OCCENA VS. JABSON, COURT OF APPEALS AND TROPICAL HOMES, INC
HALILI,
73 SCRA 637
NO. L-44349, OCTOBER 29, 1976
FACTS: Private respondent Tropical Homes, Inc had a subdivision
contract with petitioners who are the owners of the land subject of
subdivision development by private respondent. The contract
stipulated that the petitioners’ fixed and sole share and participation is
the land which is equivalent to forty percent of all cash receipts from
the sale of the subdivision lots. When the development costs increased
to such level not anticipated during the signing of the contract and
which threatened the financial viability of the project as assessed by
the private respondent, respondent filed at the lower court a complaint
for the modification of the terms and conditions of the contract by
fixing the proper shares that should pertain to the parties therein out of
the gross proceeds from the sales of the subdivision lots. Petitioners
moved for the dismissal of the complaint for lack of cause of action.
The lower court denied the motion for dismissal which was upheld by
the CA based on the civil code provision that “when the service has
become so difficult as to be manifestly beyond the contemplation of
the parties, the obligor may also be released therefrom, in whole or in
part”. Insisting that the worldwide increase in prices cited by private
respondent does not constitute a sufficient cause of action for the
modification of the terms and conditions of the contract, petitioners
filed the instant petition.
ISSUE: Whether or not private respondent may demand modification of
the terms of the contract on the ground that the prestation has
manifestly come beyond the contemplation of the parties.
RULING: If the prayer of the private respondent is to be released from
its contractual obligations on account of the fact that the prestation
has become beyond the contemplation of the parties, then private
respondent can rely on said provision of the civil code. But the prayer
of the private respondent was for the modification of their valid
contract. The above-cited civil code provision does not grant the court
the power to remake, modify, or revise the contract or to fix the division
of the shares between the parties as contractually stipulated with the
force of law between the parties. Therefore, private respondent’s
complaint for modification of its contract with petitioner must be
dismissed. The decision of respondent court is reversed.
CHARLES F. WOODHOUSE, plaintiff-appellant, vs. FORTUNATO F.
defendant-appellant.
G.R. No. L-4811 July 31, 1953
Doctrine: Fraud
FACTS:
On November 29, 1947, plaintiff Woodhouse entered into a written
agreement with defendant Halili stating among others that: 1) that they
shall organize a partnership for the bottling and distribution of
Missionsoft drinks, plaintiff to act as industrial partner or manager, and
the defendant as a capitalist, furnishing the capital necessary
therefore; 2) that plaintiff was to secure the Mission Soft Drinks franchise
for and in behalf of the proposed partnership and 3) that the plaintiff
was to receive 30 per cent of the net profits of the business. Prior to
entering into this agreement, plaintiff had informed the Mission Dry
Corporation of Los Angeles, California, that he had interested a
prominent financier (defendant herein) in the business, who was willing
to invest half a milliondollars in the bottling and distribution of the said
beverages, and requested, in order that he may close the deal with
him, that the right to bottle and distribute be granted him for a limited
time under the condition that it will finally be transferred to the
corporation. Pursuant to this request, plaintiff was given “a thirty days’
option on exclusive bottling and distribution rights for the Philippines”.
The contract was finally signed by plaintiff on December 3, 1947. When
the bottling plant was already in operation, plaintiff demanded of
defendant that the partnership papers be executed. Defendant Halili
gave excuses and would not execute said agreement, thus the
complaint by the plaintiff.
Plaintiff prays for the : 1.execution of the contract of partnership; 2)
accounting of profits and 3)share thereof of 30 percent with 4)
damages in the amount of P200,000. The Defendant on the other hand
claims that: 1) the defendant’s consent to the agreement, was secured
by the representation of plaintiff that he was the owner, or was about
to become owner of an exclusive bottling franchise, which
representation was false, and that plaintiff did not secure the franchise
but was given to defendant himself 2) that defendant did not fail to
carry out his undertakings, but that it was plaintiff who failed and 3)that
plaintiff agreed to contribute to the exclusive franchise to the
partnership, but plaintiff failed to do so with a 4) counterclaim for
P200,00 as damages.
The CFI ruling: 1) accounting of profits and to pay plaintiff 15 % of the
profits and that the 2) execution of contract cannot be enforced upon
parties. Lastly, the 3) fraud wasn’t proved
ISSUES
1. WON plaintiff falsely represented that he had an exclusive franchise
to bottle Mission beverages
2. WON false representation, if it existed, annuls the agreement to form
the partnership
HELD
1. Yes. Plaintiff did make false representations and this can be seen
through his letters to Mission Dry Corporation asking for the latter to
grant him temporary franchise so that he could settle the agreement
with defendant. The trial court reasoned, and the plaintiff on this
appeal argues, that plaintiff only undertook in the agreement “to
secure the Mission Dry franchise for and in behalf of the proposed
partnership.” The existence of this provision in the final agreement does
not militate against plaintiff having represented that he had the
exclusive franchise; it rather strengthens belief that he did actually
make the representation. The defendant believed, or was made to
believe, that plaintiff was the grantee of an exclusive franchise. Thus it
is that it was also agreed upon that the franchise was to be transferred
to the name of the partnership, and that, upon its dissolution or
termination, the same shall be reassigned to the plaintiff.
Again, the immediate reaction of defendant, when in California he
learned that plaintiff did not have the exclusive franchise, was to
reduce, as he himself testified, plaintiff’s participation in the net profits
to one half of that agreed upon. He could not have had such a feeling
had not plaintiff actually made him believe that he (plaintiff) was the
exclusive grantee of the franchise.
2. No. In consequence, article 1270 of the Spanish Civil Code
distinguishes two kinds of (civil) fraud, the causal fraud, which may be
ground for the annulment of a contract, and the incidental deceit,
which only renders the party who employs it liable for damages only.
The Supreme Court has held that in order that fraud may vitiate
consent, it must be the causal (dolo causante), not merely the
incidental (dolo incidente) inducement to the making of the contract.
The record abounds with circumstances indicative of the fact that the
principal consideration, the main cause that induced defendant to
enter into the partnership agreement with plaintiff, was the ability of
plaintiff to get the exclusive franchise to bottle and distribute for the
defendant or for the partnership. The original draft prepared by
defendant’s counsel was to the effect that plaintiff obligated himself to
secure a franchise for the defendant. But if plaintiff was guilty of a false
representation, this was not the causal consideration, or the principal
inducement, that led plaintiff to enter into the partnership agreement.
On the other hand, this supposed ownership of an exclusive franchise
was actually the consideration or price plaintiff gave in exchange for
the share of 30 per cent granted him in the net profits of the partnership
business. Defendant agreed to give plaintiff 30 per cent share in the net
profits because he was transferring his exclusive franchise to the
partnership.
Having arrived at the conclusion that the contract cannot be declared
null and void, may the agreement be carried out or executed? The SC
finds no merit in the claim of plaintiff that the partnership was already
a fait accompli from the time of the operation of the plant, as it is
evident from the very language of the agreement that the parties
intended that the execution of the agreement to form a partnership
was to be carried out at a later date. , The defendant may not be
compelled against his will to carry out the agreement nor execute the
partnership papers. The law recognizes the individual’s freedom or
liberty to do an act he has promised to do, or not to do it, as he pleases.
Dispostive Postion: With modification above indicated, the judgment
appealed from is hereby affirmed.
CLAUDINA VDA. DE VILLARUEL, ET AL. VS. MANILA MOTOR CO., INC.
104 PHIL. 926
FACTS:
On May 31, 1940, the plaintiffs Villaruel and defendant Manila Motor
Co. Inc. entered into a contract whereby the defendant agreed to
lease plaintiffs building premises. On October 31, 1940, the leased
premises were placed in the possession of the defendant until the
invasion of 1941. The Japanese military occupied and used the
property leased as part of their quarters from June, 1942 to March, 1945,
in which no payment of rentals were made. Upon the liberation of the
said city, the American forces occupied the same buildings that were
vacated by the Japanese. When the United States gave up the
occupancy of the premises, defendant decided to exercise their
option to renew the contract, in which they agreed. However, before
resuming the collection of rentals, Dr. Alfredo Villaruel upon advice
demanded payment of rentals corresponding to the time the
Japanese military occupied the leased premises, but the defendant
refused to pay. As a result plaintiff gave notice seeking the rescission of
the contract and the payment of rentals from June, 1942 to March,
1945; this was rejected by the defendant. Despite the fact the
defendant under new branch manager paid to plaintiff the sum of
P350 for the rent, the plaintiff still demanded for rents in arrears and for
the rescission of the contract of lease. The plaintiff commenced an
action before the CFC of Neg. Occidental against defendant
company. During the pendency of the case, the leased building was
burned down. Because of the occurrence, plaintiffs demanded
reimbursement from the defendants, but having been refused, they
filed a supplemental complaint to include a 3rd cause of action, the
recovery of the value of the burned building. The trial court rendered
judgment in favor of the plaintiff. Hence the defendants appeal.
ISSUE: Is Manila Motor Co. Inc. liable for the loss of the leased premises?
RULING: No. Clearly, the lessor’s insistence upon collecting the
occupation rentals for 1942-1945 was unwarranted in law. Hence, their
refusal to accept the current rentals without qualification placed them
in default (mora creditoris or accipiendi) with the result that thereafter,
they had to bear all supervening risks of accidental injury or destruction
of the leased premises. While not expressly declared by the Code of
1889, this result is clearly inferable from the nature and effects of mora.
In other words, the only effect of the failure to consign the rentals in
court was that the obligation to pay them subsisted and the lessee
remained liable for the amount of the unpaid contract rent,
corresponding to the period from July to November, 1946; it being
undisputed that, from December 1946 up to March 2, 1948, when the
commercial buildings were burned, the defendants appellants have
paid the contract rentals at the rate of P350 per month. But the failure
to consign did not eradicate the default (mora) of the lessors nor the
risk of loss that lay upon them.
Dela Rosa v. bank of the Philippine Islands
FACTS:
Defendant-bank started a contests of designs and plans for the
construction of buildings, announcing that the prizes would be
awarded not later than November 30, 1921. Plaintiff joined such contest
but said bank refrained from awarding the prizes in accordance with
the conditions stipulated. In a claim for damages filed by him, he
alleged that the bank should indemnify him for its failure to award the
prize to him on the announced date, it being a breach of contract on
the part of the bank. Such claim was subsequently ganted by the trial
court. On appeal, the defendant contended that the trial court erred
in holding that the date set for the awarding of prizes is essential in the
contract and hence, the failure to award the prizes on the said date
was a breach of contract on the part of the defendant.
ISSUE:
Whether or not the date set for the awarding of prizes is essential in the
contract and the failure to award the same on the announced date
constitutes a breach of contract on the part of the defendant (WON
the bank incurred in delay in the performance of its obligations)
RULING: No, the said date was not essential in the contract and the
defendant’s failure to award the prize does not amount to a breach of
contract on its part. Article 1100 of the Civil Code (now article 1169 of
the New Civil Code) provides that persons obliged to deliver or to do
something are in default (delay) from the moment the creditor
demnads from them judicially or extrajudicially the performance of
their obligations. Nevertheless, paragraph 2 of the same article
provides that such demand shall not be necessary in order that default
(delay) may arise when from the nature and circumstances of the
obligation, it appears that the designation of time to which the
obligation must be done was the principal inducement to the creditor
of the obligation. Applying this to the case at bar, the plaintiff did not
judicially or extrajudicially demand from the bank the fulfillment of its
obligations, thus the bank did not incur in delay. Moreover, the fixation
of the current price of concrete buildings cannot be considered as the
principal inducement of the contract, but undoubtedly, only for the
uniformity of designs, contrary to the contention of the plaintiff. None
of the conditions for delay to exist is extant in the case. Therefore, the
date set for the awarding of prizes is not essential in the contract, and
the failure of the bank to give the prizes on the said date does not
amount to a breach of contract.
Lawyers Cooperative v. Tabora
LAWYERS COOPERATIVE PUBLISHING COMPANY v. PERFECTO A. TABORA
1965
FACTS
Perfecto Tabora bought from the Lawyers Cooperative Publishing
Company a complete set of AmJur, plus a set of AmJur, General Index.
CONTRACT “Title to and ownership of the books shall remain with the
seller until the purchase price shall have been fully paid. Loss or
damage to the books after delivery to the buyer shall be borne by the
buyer.” Tabora made a partial payment of P300.00, leaving a balance
of P1,382.40. The books were delivered and receipted for by Tabora.
On the same day, a fire broke out, burning down Tabora’s law office
and library. Tabora immediately reported it to LCBC. The company
replied and as a token of goodwill it sent to Tabora free of charge 4
Philippine Reports volumes. As Tabora failed to pay the monthly
installments agreed upon, LCBC filed an action to recover of the
balance.
TABORA’S CONTENTIONS
Contract: title to and the ownership of the books shall remain with the
seller until the purchase price shall have been fully paid, so LCBC should
bear the loss. Even assuming that the ownership was transferred to
Tabora, he should not answer for the loss: force majeure (no evidence
that Tabora contributed in any way)
ISSUE:
Who bears the loss? Tabora
RATIO
GENERAL RULE The loss of the object of the contract of sale is borne by
the owner or in case of force majeure the one under obligation to
deliver the object is exempt from liability. THIS IS NOT APPLICABLE HERE.
Contract provides that loss or damage after delivery shall be borne by
the buyer.
FORCE MAJEURE DEFENSE FAILS
The rule only holds true when the obligation consists in the delivery of
a determinate thing and there is no stipulation holding him liable even
in case of fortuitous event.
NOT PRESENT IN THIS CASE
The obligation is pecuniaryin nature, and the obligor bound himself to
assume the loss after the delivery.
AEROSPACE CHEMICAL V CA
g.r.no. 108129 September 23, 1999
FACTS:
On June 27, 1986, petitioner Aerospace Industries, Inc. (Aerospace)
purchased five hundred (500) metric tons of sulfuric acid from private
respondent Philippine Phosphate Fertilizer Corporation (Philphos).
Initially set beginning July 1986, the agreement provided that the buyer
shall pay its purchases in equivalent Philippine currency value, five days
prior to the shipment date. Petitioner as buyer committed to secure the
means of transport to pick-up the purchases from private respondent's
loadports. Per agreement, one hundred metric tons (100 MT) of sulfuric
acid should be taken from Basay, Negros Oriental storage tank, while
the remaining four hundred metric tons (400 MT) should be retrieved
from Sangi, Cebu. On December 18, 1986, M/T Sultan Kayumanggi
docked at Sangi, Cebu, but withdrew only 157.51 MT of sulfuric acid.
Again, the vessel tilted. Further loading was aborted. Two survey reports
conducted by the Societe Generale de Surveillance (SGS) Far East
Limited, dated December 17, 1986 and January 2, 1987, attested to
these occurrences. Later, on a date not specified in the record, M/T
Sultan Kayumanggi sank with a total of 227.51 MT of sulfuric acid on
board. Petitioner chartered another vessel, M/T Don Victor, with a
capacity of approximately 500 MT.6 [TSN, September 1, 1989, pp. 28-
29.] On January 26 and March 20, 1987, Melecio Hernandez, acting for
the petitioner, addressed letters to private respondent, concerning
additional orders of sulfuric acid to replace its sunken purchases.
ISSUE:
Should expenses for the storage and preservation of the purchased
fungible goods, namely sulfuric acid, be on seller's account pursuant to
Article 1504 of the Civil Code?
RULING:
Petitioner tries to exempt itself from paying rental expenses and other
damages by arguing that expenses for the preservation of fungible
goods must be assumed by the seller. Rental expenses of storing sulfuric
acid should be at private respondent's account until ownership is
transferred, according to petitioner. However, the general rule that
before delivery, the risk of loss is borne by the seller who is still the owner,
is not applicable in this case because petitioner had incurred delay in
the performance of its obligation. Article 1504 of the Civil Code clearly
states: "Unless otherwise agreed, the goods remain at the seller's risk
until the ownership therein is transferred to the buyer, but when the
ownership therein is transferred to the buyer the goods are at the
buyer's risk whether actual delivery has been made or not, except that:
(2) Where actual delivery has been delayed through the fault of either
the buyer or seller the goods are at the risk of the party at fault."
On this score, we quote with approval the findings of the appellate
court, thus: The defendant [herein private respondent] was not remiss
in reminding the plaintiff that it would have to bear the said expenses
for failure to lift the commodity for an unreasonable length of time.But
even assuming that the plaintiff did not consent to be so bound, the
provisions of Civil Code come in to make it liable for the damages
sought by the defendant.
TELEFAST v CASTRO
GR NO. 73867. FEB. 29, 1988
FACTS:
Sofia Crouch was in the Philippines for vacation when her mother died.
Onthat same day, she adddressed a telegramannouncing her
mother’s death to Ignacio Castro, Sr at 685, Wanda, Scottsburg,
Indiana, USA. The defendants, after receiving the required fees and
charges, accepted the telegram for transmission.
The husband and the children of the deceased who were all residing
in the US never received the telegram. Sofia Crouch was the only one
present during the internment.
Sofia and the other plaintiffs then filed an action to recover damages
arising from the breach of contract against the defendants. The only
defense of the defendants was that, the failure was due to “the
technical and atmospheric factors beyond its control”. However no
evidence appeared on record that the defendant ever make any
attempt to advise Sofia as to why they could not transmit the telegram.
ISSUE:
Whether or not the petitioner are liable for damages for their failure to
transmit the telegram.
Whether or not the petitioners should only liable for actual or quantified
damages.
RULING:
YES. TELEFAST COMMUNICATIONS/PHIL. WIRELESS INC ARE LIABLE TO
INDEMNIFY THE RESPONDENTS FOR DAMAGES THEY HAVE SUFFERED
FROM THE FAILURE OF THE PLAINTIFFS ON TRANSMITTING THE TEEGRAM.
The defendant Sofia Crouch and the plaintiffs entered into a contract
whereby the plaintiffs shall send the respondents message overseas by
telegram, after paying the required fees. The defendant has performed
her part in the obligation. However, the plaintiffs failed to do their part.
Petitoner therefore was guilty of contravening its obligation and is liable
for damages pursuant to the provisions of Art 1170 and Art. 2176 of the
Civil Code.
NO. THE PETITIONERS LIABILITY ARE NOT LIMITED TO ACTUAL OR
QUANTIFIED DAMAGES.
Pursuant to Art. 2217 of the Civil Code, the petitioners are liable to
indmenify the respondents for the moral damages they had suffered.
The petitioners act or omissionwas the precise cause of the sufferings
that the respondents have to undergo. Respondents Sofia Crouch shall
be awarded with P16 000 as compensatory damages. Each of the
respondents shall be awarded with P10 000 as moral damages and P1
000 as exemplary damages.
JACINTO TANGUILIG vs. COURT OF APPEALS and VICENTE HERCE JR.
G.R. No. 117190
JANUARY 2, 1997
FACTS:
Petitioner Jacinto M. Tanguilig proposed to respondent Vicente Herce
Jr. to construct a windmill system for him. After some negotiations they
agreed on the construction of the windmill for a consideration of
P60,000.00. On 14 March 1988, due to the refusal and failure of
respondent to pay the balance, petitioner filed a complaint to collect
the amount. Respondent denied the claim saying that he had already
paid this amount to the San Pedro General Merchandising Inc. (SPGMI)
which constructed the deep well to which the windmill system was to
be connected. According to respondent, since the deep well formed
part of the system the payment he tendered to SPGMI should be
credited to his account by petitioner. Moreover, assuming that he
owed petitioner a balance of P15,000.00, this should be offset by the
defects in the windmill system which caused the structure to collapse
after a strong wind hit their place.
Petitioner denied that the construction of a deep well was included in
the agreement to build the windmill system, for the contract price of
P60,000.00 was solely for the windmill assembly and its installation. He
also disowned any obligation to repair or reconstruct the system since
its collapse was attributable to a typhoon, a force majeure, which
relieved him of any liability.
ISSUE:
Whether or not the payment for the deep well is part of the
contract price. Whether or not Tanguilig is liable to reconstruct the
damaged windmill considering that its collapse is due to a typhoon.
RULING:
There is absolutely no mention in the two (2) documents that a deep
well pump is a component of the proposed windmill system. The
contract prices fixed in both proposals cover only the features
specifically described therein and no other. Respondent is directed to
pay petitioner Tanguilig the balance of P15,000.00 plus legal interest.
Regarding the second issue, the Supreme Court has consistently held
that in order for a party to claim exemption from liability by reason of
fortuitous event under Art. 1174 of the Civil Code four (4) requisites must
concur: (a) the cause of the breach of the obligation must be
independent of the will of the debtor; (b) the event must be either
unforeseeable or unavoidable; (c) the event must be such as to render
it impossible 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. Petitioner failed to show that
the collapse of the windmill was due solely to a fortuitous event.
Petitioner merely stated that there was a "strong wind." But a strong
wind in this case cannot be fortuitous. On the contrary, a strong wind
should be present in places where windmills are constructed. Petitioner
is ordered to "reconstruct subject defective windmill system, in
accordance with the one-year guaranty".
BOARD OF LIQUIDATORS V KALAW G.R. No. L-18805 August 14, 1967
THE BOARD OF LIQUIDATORS representing THE GOVERNMENT OF THE
REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, vs. HEIRS OF MAXIMO
M. KALAW, JUAN BOCAR, ESTATE OF THE DECEASED CASIMIRO
GARCIA, and LEONOR MOLL, defendants-appellees.
FACTS:
The National Coconut Corporation (NACOCO, for short) was
chartered as a non-profit governmental organization on avowedly for
the protection, preservation and development of the coconut
industry in the Philippines. On August 1, 1946, NACOCO's charter was
amended [Republic Act 5] to grant that corporation the express
power to buy and sell copra. The charter amendment was enacted
to stabilize copra prices, to serve coconut producers by securing
advantageous prices for them, to cut down to a minimum, if not
altogether eliminate, the margin of middlemen, mostly aliens. General
manager and board chairman was Maximo M. Kalaw; defendants
Juan Bocar and Casimiro Garcia were members of the Board;
defendant Leonor Moll became director only on December 22, 1947.
NACOCO, after the passage of Republic Act 5, embarked on copra
trading activities.
An unhappy chain of events conspired to deter NACOCO from
fulfilling the contracts it entered into. Nature supervened. Four
devastating typhoons visited the Philippines in 1947. When it became
clear that the contracts would be unprofitable, Kalaw submitted them
to the board for approval. It was not until December 22, 1947 when
the membership was completed. Defendant Moll took her oath on
that date. A meeting was then held. Kalaw made a full disclosure of
the situation, apprised the board of the impending heavy losses. No
action was first taken on the contracts but not long thereafter, that is,
on January 30, 1948, the board met again with Kalaw, Bocar, Garcia
and Moll in attendance. They unanimously approved the contracts
hereinbefore enumerated.
As was to be expected, NACOCO but partially performed the
contracts. The buyers threatened damage suits, some of which were
settled. But one buyer, Louis Dreyfus & Go. (Overseas) Ltd., did in fact
sue before the Court of First Instance of Manila. The cases culminated
in an out-of- court amicable settlement when the Kalaw
management was already out.
With particular reference to the Dreyfus claims, NACOCO put up the
defenses that:
(1) the contracts were void because Louis Dreyfus & Co. (Overseas)
Ltd. did not have license to do business here; and
(2) failure to deliver was due to force majeure, the typhoons. All the
settlements sum up to P1,343,274.52.
In this suit started in February, 1949, NACOCO seeks to recover the
above sum of P1,343,274.52 from general manager and board
chairman Maximo M. Kalaw, and directors Juan Bocar, Casimiro
Garcia and Leonor Moll. It charges Kalaw with negligence under
Article 1902 of the old Civil Code (now Article 2176, new Civil Code);
and defendant board members, including Kalaw, with bad faith
and/or breach of trust for having approved the contracts. By
Executive Order 372, dated November 24, 1950, NACOCO, together
with other government-owned corporations, was abolished, and the
Board of Liquidators was entrusted with the function of settling and
closing its affairs.
DECISION OF LOWER COURTS:
1. CFI-Manila: dismissed the complaint. Plaintiff was ordered to pay
the heirs of Maximo Kalaw the sum of P2,601.94 for unpaid salaries
and cash deposit due the deceased Kalaw from NACOCO.
ISSUE:
1. Whether plaintiff Board of Liquidators has lost its legal personality to
continue with this suit since the three year period has elapsed, the
Board of Liquidators may not now continue with, and prosecute, the
present case to its conclusion
2. Whether the action is unenforceable against Kalaw
3. whether the case at bar is to be taken out of the general concept
of the powers of a general manager, given the cited provision of the
NACOCO by-laws requiring prior directorate approval of NACOCO
contracts.
4. Whether damages should be awarded
RULING:
1. No, the provision should be read not as an isolated provision but in
conjunction with the whole. So reading, it will be readily observed that
no time limit has been tacked to the existence of the Board of
Liquidators and its function of closing the affairs of the various
government owned corporations, including NACOCO.
The President thought it best to do away with the boards of directors
of the defunct corporations; at the same time, however, the President
had chosen to see to it that the Board of Liquidators step into the
vacuum. And nowhere in the executive order was there any mention
of the lifespan of the Board of Liquidators.
3 methods by which corporation may wind up it its affairs:
1. Voluntary dissolution, "such disposition of its assets as justice requires,
and may appoint a receiver to collect such assets and pay the debts
of the corporation;
2. Corporate existence is terminated - "shall nevertheless be
continued as a body corporate for three years after the time when it
would have been so dissolved, for the purpose of prosecuting and
defending suits by or against it and of enabling it gradually to settle
and close its affairs, to dispose of and convey its property and to
divide its capital stock, but not for the purpose of continuing the
business for which it was established;"
3. corporation, within the three year period just mentioned, "is
authorized and empowered to convey all of its property to trustees for
the benefit of members, stockholders, creditors, and others interested
Corpus Juris Secundum likewise is authority for the statement that
"[t]he dissolution of a corporation ends its existence so that there must
be statutory authority for prolongation of its life even for purposes of
pending litigation
Board of Liquidators escapes from the operation thereof for the
reason that "[o]bviously, the complete loss of plaintiff's corporate
existence after the expiration of the period of three (3) years for the
settlement of its affairs is what impelled the President to create a
Board of Liquidators, to continue the management of such matters as
may then be pending."
The Board of Liquidators thus became the trustee on behalf of the
government. It was an express trust. The legal interest became vested
in the trustee — the Board of Liquidators. The beneficial
interest remained with the sole stockholder — the government. At no
time had the government withdrawn the property, or the authority to
continue the present suit, from the Board of Liquidators. If for this
reason alone, we cannot stay the hand of the Board of Liquidators
from prosecuting this case to its final conclusion. The provisions of
Section 78 of the Corporation Law — the third method of winding up
corporate affairs — find application.
2. Action against the Kalaw heirs and, for the matter, against the
Estate of Casimiro Garcia survives.
Claims that are barred if not filed in the estate settlement
proceedings(Rule 87, sec. 5)
> actions that are abated by death are:
(1) claims for funeral expenses and those for the last sickness of the
decedent; (2) judgments for money; and (3) "all claims for money
against the decedent, arising from contract express or implied."
it is not enough that the claim against the deceased party be for
money, but it must arise from "contract express or implied"
actions that survive and may be prosecuted against the executor or
administrator (Rule 88, sec. 1)
> 1. actions for damages caused by tortious conduct of a defendant
(as in the case at bar) survive the death of the latter.
actions that survive against a decedent's executors or administrators,
and they are:
(1) actions to recover real and personal property from the estate; (2)
actions to enforce a lien thereon; and
(3) actions to recover damages for an injury to person or property.
3. The movement of the market requires that sales agreements be
entered into, even though the goods are not yet in the hands of the
seller. Known in business parlance as forward sales, it is concededly the
practice of the trade. Above all, NACOCO's limited funds necessitated
a quick turnover. Copra contracts then had to be executed on short
notice — at times within twenty-four hours. To be appreciated then is
the difficulty of calling a formal meeting of the board
So pleased was NACOCO's board of directors that, on December 5,
1946, in Kalaw's absence, it voted to grant him aspecial bonus "in
recognition of the signal achievement rendered by him in putting the
Corporation's business on a self-sufficient basis within a few months after
assuming office, despite numerous handicaps and difficulties."
These previous contract it should be stressed, were signed by
Kalaw without prior authority from the board. Existence of such
authority is established, by proof of the course of business, the usage
and practices of the company and by theknowledge which the board
of directors has, or must be presumed to have, of acts and doings of its
subordinates in and about the affairs of the corporation.
If the by-laws were to be literally followed, the board should give its
stamp of prior approval on all corporate contracts. But that board itself,
by its acts and through acquiescence, practically laid aside the by-law
requirement of prior approval.
Under the given circumstances, the Kalaw contracts are valid
corporate acts. Bad faith does not simply connote bad judgment or
negligence; it imports a dishonest purpose or some moral obliquity and
conscious doing of wrong; it means breach of a known duty thru some
motive or interest or ill will; it partakes of the nature of fraud. Applying
this precept to the given facts herein, we find that there was no
"dishonest purpose," or "some moral obliquity," or "conscious doing of
wrong," or "breach of a known duty," or "Some motive or interest or ill
will" that "partakes of the nature of fraud."
4. No. This is a case of damnum absque injuria. Conjunction of damage
and wrong is here absent. There cannot be an actionable wrong if
either one or the other is wanting. Of course, Kalaw could not have
been an insurer of profits. He could not be expected to predict the
coming of unpredictable typhoons. And even as typhoons supervened
Kalaw was not remissed in his duty. He exerted efforts to stave off losses.
That Kalaw cannot be tagged with crassa negligentia or as much as
simple negligence, would seem to be supported by the fact that even
as the contracts were being questioned in Congress and in the
NACOCO board itself, President Roxas defended the actuations of
Kalaw.
It is a well known rule of law that questions of policy of management
are left solely to the honest decision of officers and directors of a
corporation, and the court is without authority to substitute its judgment
for the judgment of the board of directors; the board is the business
manager of the corporation, and so long as it acts in good faith its
orders are not reviewable by the courts."
Southeastern College Inc. vs. Court of Appeals
G.R. No. 126389 – July 10, 1998
FACTS:
Private respondents are owners of a house near the petitioner’s four-
story school building along the same road. During a typhoon, the roof
of the petitioner’s building was partly ripped off and blown away by
strong winds, landing on and destroying portions of the roofing of
private respondents’ house. In the aftermath, an ocular inspection of
the destroyed building was spearheaded by the city building official. In
his report, he imputed negligence to the petitioner for the structural
defect of the building and improper anchorage of trusses to the roof
beams which caused the roof be ripped off the building, thereby
causing damage to the property of respondents. Respondents filed an
action before the RTC for recovery of damages based on culpa
aquiliana. Petitioner contested that it had no liability, attributing the
damage to a fortuitous event. RTC ruled in favor of respondents which
was affirmed by the CA. Hence present petition.’
ISSUE:
Whether or not the damage, in legal sense, can be attributed to a
fortuitous event.
RULING:
Yes. The court ruled that petitioner is not liable, the damage being
attributable to a fortuitous event.
Art 1174 of the Civil Code states that: “Except in cases expressly
specified by the law, or when it is otherwise declared by stipulation, or
when the nature of the obligation requires the assumption of risk, no
person shall be responsible for those events which could not be
foreseen, or which, though foreseen, were inevitable”
To be liable for a fortuitous event, the respondent must prove that
petitioners were negligent, with which they fall short, merely relying on
the report of the city building official. This is the same official that have
approved the building plans of petitioner, who made clear that there
were no prior complaints regarding the building. Since storms are
common in the country, the part of the building in question should have
failed against stronger typhoons that preceded said storm, which it had
not. Furthermore, petitioner was able to present evidence that regular
maintenance was carried out. Respondents also failed to support the
claim of the actual loss they suffered, merely relying on estimates
without considering that wear and tear of respondents’ home which
may have had a contributory effect to the damage. Petition is granted
and challenged decision is reversed.
Philcomsat v. Globe Telecom
429 SCRA 153, G.R. No. 147324 (May 25, 2004)
Facts:
Globe Telecom, Inc. (Globe) is engaged in the coordination of the
provision of various communication facilities for the military bases of the
United States of America (US) in the Clark Air Base and Subic Naval
Base.
Saud communication facilities were installed and configured for the
exclusive use of the US Defense Communications Agency (USDCA).
Globe contracted Philippine Communications Satellite Corporation
(Philcomsat) for the provision of the communication facilities.
Philcomsat and Globe entered into an agreement whereby Philcomsat
obliged itself to establish, operate and provide an IBS Standard B earth
station (earth station) for the exclusive use of the USDCA. Globe
promised to pay Philcomsat monthly rentals for each leased circuit
involved.
Philcomsat installed and established the earth station and the USDCA
made use of the same.
Senate passed and adopted its resolution, expressing its decision not to
concur in the ratification of the Treaty of Friendship, Cooperation and
Security and its Supplementary Agreements that was supposed to
extend the term of the use by the US of Subic Naval Base, among
others.
PH government sent a Note Verbale to the US government through the
US Embassy, notifying it of the Philippine termination of the RP-US Military
Base Agreement. The withdrawal of all US military forces from Subic
Naval Base should be completed by December 31. 1992.
Globe notified Philcomsat of its intention to discontinue the use of the
earth station.
Philcomsat demand payment of rentals for the balance of lease term,
despite the non-use of earth station.
Issue/s:
Whether the termination of the RP-US Military Base Agreement, the non-
ratification of the Treaty of Friendship, Cooperation and Security, and
the consequent withdrawal of US military forces and personnel from
Cubi Point constitute force majeure which would exempt Globe from
complying with its obligation to pay rentals under its Agreement with
Philcomsat.
Whether Globe is liable to pay rentals under the Agreement for the
month of December 1992.
Whether Philcomsat is entitled to attorney’s fees and exemplary
damages.
Ruling:
Yes. Philcomsat and Globe had no control over the non-renewal of the
term of the RP-US Military Base Agreement when the same expired in
1991, because the prerogative to ratify the treaty extending the life
thereof belonged to the Senate. Neither did the parties have control
over the subsequent withdrawal of the US military forces and personnel
from Cubi Point in December 1992.
As a consequence of the termination of the RP-US Military Base
Agreement the continued stay of all US Military forces and personnel
from Subic Naval Base would no longer be allowed, hence, plaintiff
would no longer be in any position to render service it was obligated
under the Agreement.
Events made impossible the continuation of the Agreement until the
end of its five-year term without fault on the part of either party. Such
fortuitous events rendered Globe exempt from payment of rentals for
the remainder of the term of the Agreement.
Philcomsat would like to charge globe rentals for the balance of the
lease term without being any corresponding telecommunications
service subject of the lease. It will be grossly unfair and iniquitous to hold
globe liable for lease charges for a service that was not and could not
have been rendered due to an act of the government which was
clearly beyond globes control.
Yes. The US military forces and personnel completely withdrew from
Cubi Point only on December 31, 1992. Thus, until that date, USDCA had
control over the earth station and had the option of using the same.
Furthermore, Philcomsat could not have removed or rendered
ineffective said communication facility until after December 31, 1992
because Cubi Point was accessible only to US naval personnel up to
that time.
No. The award of attorney’s fees is the exemption rather than the rule.
In cases where both parties have legitimate claims against each other
and no party actually prevailed, such as in the present case where the
claims of both parties were sustained in part, an award of attorney’s
fees would not be warranted.
Exemplary damages may be awarded in cases involving contracts, if
the erring party acted in wanton, fraudulent, reckless, oppressive or
malevolent manner. It was not shown that Globe acted wantonly or
oppressively in not heeding Philcomsats demands for payment of
rentals. Globe had valid grounds for refusing to comply with its
contractual obligations after 1992.
PEDRO VASQUEZ v. THE COURT OF APPEALS
G.R. No. L-42926 1985 Sep 13
FACTS:
MV 'Pioneer Cebu' was owned and operated by the defendant
and used in the transportation of goods and passengers in the
interisland shipping. It had a passenger capacity of three hundred
twenty-two including the crew. It undertook the said voyage on a
special permit issued by the Collector of Customs inasmuch as, upon
inspection, it was found to be without an emergency electrical power
system. The special permit authorized the vessel to carry only two
hundred sixty passengers due to the said deficiency and for lack of
safety devices for 322 passengers. A headcount was made of the
passengers on board, resulting on the tallying of 168 adults and 20
minors, although the passengers manifest only listed 106 passengers. It
has been admitted, however, that the headcount is not reliable. When
the vessel left Manila, its officers were already aware of the typhoon
Klaring building up somewhere in Mindanao. Plaintiffs seek the recovery
of damages due to the loss of Alfonso Vasquez, Filipinas Bagaipo and
Mario Marlon Vasquez during said voyage.
ISSUE:
Whether or not the respondent would be exempt from
responsibility due to its defense of fortuitous event.
RULING:
To constitute a caso fortuito that would exempt a person from
responsibility, it is necessary that (1) the event must be independent of
the human will; (2) the occurrence must render it impossible for the
debtor to fulfill the obligation in a normal manner; and that (3) the
obligor must be free of participation in, or aggravation of, the injury to
the creditor. The event must have been impossible to foresee, or if it
could be foreseen, must have been impossible to avoid. There must be
an entire exclusion of human agency from the cause of injury or loss.
Under the circumstances, while, indeed, the typhoon was an
inevitable occurrence, yet, having been kept posted on the course of
the typhoon by weather bulletins at intervals of six hours, the captain
and crew were well aware of the risk they were taking as they hopped
from island to island from Romblon up to Tanguingui. They held frequent
conferences, and oblivious of the utmost diligence required of very
cautious persons, they decided to take a calculated risk. In so doing,
they failed to observe that extraordinary diligence required of them
explicitly by law for the safety of the passengers transported by them
with due regard for all circumstances and unnecessarily exposed the
vessel and passengers to the tragic mishap. They failed to overcome
that presumption of fault or negligence that arises in cases of death or
injuries to passengers.
With regard to the contention that the total loss of the vessel
extinguished its liability pursuant to Article 587 of the Code of
Commerce, it was held that the liability of a shipowner is limited to the
value of the vessel or to the insurance thereon. Despite the total loss of
the vessel therefore, its insurance answers for the damages that a
shipowner or agent may be held liable for by reason of the death of its
passengers.
Hill vs. Veloso 31 Phil. 160
Facts:
It is believed that defendant Maxima Ch. Veloso is indebted to Damasa
Ricablanca, her sister-in-law and widow of Potenciano Ch. Veloso, with
the amount of P8, 000. It is also believed that Domingo Franco,
defendant’s son-in-law and minor child of Ricablanca, had the latter
sign a blank document for the purpose of compelling her to execute a
document regarding the acknowledgment of the abovementioned
debt in his behalf. The guardian of Franco, named Levering, according
to the latter, is the one who compelled the defendant to sign the said
document on Franco’s behalf. Later on, the document that was signed
by the defendant turned out to be a document containing a different
tenor which states that the defendant had executed the said
document for value of the goods that they received in La Cooperative
Filipina which they (the defendant and her husband) are bound to pay
jointly and severally to Michael and Co., for the sum of P6, 319.33.
Levering, as the guardian of the minor children of Damasa Ricablanca,
commenced proceedings against the defendant for the recovery of
the sum of P8, 000. The defendant, in turn, pray for the annulment of
the contract with Michael and Co. on the grounds of deceit and error
committed by her son-in-law Franco who was then a deceased.
Issue: Whether or not the alleged deceit caused by Franco may be a
ground for the annulment of the contract.
Ruling: The judgment is against defendant.
The deceit, in order that it may annul the consent, must be that which
the law defines as a cause. According to Article 1269 of the Civil Code
(now Article 1338 of the New Civil Code), “there is deceit, when by
words or insidious machinations on the part of one of the contracting
parties, the other is induced to execute a contract which without them
he would not have made.” Domingo Franco is not one of the
contracting parties who may have deceitfully induced the other
contracting party, Michael and Co., to execute the contract. The one
and the other contracting parties, to whom the law refers, are the
active and the passive subjects of the obligation, the party of the first
part and the party of the second part who execute the contract. The
active subject and the party of the first part of the promissory note in
question is Michael and Co., and the passive subject and the party of
the second part are Maxima Ch. Veloso and Domingo Franco; two, or
they be more, who are one single subject, one single party. Domingo
Franco is not one contracting party with regard to Maxima Ch. Veloso
as the other contracting party. They both are but one single
contracting party in contractual relation with, Michael and Co.
Domingo Franco, like any other person who might have been able to
induce Maxima Ch. Veloso to act in the manner she is said to have
done, under the influence of deceit, would be for this purpose, but a
third person. There would then be not deceit on the part of the one of
the contracting parties exercised upon the other contracting party, but
deceit practiced by a third person.
Estate of Hemady vs. Luzon Surety
Facts:
Luzon Surety files a claim against the estate of Hemady which the
deceased guaranteed as surety when still alive.
Issue:
Whether or not a solidary guarantor’s liability is extinguished by his
death.
Held:
The solidary guarantor’s liability is not extinguished by his death, and
that in such event, the Luzon Surety Co., had the right to file against the
estate a contingent claim for reimbursement. The contracts of
suretyship entered into by K. H. Hemady in favor of Luzon Surety Co. not
being rendered intransmissible due to the nature of the undertaking,
nor by the stipulations of the contracts themselves, nor by provision of
law, his eventual liability thereunder necessarily passed upon his death
to his heirs.