OBLICON CHAPTER II CASE DIGEST
establishment of the contract
I. SSS vs. Moonwalk Development and Housing
Corporation
Facts:
 SSS filed a complaint in the CFI of Rizal against
Moonwalk, alleging that they (SSS) committed an
error in failing to compute 12% interest due on
delayed payments on the loan of Moonwalk resulting
in a chain of errors in the application of payments
made by Moonwalk.
 CFI dismissed the complaint on the ground that the
obligation was already extinguished by the payment
of Moonwalk of its indebtedness to SSS and by SSS’
act of cancelling the real estate mortgages executed
in its favor by defendant Moonwalk.
Issue:
1. Is the penalty demandable even after the
extinguishment of the Principal Obligation?
2. When is default incurred and when is demand
not necessary?
Ruling:
1. NO. A penalty is demandable in case of non-
performance or late performance of the main
obligation. In other words there must be a total
or partial breach of the obligation. It is important
to note however that there is no mora or delay
unless there is demand. In the present case,
during the time when the obligation was still
subsisting, although there were late amortization
there was no demand made by the creditor,
plaintiff appellant for the payment of the penalty.
Hence up to the time of the letter of the plaintiff
there was no mora in the payment of the penalty.
2. Under the civil code, delay begins from the time
the creditor judicially or extra-judicially demands
from the obligor the performance of the
obligation. There are only three instances when
demand is not necessary to render the obligor in
default: (1169)
a) When the obligation or the law expressly so
declares
b) 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 was a controlling motive for the
c) When demand would be useless, as when the
debtor has rendered it beyond his power to
perform.
The case does not fall in any of these exceptions
therefore, demand was necessary in order for
Moonwalk to be considered in delay.
II. RCBC v. Court of Appeals
Facts:
 Lustre bought a corolla. He made a down payment of
164,620, while the balance will be paid in 24 equal
monthly installments through RCBC as the financing
agent.
 He issued 24 PDCs amounting to 14,976 pesos each
 All the checks were encashed except for the payment
for August 1991 because it was unsigned. Because of
this the amount representing said check was recalled
and re-credited to private respondent’s account.
 The recall caused the last two checks of February and
March 1993 to not be presented for payment in
conformity to the bank’s procedure.
 It demanded payment of the balance including
liquidated damages but private respondent refused
to pay prompting petitioner to file an action for
replevin and damages.
 RTC and CA both side with private respondent Lustre
 RCBC contends that the recalled check was not
encashed such that the installment for August 1991
was not paid, hence by virtue of the acceleration
clause in the chattel mortgage executed by Lustre,
RCBC was justified in treating the entire balance as
due and demandable.
 Despite RCBC’s demand, Lustre refused to pay as
such RCBC claims Lustre is in delay.
Issue:
Whether or not Lustre was in delay
Ruling:
No. Article 1170 of the New Civil code provides that those
who in the performance of their obligations are guilty of
delay are liable for damages. The delay in the
performance of the obligation however must be either
malicious or negligent. Thus assuming that Lustre was
guilty of delay, in the payment of the value of the
unsigned check, he cannot be held liable for damages.
There is no imputation much less evidence that Lustre
acted with malice or negligence in failing to sign the
check. It was merely inadvertence in his part. The
invocation of the acceleration clause of the executed
chatter mortgage was unwarranted.
III. Barzaga v. Court of Appeals
Facts:
 Barzaga’s wife wished to be laid to rest before
Christmas day to spare her family’s feelings.
 Barzaga set out to arrange for her wife’s interment on
the 24th of December.
 On December 22, he went to Alviar’s hardware store
and bought materials and told the store employees
that it needs to be delivered at the Memorial
Cemetery in Dasmarinas Cavite by 8:00 that same
morning since his hired workers were already there
and time was of the essence. Maria Boncales agreed.
 By 8:00 the delivery was not at the site yet, by 9:00
still no delivery so Barzaga went back to the store who
assured him it will be there in no time. By 10:00 still
no delivery so he went back to the store only to
receive the same answer.
 After hours of waiting, he had to dismiss his workers.
He filed a complaint against Alviar’s hardware store,
cancelled his transaction and bought materials
elsewhere. This cause the project to be delayed
further to after Christmas day.
 Barzaga sued for damages.
Issue:
Whether or not Alviar was negligent and incurred delay in
the performance of his contractual obligation
Ruling:
Yes. The law expressly provides that those who in the
performance of their obligation are guilty of fraud,
negligence or delay and those who in any manner
contravene the tenor thereof are liable for damages.
Contrary to the CA’s factual determination there was a
specific time agreed upon for the delivery of the materials
to the cemetery.
Alviar invokes fortuitous event due to the flat tire of the
delivery truck but this event was foreseeable.
This is a case of non-performance of a reciprocal
obligation. Barzaga in his end, paid the purchase price in
full therefore Alviar is obligated to fulfill his obligation to
immediately deliver the goods otherwise delay would
attach.
IV. Pantaleon v. American Express
Facts:
 Pantaleon and his family were in a tour of Western
Europe. On the last day of the tour, Mrs. Pantaleon
bought a diamond, a pendant and a chain totaling $
13,826.
 To pay for these, Pantaleon presented his American
express credit card together with his passport to the
sales clerk. This happened 15 minutes before the
group was to depart from the store.
 10 minutes later, the store clerk informed Pantaleon
that his card had not yet been approved. His son
informed them that the whole bus was waiting for
them so he ordered to cancel the sale
 The store manager asked the plaintiff to wait and so
after 15 minutes, the store manager informed
Pantaleon that the bank demanded bank references
 The coster decided to release the items even without
Amex ‘s approval of the purchase.
 After more incidents of the same nature, Pantaleon
sued for damages.
 RTC sided with Pantaleon while CA reversed their
decision and sides with Amex
Issue:
Whether or not Amex had committed breach of its
obligations to Pantaleon or if not are they liable under
article 21 of the civil code.
Ruling:
Yes. There was mora solvendi on the part of Amex.
Although Amex has the right to verify whether the credit
it is extending upon a particular purchase was indeed
contracted by the cardholder, the culpable failure of
Amex is not the failure to timely approve petitioner’s
purchase but the failure to timely act on the same
whether favorably or unfavorably. They could have
promptly informed the petitioners the reason for the
delay or that said transaction would take some time.
There is finding of bad faith attributable particularly in the
dilly-dallying of respondent’s manila credit authorizer.
V. Lorenzo Shipping Corporation v. BJ Marthel
International
Facts:
 BJMI supplied LSC with spare parts for the latter’s
marine engines. Sometime in 1989 LSC asked for a
quotation of various machine parts. Thereafter LSC
issued a purchase order for the procurement of one
set of cylinder liner (date of delivery not specified).
 Instead of paying 25% DP for the first cylinder liner,
LSC issued 10 PDCs representing the full payment of
the aforementioned cylinder liner.
 After, LSC issued another purchase order for another
unit of cylinder liner. Terms of payment are 25% upon
delivery, balance payable in 5 bi-monthly equal
installments. It also did not state the date of delivery.
 BJMI deposited LSC’s check but the same was
dishonored due to insufficiency of funds. The
remaining nine were returned by BJMI to LSC.
 The ordered cylinders were delivered to LSC’s
warehouse.
 LSC refused to pay full price for the cylinders claiming
that BJMI’s delivery was late and due to the scrapping
of the MV Dadiangas Express, it would have to sell the
cylinder and pay the balance from the proceeds of
the sale.
Issue:
Whether or not there was delay in delivery of the subjects
of the contract of sale to justify the petitioner to disregard
the terms of the contract considering that time was of the
essence thereof.
Ruling:
No. There was no actual or apparent intention in the
contract itself or the surrounding circumstance of that
intention. There was a significant difference between the
purchase orders and the quotations. The omission of the
delivery dates in the purchase order which was in the
quotation was the doing of LSC and not BJMI. Also, by
accepting the cylinder liners when these were delivered
to its warehouse, petitioner indisputably waived the
claimed delay in the delivery of said items.
VI. Solar Harvest v. Davao Corrugated Carton
Corp.
Facts:
 Solar Harvest entered into an agreement with DCC
Corporation for the purchase of carton boxes
specifically for the business of exporting fresh
bananas. Said agreement was not reduced into
writing.
 Solar harvest deposited $40,150 in DCC Corporation’s
dollar savings account as full payment.
 Despite such payment, they did not receive any boxes
from respondent so they wrote a demand letter for
reimbursement of the amount paid.
 Respondent replied that the boxes has been
completed and that petitioner failed to pick them up
from their warehouse 30 days from completion as
agreed upon. They also claim that petitioner even
placed an additional order of 24,000 boxes out of
which 14,000 had been manufactured without any
advance payment from the Solar Harvest.
 Respondent demanded Solar Harvest to remove the
boxes from their storage warehouse and to pay the
remaining balance of their orders as well as storage
fees.
Issue:
Whether or not Petitioner is entitled to the claim for
rescission he is asking for as per Article 1191 of the civil
code.
Ruling:
No. Under 1191 of the NCC, the power to rescind
obligations is implied in reciprocal ones, in case one of the
obligors should not comply with what is incumbent upon
him. In reciprocal obligations, generally demand is not
necessary but when different dates for performance of
the obligations are fixed, the default for each must be
determined by the demand of other party of the
fulfillment of his obligation. In this case, petitioners sent
a follow up letter and not a demand letter. Also
respondent showed sufficient proof that it was ready to
comply with its obligation and that even if parties agreed
for respondent to deliver the boxes, they still wouldn’t be
in delay since there was no demand from the Solar
Harvest.
VII. Cathay Pacific Airways LTD v. Sps. Vazquez
Facts:
 Sps. Vazquez are gold members of CPA. They
went to HK with some other people.
 During their boarding time on the flight back to
Manila, they were told that they have been
upgraded to first class but they refused citing that
it would be impolite to accept said offer and leave
their guests.
  The ground stewardess warned them that they
would not be allowed to take the flight if they
refused.
 Sps. Vazquez sued for damages
Issue:
1. Whether or not Sps. Vazquez are entitled to
damages.
2. Whether or not there was breach of obligation on
the part of Cathay Pacific Airways
Ruling:
1. Yes to nominal damages but No to moral
damages. There was no bad faith on the part of
the ground stewardess. She was honest in saying
that their seats were given to other passengers
and that the business class was fully booked.
2. Yes. Sps. Vazquez should have been consulted
first whether they wanted to avail the privilege or
waive it. They had every right to waive it and it
should not be imposed on them no matter how
seemingly odd it is to deny the upgrade. By
insisting on the upgrade, Cathay breached its
contract of carriage with the Vazquezes
Note** Breach of contract is failure without legal reason
to comply with the terms of a contract.
VIII. Meralco v. Ramoy
Facts:
 The electric service connection of Ramoy and his
wife were disconnected pursuant to a court order
acquired by NPC for ejectment of settlers
occupying their property. They sought the help of
Meralco in doing this.
 Ramoy reasoned with the Meralco foreman that
he was the registered owners of a parcel of land
covered by a TCT and that his property was
outside NPC’s property coverage.
 During the ocular inspection ordered by the
court, it was found that Ramoy’s property was
indeed outside the property of NPC.
Issue:
Whether or not Meralco acted in bad faith in the
disconnection of the electric services of Ramoy and his
wife.
Whether or not Meralco is guilty of breach of contract
Ruling:
YES. Meralco is liable for damages under Article 1170 of
the NCC which provides, those who in the performance of
their obligation are guilty of fraud, negligence, or delay,
and those who in any manner contravene the tenor
thereof, are liable for damages. Meralco is required to
exercise utmost care and diligence being a public utility
vested with vital interest. It is guilty of negligence in
following the court order of MTC. It could have
coordinated with the proper court officials in determining
the structures covered by the court order before cutting
power supply of Ramoy.
IX. Areola v. CA and Prudential Guarantee
Insurance
Facts:
 7 months after the issuance of Areola’s personal
accident insurance, respondent insurance company
unilaterally cancelled the same since the company
records revealed that petitioner-insured failed to pay
his premiums.
 Respondent then offered to reinstate the same policy
it previously cancelled and even proposed to extend
its lifetime upon finding that the cancellation was
erroneous and that the premiums were paid full but
not remitted by the insurance company’s branch
manager.
Issue:
1. Did the erroneous act of cancelling subject
insurance policy entitle petitioner to payment of
damages due to breach of obligation
2. Did the subsequent act of reinstating the
wrongfully cancelled insurance policy obliterate
liability for damages of the insurance company?
Ruling:
Yes. Article 1191 grants the injured party a choice
between rescission and fulfillment of the obligation in
case the debtor fails to comply with what is incumbent
upon him. In any case, the payment of damages is proper
regardless whether he chooses fulfillment or rescission.
Only nominal damages since no actual or substantial
damage or injury was inflicted on petitioner and the
respondent insurance company rectified its error
immediately after its realization of said mistake.
X. Tanguilig v. Court of Appeals
Facts: Inc. while the plans and specifications for the building
were prepared by Nakpil and Sons
 Tanguilig proposed to Herce to construct a windmill
 On August 2, 1968, a strong earthquake hit Manila
system for him for 60,000 with a one-year guarantee
and its environs and the building in question
from date of completion and acceptance of Herce of
sustained major damages.
the project.
 As a temporary remedial measure, the building was
 Tanguilig paid Herce 30,000 with an installment
shored up by United Construction Inc. for 13,661.28
payment of 15,000 leaving a balance of 15,000
pesos.
 Thereafter, due to refusal and failure of respondent
 The PBA sued United Construction claiming defects in
to pay the balance, Herce filed a complaint to collect
construction while Unite Construction sued Nakpil
the amount
and Sons claiming defects in the design and
 Petitioner denied the claim saying he already paid this
specifications.
amount to SPGMI which constructed the ell to which
the windmill system was to be connected. Further, he Issue:
said that assuming he does have unpaid balance, it
Whether or not the substantial damage of the building
should be offset by defects in the windmill which
was attributable to a fortuitous event.
caused the structure to collapse after a strong wind
hit their place. Ruling:
Issue: No. The facts determined by the lower courts indicate
wanton negligence off both the defendant and the third
Whether or not the claim of respondent of force majeure
party defendants in effecting the plans, designs,
should be appreciated
specifications, and construction of the PBA building. Their
Ruling: negligence is equivalent to bad faith in the performance
of their respective tasks.
No. To invoke fortuitous event, four requisites must
concur: Note** Instances where rule on fortuitous event does not
apply: If upon the happening of a fortuitous event, or an
a) Cause of the breach of the obligation must be
act of God there concurs a corresponding fraud,
independent of the will of the debtor
negligence, delay or contravention in any manner of the
b) The event must be either unforeseeable or
tenor of the obligation.
unavoidable
c) The event must be such as to render it impossible XII. Republic v. Luzon Stevedoring
for the debtor to fulfill his obligation in a normal
Facts:
manner.
d) Debtor must be free from any participation in or  In the early afternoon of August 17, 1960, a barge
aggravation of the injury to the creditor. owned by respondents was being towed down the
Pasig River by tugboats belonging to the same
Herce failed to show that the collapse of the windmill was
corporation.
due solely to a fortuitous event. Interestingly the
 The barge rammed against one of the wooden piles
evidence does not disclose that a typhoon transpired but
of Nagtahan Bailey bridge, smashing the posts and
rather only a strong wind. But a strong wind in this case
causing the bridge to list.
cannot be fortuitous. On the contrary a strong wind
should be present in places where windmills are  The river at the time was swollen due to the heavy
constructed, otherwise the windmills will not turn. downpour recently.
 The Republic is suing Luzon Stevedoring for actual
XI. Nakpil and Sons v. Court of Appeals and consequential damages while LS contends they
exercised due diligence in the selection and
Facts:
supervision of its employees and that the damages to
 The Philippine Bar Association decided to construct the bridge were caused by force majeure.
an office building in Intramuros, Manila, The
Issue:
construction was undertaken by United Construction
Whether or not the collision of the appellant’s barge with
the supports of the bridge was cause by a fortuitous event
Ruling:
No. fortuitous events are extraordinary events not
foreseeable or avoidable. Events that could not be
foreseen or though which foreseen, were inevitable. It is
therefore not enough that the event should not have
been foreseen or anticipated, as is commonly believed it
must be one that is impossible to foresee or avoid. Mere
difficulty to see the happening is not impossibility to
foresee the same. The very measures adopted by the
appellant prove that the possibility of danger is not only
foreseeable but actually foreseen. They should have
exercised a higher level of care and diligence knowing the
possibility of such event in happening.
XIII. Far East Bank and Trust Co. v. CA
Facts:
 Luna applied for and was accorded a FAR EAST CARD
issued by petitioner bank. He also requested a
supplemental card for Clarita Luna
 Clarita lost her card and FEBTC was informed. In order
for it to be replaced Clarita submitted an affidavit of
loss.
 Luis Luna’s card was not honored when he tried
paying for a despedida lunch for a close friend
 Luis Luna sued for damages
Issue:
Whether FEBTC is liable for damages
Ruling:
No. In culpa contractual, moral damages may be
recovered where the defendant is shown to have acted in
bad faith or with malice in the breach of the contract. The
bank was remiss in indeed neglecting to personally inform
Luis of his own card’s cancellation. However, nothing in
the findings of the trial court and appellate court can
sufficiently indicate deliberate intent on the part of FEBTC
to cause harm to respondent.
Nominal Damages may be recovered. Article 2221 of NCC:
“Nominal damages are adjudicated in order that a right
of the plaintiff which has been violated or invaded by the
defendant may be vindicated or recognized and not for
the purpose of indemnifying the plaintiff for any loss
suffered by him”
XIV. Salugada v. FEU
Facts:
 Saludaga was a sophomore law student of
respondent FEU when he was shot by Rosete, one of
the security guards on duty at the school premises.
 He was rushed to FEU-NRMF due to the wound he
sustained.
 Petitioner filed a complaint against respondent
school on the grounds of breach of obligation to
provide students with a safe and secure environment
and an atmosphere conducive to learning.
 Respondent school filed a third party complaint with
the Security Agency to indemnify them with whatever
would be adjudged in favor of petitioner.
 Respondent school invoke fortuitous event reasoning
that they could not have reasonably foreseen nor
avoided the accident caused by Rosete since he was
not their employee.
Issue:
Whether or not defense of fortuitous event should be
appreciated.
Ruling:
No. In order for force majeure to be considered,
respondents must show that no negligence or
misconduct was committed that may have occasioned
the loss. In this case FEU was negligent by not using a
higher level of scrutiny in checking the qualifications of
the security guards being given to them by the agency.
XV. Fil Estate Properties Inc. v. Sps. Ronquillo
Facts:
 Sps. Ronquillo purchased from petitioners an 82 sqm.
Condo for 5.1 million.
 Upon learning that the construction works had
stopped, respondents likewise stopped paying the
monthly amortization. They then demanded full
refund which the petitioners refuse to do.
Issue:
Is the breach of obligation due to economic hardships a
fortuitous event?
Ruling:
No. the Asian financial crisis is not a fortuitous event that
would excuse petitioners from performing their
contractual obligation. Because of the Petitioner’s breach
they are ordered to refund the amount paid and to
rescind the contract.
XVI. Metro Concast Steel Corp. v. Allied Bank
Corp.
Facts:
On various dates and for different amounts, Metro
Concast, a corporation duly organized and existing under
and by virtue of Philippine laws and engaged in the
business of manufacturing steel, through its officers
obtained several loans from Allied Bank. These loan
transactions were covered by a promissory note and
separate letters of credit/trust receipts.
Petitioners failed to settle their obligations under the
aforementioned promissory note and trust receipts,
hence, Allied Bank, through counsel, sent them demand
letters,20 all dated December 10, 1998, seeking payment
but to no avail. Thus, Allied Bank was prompted to file a
complaint for collection of sum of money against
petitioners before the RTC.
The petitioners purported that the economic reverses
suffered by the economy and the devaluation of the peso
against the US dollar contributed to the downfall of the
steel industry, directly affecting the business of Metro
Concast and eventually leading to its cessation.
Petitioners offered the sale of Metro Concast’s remaining
assets, consisting of machineries and equipment, to Allied
Bank, which the latter refused. Instead, Allied Bank
advised them to sell the equipment and apply the
proceeds of the sale to their outstanding obligations.
Petitioners offered the equipment for sale, but there
were no takers, and it was reduced into scrap metal.
Peakstar Oil Corporation (Peakstar), represented by one
Crisanta Camiling (Camiling), expressed interest in buying
the scrap metal. A Memorandum of Agreement dated
November 8, 2002 (MoA) was drawn between Metro
Concast, represented by petitioner Jose Dychiao, and
Peakstar, through Camiling, under which Peakstar
obligated itself to purchase the scrap metal.
Unfortunately, Peakstar defaulted on all its obligations
under the MoA. In this regard, petitioners averred that
their failure to pay their outstanding loan obligations to
Allied Bank must be considered as force majeure, and
therefore extinguished.
Issue:
Whether or not the loan obligations incurred by the
petitioners under the subject promissory note and
various trust receipts have already been extinguished due
to force majeure or fortuitous event.
Held:
No. The loan obligation was not extinguished.
Article 1231 of the Civil Code states that obligations are
extinguished either by payment or performance, the loss
of the thing due, the condonation or remission of the
debt, the confusion or merger of the rights of creditor and
debtor, compensation or novation.
In the present case, petitioners argued that their loan
obligations to Allied Bank had already been extinguished
due to Peakstar’s failure to perform its own obligations to
Metro Concast pursuant to the MoA.
Petitioners classify Peakstar’s default as a form of force
majeure in the sense that they have, beyond their control,
lost the funds they expected to have received from the
Peakstar which they would, in turn, use to pay their own
loan obligations to Allied Bank.
While it may be argued that Peakstar’s breach of the MoA
was unforseen by petitioners, the same us clearly not
“impossible”to foresee or even an event which is
independent of human will.” Neither has it been shown
that said occurrence rendered it impossible for
petitioners to pay their loan obligations to Allied Bank and
thus, negates the former’s force majeure theory
altogether.
XVII. Seoane v. Franco
Facts:
 A mortgage was executed on October 13, 1884 to
secure the payment of the sum of4876.01, the
mortgagor agreeing to pay the sum little by little
 The claim appears to have been presented to the
plaintiff’s intestate on August 8, 1911. Nothing has
been paid either of principal or of interest.
This is an appeal from a judgment of the Court of First
Instance of Zamboanga in favor of the plaintiff, holding
that the right of action upon the mortgage debt which
was the basis of the claim presented against the plaintiffs
estate had prescribed.
The mortgage in question was executed on the 13th of
October, 1884, to secure the payment of the sum of
P4,876.01, the mortgagor agreeing to pay the sum "little
by little," The claim appears to have been presented to
the plaintiff's intestate on the 8th of August, 1911.
Nothing has been paid either of principal or of interest.
We are of the opinion that this case falls within the
provisions of article 1128 of the Civil Code, which reads as
follows:
"1128. When the obligation does not fix a term, but it can
be inferred from its nature and circumstance that there
was an intention of granting it to the debtor, the courts
shall fix the duration of such a term.
"The courts shall also fix the duration of a term when it
may have been left at the will of the debtor."
The obligation in question seems to leave the duration of
the period for the payment thereof to the will of the
debtor. It appears also that it was the intention of the
instrument to give the debtor time within which to pay
the obligation. In such cases this court has held, on
several occasions, that the obligation is not due and
payable until an action has been commenced by the
mortgagee against the mortgagor for the purpose of
having the court fix the date on and after which the
instrument shall be payable and the date of maturity is
fixed in pursuance thereof. The case of Eleizegui vs. The
Manila Lawn Tennis Club (2 Phil Rep., 309), in which the
opinion was written by the Chief Justice of the court, is
the leading case upon the subject. In that case the
question was over the duration of a lease concerning "a
piece of land for a fixed consideration and to endure at
the will of the lessee." In discussing the question the court
said (p. 310):
"With respect to the term of the lease the present
question has arisen. In its discussion three theories have
been presented: One which makes the duration depend
upon the will of the lessor, who, upon one month's notice
given to the 'lessee, may terminate the lease so
stipulated; another which, on the contrary, makes it
dependent upon the will of the lessee, as stipulated; and
the third, in accordance with which the right is reserved
to the court to fix the duration of the term."
The clause on which the case turns is as follows (p. 312):
"Mr. Williamson, or whoever may succeed him as
secretary of the club, may terminate this lease whenever
desired without other formality than that of giving a
month's notice. The owners of the land undertake to
maintain the club as tenant as long as the latter shall see
fit."
Considering the case the court said (p. 314):
"The Civil Code has made provision for such a case in all
kinds of obligations. In speaking in general of obligations
with a term it has supplied the deficiency of the former
law with respect to the 'duration of the term when it has
been left to the will of the debtor and provides that in this
case the term shall be fixed by the courts. (Art. 1128, sec.
2.) In every contract, as laid down by the authorities,
there is always a creditor who is entitled to demand the
performance, and a debtor upon whom rests the
obligation to perform the undertaking. In bilateral
contracts the contracting parties are mutually creditors
and debtors. Thus, in this contract of lease, the lessee is
the creditor with respect to the rights enumerated in
article 1554, and is the debtor with respect to the
obligations imposed by articles 1555 and 1561. The term
within which performance of the latter obligation is due
is what has been left to the will of the debtor. This term
it is which must be fixed by the courts,
"The only action which can be maintained under the
terms of the contract is that by which it is sought to obtain
from the judge the determination of this period, and not
the unlawful detainer action which has been brought-an
action which presupposes the expiration of the term and
makes it the duty of the judge to simply decree an
eviction. To maintain the latter action it is sufficient to
show the expiration of the term of the contract, whether
conventional or legal; in order to decree the relief to be
granted in the former action it is necessary for the judge
to look into the character and conditions of the mutual
undertakings with a view to supplying the lacking element
of a time at which the lease is to expire."
The case of Barretto vs. The City of Manila (7 Phil. Rep.,
416) dealt with a case where the terms of a donation did
not fix the time of the performance of the condition
placed upon the donation, and the court held that the
period must be determined by the court in a proper
action in accordance with article 1128 of the Civil Code,
saying (p. 420):
"The contract having fixed no period in which the
condition should be fulfilled, the provisions of article 1128
of the Civil Code are applicable and it is the duty of the
court to fix a suitable time for its fulfillment. Eleizegui vs.
The Manila Lawn Tennis Club, 2 Phil. Rep., 309' (11 Phil.
Rep., 624.[1])
In the case of Levy Hermanos vs. Paterno (18 Phil. Rep.,
353) the court said (p. 355):
"The defendant having bound himself to pay his debt to
the plaintiffs in partial payments, as set forth in the note
in question, it is seen that the obligation is one of
payment by installments, since its fulfillment cannot be
required immediately nor does its existence depend upon
the happening of any particular event. But, though the
obligation is one of payment by installments,
nevertheless no fixed day was specified for its fulfillment,
so that the period for payment is undetermined or was
not fixed by the parties when they executed the contract.
Besides, it is evident that the term for payment was
granted for the exclusive benefit of the defendant and for
his own convenience, as by the language of the
document, the plaintiffs gained nothing by the fact that
the debt was not immediately demandable. Nor was any
interest stipulated on the debt during the time that it
should remain unpaid by the defendant. For the
foregoing reasons, and in whatever manner this case be
considered, it is unquestionable that it falls within the
provisions of article 1128 of the Civil Code. * * *
"The obligation being manifestly defective with regard to
the duration of the period granted to the debtor, that is,
to the defendant, that defect must be cured by the courts
through judicial decision which shall determine the said
duration, under the power expressly granted them for
such purpose by the legal provisions just above
transcribed.
"The trial court, therefore, acted in accordance with the
law in exercising the said power in the present case, by
fixing the duration of the period on the basis that the
payment of the debt should be made at the rate of P200
a month; and we see no abuse of judicial discretion in
fixing such a rate, considering the importance of the
obligation and the absence of any stipulation of interest
in favor of the creditors."
From these decisions it is clear that the instrument sued
upon in the case at bar is one which leaves the period of
payment at the will of the mortgagor. Such being the
case, an action should have been brought for the purpose
of having the court set a date on which the instrument
should become due and payable. Until such action was
prosecuted no suit could be brought for the recovery of
the amount named in the instrument. It is, therefore,
clear that this action is premature. The instrument has
been sued upon before it is due. The action must
accordingly be dismissed.
Ordinarily, when an action of this sort is dismissed the
plaintiff may at once begin his action for the purpose of
fixing a date upon which the instrument shall become
due. From the undisputed facts in this case and from the
facts and conditions that very probably cannot be
charged hereafter, it is our present opinion that such
action is itself prescribed. Section 38 of the Code of Civil
Procedure reads as follows:
"SEC. 38. To what this chapter does not apply. This
chapter shall not apply to actions already commenced, or
to cases wherein the right of action has already accrued;
but the statutes in force when the action or right of action
accrued shall be applicable to such cases according to the
subject of the action and without regard to the form; nor
shall this chapter apply in the case of a continuing and
subsisting trust, nor to an action by the vendee of real
property in possession thereof to obtain the conveyance
of it: Provided, nevertheless, That all rights of action
which have already accrued, except those named in the
last preceding paragraph, must be vindicated by the
commencement of an action or proceeding to enforce
the same within ten years after this Act comes into
effect."
This section evidently covers all rights of action of
whatever kind or nature, except those which have special
limitations and are referred to in subsequent sections. A
right of action to fix a day for the determination of the
time of payment is included within the terms of this
section. The mortgage in question having left the period
of payment to the will of the mortgagor, an action could
have been maintained by the mortgagee at any time after
its execution for the naming of a date on which the
instrument must be paid in full. That right of action
accrued as soon as the instrument was executed. Such
action, therefore, falls within the provisions of section 38,
and not having been, commenced within the ten years
next following the 1st day of October, 1901, such action
cannot, under the facts as they now appear, be
maintained.
While the expression of an opinion as to the prescription
of the action to fix a date for the maturity of the obligation
in question is unnecessary for a complete resolution of
the case before us, still we do not hesitate to express that
opinion for the reasons which we have heretofore given
in one or two other cases, particularly that of Lichauco vs.
Limjuco (19 Phil. Rep., 12). That case went off upon the
finding of the court that the action could not be
maintained by the plaintiff, Lichauco, on behalf of his
brothers and sisters and upon that finding the complaint
was dismissed. While the merits in that case were not
necessarily before us, we nevertheless took up the facts
as they appeared and expressed our opinion of what the
result of the case would be upon the merits if it
subsequently came before us upon the same facts. In
that case we said (p. 17):
"We believe, however, that, for the information of the
parties interested in the subject matter of this action and
to the end that unnecessary litigation may be avoided,
the opinion of the court should be given upon the facts
presented in this case. Knowing what our opinion is upon
these facts it is probable that the heirs will not care to
pursue the litigation further unless, which is somewhat
unlikely, they are able to present new facts. We,
therefore, proceed to a consideration of the case upon
the merits as presented by the record."
The judgment is affirmed, with costs against the
appellant. So ordered.
XVIII. Jimmy Co v. Court of Appeals
Facts:
 Co entrusted his car to BMSC for some repair
including battery replacement with BMSC
undertaking to return the vehicle on July 21, 1990
fully serviced and supplied in accordance with the job
contract.
 When the due date came, the battery was weak and
not yet replaced so Co had no choice to buy a new
battery and deliver it to BMSC for installation on the
same day.
 The battery was still not installed so it was
rescheduled to July 24, 1990
 When Co arrived on July 24 he was told that it was
carnapped on the same day while being road-tested
an employee of private respondent.
 Petitioner filed a suit for damages against private
respondent. The RTC found for the petitioner while
upon appeal the CA found for the respondent on the
ground of fortuitous event.
Issue:
Whether or not carnapping constitute as a fortuitous
event.
Ruling:
No. carnapping is not a fortuitous event. It must be
proved and established that the event was an act of god
or was done solely by third persons and that neither
claimant nor the person alleged to be negligent has any
participation.
Even assuming arguendo that carnapping was duly
established as a fortuitous event, still private respondent
cannot escape liability. Article 1165 of the NCC makes an
obligor who is guilty of delay responsible even for a
fortuitous event until he has effected the delivery.
XIX. Sicam v. Jorge
Facts:
 Jorge pawned several pieces of jewelry with Sicam to
secure a loan of 59,500
 On October 19, 1987, two armed men entered the
pawnshop and took away whatever cash and jewelry
were found in the pawnshop vault.
 Sicam sent Jorge a informing her of the loss of her
jewelry due to robbery
 Jorge requested Sicam to prepare the pawned
jewelry for withdrawal but Sicam failed to do so.
 Jorge and her husband filed with the RTC a case for
damages
 Sicam in his defense stated that he exercised due care
and diligence in the safekeeping of the articles
pledged with it and it could not be made liable for
event that is fortuitous.
Issue:
Whether or not the robbery that transpired is a fortuitous
event.
Ruling:
No. Article 1174 provides: Except in cases by the law or
when it is declared by stipulation, or when the nature of
the obligation requires the assumption of risk, no person
shall be responsible for those events which not be
foreseen or which though foreseen were inevitable.
Fortuitous events must be one that is impossible to
foresee or to avoid. The mere difficulty to foresee the
happening is not impossibility to foresee the same. The
testimony of Sicam of the measures he adopted to safe
keep those that are pawned in his shop shows that the
possibility of robbery was not only foreseeable but
actually foreseen and anticipated. Furthermore there was
negligence on Sicam’s part.
XX. Austria v. CA (1971)
Facts:
 Abad received from Austria a pendant with diamonds
to be sold on commission basis or to be returned on
demand.
 Abad while walking home, her purse was snatched by
two men among those taken was the consigned
pendant.
 Austria sued for damages while Abad interposed the
defense of fortuitous event.
Issue:
Whether or not the defense of fortuitous should be
appreciated.
Ruling:
No. Abad was negligent. The requisites of a fortuitous
event are as follows.
a) The event must be independent of the human
will
b) The occurrence must render it impossible for the
debtor to fulfill the obligation in a normal manner
c) The obligor must be free of participation in or
aggravation of the injury to the creditor.
**Abad’s negligence aggravated the injury to the
creditor.
XXI. Hernandez v. Chairman of COA
Facts:
 Hernandez is the officer in charge of the Ternate
Beach Project of the Philippine Tourism Authority in
Cavite.
 He went to the main office in Manila to encash two
checks covering the wages of the employes and the
operating expense of the project but it was delayed
and so it was released on the same day at night.
 He took the cash with him home in Marilao Bulacan
but while in transit. The bus he was riding was robbed
and the money with him was stolen.
 He then filed a request for relief from money
accountability under section 638 of the Revised
Administration Code.
 The Chairman of COA denied the petitioner’s request.
Issue:
Whether or not petitioner should be absolved of money
accountability.
Ruling:
Yes. Applying the letter and spirit of the above-mentioned
laws and after considering the established facts in light of
the arguments of the parties, the court inclined in favor
of the petitioner.
XXII. Yobido v. CA
Facts:
 The Tumboy family boarded a Yobido bus bound for
Davao City.
 While in transit, the front tire of the bus exploded and
the bus fell into a ravine and struck a tree which
caused the death of Tito Tumboy and physical injuries
to other passengers.
 Leny Tumboy filed a complaint for breach of contract
of carriage against the owner of the bus company and
its driver.
Issue:
Is the tire explosion a fortuitous event?
Ruling:
No. it is settled that an accident caused either by defects
in the automobile or through the negligence of its driver
is not a fortuitous event that would exempt the carrier
from liability for damages.
When a passenger dies while travelling, the carrier is
presumed to have been at fault or acted negligently. It
may only be overcome by evidence that the carrier had
observed extraordinary diligence as prescribed by 1733,
1755 and 1756 or that the death was due to a fortuitous
event.
XXIII. Juntilla v. Fontanar
Facts:
 Juntilla was a passenger of a PUJ from Danao City to
Cebu City
 When the jeepney reached Mandaue city the right
rear tire exploded causing the vehicle to turn turtle.
In the process, Junitlla who was in the front seat was
thrown out of the vehicle.
 He sustained injuries and lost his watch.
Issue:
Whether or not the explosion of the tire was a fortuitous
event.
Ruling:
No. The cause of the unforeseen and unexpected
occurrence was not independent of the human will. The
accident was cause either through negligence of the
driver or because of mechanical defects in the tire.
XXIV. Perla Compania de Seguros v. Sarangay
FACTS:
• Respondent spouses Gaudencio Sarangaya III and
Primitiva Sarangaya erected a semi-concrete, semi-narra,
one-storey commercial building, subdivided into three
doors, each of which was leased out.
• Perla Compania de Seguros, Inc. leased the first door
renovated its rented space and divided it into two, left
side as an office while the right was used by Pascual as a
garage.
• On July 7, 1988, after checking his appointments the
next day, decided to warm up the car. When he pulled up
the handbrake and switched on the ignition key, the
engine made an odd sound and did not start.
• Thinking it was just the gasoline percolating into the
engine, he again stepped on the accelerator and started
the car. This revved the engine but petitioner again heard
an unusual sound. He then saw a small flame coming out
of the engine.
• Startled, he turned it off, alighted from the vehicle and
started to push it out of the garage when suddenly, fire
spewed out of its rear compartment and engulfed the
whole garage. Pascual was trapped inside and suffered
burns on his face, legs and arms.
• Meanwhile, respondents were busy watching television
when they heard two loud explosions and, in no time, fire
spread inside their house, destroying all their belongings,
furniture and appliances.
• Criminal complaint for Reckless Imprudence Resulting
to Damage in Property was filed against petitioner
Pascual. On the other hand, petitioner-corporation was
asked to pay the amount of P7,992,350, inclusive of the
value of the commercial building
• Respondents later on filed a civil complaint based on
quasi-delict against petitioners for a sum of money and
damages, alleging that Pascual acted with gross
negligence while petitioner-corporation lacked the
required diligence in the selection and supervision of
Pascual as its employee
• The court a quo declared that, although the
respondents failed to prove the precise cause of the fire
that engulfed the garage, Pascual was nevertheless
negligent based on the doctrine of res ipsa loquitur.
Issue: WON the court erred in applying the doctrine of
RES IPSA LOQUITOR
Held:
• To sustain the allegation of negligence based on the
doctrine of res ipsa loquitur, the following requisites must
concur:
1) The accident is of a kind which does not ordinarily
occur unless someone is negligent;
2) The cause of the injury was under the exclusive control
of the person in charge and
3) The injury suffered must not have been due to any
voluntary action or contribution on the part of the person
injured.
• Under the first requisite, the occurrence must be one
that does not ordinarily occur unless there is negligence.
Flames spewing out of a car engine, when it is switched
on, is obviously not a normal event. Neither does an
explosion usually occur when a car engine is revved.
Hence, in this case, without any direct evidence as to the
cause of the accident, the doctrine of res ipsa loquitur
comes into play. Under the second requisite, the
instrumentality or agency that triggered the occurrence
must be one that falls under the exclusive control of the
person in charge thereof. In this case, the car where the
fire originated was under the control of Pascual. Under
the third requisite, there is nothing in the records to show
that respondents contributed to the incident
• The relationship between the two petitioners was based
on the principle of pater familias according to which the
employer becomes liable to the party aggrieved by its
employee if he fails to prove due diligence of a good
father of a family in the selection and supervision of his
employees. The burden of proof that such diligence was
observed devolves on the employer who formulated the
rules and procedures for the selection and hiring of his
employees. In the selection of prospective employees,
employers are required to examine them as to their
qualifications, experience and service records. While the
petitioner-corporation does not appear to have erred in
considering Pascual for his position, its lack of supervision
over him made it jointly and solidarily liable for the fire.
When there is caso fortuito:
(a) The cause of the unforeseen and unexpected
occurrence was independent of the human will
human agency must be entirely excluded as the
proximate cause or contributory cause of the injury or
loss -Not because car not maintained
(b) It was impossible to foresee the event which
constituted the caso fortuito or, if it could be foreseen, it
was impossible to avoid - NOT under the control of
Pascual
(c) The occurrence must be such as to render it impossible
to perform an obligation in a normal manner - Spouses
had no access nor obligation for the maintenance
(d) The person tasked to perform the obligation must not
have participated in any course of conduct that
aggravated the accident
2. YES.
Perla did not include any rule or regulation that Pascual
should have observed in performing his functions
There was no guidelines for the maintenance and upkeep
of company property like the vehicle that caught fire
Did not require periodic reports on or inventories of its
properties
Article 2180 of the Civil Code states that employers shall
be liable for the damage caused by their employees. The
liability is imposed on all those who by their industry,
profession or other enterprise have other persons in their
service or supervision
Nowhere does it state that the liability is limited to
employers in the transportation business.
XXV. Fil-Estate Properties v. Go
Facts
Fil-Estate Properties, Inc. (petitioner) entered into a
contract to sell a condominium unit to respondent
spouses Gonzalo and Consuelo Go at “Eight Sto. Domingo
Place,” a condominium project of petitioner located on
Sto. Domingo Avenue, Quezon City on December 29,
1995. The spouses paid a total of P3,439,000.07 of the
full contract price set at P3,620,000.00.
Petitioner failed to develop the condominium project so
on August 4, 1999, the spouses demanded the refund of
the amount they paid, plus interest. When petitioner did
not refund the spouses, the latter filed a complaint
against petitioner for reimbursement of P3,620,000
representing the lump sum price of the condominium
unit, plus interest,P100,000 attorney’s fees, and expenses
of litigation before the Housing and Land Use Regulatory
Board (HLURB). In response, petitioner claimed that
respondents had no cause of action since the delay in the
construction of the condominium was caused by the
financial crisis that hit the Asian region, a fortuitous event
over which petitioner had no control. The HLURB Regional
Director approved the decision of the Housing and Land
Use Arbiter in favor of the spouses Go on July 18, 2000
ordering the petitioner to refund to the complainants,
P3,439,000.07 (the amount proved) plus 12% interest
thereon reckoned from 09 August 1999 (the date the
respondent received the demand letter) until the same is
fully paid and pay P25,000.00 attorney’s fees as and by
way of damages.
The Board of Commissioners of the HLURB denied
petitioner’s petition for review and consequent motion
for reconsideration. The Office of the President dismissed
petitioner’s appeal and denied its motion for
reconsideration.
On appeal, asserting that both the HLURB and the Office
of the President committed reversible errors, Fil-Estate
asked the Court of Appeals to set aside the orders it is
appealing. The Court of Appeals affirmed the actions
taken by the HLURB and the Office of the President and
denied petitioner’s motion for reconsideration.
Issue
Whether or not the financial crisis that hit the Asian
region is considered a fortuitous event which caused the
delay in fulfilling the petitioner’s obligation to the
respondent.

Held

The Court had said that the 1997 financial crisis that
ensued in Asia did not constitute a valid justification to
renege on obligations and that is not among the
fortuitous events contemplated under Article 1174 of the
Civil Code. The Court does not generalize that the Asian
financial crisis in 1997 was unforeseeable and beyond the
control of a business corporation. However, a real estate
enterprise engaged in the pre-selling of condominium
units is concededly a master in projections on
commodities and currency movements and business
risks. The fluctuating movement of the Philippine peso in
the foreign exchange market is an everyday occurrence,
and fluctuations in currency exchange rates happen
everyday, thus, not an instance of caso fortuito. Following
Article 1475 of the Civil Code, upon perfection of the
contract, the parties, may demand performance. And
under Article 1191 of the same code, should one of the
parties, in this instance Fil-Estate, fail to comply with the
obligation, the aggrieved party may choose between
fulfillment or rescission of the obligation, with damages in
either case. Inasmuch as Fil-Estate could no longer fulfill
its obligation, the spouses Go may ask for rescission of the
contract with damages.

The Court DENIED the petition for lack of merit and ruled
to award only P3,439,000.07, representing the sum of
their actual payments plus amortization interests and
interest at legal rate which is 6% per annum from the date
of demand on August 4, 1999 and conformed with the
ruling in Eastern Shipping Lines, Inc. v. Court of Appeals,
the award of 12% interest on the amount of refund must
be reduced to 6%. Also the Court modified the Court of
Appeals’ grant of attorney’s fees from P25,000 to
P100,000 as just and equitable since respondents were
compelled to secure the services of counsel over eight
years to protect their interest due to petitioner’s delay in
the performance of their clear obligation. Costs against
petitioner.