foreclose the mortgage
11.) Abella v Gonzaga

10.) MayBank v Sps Tarrosa

Facts: Sps. Tarrosa obtained from then PNB-Republic Bank, now Maybank
Philippines, Inc. (Maybank), After paying the said loan, or sometime in March 1983,
Sps. Tarrosa obtained another loan from Maybank payable on March 11, 1984.
However, Sps. Tarrosa failed to settle the second loan upon maturity. Sometime in
April 1998, Sps. Tarrosa received a Final Demand Letter.

Dated March 4, 1998 (final demand letter) from Maybank requiring them to settle
their outstanding loan. They offered to pay a lesser amount, which Maybank
12.) Agner v BPI

13.) Vda de Villaruel v Manila Motor Co

14.) Tengco v CA