Beruflich Dokumente
Kultur Dokumente
DISPOSITIVE: WHEREFORE, the lower court decision of July 24, 1968 is affirmed.
Costs against George Pay.
Case Number #2 (JAO) notified the defendant of the arrival of the goods, and asked instructions from
him as to the delivery thereof, and that the defendant refused to receive any
SMITH, BELL & CO., LTD. v. VICENTE SOTELO MATTI of them and to pay their price.
March 9, 1922 | ROMUALDEZ, J | En Banc | Conditional Obli a. The plaintiff, further, alleged that the expellers and the motors were
in good condition.
5. Defendant: Mr. Sotelo, and the intervenor denied the plaintiff's allegations as
Petitioner: SMITH, BELL & CO., LTD.
to the shipment of these goods and their arrival at Manila, the notification to
Respondent: VICENTE SOTELO MATTI
the defendant, Mr. Sotelo, the latter's refusal to receive them and pay their
price, and the good condition of the expellers and the motors, alleging as
Nature of the Action:
special defense that Mr. Sotelo had made the contracts in question as
Manager of the intervenor, which fact was known to the plaintiff, and that "it
Doctrine:
was only in May, 1919, that it notified the intervenor that said tanks had
Where the fulfillment of the condition does not depend on the will of the obligor,
arrived, the motors and the expellers having arrived incomplete and long
but on that of a third person who can in no way be compelled to carry it out, the
after the date stipulated."
obligor's part of the contract is complied with, if he does all that is in his power, and
6. Lower Court:
it then becomes incumbent upon the other contracting party to comply with the
a. Absolved the defendants from the complaint insofar as the tanks and
terms of the contract.
the electric motors were concerned
b. But ordering them to "receive the aforesaid expellers and pay the
plaintiff the sum of fifty thousand pesos (50,000) with legal interest
FACTS:
thereon from July 26, 1919
1. In August, 1918, the plaintiff corporation and the defendant, Mr. Vicente
ISSUES: Whether or not the plaintiff has fulfilled, in due time, its obligation to bring
Sotelo, entered into contracts whereby the former obligated itself to sell, and
the goods in question to Manila. YES.
the latter to purchase from it:
RULING:
a. Two steel tanks, for the total price of twenty-one thousand pesos,
1. It cannot be said that any definite date was fixed for the delivery of the goods.
the same to be shipped from New York and delivered at Manila
As to the tanks, the agreement was that the delivery was to be made "within
"within three or four months;"
3 or 4 months," but that period was subject to the contingencies referred to in
b. Two expellers at the price of twenty five thousand pesos each, which
a subsequent clause.
were to be shipped from San Francisco in the month of September,
2. With regard to the expellers, the contract says "within the month of
1918, or as soon as possible;
September, 1918," but to this is added "or as soon as possible."
c. The two electric motors at the price of two thousand pesos each, as
3. And with reference to the motors, the contract contains this expressions,
to the delivery of which stipulation was made, couched in these
"Approximate delivery within ninety days," but right after this, it is noted that
words: "Approximate delivery within ninety days. — This is not
"this is not guaranteed."
guaranteed."
4. Pertinent part of the contract:
2. The tanks arrived at Manila on the 27th of April, 1919; the expellers on the
"To be delivered within 3 or 4 months — The promise or indication
26th of October, 1918; and the motors on the 27th of February, 1919.
of shipment carries with it absolutely no obligation on our part —
3. The plaintiff corporation notified the defendant, Mr. Sotelo, of the arrival of
Government regulations, railroad embargoes, lack of vessel space, the
these goods, but Mr. Sotelo refused to receive them and to pay the prices
exigencies of the requirements of the United States Government, or a number
stipulated.
of causes may act to entirely vitiate the indication of shipment as stated. In
4. PLAINTIFF: The plaintiff brought suit against the defendant, based on four
other words, the order is accepted on the basis of shipment at Mill's
separate causes of action, alleging, among other facts, that it immediately
convenience, time of shipment being merely an indication of what we hope to to railroad embargoes, then the delivery was subject to a condition the
accomplish." fulfillment of which depended not only upon the effort of the herein plaintiff,
"The following articles, herein below more particularly described, but upon the will of third persons who could in no way be compelled to fulfill
to be shipped at San Francisco within the month of September /18, or as soon the condition. In cases like this, which are not expressly provided for, but
as possible. — Two Anderson oil expellers . . ." impliedly covered, by the Civil Code, the obligor will be deemed to have
5. In all these contracts, there is a final clause as follows: sufficiently performed his part of the obligation, if he has done all that was
" The sellers are not responsible for delays caused by fires, riots on in his power, even if the condition has not been fulfilled in reality.
land or on the sea, strikes or other cause known as 'Force Majeure' entirely 9. The record shows, as we have stated, that the plaintiff did all within its power
beyond the control of the sellers or their representatives." to have the machinery arrive at Manila as soon as possible, and immediately
a. From the record it appears that these contracts were executed at the upon its arrival it notified the purchaser of the fact and offered to deliver it to
time of the world war when there existed rigid restrictions on the him. Taking these circumstances into account, the hold that the said
export from the United States of articles like the machinery in machinery was brought to Manila by the plaintiff within a reasonable time.
question, and maritime, as well as railroad, transportation was
difficult, which fact was known to the parties;
b. Hence clauses were inserted in the contracts, regarding DISPOSITIVE:
"Government regulations, railroad embargoes, lack of vessel space, Wherefore, the judgment appealed from is modified, and the defendant, Mr. Vicente
the exigencies of the requirements of the United States Sotelo Matti, sentenced to accept and receive from the plaintiff the tanks, the expellers
Government," in connection with the tanks and "Priority Certificate, and the motors is question, and to pay the plaintiff the sum of ninety-six thousand
subject to the United States Government requirements," with respect pesos (96,000), with legal interest thereon from July 17, 1919, the date of the filing of
to the motors. the complaint, until fully paid , and the costs of both instances. So ordered.
c. At the time of the execution of the contracts, the parties were not
unmindful of the contingency of the United States Government not
allowing the export of the goods, nor of the fact that the other
foreseen circumstances therein stated might prevent it.
6. *Definition* Hence, the obligation must be regarded as conditional.
"Obligations for the performance of which a day certain has been fixed shall
be demandable only when the day arrives. "A day certain is understood to be
one which must necessarily arrive, even though its date be unknown.
a. "If the uncertainty should consist in the arrival or non arrival of the
day, the obligation is conditional and shall be governed by the rules
of the pure and conditional obligations”
7. *IMPORTANT* It is sufficiently proven in the record that the plaintiff has
made all the efforts it could possibly by expected to make under the
circumstances, to bring the goods in question to Manila, as soon as possible.
And, as a matter of fact, through such efforts, it succeeded in importing them
and placing them at the disposal of the defendant, Mr. Sotelo, in April, 1919.
8. And as the export of the machinery in question was as stated in the contract,
contingent upon the sellers obtaining certificate of priority and permission of
the United States Government, subject to the rules and regulations, as well as
Case Number 3 (AGUSTIN) ● On October 29, 1963. the plaintiff sent a letter to the defendant formally
demanding the return of the missing parts, the interior cover and the sum of
CHAVEZ V. GONZALEZ P6.00 (Exhibit D).
G.R. No. L-27454 | 30 April 1970 | REYES, J.B.L., J: | SUPREME COURT EN ● The following day, the defendant returned to the plaintiff some of the missing
BANC parts, the interior cover and the P6.00. In his answer as well as in his
| As to Perfection and Extinguishment – with a term or period testimony given before this court, the defendant made no denials of the facts
narrated above, except the claim of the plaintiff that the typewriter was
delivered to the defendant through a certain Julio Bocalin, which the
Plaintiff: Rosendo O. Chaves
defendant denied allegedly because the typewriter was delivered to him
Defendant: Ructuoso Gonzales
personally by the plaintiff.
Nature of the Action: A direct appeal by the party who prevailed in a suit for breach
ISSUE: W/N the defense that the court should first fix a period is tenable?
of oral contract and recovery of damages but was unsatisfied with the decision
rendered by the CFI
RULING:
Doctrine:
The inferences derivable from these findings of fact are that the appellant and the
ART. 1167. If a person obliged to do something fails to do it, the same shall be
appellee had a perfected contract for cleaning and servicing a typewriter; that they
executed at his cost. This same rule shall be observed if he does it in contravention
intended that the defendant was to finish it at some future time although such time was
of the tenor of the obligation. Furthermore it may be decreed that what has been
not specified; and that such time had passed without the work having been
poorly done he undone.
accomplished, far the defendant returned the typewriter cannibalized and unrepaired,
which in itself is a breach of his obligation, without demanding that he should be given
FACTS: more time to finish the job, or compensation for the work he had already done. The
time for compliance having evidently expired, and there being a breach of contract by
● In the early part of July, 1963, the plaintiff delivered to the defendant, who is non-performance, it was academic for the plaintiff to have first petitioned the court to
a typewriter repairer, a portable typewriter for routine cleaning and servicing. fix a period for the performance of the contract before filing his complaint in this case.
The defendant was not able to finish the job after some time despite repeated Defendant cannot invoke Article 1197 of the Civil Code for he virtually admitted non-
reminders made by the plaintiff. The defendant merely gave assurances, but performance by returning the typewriter that he was obliged to repair in a non-working
failed to comply with the same. condition, with essential parts missing. The fixing of a period would thus be a mere
● In October, 1963, the defendant asked from the plaintiff the sum of P6.00 for formality and would serve no purpose than to delay.
the purchase of spare parts, which amount the plaintiff gave to the defendant.
● On October 26, 1963, after getting exasperated with the delay of the repair of It is clear that the defendant-appellee contravened the tenor of his obligation because
the typewriter, the plaintiff went to the house of the defendant and asked for he not only did not repair the typewriter but returned it "in shambles", according to the
the return of the typewriter. The defendant delivered the typewriter in a appealed decision. For such contravention, as appellant contends, he is liable under
wrapped package. Article 1167 of the Civil Code. jam quot, for the cost of executing the obligation in a
● On reaching home, the plaintiff examined the typewriter returned to him by proper manner. The cost of the execution of the obligation in this case should be the
the defendant and found out that the same was in shambles, with the interior cost of the labor or service expended in the repair of the typewriter, which is in the
cover and some parts and screws missing. amount of P58.75. because the obligation or contract was to repair it.
In addition, the defendant-appellee is likewise liable, under Article 1170 of the Code,
for the cost of the missing parts, in the amount of P31.10, for in his obligation to repair
the typewriter he was bound, but failed or neglected, to return it in the same condition
it was when he received it.
DISPOSITIVE:
IN VIEW OF THE FOREGOING REASONS, the appealed judgment is hereby
modified, by ordering the defendant-appellee to pay, as he is hereby ordered to pay,
the plaintiff-appellant the sum of P89.85, with interest at the legal rate from the filing
of the complaint. Costs in all instances against appellee Fructuoso Gonzales.
Case Number #4 (KANG) The continuance and fulfillment of the contract of lease cannot be made to depend
solely and exclusively upon the free and uncontrolled choice of the lessees between
Encarnacion v. Baldomar continuing paying the rentals or not, completely depriving the owner of all say in the
G.R. No. L-264 | October 4, 1946 | Hilado, J.| En Banc| Kinds of Obligation; as matter.
to perfection and extinguishment
If this were allowed, so long as defendants elected to continue the lease by continuing
the payment of the rentals, the owner would never be able to discontinue it. Even if
Petitioner/Plaintiff: plaintiff-appellee, Vincente Singson Encarnacion
the lessor wanted to continue the lease, the lessee could effectively thwart his purpose
Respondent/Defendant: defendants-appellants, Jacinta Baldomar, et. al
if they should prefer to terminate the contract by the simple expedient of stopping
payment of the rentals. This is prohibited by article 1256 of the (old) civil code.
Nature of the Action: Appeal from judgment of CFI
DISPOSITIVE:
Doctrine: The continuance and fulfillment of the contract of lease cannot be made
Upon the whole, we are clearly of opinion that the judgment appealed from should be,
to depend solely and exclusively upon the free and uncontrolled choice of the
as it is hereby, affirmed, with the costs of the three instances to appellantes.
lessees between continuing paying the rentals or not, completely depriving the
So ordered.
owner of all say in the matter.
FACTS:
1. Vincente Singson Encarnacion is the owner of the house (numbered 589 Legarda
Street, Manila) leased the said house to Jacinto Baldomar and her son, Lefrado
Fernando, monthly basis, rental of P35. Six years ago.
2. After the liberation of Manila from war, and in need of new office, Encarnacion
notified the defendants, to vacate the said house on or before April 15, 1945.
3. Despite demand, defendants continued their occupancy.
4. When the case was filed in the MTC, the defendants were not able to pay the
monthly rental, MTC ordered the defendants to pay for the same from May 1, 1945
until they vacate the premises.
5. The defendants filed a motion to dismiss when the case was appealed to the CFI on
the grounds that CFI had no jurisdiction over the subject matter.
6. CFI: denied the motion to dismiss on the ground that plaintiff had waived said claim
for damages in the MTC, hence the same waiver was understood to have been made
in the CFI.
ISSUES: w/n the validity and fulfillment of an obligation (to pay and occupy the
house) can be left to the exclusive will of the lessee (obligor) – No.
RULING:
Case Number #5 (MANLONGAT) argued that the duration of the lease depends upon the will of the lessor on the basis of
Eleizegui v Lawn Tennis Club Art. 1581 which provides that, "When the term has not been fixed for the lease, it is
G.R. No. 967 | May 19, 1903 | Arellano, C.J.| En Banc| Obligation with a term: understood to be for years when an annual rental has been fixed, for months when the
When may the court fix the period rent is monthly. . . ." The second clause of the contract provides as follows: "The rent
of the said land is fixed at 25 pesos per month."
Petitioner/Plaintiff: plaintiff-appellee, Dario and Gaudencio Eleizegui
3. The lower court ruled in favor of the Plaintiffs on the basis of Article 1581 of the
Respondent/Defendant: defendants-appellants, Manila Lawn Tennis Club
Civil Code, the law which was in force at the time the contract was entered into. It is
of the opinion that the contract of lease was terminated by the notice given by the
Doctrine: The Civil Code has made provision for such a case in all kinds of
plaintiff. The judgment was entered upon the theory of the expiration of a legal term
obligations. In speaking in general of obligations with a term it has supplied
which does not exist, as the case requires that a term be fixed by the courts under the
the deficiency of the former law with respect to the "duration of the term
provisions of article 1128 with respect to obligations which, as is the present, are
when it has been left to the will of the debtor," and provides that in this
terminable at the will of the obligee.
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
ISSUE:
entitled to demand the performance, and a debtor upon whom rests the
1. Whether or not the parties have agreed upon the duration of the lease
obligation to perform the undertaking. In bilateral contracts the contracting
2. Whether or not the lease depends upon the will of the lessee
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
RULING:
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
1. YES, the parties have agreed upon a term hence Art. 1581 is inapplicable.
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 legal term cannot be applied under Art 1581 as it appears that there was actually
an agreement between the parties as to the duration of the lease, albeit implied that the
FACTS: lease is to be dependent upon the will of the lessee. It would be absurd to accept the
1. A contract of lease was executed on January 25, 1980 over a piece of land owned argument of the plaintiff that the contract was terminated at its notice, given this
by the plaintiffs Eleizegui (Lessor) to the Manila Lawn Tennis Club, an English implication.
association (represented by Mr. Williamson) for a fixed consideration of P25 per
month and accordingly, to last at the will of the lessee. Under the contract, the lessee Interestingly, the contract should not be understood as one stipulated as a life tenancy,
can make improvements deemed desirable for the comfort and amusement of its and still less as a perpetual lease since the terms of the contract express nothing to this
members. It appeared that the plaintiffs terminated the lease right on the first month. effect, even if they implied this idea. If the lease could last during such time as the
The defendant is in the belief that there can be no other mode of terminating the lease lessee might see fit, because it has been so stipulated by the lessor, it would last, first,
than by its own will, as what they believe has been stipulated. as long as the will of the lessee — that is, all his life; second, during all the time that
he may have succession, inasmuch as he who contracts does so for himself and his
2. As a result the plaintiff filed a case for unlawful detainer for the restitution of the heirs. (Art. 1257 of the Civil Code.) The lease in question does not fall within any of
land claiming that article 1569 of the Civil Code provided that a lessor may judicially the cases in which the rights and obligations arising from a contract can not be
dispossess the lessee upon the expiration of the conventional term or of the legal term; transmitted to heirs, either by its nature, by agreement, or by provision of law.
the conventional term — that is, the one agreed upon by the parties; the legal term, in Moreover, being a lease, then it must be for a determinate period. (Art. 1543.) By its
defect of the conventional, fixed for leases by articles 1577 and 1581. The Plaintiffs
very nature it must be temporary, just as by reason of its nature, an emphyteusis must proposition concludes, "contracts whose term is left to the will of one of the
be perpetual, or for an unlimited period. (Art. 1608.) contracting parties must be fixed by the courts, . . . the conditions as to the term of this
lease has a direct legislative sanction," and he cites articles 1128. "In place of the
2. The duration of the lease does not depend solely upon the will of the Lessee ruthless method of annihilating a solemn obligation, which the plaintiffs in this case
(defendant). have sought to pursue, the Code has provided a legitimate and easily available
remedy. . . . The Code has provided for the proper disposition of those covenants, and
It cannot be concluded that the termination of the contract is to be left completely at a case can hardly arise more clearly demonstrating the usefulness of that provision
the will of the lessee simply because it has been stipulated that its duration is to be left than the case at bar."
to his will.
DISPOSITIVE: The lower court’s judgement is erroneous and therefore reversed
The Civil Code has made provision for such a case in all kinds of obligations. In and the case was remanded with directions to enter a judgment of dismissal of the
speaking in general of obligations with a term it has supplied the deficiency of the action in favor of the defendant, the Manila Lawn Tennis Club.
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.
RULING:
It is clear in the agreement, Exhibit "A", that the proceeds of the sale of the tobacco
Background of the Case:
should be turned over to the complainant as soon as the same was sold, or, that the
● Lim was found guilty of the crime of Estafa and was sentenced accordingly.
obligation was immediately demandable as soon as the tobacco was disposed of.
Likewise, to indemnify the offended party in the amount of P559.50 with
Hence, Article 1197 of the New Civil Code, which provides that the courts may
subsidiary imprisonment in case of insolvency, and to pay the cost.
fix the duration of the obligation if it does not fix a period, does not apply.
● CA: affirmed the decision of the lower court but modified the penalty
imposed to suffer an indeterminate penalty of prision correccional as
The argument that the petitioner was not an agent because Exhibit A does not say that
maximum and to pay the amount of P550.50 without subsidiary
she would be paid the commission if the goods were sold, the CA correctly resolved
imprisonment.
the matter. The fact that appellant received the tobacco to be sold at P1.30 per kilo and
FACTS:
the proceeds to be given to complainant as soon as it was sold, strongly negates transfer
● Lim, a business woman went to the house of Maria Ayroso and proposed to
of ownership of the goods to the petitioner. The agreement (Exhibit "A") constituted
sell Ayroso’s tobacco to which Ayroso agreed. The appellant was to receive
her as an agent with the obligation to return the tobacco if the same was not sold.
the overprice for which she could sell the tobacco.
● The negotiation was made in the presence of Salud Bantug, the plaintiff’s
DISPOSITIVE:
sister. Bantug drew the document which is now “Exhibit A”
ACCORDINGLY, the petition for review on certiorari is dismissed for lack of
merit. With costs
EXHIBIT A STATES:
'To Whom It May Concern:
This is to certify that I have received from Mrs. Maria de Guzman Vda. de
Ayroso, of Gapan, Nueva Ecija, six hundred fifteen kilos of leaf tobacco to be sold at
P1.30 per kilo. The proceed in the amount of Seven Hundred Ninety Nine Pesos and
50/100 (P799.50) will be given to her as soon as it was sold.'
Case Number #8 CEL ● Philippine Sugar Estates filed a complaint against JM Tuason Inc and
Gregorio Araneta Inc in the Court of First Instance, seeking to compel the
Araneta Inc v Phil Sugar Estates latter to comply with their obligation, as stipulated in the deed of sale,
GR No L-22558 | May 31 1967 | Reyes, JBL, J | En Banc | Art 1197 Obligations and/or to pay damages in the event they failed or refused to perform said
with a Period obligation
● Petitioner’s Contention: Action was premature since its obligation to
construct the streets was without a definite period which needs to be fixed
Petitioner: Gregorio Araneta, Inc
first by the court in a proper suit for that purpose before a complaint for
Respondent/Defendant: The Philippiine Sugar Estates Development Co, LTD
specific performance will prosper
● CFI Decision: ruled in favor of Gregorio Araneta Inc
Nature of the Action: Petition for Review by Certiorari
○ Philippine Sugar Estates moved for reconsideration and prayed
Doctrine: that the court fix a period within which Gregorio Araneta Inc within
Art 1197 involves a 2 step process which defendants will comply with their obligation to construct the
1) The Court must first determine that “the obligation does not fix a period” (or streets → granted
that the period is made to depend upon the will of the debtor), “but from the ○ Gregorio Araneta Inc opposed said motion, maintaining that
nature and circumstances it can be inferred that a period was intended” plaintiff's complaint did not expressly or impliedly allege and pray
2) The Court must then decide what period was “probably contemplated by the for the fixing of a period to comply with its obligation and that the
parties”. evidence presented at the trial was insufficient to warrant the fixing
of such a period
○ Gregorio Araneta presented a MR → denied. Hence, he appealed
to the CA
FACTS:
● Court of Appeals
● JM Tuason & Co though Gergorio Araneta Inc, sold a portion of their land in
○ declared that the fixing of a period was within the pleadings and that
Sta Mesa Heights Subdivision, Quezon City. It has an area of 43,034.4 sqm
there was no true change of theory after the submission of the case
and more or less for the sum of P430,514.00 to herein respondent Philippine
for decision since defendant-appellant Gregorio Araneta, Inc. itself
Sugar Estates.
squarely placed said issue by alleging in paragraph 7 of the
● The parties stipulated in the contract that
affirmative defenses contained in its answer which reads —
○ The buyer will build on the parcel of land the Sto Domingo church
and convent
"7. Under the Deed of Sale with Mortgage of July 28,
○ The seller will construct streets on the NE and NW and SW sides of
1950, herein defendant has a reasonable time within
the land herein sold so that the latter will be a block surrounded by
which to comply with its obligations to construct and
streets on all four sides; and the street on the NE side shall be named
complete the streets on the NE, NW and SW sides of
“Sto Domingo Avenue”
the lot in question; that under the circumstances, said
● The buyer (Philippine Sugar Estates) finished the Construction of the Church
reasonable time has not elapsed;
but the seller (Gergorio Araneta Inc) began construction of she streets but
● Hence, this petition for review by certiorari
was unable to finish the construction of the street in the NE side (named Sto
Domingo Ave) because a certain 3rd party, Manuel Abundo, who has been
ISSUES: Whether or not the parties agreed that Gregorio Araneta Inc should have
physically occupying a middle part thereof, refused to vacate the same
reasonable time to perform its part of the obligation
RULING:
● If the contract so provided, then there was a period fixed, a “reasonable time”;
and all that the court should have done was to determine if tht reasonable time
had already elapsed when suit was filed. If it had passed, then the court should
declare that petitioner had breached the contract, as averred in the complaint
and fix the resulting damages. On the other hand, if the reasonable time had
not yet elapsed, the court perforce was bound to dismiss the action for being
premature
● Art 1197 involves a 2 step process
3) The Court must first determine that “the obligation does not fix a
period” (or that the period is made to depend upon the will of the
debtor), “but from the nature and circumstances it can be inferred
that a period was intended”
4) The Court must then decide what period was “probably
contemplated by the parties”.
● In this connection, it is to be borne in mind that the contract shows that the
parties were fully aware that the land was occupied by squatters. As the
parties must have known that they could not take the law into their own hands,
but must resort to legal processes in evicting the squatters, they must have
realized that the duration of the suits to be brought would not be under their
control nor could the same be determined in advance.
● The conclusion is thus forced that the parties must have intended to defer the
performance of the obligations under the contact until the squatters were duly
evicted
DISPOSITIVE:
In view of the foregoing, the decision appealed from is reversed, and the time for the
performance of the obligations of petitioner Gregorio Araneta, Inc. is hereby fixed at
the date that all the squatters on affected areas are finally evicted therefrom.
Costs against respondent Philippine Sugar Estates Development, Co., Ltd. So ordered.
the rental fee could be resolved at a later time since "the matter is simple among
us", which alleged remark was supposedly taken by the spouses Co to mean that
Case Number #9 PANISALES the Contract of Lease had been renewed, prompting them to continue occupying
the subject premises and to forego their search for a substitute place to rent.
PACIFICA MILLARE v. HON. HAROLD M. HERNANDO, ANTONIO CO,
and ELSA CO 3. However, the lessor flatly denied ever having considered, much less offered,
GR No. L-55480 | June 30, 1987 | Feliciano, J. | First Division | Obligations with a renewal of the Contract of Lease.
a Term or Period
4. (ON RECORD) The variance in versions notwithstanding, the record shows
that on July 22, 1980, petitioner wrote the Co spouses requesting them to vacate
Petitioner: Pacifica Millare
the leased premises as she had no intention of renewing their contract. In reply,
Respondents: Hon. Harold M. Hernando, In his capacity as Presiding Judge of
the Co spouses reiterated their unwillingness to pay the increased rental which
the CFI of Abra, Second Judicial District, Branch I, Antonio Co, and Elsa Co
they considered “highly excessive, oppressive and contrary to existing laws”.
They also signified their intention to deposit the amount of rentals in court, in
Nature of the Action: Petition for Certiorari, Prohibition and Mandamus
view of petitioner’s refusal to accept their counter-offer.
Doctrine: Contractual terms and conditions created by a court for two parties are a
5. Another letter of demand from petitioner was then received by the Co spouses,
contradiction in terms. If they are imposed by a judge who draws upon his own
who responded by depositing the rentals for June and July (at P700 a month) in
private notions of what "morals, good customs, justice, equity and public policy"
court.
demand, the resulting "agreement" cannot, by definition, be consensual or
contractual in nature. It would also follow that such coerced terms and conditions
6. The Co spouses then filed a Complaint with the CFI of Abra against petitioner
cannot be the law as between the parties themselves. Contracts spring from the
seeking judgment:
volition of the parties. That volition cannot be supplied by a judge and a judge who
a. Ordering the renewal of the Contract of Lease at a rental rate of
pretends to do so, acts tyrannically, arbitrarily and in excess of his jurisdiction.
P700 a month and for a period of ten years;
b. Ordering the defendants to collect the sum of P1400 deposited
by them with the Court;
c. Ordering the defendant to pay damages in the amount of P50K.
In every case, the courts shall determine such period as may, under the circumstances,
ISSUE: W/N the Co spouses have a valid cause of action against petitioner? --NO.
have been probably contemplated by the parties. Once fixed by the courts, the period
cannot be changed by them."
RULING:
The first paragraph of Article 1197 is clearly inapplicable, since the Contract of
1. Paragraph 13 of the Contract of Lease of the parties reads as follows: Lease did in fact fix an original period of five years, which had expired. It is also
clear from paragraph 13 of the Contract of Lease that the parties reserved to themselves
"13. This contract of lease is subject to the laws and regulations of the government;
the faculty of agreeing upon the period of the renewal contract. The second paragraph
and that this contract of lease may be renewed after a period of five (5) years
(under the terms and conditions as win be mutually agreed upon by the parties of Article 1197 is equally clearly inapplicable since the duration of the renewal
at the time of renewal) . . ." period was not left to the will of the lessee alone, but rather to the will of both the
lessor and the lessee. Most importantly, Article 1197 applies only where a contract of
2. In respondent judge’s answer and comment, he urges that under the said lease clearly exists. Here, the contract was not renewed at all, there was in fact no
paragraph: contract at all the period of which could have been fixed.
"there was already a consummated and finished mutual agreement of the parties to 6. Contractual terms and conditions created by a court for two parties are
renew the contract of lease after five years; what is only left unsettled between the
a contradiction in terms. If they are imposed by a judge who draws upon his
parties to the contract of lease is the amount of the monthly rental; the lessor insists
P1,200 a month, while the lessee is begging P700 a month which doubled the P350 own private notions of what "morals, good customs, justice, equity and
monthly rental under the original contract . . . . In short, the lease contract has never public policy" demand, the resulting "agreement" cannot, by definition, be
expired because paragraph 13 thereof had expressly mandated that it is renewable…" consensual or contractual in nature. It would also follow that such coerced
terms and conditions cannot be the law as between the parties themselves.
3. Paragraph 13 of the Contract of Lease can only mean that the lessor and Contracts spring from the volition of the parties. That volition cannot be supplied
lessee may agree to renew the contract upon their reaching of an agreement by a judge and a judge who pretends to do so, acts tyrannically, arbitrarily and in
on the terms and conditions to be embodied in such renewal contract. Failure excess of his jurisdiction.
to reach agreement on the terms and conditions of the renewal contract will
of course prevent the contract from being renewed at all. DISPOSITIVE:
4. In this case, the lessor and the lessee conspicuously failed to reach an WHEREFORE, the Petition for Certiorari, Prohibition and Mandamus is granted. The
agreement both on the amount of the rental to be payable during the renewal term, Orders of the respondent judge in Civil Case No. 1434 dated 26 September 1980
and on the term of the renewed contract. (denying petitioner's motion to dismiss) and 4 November 1980 (denying petitioner's
motion for reconsideration), and the "Judgment by Default" rendered by the
5. The respondent judge cited Articles 1197 and 1670 of the Civil Code to respondent judge dated 26 November 1980, are hereby annulled and set aside and Civil
sustain the "Judgment by Default" by which he ordered the renewal of the lease Case No. 1434 is hereby dismissed. The temporary restraining order dated 21
for another term of five years and fixed monthly rental thereunder at P700.00 a November 1980 issued by this Court is hereby made permanent. No pronouncement
month. Article 1197 of the Civil Code provides as follows: as to costs.
Executive Officer and President, Candida A. Santos. The parties allegedly
agreed that Arco Pulp and Paper would either pay Dan T. Lim the value of
the raw materials or deliver to him their finished products of equivalent value.
Case Number # 11 AGUSTIN ● Dan T. Lim alleged that when he delivered the raw materials, Arco Pulp and
Paper issued a post-dated check dated April 18, 2007 in the amount of
ARCO PULP AND PAPER CO., INC. and CANDIDA A. SANTOS v. DAN 1,487,766.68 as partial payment, with the assurance that the check would not
T. LIM bounce. When he deposited the check on April 18, 2007, it was dishonored
GR No. 206806 | 25 June 2014 | Leonen, J. | Third Division | As to Plurality of for being drawn against a closed account.
Prestation – Alternative Obligation ● On the same day, Arco Pulp and Paper and a certain Eric Sy executed a
memorandum of agreement where Arco Pulp and Paper bound themselves to
deliver their finished products to Megapack Container Corporation, owned
Petitioners: Arco Pulp and Paper Co., Inc. and Candida A. Santos,
Respondent: DAN T. LIM, doing business under the name and style of quality by Eric Sy, for his account. According to the memorandum, the raw materials
papers & plastic products enterprises would be supplied by Dan T. Lim, through his company, Quality Paper and
Nature of the Action: A Petition for Review on Certiorari Plastic Products. The memorandum of agreement reads as follows:
Per meeting held at ARCO, April 18, 2007, it
Doctrine: has been mutually agreed between Mrs. Candida A.
Article 1199. A person alternatively bound by different prestations shall completely Santos and Mr. Eric Sy that ARCO will deliver 600 tons
perform one of them.
Test Liner 150/175 GSM, full width 76 inches at the
The creditor cannot be compelled to receive part of one and part of the other price of ₱18.50 per kg. to Megapack Container for Mr.
undertaking. Eric Sy’s account. Schedule of deliveries are as follows:
"In an alternative obligation, there is more than one object, and the fulfillment of It has been agreed further that the Local OCC
one is sufficient, determined by the choice of the debtor who generally has the right materials to be used for the production of the above Test
of election."The right of election is extinguished when the party who may exercise
Liners will be supplied by Quality Paper & Plastic
that option categorically and unequivocally makes his or her choice known.
Products Ent., total of 600 Metric Tons at ₱6.50 per kg.
The choice of the debtor must also be communicated to the creditor who must (price subject to change per advance notice). Quantity
receive notice of it since: The object of this notice is to give the creditor . . . of Local OCC delivery will be based on the quantity of
opportunity to express his consent, or to impugn the election made by the debtor, Test Liner delivered to Megapack Container Corp.
and only after said notice shall the election take legal effect when consented by the based on the above production schedule.
creditor, or if impugned by the latter, when declared proper by a competent court.
● On May 5, 2007, Dan T.Lim sent a letter to Arco Pulp and Paper demanding
payment of the amount of 7,220,968.31, but no payment was made to him.
FACTS: Dan T. Lim filed a complaint for collection of sum of money with prayer for
attachment with the Regional Trial Court, Branch 171, Valenzuela City, on
● Dan T. Lim works in the business of supplying scrap papers, cartons, and May 28, 2007. Arco Pulp and Paper filed its answer but failed to have its
other raw materials, under the name Quality Paper and Plastic Products, representatives attend the pre-trial hearing. Hence, the trial court allowed Dan
Enterprises, to factories engaged in the paper mill business. From February T. Lim to present his evidence ex parte.
2007 to March 2007, he delivered scrap papers worth 7,220,968.31 to Arco ● On September 19, 2008, the trial court rendered a judgment in favor of Arco
Pulp and Paper Company, Inc. (Arco Pulp and Paper) through its Chief Pulp and Paper and dismissed the complaint, holding that when Arco Pulp
and Paper and Eric Sy entered into the memorandum of agreement, novation "In an alternative obligation, there is more than one object, and the fulfillment of one
took place, which extinguished Arco Pulp and Paper’s obligation to Dan T. is sufficient, determined by the choice of the debtor who generally has the right of
Lim. election."32 The right of election is extinguished when the party who may exercise
● On January 11, 2013, the Court of Appeals rendered a decision reversing and that option categorically and unequivocally makes his or her choice known.33
setting aside the judgment dated September 19, 2008 and ordering Arco Pulp
and Paper to jointly and severally pay Dan T. Lim the amount of The choice of the debtor must also be communicated to the creditor who must receive
₱7,220,968.31 with interest at 12% per annum from the time of demand; notice of it since: The object of this notice is to give the creditor . . . opportunity to
₱50,000.00 moral damages; ₱50,000.00 exemplary damages; and ₱50,000.00 express his consent, or to impugn the election made by the debtor, and only after said
attorney’s fees. notice shall the election take legal effect when consented by the creditor, or if
● The appellate court ruled that the facts and circumstances in this case clearly impugned by the latter, when declared proper by a competent court.34
showed the existence of an alternative obligation. It also ruled that Dan T.
Lim was entitled to damages and attorney’s fees due to the bad faith exhibited According to the factual findings of the trial court and the appellate court, the original
by Arco Pulp and Paper in not honoring its undertaking. contract between the parties was for respondent to deliver scrap papers worth
● On one hand, petitioners argue that the execution of the memorandum of ₱7,220,968.31 to petitioner Arco Pulp and Paper. The payment for this delivery
agreement constituted a novation of the original obligation since Eric Sy became petitioner Arco Pulp and Paper’s obligation. By agreement, petitioner Arco
became the new debtor of respondent. They also argue that there is no legal Pulp and Paper, as the debtor, had the option to either (1) pay the price or(2) deliver
basis to hold petitioner Candida A. Santos personally liable for the transaction the finished products of equivalent value to respondent.35
that petitioner corporation entered into with respondent. The Court of
Appeals, they allege, also erred in awarding moral and exemplary damages The appellate court, therefore, correctly identified the obligation between the parties
and attorney’s fees to respondent who did not show proof that he was entitled as an alternative obligation, whereby petitioner Arco Pulp and Paper, after receiving
to damages. the raw materials from respondent, would either pay him the price of the raw materials
or, in the alternative, deliver to him the finished products of equivalent value.
ISSUES:
When petitioner Arco Pulp and Paper tendered a check to respondent in partial
Whether or not the obligation between the parties was an Alternative Obligation. payment for the scrap papers, they exercised their option to pay the price.
Respondent’s receipt of the check and his subsequent act of depositing it constituted
RULING: his notice of petitioner Arco Pulp and Paper’s option to pay.
The obligation between the parties was an alternative obligation. This choice was also shown by the terms of the memorandum of agreement, which
was executed on the same day. The memorandum declared in clear terms that the
The rule on alternative obligations is governed by Article 1199 of the Civil Code, delivery of petitioner Arco Pulp and Paper’s finished products would be to a third
which states: person, thereby extinguishing the option to deliver the finished products of equivalent
value to respondent.
Article 1199. A person alternatively bound by different prestations shall completely
perform one of them. DISPOSITIVE:
The creditor cannot be compelled to receive part of one and part of the other WHEREFORE, the petition is DENIED in part. The decision in CA-G.R. CV No.
undertaking. 95709 is AFFIRMED.
Petitioners Arco Pulp & Paper Co., Inc. and Candida A. Santos are hereby ordered
solidarily to pay respondent Dan T. Lim the amount of ₱7,220,968.31 with interest of
6% per annum at the time of demand until finality of judgment and its full satisfaction,
with moral damages in the amount of ₱50,000.00, exemplary damages in the amount
of ₱50,000.00, and attorney's fees in the amount of ₱50,000.00.
SO ORDERED.
Case Number # 10 (SOBREVEGA) the agreement, the innocent party will be entitled to an execution of the decision based
on this compromise agreement and the defaulting party agrees and hold themselves to
Ernesto V. Ronquillo v. Court of Appeals reimburse the innocent party for attorney’s fees, execution fees and other fees related
G.R. No. L-55138 | September 28, 1984 | CUEVAS, J | Second Division | Joint / with the execution.
Solidary Obligation · So filed a motion for execution when the debtors failed to pay the first tranche in
December 1979, but Ronquillo said they could not find So on December 24, the last
date for payment. Ronquillo and his co-debtor, Pilar Tan, later deposited half of the
Petitioner/Plaintiff: Ernesto V. Ronquillo P55,000 with the clerk of court because So at first wanted the full amount paid, but So
Respondent/Defendant: Court of Appeals and Antonio P. So later withdrew the deposited amount.
· The lower court however issued a motion for execution against the two other
Nature of the Action: Petition to review the Resolution dated June 30, 1980 of the co-debtors, for the remaining half of the initial payment. So moved for the
then Court of Appeals and the Order of said court dated August 20, 1980, denying execution of the order “against all defendants, jointly and severally.”
petitioner's motion for reconsideration of the above resolution. · Ronquillo opposed this, saying that the lower court’s order did not declare the
defendants’ liability to be solidary.
Doctrine: · The court however noted that only one-fourth of the debt had been paid, and
ordered a writ of execution for the remaining P82,500. The sheriff issued a notice of
Art. 1207. The concurrence of two or more debtors in one and the same obligation sale for certain appliances and furniture in Ronquillo’s residence to satisfy the debt.
does not imply that each one of the former has a right to demand, or that each one · Ronquillo filed an appeal with the Court of Appeals, which was then denied.
of the latter is bound to render, entire compliance with the prestation. There is a
solidary liability only when the obligation expressly so states, or when the law ISSUES: WON Ronquillo is solidarily liable with the other defendants in the civil
or the nature of the obligation requires solidarity. case
Art. 1208. If from the law, or the nature or the wording of the obligation to which
RULING: Yes. The term individually has the same meaning as collectively,
the preceding article refers the contrary does not appear, the credit or debt shall be
separately, distinctively, respectively or severally.
presumed to be divided into as many equal shares as there are creditors and debtors,
the credits or debts being considered distinct from one another, subject to the Rules
An agreement to be individually liable undoubtedly creates a several obligation
of Court governing the multiplicity of suits.
and a several obligation is one which binds himself to perform the whole
obligation.
FACTS: The Supreme Court noted that Ronquillo and his co-debtors individually and jointly
· This is a case of solidary liability. Ronquillo was one of four debtors for the sum agreed to pay the debt.
of P117, 498.98 from Antonio So. The amount represents the checks signed by the
debtors in exchange for foodstuffs delivered by So. On the issue as to the nature of the liability of Ronquillo, as one of the defendants,
· When they failed to pay, So filed a civil case for collection before the Court whether or not he is liable jointly or solidarily, Article 1207 and 1208 of the Civil
of First Instance of Rizal. Ronquillo and his co-debtors negotiated with So, who Code provides —
agreed to reduce the debt to P110,000, with the payment to be done in two instalments
of P55,000 each. Art. 1207. The concurrence of two or more debtors in one and the same obligation
· The compromise agreement stated that the debtors agreed to pay “individually does not imply that each one of the former has a right to demand, or that each one of
and jointly” before June 1980 and that in case of failure to comply with the terms of the latter is bound to render, entire compliance with the prestation. There is a solidary
liability only when the obligation expressly so states, or when the law or the nature of
the obligation requires solidarity.
Art. 1208. If from the law,or the nature or the wording of the obligation to which the
preceding article refers the contrary does not appear, the credit or debt shall be
presumed to be divided into as many equal shares as there are creditors and debtors,
the credits or debts being considered distinct from one another, subject to the Rules of
Court governing the multiplicity of suits.
“Clearly then, by the express term of the compromise agreement and the decision
based upon it, the defendants obligated themselves to pay their obligation
“individually and jointly”.
HELD: No. While it is true that where the insurance contract provides for indemnity
Doctrine: In solidary obligations, the creditor may enforce the entire obligation
against liability to third persons, such third persons can directly sue the insurer,
against one of the solidary debtors. On the other hand, insurance is defined as "a
however, the direct liability of the insurer under indemnity contracts against third party
contract whereby one undertakes for a consideration to indemnify another against
liability does not mean that the insurer can be held solidarily liable with the insured
loss, damage, or liability arising from an unknown or contingent event."
and/or the other parties found at fault. The liability of the insurer is based on contract;
that of the insured is based on tort.
FACTS: Malayan Insurance Co. issued a car comprehensive policy in favor Sio Choy In the case at bar, petitioner as insurer of Sio Choy, is liable to respondent Vallejos,
covering a jeep. The insurance coverage was for “own damage” not to exceed P600 but it cannot, as incorrectly held by the trial court, be made "solidarily" liable with the
and “third party liability” amounting to P20,000 two principal tortfeasors, namely respondents Sio Choy and San Leon Rice Mill, Inc.
1. While to policy was in force, the jeep, while driven by Campollo (San Leon For if petitioner-insurer were solidarily liable with said 2 respondents by reason of the
Rice Mil employee), collided with a bus operated by PANTRANCO, causing indemnity contract against third party liability — under which an insurer can be
damage to the insured jeep, injuries to the driver and respondent Vallejos, who directly sued by a third party — this will result in a violation of the principles
was one of the jeepney passenger underlying solidary obligation and insurance contracts.
2. Vallejos filed an action for damages against Sio Choy, Malayan, and
PANTRANCO In solidary obligation, the creditor may enforce the entire obligation against one of the
3. PANTRANCO’s defenses: the jeep was running at an excessive speed, and solidary debtors. On the other hand, insurance is defined as "a contract whereby one
that the bus stopped at the shoulder of the highway to avoid the jeep. Sio Choy undertakes for a consideration to indemnify another against loss, damage, or liability
failed to observe ordinary diligence in the selection and supervision of its arising from an unknown or contingent event."
employees
4. Sio Choy and Malayan’s defenses: the accident was solely imputable to CAB: The qualification made in the decision of the trial court to the effect that
PANTRANCO petitioner is sentenced to pay up to P20,000.00 only when the obligation to pay
P29,103.00 is made solidary, is an evident breach of the concept of a solidary
obligation
ISSUE: WON Malayan is entitled to be reimbursed by San Leon
CAB: Only respondents Sio Choy and San Leon Rice Mill, Inc. are solidarily liable to
the respondent Martin C. Vallejos for the amount of P29,103.00. Vallejos may enforce
the entire obligation on only one of said solidary debtors. If Sio Choy as solidary
debtor is made to pay for the entire obligation (P29,103.00) and petitioner, as insurer
of Sio Choy, is compelled to pay P20,000.00 of said entire obligation, petitioner would
be entitled, as subrogee of Sio Choy as against San Leon Rice Mills, Inc., to be
reimbursed by the latter in the amount of P14,551.50 (which is 1/2 of P29,103.00).
WHEREFORE, the petition is GRANTED. The decision of the trial court, as affirmed
by the Court of Appeals, is hereby AFFIRMED, with the modification above-
mentioned. Without pronouncement as to costs.
SO ORDERED.
of the deceased defendant pursuant to Section 6 of Rule 86 of the Rules of
Case Number #12 (ZUÑO) Court.
PHILIPPINE NATIONAL BANK v. INDEPENDENT PLANTERS SEC. 6. Solidary obligation of decedent.— the obligation of the decedent is solidary
ASSOCIATION, INC. with another debtor, the claim shall be filed against the decedent as if he were the only
G.R. No. L-28046 | May 16, 1983 | PLANA, J. | First Division | Actions debtor, without prejudice to the right of the estate to recover contribution from the
other debtor. In a joint obligation of the decedent, the claim shall be confined to the
portion belonging to him.
Plaintiff-appellant: PHILIPPINE NATIONAL BANK
Defendant-appellees: INDEPENDENT PLANTERS ASSOCIATION, INC.,
2. The appellant assails the order of dismissal, invoking its right of recourse
ANTONIO DIMAYUGA, DELFIN FAJARDO, CEFERINO VALENCIA,
against one, some or all of its solidary debtors under Article 1216 of the Civil
MOISES CARANDANG, LUCIANO CASTILLO, AURELIO VALENCIA,
Code —
LAURO LEVISTE, GAVINO GONZALES, LOPE GEVANA and BONIFACIO
LAUREANA
ART. 1216. The creditor may proceed against any one of the solidary debtors or some
or all of them simultaneously. The demand made against one of them shall not be an
Nature of the Action:
obstacle to those which may subsequently be directed against the others, so long as the
See: (1) in FACTS.
debt has not been fully collected.
Doctrine:
ISSUE: Whether or not the death of one defendant, in an action for collection of a sum
Article 1216 of the Civil Code grants the creditor the substantive right to seek
of money based on contract against all the solidary debtors, deprives the court of
satisfaction of his credit from one, some or all of his solidary debtors, as he deems
jurisdiction to proceed with the case against the surviving defendants. - NO.
fit or convenient for the protection of his interests; and if, after instituting a
collection suit based on contract against some or all of them and, during its
RULING:
pendency, one of the defendants dies, the court retains jurisdiction to continue the
1. Article 1216 grants the creditor the substantive right to seek satisfaction of
proceedings and decide the case in respect of the surviving defendants.
his credit from one, some or all of his solidary debtors, as he deems fit or
convenient for the protection of his interests; and if, after instituting a
Section 6, Rule 86 of the Revised Rules of Court cannot be made to prevail over
collection suit based on contract against some or all of them and, during its
Article 1216 of the New Civil Code, the former being merely procedural, while the
pendency, one of the defendants dies, the court retains jurisdiction to continue
latter, substantive.
the proceedings and decide the case in respect of the surviving defendants.
2. Construing Section 698 of the Code of Civil Procedure from whence the
aforequoted provision (Sec. 6, Rule 86) was taken, this Court held that where
FACTS: two persons are bound in solidum for the same debt and one of them dies, the
1. Appeal by the Philippine National Bank (PNB) from the Order of the Court whole indebtedness can be proved against the estate of the latter, the
of First Instance which dismissed PNB's complaint against several solidary decedent's liability being absolute and primary; and if the claim is not
debtors for the collection of a sum of money on the ground that one of the presented within the time provided by the rules, the same will be barred as
defendants (Ceferino Valencia) died during the pendency of the case, and against the estate.
therefore the complaint, being a money claim based on contract, should be 3. It is evident then that Rule 86 provides the procedure should the creditor
prosecuted in the testate or intestate proceeding for the settlement of the estate desire to go against the deceased debtor - but there is certainly nothing in
the said provision making compliance with such procedure a condition
precedent before an ordinary action against the surviving solidary debtors
could be entertained to the extent that failure to observe the same would
deprive the court jurisdiction to take cognizance of the action against the
surviving debtors.
4. Upon the other hand, the Civil Code expressly allows the creditor to
proceed against any one of the solidary debtors or some or all of them
simultaneously. There is, therefore, nothing improper in the creditor's filing
of an action against the surviving solidary debtors alone, instead of instituting
a proceeding for the settlement of the estate of the deceased debtor wherein
his claim could be filed.
5. The choice is undoubtedly left to the creditor to determine against whom
he will enforce collection. In case of the death of one of the solidary debtors
the creditor may, if he so chooses, proceed against the surviving solidary
debtors without necessity of filing a claim in the estate of the deceased
debtors. It is not mandatory for him to have the case dismissed against the
surviving debtors and file its claim in the estate of the deceased solidary
debtor.
6. As correctly argued by petitioner, if Section 6, Rule 86 of the Revised Rules
of Court were applied literally, Article 1216 of the New Civil Code would,
in effect, be repealed since under the Rules of Court, petitioner has no choice
but to proceed against the estate of Manuel Barredo only.
7. Obviously, this construction diminishes the Bank's right under the New Civil
Code. Such a construction is not sanctioned by the principle that a substantive
law cannot be amended by a procedural rule.
8. Otherwise stated, Section 6, Rule 86 of the Revised Rules of Court cannot
be made to prevail over Article 1216 of the New Civil Code, the former
being merely procedural, while the latter, substantive.
Nature of the Action: Petition for review on certiorari, assailing the decision and RTC: ruled in Adworld’s favor; declared Trnasworld and Ruks jointly and severally
resolution of the CA. liable to Adworld for damages. On the grounds that Transworld and Ruks negligent in
the construction of the collapsed billboard as they knew of the weak existing
Doctrine: Under Article 2194 of the CC, joint tortfeasors are solidarily liable as foundation.
principals, to the same extent and in the same manner as if they had performed the
wrongful act themselves. CA: denied Ruk’s appeal and affirmed the ruling of the RTC.
In People v. Velasco, “where several causes producing an injury are concurrent ISSUES: w/n CA correctly affirmed the ruling of the RTC declaring Ruks jointly
and each is an efficient cause without which the injury would not have happened, and severally liable with Transworld for damages sustained by Adworld – YES.
the injury may be attributed to all or any of the causes and recovery may be had
against any or all of the responsible persons.” RULING:
Jurisprudence defines negligence as the omission to do something which a reasonable
There is no contribution between joint tortfeasors whose liability is solidary since man, guided by those considerations which ordinarily regulate the conduct of human
both of them are liable for the total damage. affairs, would do, or the doing of something which a prudent and reasonable man
would not do. It is the failure to observe for the protection of the interests of another
person that degree of care, precaution, and vigilance which the circumstances justly
FACTS: demand, whereby such other person suffers injury.
WHEREFORE, the petition is DENIED. The Decision dated November 16, 2011
Transworld's initial construction of its billboard's lower structure without the proper and the Resolution dated December 10, 2012 of the Court of Appeals in CA-G.R.
foundation, and that of Ruks's finishing its upper structure and just merely assuming CV No. 94693 are hereby AFFIRMED.
that Transworld would reinforce the weak foundation are the two (2) successive acts
which were the direct and proximate cause of the damages sustained by Adworld.
Ruks and Transworld were fully aware that the foundation for the former’s billboard
was weak, yet neither of them took any positive step to reinforce the same. No repair
was done. Hence they should be held liable in the collapse of the billboard structure.
● For the waiver to be clear and unequivocal, the person waiving the right
should understand what she is waiving and the effect of such waiver.
● Colipano could not have clearly and unequivocally waived her right to claim
damages when she had no understanding of the right she was waiving and the
extent of that right. Worse, she was made to sign a document written in a
language she did not understand.
● The fourth requirement for a valid waiver is also lacking as the waiver, based
on the attendant facts, can only be construed as contrary to public policy.
● Waiver was considered offensive to public policy because it was shown that
the passenger was still in the hospital and was dizzy when she signed the
document.
FACTS: RTC: Kodak presented evidence ex-parte. The RTC issued the decision in favor of
● The Lam SPS entered into an agreement for the sale of 3 units of Kodak Kodak, ordering the seizure of the Minilab Equipment. Due to this, they were able to
Minilab System 22XL in the amount of P1,796,000.00 per unit. With the obtain a Writ of Seizure for the equipment located at Tagum, Davao Province.
following terms: (sorry mahaba but important syafor the facts):
○ Said Minilab Equipment packages will avail a total of 19% multiple CA: The Lam SPS then filed in the CAa Petition to Set Aside the Orders issued by the
order discount based on prevailing equipment price provided said RTC. It was granted and the case was remanded back to the RTC for pre-trial
equipment packages will be purchased not later than June 30, 1992.
○ 19% Multiple Order Discount shall be applied in the form of RTC PRE-TRIAL: RTC DISMISSED the case and ordered Kodak to pay Lam SPS.
merchandise and delivered in advance immediately after signing of It was found that Kodak defaulted in the performance of their obligation. It held that
the contract. * Also includes start-up packages worth P61,000.00. Kodak Philippines, Ltd.'s failure to deliver two (2) out of the three (3) units of the
○ NO DOWNPAYMENT. Minilab Equipment caused the Lam Spouses to stop paying for the rest of the
○ Minilab Equipment Package shall be payable in 48 monthly installments.
installments at THIRTY FIVE THOUSAND PESOS (P35,000.00)
inclusive of 24% interest rate for the 8rst 12 months; the balance
● The RTC noted that while the Letter Agreement did not specify a period In its letter, Kodak demanded that the Lam SPS surrender the 1 delivered unit along
within which the delivery of all units was to be made, the NCC provides with its standard accessories. Likewise, the Lam SPS rescinded its contract through its
“reasonable time” as the standard period of compliance under Par. 2 Art. 1521 letter on account of Kodak’s breach of obligations. Due to this, “both parties must be
● [IMPORTANT] Kodak failed to give sufficient explanation for its failure to restored to their original situation”. Extinguishing the obligation as if it was never
deliver all 3 purchased units w/in a reasonable time. The RTC held that there created.
should have been simultaneous delivery even if only 2 payment by
installment was honored. Kodak was not at liberty to determine the
defendant’s capacity to pay
● Lam SPS (questioning the damages to be awarded for them lang) and Kodak ISSUES:
both filed for an appeal. However, CA dismissed it for Kodak for failure to 1. [PERTINENT ISSUE] W/N the contracts between Lam SPS and Kodak
file its appellant’s brief. pertained to obligations that are SEVERABLE, DIVISIBLE, and
SUSCEPTIBLE of PARTIAL PERFORMANCE under art 1225 of the NCC
CA: [IMPORTANT] Affirmed with MODIFICATIONS the decision of the RTC. - NO.
Under Article 1225 of the NCC, their obligation DIVISIBLE. It states that:
RULING:
“In determining the divisibility of an obligation, the following factors may be 1. The letter agreement contained an INDIVISIBLE OBLIGATION. The
considered, to wit: (1) the will or intention of the parties, which may be expressed or intention of the parties is for there to be a single transaction covering all three
presumed; (2) the objective or purpose of the stipulated prestation; (3) the nature of (3) units of the Minilab Equipment. Respondent’s obligation was to deliver
the thing; and (4) provisions of law affecting the prestation” all products purchased under a "package," and, in turn, petitioners’ obligation
was to pay for the total purchase price, payable in installments.
The CA held that the intention of the parties is to be bound SEPARATELY for
each Minilab Equipment. Under such principle, Sps. Lam shall be liable for the entire The intention of the parties to bind themselves to an indivisible obligation can be
amount of the purchase price of the Minilab Equipment delivered considering that further discerned through their direct acts in relation to the package deal. There was
Kodak had already completely fulfilled its obligation to deliver the same. only one agreement covering all three (3) units of the Minilab Equipment and their
accessories. The Letter Agreement specified only one purpose for the buyer, which
The CA also held that their contract was “Severable in Character” - "If the part to be was to obtain these units for three different outlets. If the intention of the parties were
performed by one party consists in several distinct and separate items and the price is to have a divisible contract, then separate agreements could have been made for each
apportioned to each of them, the contract will generally be held to be severable.” Minilab Equipment unit instead of covering all three in one package deal. Furthermore,
Considering this, Kodak's breach of its obligation to deliver the other two (2) the 19% multiple order discount as contained in the Letter Agreement was applied to
equipment cannot bar its recovery for the full payment of the equipment already all three acquired units. The "no downpayment" term contained in the Letter
delivered. As far as Kodak is concerned, it had already fully complied with its Agreement was also applicable to all the Minilab Equipment units. Lastly, the fourth
separable obligation to deliver the first unit of Minilab Equipment. clause of the Letter Agreement clearly referred to the object of the contract as "Minilab
Equipment Package."
CA’s Discussion on RECISSION: The recission was based on Art. 1191 of the NCC
which provides: In ruling that the contract between the parties intended to cover divisible obligations,
the Court of Appeals highlighted: (a) the separate purchase price of each item; (b)
“The power to rescind obligations is implied in reciprocal ones, in case one petitioners’ acceptance of separate deliveries of the units; and (c) the separate payment
of the obligors should not comply with what is incumbent upon him.” arrangements for each unit. However, through the specified terms and conditions, the
tenor of the Letter Agreement INDICATED AN INTENTION FOR A SINGLE
TRANSACTION This intent must prevail even though the articles involved are The court shall decree the rescission claimed, unless there be just cause authorizing
physically separable and capable of being paid for and delivered individually, the fixing of a period.
consistent with the New Civil Code: Article 1225. For the purposes of the preceding
articles, obligations to give definite things and those which are not susceptible of Rescission under Article 1191 has the effect of mutual restitution. In Velarde v. Court
partial performance shall be deemed to be indivisible. When the obligation has for its of Appeals: Rescission abrogates the contract from its inception and requires a mutual
object the execution of a certain number of days of work, the accomplishment of work restitution of benefits received.
by metrical units, or analogous things which by their nature are susceptible of partial
performance, it shall be divisible. However, even though the object or service may The Court of Appeals correctly ruled that both parties must be restored to their original
be physically divisible, an obligation is indivisible if so provided by law or situation as far as practicable, as if the contract was never entered into. Petitioners
intended by the parties. must relinquish possession of the delivered Minilab Equipment unit and accessories,
while respondent must return the amount tendered by petitioners as partial payment
In Nazareno v. Court of Appeals, the indivisibility of an obligation is tested for the unit received. Further, respondent cannot claim that the two (2) monthly
against whether it can be the subject of partial performance: An obligation is installments should be offset against the amount awarded by the Court of Appeals to
indivisible when it cannot be validly performed in parts, whatever may be the nature petitioners because the effect of rescission under Article 1191 is to bring the parties
of the thing which is the object thereof. The indivisibility refers to the prestation and back to their original positions before the contract was entered into.
not to the object thereof. In the present case, the Deed of Sale of January 29, 1970
supposedly conveyed the six lots to Natividad. The obligation is clearly indivisible When rescission is sought under Article 1191 of the Civil Code, it need not be
because the performance of the contract cannot be done in parts, otherwise the value judicially invoked because the power to resolve is implied in reciprocal
of what is transferred is diminished. Petitioners are therefore mistaken in basing the obligations. The right to resolve allows an injured party to minimize the damages he
indivisibility of a contract on the number of obligors. or she may suffer on account of the other party’s failure to perform what is incumbent
upon him or her. When a party fails to comply with his or her obligation, the other
There is no indication in the Letter Agreement that the units petitioners ordered were party’s right to resolve the contract is triggered. The resolution immediately produces
covered by three (3) separate transactions. The factors considered by the Court of legal effects if the non-performing party does not question the resolution. Court
Appeals are mere incidents of the execution of the obligation, which is to deliver three intervention only becomes necessary when the party who allegedly failed to comply
units of the Minilab Equipment on the part of respondent and payment for all three on with his or her obligation disputes the resolution of the contract. Since both parties in
the part of petitioners. The intention to create an indivisible contract is apparent from this case have exercised their right to resolve under Article 1191, there is no need for
the benefits that the Letter Agreement afforded to both parties. a judicial decree before the resolution produces effects.
DISPOSITIVE:
WHEREFORE, the Petition is DENIED. The Amended Decision dated
September 9, 2005 is AFFIRMED with MODIFICATION
The injured party may choose between the fulfilment and the rescission of the
obligation, with the payment of damages in either case. He may also seek rescission,
even after he has chosen fulfilment, if the latter should become impossible.
Case Number #18 CEL ● To secure this payment, Espiritu mortgaged to Bachrach the said truck
purchased and trucks no. 77197 and 92744 (the same trucks that were
The Bachrach Motor Co Inc v Espiritu mortgaged in the purchase of the other truck in GR 28497)
GR No28497-98 | Nov 6 1928 | Avacena, CJ | En Banc | Obligations with a ● Espiritu failed to pay P4,208.28
Penal Clause In both sales, it was agreed that 12% interest would be paid upon the unpaid portion
of the price at the execution of the contracts, and in case of non-payment of the total
debt upon its maturity 25% thereon, as penalty
Plaintiff-Appellee: The Bachrach Motor Co., Inc.
Defendant-Appellant: Faustino Espiritu and Rosario Espiritu as Intervenor-
In addition to the mortgage deeds, Espiritu also signed a promissory note solidarily
appellant
with his brother for the several sums secured by the two mortgages
Nature of the Action: Appeal
Rosario Espiritu appeared in these two cases as intervenor, alleging to be the exclusive
owner of the two White trucks Nos. 77197 and 92744, which appear to have been
Doctrine: Article 1152 of the Civil Code permits the agreement upon a penalty
mortgaged by the defendant to the plaintiff.
apart from the interest. Should there be such an agreement, the penalty does not
include the interest, and as such the two are different and distinct things which may
While these two cases were pending in the lower court the mortgaged trucks were sold
be demanded separately.
by virtue of the mortgage, all of them together bringing in, after deducting the sheriff's
fees and transportation charges to Manila, the net sum of P3,269.58.
Art 1164 - When obligation is partially performed, the court is allowed to reduce
the penalty imposed therein
ISSUES: W/N the 25% penalty upon the debt plus the 12% per annum makes the
contract usurious - NO
FACTS:
GR 28497 RULING:
● July 28 1925: Espiritu purchased from Bachrach a two-ton white truck for Article 1152 of the Civil Code permits the agreement upon a penalty apart from the
P11,983.50, paying P1,000 down to apply to account of its price, and interest. Should there be such an agreement, the penalty, as was held in the case of
obligating himself to pay the remaining P10,983.50 within the period agreed Lopez vs. Hernaez, does not include the interest, and as such the two are different and
upon distinct things which may be demanded separately.
● To secure the payment of this sum, Espiritu mortgaged the said truck According to this, the penalty is not to be added to the interest for the determination
purchased, and besides three others (two of which are numbered 77197 and of whether the interest exceeds the rate fixed by the law, since said rate was fixed only
92744) , and all of the White trucks for the interest. But considering that the obligation was partly performed, and making
○ The two trucks (77197 and 92744) were purchased and were fully use of the power given to the court by article 1154 of the Civil Code, this penalty is
paid for by Espirut and his brother, Rosario Espiritu reduced to 10 per cent of the unpaid debt
● Espiritu then failed to pay P10.477.82 of the price secured by his mortgage
GR 28498 DISPOSITIVE:
● Feb 18 1925 Espiritu bought a one-ton White truck for the sum of P7,136.59, With the sole modification that instead of 25 per cent upon the sum owed, the
and after having deducted the P500 cash payment and the 12% annual interest defendants need to pay only 10 per cent thereon as penalty, the judgment appealed
of the unpaid principal, obligated himself to make payments of this sum from is affirmed in all other respects without special pronouncement as to costs. So
within the period agreed upon ordered.
VENDEE the total amount already paid for, plus an interest at the rate of 4% per
annum."
Case Number #19 PANISALES
5. Notwithstanding the lapse of the said period of six months, the corporation
ROBES-FRANCISCO REALTY & DEVELOPMENT CORPORATION v.
failed to cause the issuance of the corresponding TCT of the lot sold to Millan.
COURT OF FIRST INSTANCE OF RIZAL (BRANCH XXIV), and LOLITA
This prompted Millan to file a Complaint for Specific Performance and Damages
MILLAN
against petitioner with the CFI of Rizal.
GR No. L-41093 | October 30, 1978 | Munoz Palma, J. | First Division |
Presence of an Accessory Undertaking in case of Breach
6. The complaint prayed for judgment:
a. Ordering the reformation of the Deed of Absolute Sale;
Petitioner: Robes-Francisco Realty and Development Corporation b. Ordering the defendant to deliver to plaintiff the certificate of
Respondents: Court of First Instance of Rizal (Branch XXIV) and Lolita title over the lot free from any lien or encumbrance;
Millan c. Should this be not possible, to pay plaintiff the value of the lot
which should not be less than P27,600 (allegedly the present
Nature of the Action: Direct appeal from a Decision of the CFI estimated value of the lot; and
d. Ordering the defendant to pay the plaintiff damages, corrective
Doctrine: Nominal damages are not intended for indemnification of loss suffered and actual in the sum of P15k.
but for the vindication or recognition of a right violated or invaded. They are
recoverable where some injury has been done the amount of which the evidence 7. In its answer, the corporation prayed that the complaint be dismissed alleging
fails to show, the assessment of damages being left to the discretion of the court that the deed of absolute sale was voluntarily executed between the parties and
according to the circumstances of the case. the interest of the plaintiff was amply protected by the provision in said contract
for payment of interest at 4% per annum of the total amount paid, for the delay in
the issuance of the title.
FACTS: 8. CFI RULING: Finding that the realty corporation failed to cause the issuance
1. In May 1962, petitioner Robes-Francisco Realty & Development Corp. agreed of the corresponding transfer certificate of title because the parcel of land
to sell to private respondent Lolita Millan a piece of land in Caloocan City for the conveyed to Millan was included among other properties of the corporation
amount of P3864, payable in installments. mortgaged to the GSIS to secure an obligation of P10 million and that the owner's
2. Respondent Millan complied with her obligation under the contract and paid duplicate certificate of title of the subdivision was in the possession of the GSIS,
the installments stipulated therein, the final payment of P5,193.63 having been the CFI held petitioner corporation liable to Millan. It ordered that the Deed of
made on December 1971. Absolute Sale be registered in the name of Millan. It also ordered the payment of
3. Thereafter, Millan made repeated demands upon the corporation for the nominal damages and payment of attorney’s fee.
execution of the final deed of sale and the issuance to her of the TCT over the lot.
4. In March 1973, the parties executed a deed of absolute sale of the 9. Petitioner corporation then filed this case questioning the award for nominal
aforementioned parcel of land. In contained this particular provision: damages of P20,000.00 and attorney's fee of P5,000.00 which are allegedly
excessive and unjustified.
"That the VENDOR further warrants that the transfer certificate of title of the above
described parcel of land shall be transferred in the name of the VENDEE within the
period of six (6) months from the date of full payment and in case the VENDOR fails ISSUE: W/N the CFI erred in awarding nominal damages to petitioner? NO but the
to issue said transfer certificate of title, it shall bear the obligation to refund to the circumstances of the case warrant a reduction of the amount.
RULING: 6. Under the foregoing provisions nominal damages are not intended for
1. There can be no dispute in this case under the pleadings and the admitted facts indemnification of loss suffered but for the vindication or recognition of a
that petitioner corporation was guilty of delay, amounting to nonperformance of right violated or invaded. They are recoverable where some injury has been done
its obligation, in issuing the transfer certificate of title to vendee Millan who had the amount of which the evidence fails to show, the assessment of damages being
fully paid up her installments on the lot bought by her. Article 1170 of the Civil left to the discretion of the court according to the circumstances of the case.
Code expressly provides that those who in the performance of their
obligations are guilty of fraud, negligence, or delay, and those who in any 7. The circumstances of a particular case will determine whether or not the
manner contravene the tenor thereof are liable for damages. amount assessed as nominal damages is within the scope or intent of the law, more
particularly, Article 2221 of the Civil Code.
2. Petitioner contends that the deed of absolute sale executed between the parties
stipulates that should the vendor fail to issue the transfer certificate of title within 8. In this case, the Court of the view that the amount of P20,000.00 is
six months from the date of full payment, it shall refund to the vendee the total excessive. The admitted fact that petitioner corporation failed to convey a transfer
amount paid for with interest at the rate of 4% per annum, hence, the vendee is certificate of title to respondent Millan because the subdivision property was
bound by the terms of the provision and cannot recover more than what is agreed mortgaged to the GSIS does not in itself show that there was bad faith or fraud.
upon. Bad faith is not to be presumed. Moreover, there was the expectation of the vendor
that arrangements were possible for the GSIS to make partial releases of the
3. Presumably, petitioner is invoking Article 1226 of the Civil Code which subdivision lots from the overall real estate mortgage. It was simply unfortunate
provides that in obligations with a penal clause, the penalty shall substitute the that petitioner did not succeed in that regard.
indemnity for damages and the payment of interests in case of noncompliance, if
there is no stipulation to the contrary. 9. In case of breach of contract, exemplary damages may be awarded if the
guilty party acted in wanton, fraudulent, reckless, oppressive or malevolent
4. We would agree with petitioner if the clause in question were to be considered manner. Furthermore, exemplary or corrective damages are to be imposed by
as a penal clause. Nevertheless, for very obvious reasons, said clause does not way of example or correction for the public good, only if the injured party
convey any penalty, for even without it, pursuant to Article 2209 of the Civil has shown that he is entitled to recover moral, temperate or compensatory
Code, the vendee would be entitled to recover the amount paid by her with damages. Here, respondent Millan did not submit any evidence to prove that
legal rate of interest which is even more than the 4% provided for in the she suffered actual or compensatory damages.
clause.
10. The sum of Ten Thousand Pesos (P10K) by way of nominal damages is fair
5. The facts show that the right of the vendee to acquire title to the lot brought and just under the following circumstances, viz: respondent Millan bought the lot
by her was violated by petitioner and this entitles her at the very least to nominal from petitioner in May, 1962, and paid in full her installments on December 22,
damages. The relevant provisions are: 1971, but it was only on March 2, 1973, that a deed of absolute sale was executed
in her favor, and notwithstanding the lapse of almost three years since she made
"Art. 2221. Nominal damages are adjudicated in order that a right of the plaintiff, her last payment, petitioner still failed to convey the corresponding transfer
which has been violated or invaded by the defendant, may be vindicated or
certificate of title to Millan who accordingly was compelled to file the instant
recognized, and not for the purpose of indemnifying the plaintiff for any loss
suffered by him." complaint in August of 1974.
"Art. 2222. The court may award nominal damages in every obligation arising DISPOSITIVE: PREMISES CONSIDERED, We modify the decision of the trial
from any source enumerated in article 1157, or in every case where any property
court and reduce the nominal damages to Ten Thousand Pesos (P10,000.00). In all
right has been invaded."
other respects the aforesaid decision stands.
· Subsequently, Yu Ping Kun filed an action to enforce a provision in their contract
of sale which states that any violation of the stipulations of that contract would entitle
the aggrieved party to liquidated damages in the amount of Php 10, 000 from the
Case Number # 20 (SOBREVEGA) offending party.
· RTC: Added to these two items of damages (P67, 174.17 as unrealized profits
Mariano C. Pamintuan v. Court of Appeals and P12, 282.26 as overpayment): (a) P10, 000 as stipulated liquidated damages, (b)
G.R. No. L-26339 | December 14, 1979 | AQUINO, J | Second Division | P10,000 as moral damages, (c) Pl,102.85 as premium paid by the company on the bond
Obligations with a Penal Clause of P102,502.13 for the issuance of the writ of preliminary attachment and (d) P10,000
as attorney's fees, or total damages of P110,559.28 (in favor of Yu Ping Kun).
· The CA found that Pamintuan was guilty of fraud because (1) he was able to
Petitioner/Plaintiff: Mariano C. Pamintuan make the company agree to change the manner of paying the price by falsely alleging
Respondent/Defendant: Court of Appeals and Yu Ping Kun Co., Inc. that there was a delay in obtaining confirmation of the suppliers' acceptance of the
offer to buy; (2) he caused the plastic sheetings to be deposited in the bonded
Nature of the Action: Recovery compensatory, damages for breach of a contract warehouse of his brother and then required his brother to make him Pamintuan), his
of sale in addition to liquidated damages. attorney-in-fact so that he could control the disposal of the goods; (3) Pamintuan, as
attorney-in-fact of the warehouseman, endorsed to the customs broker the warehouse
Doctrine: receipts covering the plastic sheetings withheld by him and (4) he overpriced the
plastic sheetings which he delivered to the company.
Art. 1226, par. 1. In obligations with a penal clause, the penalty shall substitute the · CA: Affirmed the RTC’s judgment with the modification that the moral
indemnity for damages and the payment of interests in case of noncompliance, if damages were disallowed.
there is no stipulation to the contrary. Nevertheless, damages shall be paid if the
obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the ISSUES: WON compensatory damages may be awarded for breach of a contract of
obligation. sale in addition to liquidated damages/stipulated penalty in the said contract
.
RULING: Yes. Compensatory damages may be awarded for breach of a contract
FACTS: of sale in addition to liquidated damages/stipulated penalty in the said contract.
· Mariano Pamintuan was in an agreement with Yu Ping Kun Co., Inc. to sell Paragraph 1 of Article 1226 of the New Civil Code states that:
plastic sheetings imported by the former from Japan through a barter license he had
for the export of white flint corn to Toyo Menka Kaisha, Ltd. “In obligations with a penal clause, the penalty shall substitute the indemnity
· While the plastic sheetings were arriving in Manila, Pamintuan informed the for damages and the payment of interests in case of noncompliance, if there
President of Yu Ping Kun that he was in dire need of cash and requested that he be is no stipulation to the contrary. Nevertheless, damages shall be paid if the
paid immediately for the plastic sheetings. Consequently, the two parties fixed a price obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the
to the plastic sheetings regardless of the kind, quality or actual invoice value thereof obligation.”
and based it on dividing the total price of the shipment with its aggregate quantity.
· After the shipments arrived in Manila (4 shipments in total), Pamintuan only Thus, as a general rule, the penalty takes the place of the indemnity for damages
delivered a portion or 224, 150 yards of the expected 339, 440 yards of plastic and the payment of interest. However there are exceptions to this rule under the
sheetings he received to Yu Ping Kun's warehouse. Civil Code, and one of them is; when the obligor is guilty of fraud in the fulfillment
· Furthermore, he delivered plastic sheetings of inferior quality that were valued of the obligation, indemnity for damages may be awarded in addition to and apart
at a lesser price than what Yu Ping Kun had paid. from the penalty stipulated.
The factual findings of the lower courts that Pamintuan was guilty of fraud because he
did not make a complete delivery of the plastic sheetings and he overpriced the same
is conclusive upon the Supreme Court.
Hence, based on this fact, Pamintuan should pay damages. However, in case of fraud
the creditor, Ping Kun, in addition to and apart from the stipulated penalty, may only
recover the difference between the actual proven damages and the stipulated penalty.
Art. 1229. The judge shall equitably reduce the penalty when the principal obligation
has been partly or irregularly complied with by the debtor. Even if there has been no
performance, the penalty may also be reduced by the courts if it is iniquitous or
unconscionable
● The reasonableness of a penalty depends on the circumstances in each case.
In resolving this issue, courts may consider factors including but not limited
to the type, extent and purpose of the penalty; the nature of the obligation;
the mode of the breach and its consequences; the supervening realities; and
the standing and relationship of the parties.
● Under the circumstances, it is neither fair nor reasonable to deprive depositors
and creditors of what could be their last chance to recoup whatever bank
assets or receivables the PDIC can still legally recover.
● Strict adherence to the doctrine of freedom of contracts, at the expense
of the rights of innocent creditors and investors, will only work injustice
rather than promote justice in this case. Such adherence may even be
misconstrued as condoning profligate bank operations. We cannot allow
this to happen.
Finally, in line with prevailing jurisprudence, legal interest at the rate of 6% per
annum is imposed on the monetary award computed from the finality of this
Decision until full payment.