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20. Zulueta v. Mariano, G.R. No.

L-29360, January 30, 1982 (111 SCRA 206)


DUE DATE: Oct 6 3PM KANG
Case Distribution: 21. Palay, Inc. v. Clave, G.R. No.L-56076, September 21, 1983 (124 SCRA
E. Breach of Obligations 638) RUTH
1. Honrado vs. GMA Network Films, Inc., G.R. No. 204702, January 14, 2015 22. Angeles v. Calasanz, G.R. No.L-4228, March 18, 1985 (135 SCRA 323)
KYLE RV
2. Cangco v. MRR, G.R. No. 12191, October 14, 1918 (38 Phil 768) 23. Boysaw v. Interphil Promotions, G.R. No. L-22590, March 20, 1987 (148
KANG SCRA 635) ANDREW
3. Telefast v. Castro, G.R. No.L-73867, February 29, 1988 (158 SCRA 445) 24. Pilipinas Bank v. IAC, G.R. No.L-67881, June 30, 1987 (151 SCRA 546)
RUTH CELINA
4. Meralco v. Ramoy, G.R. No. 158911. March 4, 2008 25. Central Bank v. CA, G.R. No.L-45710, October 3, 1985 (139 SCRA 46)
RV KAREN
5. Mindanao Terminal v. Phoenix Assurance, G.R. No. 162467 May 8, 2009 26. Unlad Resources Development v. Dragon, G.R. No. 149338, July 28, 2008
ANDREW ARJEAN
6. Jimenez v. City of Manila, 150 SCRA 510 27. Swire Realty Dev’t Corp. vs. Jayne Yu, G.R. No. 207133, March 9, 2015
CELINA JAO
7. Nakpil & Sons v. CA, 144 SCRA 596; 160 SCRA 334 28. Olivarez Realty v. Castillo, G.R. No. 196251, July 9, 2014
KAREN KYLE
8. Gilat Satellite Networks, Ltd. v. UCPB, G.R. No.189563, April 7, 2014 29. NCLPI v. Lica and PROTON, G.R. No. 176986; January 13, 2016
ARJEAN KANG
9. Rivera vs. Spouses Chua, G.R. No. 184458, January 14, 2015
JAO
10. Solar Harvest, Inc. v. Davao Corrugated Carton Corp., G.R. No. 176868 July
26, 2010
KYLE
11. Agcaoili v. GSIS, G.R. No. L-30056, August 30, 1988 (165 SCRA 1)
KANG
12. Arrieta v. Naric, bG.R. No. L-15645, January 31, 1964 (10 SCRA 79)
RUTH
13. Sicam v. Jorge, G.R. No. 159617 August 8, 2007
RV
14. NPC v. CA, G.R. No. L-47379, May 16, 1988 (161 SCRA 334)
ANDREW
15. Fil-Estate v. Sps. Ronquillo, G.R. No. 185798, January 13, 2014
CELINA
16. TMBI v. Feb Mitsui and Manalastas, G.R. No. 194121, July 11, 2016
KAREN
F. Remedies
17. Universal Food Corp. v. CA, G.R. No. L-29155, May 13, 1970 (33 SCRA
1) ARJEAN
18. Magdalena Estate v. Myrick, G.R. No.47774, March 14, 1941 (71 Phil
344) JAO
19. UP v. de los Angeles, G.R. No.L-28602, September, 29, 1970 (35 SCRA
102) KYLE
Case Number # (*Name*)

Case Name
GR No | Date | Ponente | Division or En Banc | Topic

NOTE: please indicate if petitioner/respondent or plaintiff-


appellant/defendant-appellee, etc.
Petitioner/Plaintiff:
Respondent/Defendant:

Nature of the Action:

Doctrine:

FACTS:
ISSUES:
RULING:
DISPOSITIVE:
Case Number 1 AGUSTIN Two of the films covered by the Agreement were Evangeline Katorse and Bubot for which
GMA Films paid ₱1.5 million each.
HONARDO V. GMA NETWORK FILMS, INC.
G.R. No. 204702 | January 14, 2015| Carpio, J. | Second Division | Breach of In 2003, GMA Films sued Ricardo in the RTC of QC to collect ₱1.6 million representing the
Obligations fee it paid for Evangeline Katorse (₱1.5 million) and a portion of the fee it paid for Bubot
(₱350,000). GMA Films alleged that it rejected Evangeline Katorse because "its running
time was too short for telecast" and Ricardo only remitted ₱900,000 to the owner of Bubot
Petitioner: Ricardo Honrado
Respondent: GMA Network Films, INC. (Juanita Alano [Alano]), keeping for himself the balance of ₱350,000. GMA Films prayed
Nature of the Action: Collection of sum of money for breach of contract and breach of for the return of such amount on the theory that an implied trust arose between the parties as
trust. petitioner fraudulently kept it for himself.
Doctrine:
The Agreement, as its full title denotes ("TV Rights Agreement"), is a licensing contract, Petitioner denied liability, counter-alleging that after GMA Films rejected Evangeline
the essence of which is the transfer by the licensor (petitioner) to the licensee (GMA Katorse, he replaced it with another film, Winasak na Pangarap, which GMA Films accepted.
Films), for a fee, of the exclusive right to telecast the films listed in the Agreement. As proof of such acceptance, petitioner invoked a certification of GMA Network, dated 30
Stipulations for payment of "commission" to the licensor is incongruous to the nature of March 1999, attesting that such film "is of good broadcast quality"7 (Film Certification).
such contracts unless the licensor merely acted as agent of the film owners. Nowhere in Regarding the fee GMA Films paid for Bubot, petitioner alleged that he had settled his
the Agreement, however, did the parties stipulate that petitioner signed the contract in such obligation to Alano. Alternatively, petitioner alleged that GMA Films, being a stranger to
capacity. On the contrary, the Agreement repeatedly refers to petitioner as "licensor" and the contracts he entered into with the owners of the films in question, has no personality to
GMA Films as "licensee." Nor did the parties stipulate that the fees paid by GMA Films question his compliance with the terms of such contracts. Petitioner counterclaimed for
for the films listed in the Agreement will be turned over by petitioner to the film owners. attorney’s fees.
Instead, the Agreement merely provided that the total fees will be paid in three
installments (Paragraph 3). ISSUE: Whether or not petitioner is liable for breach of contract.

RULING:
FACTS:
No. Under the stipulation stated in Paragraph 4 of the Agreement, what triggers the rejection
GMA films entered into a “TV Rights Agreement” with Ricardo, as licensor of 36 Films, and replacement of any film listed in the Agreement is the "disapproval" of its telecasting by
granted to GMA films, for a fee of ₱60.75 million, the exclusive right to telecast the 36 films MTRCB. Nor is there any dispute that GMA Films rejected Evangeline Katorse not because
for a period of three years. Paragraph 3 of the agreement: the TV station operated by GMA it was disapproved by MTRCB but because the film’s total running time was too short for
Network, Inc. (GMA Network), an affiliate of GMA Films. The parties also agreed to submit telecast (undertime). Instead of rejecting GMA Films’ demand for falling outside of the terms
the films for review by the Movie and Television Review and Classification Board of Paragraph 4, petitioner voluntarily acceded to it and replaced such film with Winasak na
(MTRCB). Pangarap. What is disputed is whether GMA Films accepted the replacement film offered by
petitioner.
Paragraph 4 of the agreement: “The PROGRAMME TITLES listed above shall be subject
to approval by the Movie and Television Review and Classification Board (MTRCB) and, On the other hand, GMA Films insists that such clearance pertained only to the technical
in the event of disapproval, LICENSOR [Petitioner] will either replace the censored quality of the film but not to its content which it rejected because it found the film as "bomba"
PROGRAMME TITLES with another title which is mutually acceptable to both parties or, (bold). The CA, working under the assumption that the ground GMA Films invoked to reject
failure to do such, a proportionate reduction from the total price shall either be deducted or Winasak na Pangarap was sanctioned under the Agreement, found merit in the latter’s claim.
refunded whichever is the case by the LICENSOR OR LICENSEE [GMA Films].”
We hold that regardless of the import of the Film Certification, GMA Films’ rejection of
Winasak na Pangarap finds no basis in the Agreement.

The Agreement, as its full title denotes ("TV Rights Agreement"), is a licensing contract, the
essence of which is the transfer by the licensor (petitioner) to the licensee (GMA Films), for
a fee, of the exclusive right to telecast the films listed in the Agreement. Stipulations for
payment of "commission" to the licensor is incongruous to the nature of such contracts unless
the licensor merely acted as agent of the film owners. Nowhere in the Agreement, however,
did the parties stipulate that petitioner signed the contract in such capacity. On the contrary,
the Agreement repeatedly refers to petitioner as "licensor" and GMA Films as "licensee."
Nor did the parties stipulate that the fees paid by GMA Films for the films listed in the
Agreement will be turned over by petitioner to the film owners. Instead, the Agreement
merely provided that the total fees will be paid in three installments (Paragraph 3).
We entertain no doubt that petitioner forged separate contractual arrangements with the
owners of the films listed in the Agreement, spelling out the terms of payment to the latter.
Whether or not petitioner complied with these terms, however, is a matter to which GMA
Films holds absolutely no interest. Being a stranger to such arrangements, GMA Films is no
more entitled to complain of any breach by petitioner of his contracts with the film owners
than the film owners are for any breach by GMA Films of its Agreement with petitioner.

DISPOSITIVE:
WHEREFORE, we GRANT the petition. The Decision, dated 30 April 2012 and Resolution,
dated 19 November 2012, of the Court of Appeals are SET ASIDE. The Decision, dated 5
December 2008, of the Regional Trial Court of Quezon City (Branch 223) is REINSTATED
with the MODIFICATION that the award of attorney's fees is DELETED.
SO ORDERED.
Case Number # 2 (KANG)
● As the train slowed down, another passenger got off the same car, alighting safely
Cangco v. MRR at the point where the platform begins to rise from the level off the ground. When
GR No 12191| October 14, 1918 | Fisher. J. | En Banc | Manner of Breach: Negligence the train proceeded a little farther, the plaintiff stepped off also but one or both of
his feet came in contact with a sack of watermelons with the result that his feet
slipped under him and he fell violently on the platform. His body at once rolled
Plaintiff-Appellant: Jose Cangco
from the platform and was drawn under the moving car, where his right arm was
Defendant-Appellee: Manila Railroad Co.
badly crushed and lacerated.
Nature of the Action: Petition to appeal the judgement of the CFI-Manila
● The presence of a sack of melons was because it was the customary season for
harvesting these melons and a large lot had been brought to the station for shipment
Doctrine:
to the market. They were contained in numerous tow sacks piled on the platform in
In case of extra-contractual culpa based upon negligence, it is necessary that there
shall have been some fault attributable to the defendant personally and that a row one upon another.
the liability created by article 1903 is imposed by reason of the breach of the
duties inherent in the special relations of authority or superiority existing ● The plaintiff was drawn from under the car in an unconscious condition, and it
between the person called upon to repair the damage and the one who, by his act appeared that the injuries which he had received were very serious. He was
or omission, was the cause of it. therefore brought at once to a certain hospital in the city of Manila where an
examination was made and his arm was amputated. It appears in evidence that the
Doctrine of Vicarious Liability. Negligence or Fault of the employee is the
plaintiff expended the sum of P790.25 in the form of medical and surgical fees and
negligence or Fault of the employer. Unless, employer acted with the diligence
for other expenses in connection with the process of his curation.
of a good father of a family to prevent such negligence or Fault.
● Plaintiff instituted this proceeding in the Court of First Instance of Manila to recover
FACTS: (facts from Karen) damages of the defendant company, founding his action upon the negligence of the
● At the time of the incident which gave rise to this litigation, plaintiff Jose Cangco servants and employees of the defendant in placing the sacks of melons upon the
was employed in the Manila Railroad Company as a clerk. He lived in San Mateo, platform and in leaving them so placed as to be a menace to the security of
Rizal which is located upon the line of the defendant railroad company. In coming passengers alighting from the company's trains.
home daily, he used the train by the company’s office in Manila where he worked
and used a pass supplied by the company which entitled him to ride the company’s CFI RULING: It ruled in favor of the defendant company. It found that although negligence
trains free of charge. was attributable to the defendant by reason of the fact that the sacks of melons were so placed
as to obstruct passengers passing to and from the cars, nevertheless, the plaintiff himself had
● On the side of the train where passengers alight at the San Mateo station, there is a failed to use due caution in alighting from the coach and was therefore precluded from
cement platform which begins to rise with a moderate gradient some distance away recovering.
from the company’s office and extends along in front of it for a distance sufficient
to cover the length of several coaches.
ISSUES: W/N there was a breach of obligations through negligence by the MRR? -
● During the time of the incident, the plaintiff was returning home by rail from work YES.
and as the train drew up to the station, he arose from his seat and made his exit
through the door, took his position upon the steps of the coach, seizing the upright RULING:
guardrail with his right hand for support. There was a breach of contract: its obligation being “to safely deliver the passenger”
● the contract of defendant to transport plaintiff carried with it, by implication, the
duty to carry him in safety and to provide safe means of entering and leaving its
trains (Civil Code, article 1258). That duty, being contractual, was direct and
immediate, and its non-performance could not be excused by proof that the
fault was morally imputable to defendant's servants.

● In this particular instance, that the train was barely moving when plaintiff alighted
is shown conclusively by the fact that it came to stop within six meters from the
place where he stepped from it. There is no reason to believe that plaintiff would
have suffered any injury whatever in alighting as he did had it not been for
defendant's negligent failure to perform its duty to provide a safe alighting
place.

● In the present case, there was no contributory negligence by the plaintiff,


considering that place was perfectly familiar to the plaintiff, as it was his daily
custom to get on and off the train at this station. There could, therefore, be no
uncertainty in his mind with regard either to the length of the step which he was
required to take or the character of the platform where he was alighting.

● The evidence shows that the plaintiff, at the time of the accident, was earning P25
a month as a copyist clerk, and that the injuries he has suffered have permanently
disabled him from continuing that employment. We are of the opinion that a fair
compensation for the damage suffered by him for his permanent disability is the
sum of P2,500, and that he is also entitled to recover of defendant the additional
sum of P790.25 for medical attention, hospital services, and other incidental
expenditures connected with the treatment of his injuries.

DISPOSITIVE: The decision of the lower court is reversed, and judgment is hereby
rendered plaintiff for the sum of P3,290.25, and for the costs of both instances. So ordered.
vacationing in the Philippines, addressed a telegram to plaintiff Ignacio Castro,
Case Number # 3 ( RUTH ) Sr. at 685 Wanda, Scottsburg, Indiana, U.S.A., 47170 announcing
Consolacion's death. The telegram was accepted by the defendant in its
Telefast v. Castro Dagupan office, for transmission, after payment of the required fees or charges.
GR No. 73867 | Feb 29, 2988 | Padilla, J. | 2 nd Division | Breach of Obligation – · The telegram never reached its addressee. Consolacion was interred with only
Damages from Negligence her daughter Sofia in attendance. Neither the husband nor any of the other
children of the deceased, then all residing in the United States, returned for the
burial.
Petitioner/Plaintiff: Telefast communications/Philippine Wireless, Inc.
· When Sofia returned to the United States, she discovered that the wire she had
Respondent/Defendant: Ignacio Castro, Sr., Sofia C. Crouch, Ignacio Castro, Jr.,
caused the defendant to send, had not been received. She and the other plaintiffs
Aurora Castro, Salvador Castro. Mario Castro, Conrado Castro, Esmeralda Floro,
thereupon brought action for damages arising from defendant's breach of
Agerico Castro, Rolando Castro, Virgilio Castro and Gloria Castro, and Honorable
contract. The case was filed in the Court of First Instance of Pangasinan. The
Intermediate Appellate Court
only defense of the defendant was that it was unable to transmit the
telegram because of "technical and atmospheric factors beyond its
Nature of the Action: Petition for review on certiorari of the decions of the
control." No evidence appears on record that defendant ever made any attempt
Intermediate Appellate Court
to advise the plaintiff Sofia C. Crouch as to why it could not transmit the
telegram.
Doctrine:
· The Court of First Instance of Pangasinan, after trial, ordered the defendant
Party who failed to transmit telegram liable thereon -
(now petitioner) to pay the plaintiffs (now private respondents) damages, as
In the case at bar, petitioner and private respondent Sofia C. Crouch entered into a contract
follows, with interest at 6% per annum:
whereby, for a fee, petitioner undertook to send said private respondent's message
o "1. Sofia C. Crouch, P31.92 and P16,000.00 as compensatory damages and P20,000.00
overseas by telegram. This, petitioner did not do, despite performance by said private as moral damages.
respondent of her obligation by paying the required charges. Petitioner was therefore o 2. Ignacio Castro Sr., P20,000.00 as moral damages.
guilty of contravening its obligation to said private respondent and is thus liable for o 3. Ignacio Castro Jr., P20,000.00 as moral damages.
damages under Articles 1170 and 2196 of the Civil Code. o 4. Aurora Castro, P10,000.00 moral damages.
o 5. Salvador Castro, P10,000.00 moral damages.
o 6. Mario Castro, P10,000.00 moral damages.
Party who suffered emotional suffering entitled - o 7. Conrado Castro, P10,000 moral damages.
We find Art. 2217 of the Civil Code applicable to the case at bar. It states: "Moral damages o 8. Esmeralda C. Floro, P20,000.00 moral damages.
include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, o 9. Agerico Castro, P10,000.00 moral damages.
wounded feelings, moral shock, social humiliation, and similar injury. Though incapable o 10. Rolando Castro, P10,000.00 moral damages.
of pecuniary computation, moral damages may be recovered if they are the proximate o 11. Virgilio Castro, P10,000.00 moral damages.
o 12. Gloria Castro, P10,000.00 moral damages.
results of the defendant's wrongful act or omission." Here, petitioner's act or omission,
o Defendant is also ordered to pay P5,000.00 attorney's fees, exemplary damages in the
which amounted to gross negligence, was precisely the cause of the suffering private amount of P1,000.00 to each of the plaintiffs and costs."
respondents had to undergo. · On appeal by petitioner, the Intermediate Appellate Court affirmed the trial
court's decision but eliminated the award of P16,000.00 as compensatory
FACTS: damages to Sofia C. Crouch and the award of P1,000.00 to each of the private
· On 2 November 1956, Consolacion Bravo-Castro, wife of plaintiff Ignacio respondents as exemplary damages. The award of P20,000.00 as moral
Castro, Sr. and mother of the other plaintiffs, passed away in Lingayen, damages to each of Sofia C. Crouch, Ignacio Castro, Jr. and Esmeralda C. Floro
Pangasinan. On the same day, her daughter Sofia C. Crouch, who was then was also reduced to P10,000.00 for each.
· Petitioner appeals from the judgment of the appellate court, contending that the · We also sustain the trial court's award of P16,000.00 as compensatory damages
award of moral damages should be eliminated as defendant's negligent act to Sofia C. Crouch representing the expenses she incurred when she came to
was not motivated by "fraud, malice or recklessness." the Philippines from the United States to testify before the trial court. Had
ISSUES: W/N petitioner is liable for damages arising from the breach of contract even petitioner not been remiss in performing its obligation, there would have been
though that there was a technical and atmospheric factors that lead to its failure to no need for this suit or for Mrs. Crouch's testimony.
comply with terms of the contract? YES. · The award of exemplary damages by the trial court is likewise justified and,
therefore, sustained in the amount of P1,000.00 for each of the private
RULING: respondents, as a warning to all telegram companies to observe due diligence
· Art. 1170 of the Civil Code provides that "those who in the performance of their in transmitting the messages of their customers.
obligations are guilty of fraud, negligence or delay, and those who in any DISPOSITIVE:
manner contravene the tenor thereof, are liable for damages." Art. 2176 also WHEREFORE, the petition is DENIED. The decision appealed from is modified so that
provides that "whoever by act or omission causes damage to another, there petitioner is held liable to private respondents in the following amounts:
being fault or negligence, is obliged to pay for the damage done." (1) P10,000.00 as moral damages, to each of private respondents;
· In the case at bar, petitioner and private respondent So􀀶a C. Crouch entered (2) P1,000.00 as exemplary damages, to each of private respondents;
into a contract whereby, for a fee, petitioner undertook to send said private (3) P16,000.00 as compensatory damages, to private respondent Sofia C. Crouch;
respondent's message overseas by telegram. This, petitioner did not do, despite (4) P5,000.00 as attorney's fees; and
performance by said private respondent of her obligation by paying the (5) Costs of suit.
required charges. Petitioner was therefore guilty of contravening its obligation
to said private respondent and is thus liable for damages.
· This liability is not limited to actual or quantified damages. To sustain
petitioner's contrary position in this regard would result in an inequitous
situation where petitioner will only be held liable for the actual cost of a
telegram fixed thirty (30) years ago.
· We find Art. 2217 of the Civil Code applicable to the case at bar. It states:
"Moral damages include physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar injury. Though incapable of pecuniary computation,
moral damages may be recovered if they are the proximate results of the
defendant's wrongful act or omission."
· Here, petitioner's act or omission, which amounted to gross negligence, was
precisely the cause of the suffering private respondents had to undergo.
· As the appellate court properly observed: "[Who] can seriously dispute the
shock, the mental anguish and the sorrow that the overseas children must have
suffered upon learning of the death of their mother after she had already been
interred, without being given the opportunity to even make a choice on whether
they wanted to pay her their last respects? There is no doubt that these
emotional sufferings were proximately caused by appellant's omission and
substantive law provides for the justification for the award of moral damages."
Case #4 (RV) 7. Meralco requested NPC for a joint survey to determine all the establishments
Manila Electric Company (MERALCO) v. Ramoy considered under NPC property since "the houses in the area are very close to each
G.R. No. 158911 | March 4, 2008 | Third Division | Austria-Martinez, J. | Breach of Obli - other". A joint survey was conducted.
Negligence 8. In due time, the electric service connection of the plaintiffs [herein respondents]
was disconnected.
PETITIONER: Manila Electric Company 9. Plaintiff Leoncio Ramoy testified that he and his wife are the registered owners of
RESPONDENT: Matilde Macabagdal Ramoy, Bienvenido Ramoy, Romana Ramoy- a parcel of land covered, a portion of which was occupied by plaintiffs Rosemarie
Ramos, Rosemarie Ramoy, Ofelia Durian And Cyrene Panado Ramoy, Ofelia Durian, Jose Valiza and Cyrene S. Panado as lessees.
10. When the Meralco employees were disconnecting plaintiffs' power connection,
DOCTRINE: Leoncio Ramoy objected by informing the Meralco foreman that his property was
1. Article 1170. Those who in the performance of their obligations are guilty of fraud, outside the NPC property and pointing out the monuments showing the boundaries
negligence, or delay, and those who in any manner contravene the tenor thereof, are of his property.
liable for damages. 11. However, he was threatened and told not to interfere by the armed men who
As per jurisprudence: "In culpa contractual x x x the mere proof of the existence of accompanied the Meralco employees. After the electric power in Ramoy's
the contract and the failure of its compliance justify, prima facie, a corresponding apartment was cut off, the lessees left the premises.
right of relief. 12. During the inspection ordered by the Court, it was found out that the residence of
2. Article 1173 also provides that: the fault or negligence of the obligor consists in the plaintiffs-spouses Leoncio and Matilde Ramoy was indeed outside the NPC
omission of that diligence which is required by the nature of the obligation and property. This was confirmed by witness R.P. Monsale. He also admitted that he
corresponds with the circumstances of the persons, of the time and of the place. did not inform his supervisor about this fact. Nor did Monsale recommend the re-
"As a public utility, MERALCO has the obligation to discharge its functions connection of their electric service.
with utmost care and diligence." 13. The record also shows that at the request of NPC, defendant Meralco re-connected
the electric service of four customers previously disconnected none of whom was
FACTS: any of the plaintiffs.
1. 1987: National Power Corporation (NPC) filed with the MTC ejectment case 14. RTC: in favor of MERALCO dismissed claim for moral and exemplary damages,
against several persons allegedly illegally occupying its properties in Baesa, QC. and attorney's fees. Ordered MERALCO to restore the electric power supply of
2. Among the defendants (in the ejectment case) was Leoncio Ramoy, who is one of respondents.
the plaintiffs in this case (action for damages) at bar. 15. CA: faulted MERALCO for not requiring NPC a writ of execution or demolition.
3. 1989: after the defendants (in the ejectment case) failed to file an answer in spite of MERALCO liable for moral and exemplary damages and attorney's fees.
summons duly served, the MTC rendered judgment for the plaintiff (MERALCO)
and "ordering the defendants to demolish or remove the building and structures they ISSUES:
built on the land of the plaintiff and to vacate the premises." 1. W/N MERALCO is negligent when it disconnected the electric service of respondents
4. It was found that Leoncio Ramoy was occupying a portion of Lot involved in the (did MERALCO breach the Service Contract?) - YES
ejectment case. 2. W/N MERALCO is liable for:
5. NPC wrote Meralco requesting for the "immediate disconnection of electric power a) Moral damages - YES, but only for Leoncio Ramoy
supply to all establishments beneath the NPC transmission lines along Baesa, b) Exemplary damages and attorney’s fees. - NO
Quezon City.
6. Meralco decided to comply with NPC's request and issued notices of disconnection RULING: The petition is partly meritorious.
to all establishments affected including (6) plaintiffs Leoncio Ramoy, Matilde
Ramoy, Rosemarie Ramoy, Ofelia Durian, Jose Valiza and Cyrene S. Panado. ISSUE #1: Negligence
● MERALCO admits that respondents are its customers under a Service Contract ● Although MERALCO insists that the MTC Decision is final and executory, it never
whereby it is obliged to supply respondents with electricity. Nevertheless, upon showed any documentary evidence to support this allegation.
request of the NPC, MERALCO disconnected its power supply to respondents on ● Moreover, if it were true that the decision was final and executory, the most prudent
the ground that they were illegally occupying the NPC's right of way. thing for MERALCO to have done was to coordinate with the proper court officials
● Under the Service Contract, "[a] customer of electric service must show his right or in determining which structures are covered by said court order.
proper interest over the property in order that he will be provided with and assured
a continuous electric service." The utmost care and diligence required of MERALCO necessitates such great degree of
● MERALCO argues that since there is MTC ruling that the respondents were among prudence on its part, and failure to exercise the diligence required means that MERALCO
the illegal occupants of the NPC's right of way, MERALCO was justified in cutting was at fault and negligent in the performance of its obligation.
off service to respondents. MERALCO is liable for damages under Art. 1170 of the Civil Code.

A. Clearly, respondents' cause of action against MERALCO is based on culpa contractual -------------------------------------------------------------------------------------------------------
or breach of contract for the discontinuance of its electric service under Art. 1170 of the
Civil Code: ISSUE #2: Moral Damages; Exemplary damages; Attorney’s fees
Article 1170. Those who in the performance of their obligations are guilty of fraud, A. Moral Damages
negligence, or delay, and those who in any manner contravene the tenor thereof, are Article 2220. Willful injury to property may be a legal ground for awarding moral damages
liable for damages. if the court should find that, under the circumstances, such damages are justly due. The same
rule applies to breaches of contract where the defendant acted fraudulently or in bad faith.
As per jurisprudence: "In culpa contractual x x x the mere proof of the existence of the
contract and the failure of its compliance justify, prima facie, a corresponding right of relief. ●
MERALCO wilfully caused injury to by withholding from Leoncio and his tenants
the supply of electricity they were entitled under the Service Contract.
● A breach upon the contract confers upon the injured party a valid cause for ● This is contrary to public policy because, as discussed above, MERALCO,
recovering that which may have been lost or suffered. being a vital public utility, is expected to exercise utmost care and diligence in
● The effect of every infraction (breach) is to create a new duty: to recompense the the performance of its obligation.
one who has been injured by the failure of another to observe his contractual ● It was incumbent upon MERALCO to do everything within its power to ensure that
obligation unless he can show extenuating circumstances, like proof of his exercise the improvements built by respondents are within the NPC’s right of way before
of due diligence x x x or of the attendance of fortuitous event, to excuse him from disconnecting their power supply.
his ensuing liability. ● Electricity is a basic necessity imbued with public interest, and its provider is a
public utility subject to strict regulation by the State. Failure to comply with these
B. Article 1173 also provides that: the fault or negligence of the obligor consists in the regulations will give rise to the presumption of bad faith or abuse of right.
omission of that diligence which is required by the nature of the obligation and corresponds ● MERALCO's failure to exercise utmost care and diligence in the performance of its
with the circumstances of the persons, of the time and of the place. obligation to Leoncio Ramoy, its customer, is tantamount to bad faith. Leoncio
Ramoy testified that he suffered wounded feelings because of MERALCO's actions.
Jurisprudence: "as a public utility, MERALCO has the obligation to discharge its Furthermore, due to the lack of power supply, the lessees of his four apartments on
functions with utmost care and diligence." subject lot left the premises. Clearly, therefore, Leoncio Ramoy is entitled to moral
● MERALCO failed to exercise the utmost degree of care and diligence required of damages.
it. To repeat, it was not enough for MERALCO to merely rely on the Decision of [HOWEVER, only for Leioncio, not for other plaintiffs]
the MTC without ascertaining whether it had become final and executory. ● Leoncio Ramoy, the lone witness for respondents, was the only one who testified
regarding the effects on him of MERALCO's electric service disconnection. His co-
respondents Matilde Ramoy, Rosemarie Ramoy, Ofelia Durian and Cyrene Panado WHEREFORE, the petition is PARTLY GRANTED. The Decision of the Court of Appeals
did not present any evidence of damages they suffered. is AFFIRMED with MODIFICATION. The award for exemplary damages and attorney's
● In order that moral damages may be awarded, there must be pleading and proof of fees is DELETED.
moral suffering, mental anguish, fright and the like. While respondent alleged in his
complaint that he suffered mental anguish, serious anxiety, wounded feelings and
moral shock, he failed to prove them during the trial.
● "While no proof of pecuniary loss is necessary in order that moral damages may be
awarded, it is nevertheless essential that the claimant should satisfactorily show the
existence of the factual basis of damages and its causal connection to defendant’s
acts.
Thus, only respondent Leoncio Ramoy, who testified as to his wounded feelings, may be
awarded moral damages.

B. Exemplary Damages
● With regard to exemplary damages, Article 2232 of the Civil Code provides that in
contracts and quasi-contracts, the court may award exemplary damages if the
defendant, in this case MERALCO, acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner, while Article 2233 of the same Code provides
that such damages cannot be recovered as a matter of right and the adjudication of
the same is within the discretion of the court.1avvphi1
● The Court finds that MERALCO fell short of exercising the due diligence required,
but its actions cannot be considered wanton, fraudulent, reckless, oppressive or
malevolent. Records show that MERALCO did take some measures, i.e.,
coordinating with NPC officials and conducting a joint survey of the subject area,
to verify which electric meters should be disconnected although these measures are
not sufficient, considering the degree of diligence required of it. Thus, in this case,
exemplary damages should not be awarded.
● Attorney’s fees:

C. Attorney’s Fees
● Since the Court does not deem it proper to award exemplary damages in this case,
then the CA's award for attorney's fees should likewise be deleted, as Article 2208
of the Civil Code states that in the absence of stipulation, attorney's fees cannot be
recovered except in cases provided for in said Article, to wit: (there are 11
enumerations)
● None of the grounds for recovery of attorney's fees are present.

DISPOSITIVE:
Case Number # 5 Andrew ● [Important] Phoenix and McGee filed damages against Mindanao Terminal in the
RTC:
Mindanao Terminal v. Phoenix Assurance Company of New York/Mcgee & Co. ○ Held that held that the only participation of Mindanao Terminal was to
GR No. 162467 | May 8, 2009 | Tinga, J. | Second Division | Breach of Obli load the cargoes on board the M/V Mistrau under the direction and
supervision of the ship's officers,
○ Held that the only participation of Mindanao Terminal was to load the
Petitioner: MINDANAO TERMINAL AND BROKERAGE SERVICE, INC.,
cargoes on board the M/V Mistrau under the direction and supervision of
Respondent/Defendant: PHOENIX ASSURANCE COMPANY OF NEW
the ship's ocers,
YORK/MCGEE & CO.,
○ Held also that the cargoes were damaged due to a typhoon that the vessel
encountered during the voyage. RTC DISMISSED THE COMPLAINT
Nature of the Action: A petition for review on certiorari the Decision of the CA
○ Also, Phoenix and Mcgee had no cause of action against Mindanao
of the same court denying petitioner’s motion for reconsideration.
terminal since they are a distinct corporation from Del Monte Produce and
had no contract with it.
Doctrine: Despite the absence of contractual relationship between Del Monte
CA:
Produce and Mindanao Terminal, the allegation of negligence on the part of the
● Reversed the decision of RTC:
defendant should be sufficient to establish a cause of action arising from quasi-
○ Sustained Phoenix and Mcgee’s argument that the damage to the cargoes
delict
was a result of improper stowage by Mindanao Terminal as the
STEVEDORE OF THE CARGO, with the duty to exercise
Mindanao Terminal was performing PURELY stevedoring functions ONLY. A
extraordinary diligence in loading and stowing the cargoes.
Stevedore is NOT A COMMON CARRIER for it does not transport goods of
○ Even with the absence of a contractual obligation between Mindanao
passengers. Thus, no need for extraordinary diligence.
terminal and Del Monte produce, the cause of action could be based on a
Quasi-Delict.

FACTS: ISSUES:
● Del Monte contracted Mindanao terminal (A Stevedoring company. Definition is 1. W/N Phoenix and Mcgee has a cause of action against Mindanao Terminal -
found on the next page) to load and stow shipments of bananas and pineapples YES
belonging to the Del Monte Fresh Produce International (Del Monte Produce) into 2. W/N Mindanao Terminal, as a stevedoring company is to follow an
the cargo hold of the vessel M/V Mistrau. extraordinary degree of diligence - NO
● The goods was supposed to be transported in Inchon, Korea in favor of Taegu 3. W/N Mindanao Terminal observed the degree of diligence required by law of
Industries. Del Monte Produce insured the shipment under an “open cargo policy” a stevedoring company. - YES
with Phoenix and Mcgee.
● Petitioner Mindanao terminal loaded and stowed the cargoes aboard the M/V RULING:
Mistrau. It was then discovered by the Marine Cargo Damage Surveyor Byeong 1. The present action is based on quasi-delict, arising from the negligent and careless
Ahn that upon discharge, some of the cargo was in bad condition in a state that some loading and stowing of the cargoes belonging to Del Monte Produce. the present
did not have any commercial value anymore. case, Phoenix and McGee are not suing for damages for injuries arising from the
● Del Monte Produce filed a claim under the open cargo policy for the damages to its breach of the contract of service but from the alleged negligent manner by which
shipment. A check for the recommended amount was sent to Del Monte Produce; Mindanao Terminal handled the cargoes belonging to Del Monte Produce
the latter issued a subrogation receipt to Phoenix and Mcgee (Subgrogation a. Despite the absence of contractual relationship between Del Monte
means ikaw na ung magiging bagong creditor) Produce and Mindanao Terminal, the allegation of negligence on the part
of the defendant should be sufficient to establish a cause of action arising DISPOSITIVE: WHEREFORE, the petition is GRANTED. The decision of the Court
from quasi-delict of Appeals in CA-G.R. CV No. 66121 is SET ASIDE and the decision of the Regional
2. Art 1173 of the civil code clearly states that absent of the degree of diligence Trial Court of Davao City, Branch 12 in Civil Case No. 25,311.97 is hereby
required in the contract, that which is to be observed is what is expected of a good REINSTATED MINUS the awards of P100,000.00 as attorney's fees and P83,945.80 as
father of a family OR ordinary Diligence. A stevedoring company which was actual damages.
charged with the loading and stowing the cargoes of Del Monte Produce aboard
M/V Mistrau, had acted merely as a labor provider in the case at bar. There is no
specific provision of law that imposes a higher degree of diligence than ordinary
diligence for a stevedoring company or one who is charged only with the loading
and stowing of cargoes.
a. The CA erred in applying the case of Summa Insurance v Ca. in imposing
a higher degree of diligence. The case discussed the relationship between
the Consignee and the Arrastre operator. Being the custodian of the goods
discharged from a vessel, an arrastre operator's duty is to take good care
of the goods and to turn them over to the party entitled to their possession
b. Difference Between Arrastre - Spanish word which refers to hauling
of cargo, comprehends the handling of cargo on the wharf or between
the establishment of the consignee or shipper and the ship's tackle.
Responsibility lasts until the delivery of the cargo to the consignee.
c. [Important] Stevedoring - refers to the handling of the cargo in the
holds of the vessel or between the ship's tackle and the holds of the
vessel. The responsibility of the stevedore ENDS UPON THE
LOADING AND STOWING OF THE CARGO IN THE VESSEL.
d. In the case at hand, Mindanao Terminal was performing PURELY
stevedoring functions ONLY. A Stevedore is NOT A COMMON
CARRIER for it does not transport goods of passengers. Thus, no need
for extraordinary diligence.
3. Phoenix and Mcgee failed to prove by preponderance of evidence that Mindanao
terminal Acted negligently. The SC adopt the findings of the RTC and held that the
only participation of Mindanao terminal was to load the cargoes on board M/V
Mistrau.
a. Phoenix and mcgee relied heavily on the deposition of Byeong Ahn. Even
the survey report found that it was because of the boisterous stormy
weather due to the typhoon Seth, as encountered by M/V Mistrau during
its voyage, which caused the shipments in the cargo hold to collapse, shift
and bruise in extensive extent.
Case Number # 6 Celina ○ Jimenez then appealed to the IAC
● Intermediate Appellate Court
JIMENEZ v CITY OF MANILA ○ Held the Asiatic Integrated Corporation liable for damages but absolved
GR No 71049 | May 29, 1987 | Paras, J | Second Division | Breach of Obligations the City of Manila
● Hence, this petition
Petitioner: Bernardino Jimenez
ISSUE: Whether or not the IAC erred in not ruling that respondent City of Manila should be
Respondent/: City of Manila and Intermediate Appellate Court
jointly and severally liable with Asiatic Integrated Corporation for the injuries Petitioner
Jimenez suffered - YES, the IAC erred
Nature of the Action: Petition for Review on Certiorari

RULING:
Doctrine:
Article 2189 of the Civil Code of the Philippines which provides that:
"Provinces, cities and municipalities shall be liable for damages for the death of, Petitioner’s Arguments Respondent’s Arguments
or injuries suffered by any person by reason of defective conditions of roads,
streets, bridges, public buildings and other public works under their control or Both Asiatic and the City of Manila should The City of Manila cannot be held liable for
supervision." be held liable for damages damages under Art 1, Sec.4 of RA 409 as
mended or the Revised City Charter of
Manila which provides:
FACTS: "The City shall not be liable or held for
● Petitioner Jimenez went to Sta. Ana public market to buy "bagoong" at the time damages or injuries to persons or property
when the public market was flooded with ankle deep rainwater. After purchasing arising from the failure of the Mayor, the
the "bagoong" he turned around to return home but he stepped on an uncovered Municipal Board, or any other City Officer,
opening which could not be seen because of the dirty rainwater, causing a dirty and to enforce the provisions of this chapter, or
rusty four inch nail, stuck inside the uncovered opening, to pierce the left leg of any other law or ordinance, or from
plaintiff-petitioner penetrating to a depth of about one and a half inches negligence of said Mayor, Municipal
● First aid treatment was not enough, he fell ill and developed a fever and had to be Board, or any other officers while enforcing
carried to Dr.Mascardo. Despite the medicine administered to him, his left leg or attempting to enforce said provisions."
swelled with great pain. He was rushed to the Veterans Memorial Hospital where
he had to be confined for 20 days The Supreme Court held that the Revised City Charter of Manila established the general rule
● Upon his discharge from the hospital, he had to walk around with crutches for 15 regulating the liability of the City of Manila for "damages or injury to persons or property
days. His injury prevented him from attending the school buses he is operating. H arising from the failure of city officers" to enforce the provisions of said Act, "or any other
had to engage the services of one Bienvenido Valdez to supervise his business for law or ordinance or from negligence" of the City "Mayor, Municipal Board, or other officers
an aggregate compensation of 900 pesos. while enforcing or attempting to enforce said provisions."
● Court of First Instance
Upon the other hand, Article 2189 of the Civil Code of the Philippines which provides that:
○ Jimenez sued for damages against the City of Manila and the Asiatic
"Provinces, cities and municipalities shall be liable for damages for the death of, or injuries
Integrated Corporation (Asiatic) under whose administration Sta/Ana suffered by any person by reason of defective conditions of roads, streets, bridges, public
Public Market had been placed by virture of a Management and Operating buildings and other public works under their control or supervision."
Contract
○ CFI ruled in favor of the respondents
In other words, Art. 1, sec. 4, R.A. No. 409 refers to liability arising from negligence, in City of Manila and Asiatic are held solidarily liable under Art. 2194 of the Civin Colde.
general, regardless of the object, thereof, while Article 2189 of the Civil Code governs
liability due to "defective streets, public buildings and other public works" in particular and DISPOSITIVE:
is therefore decisive on this specific case.
PREMISES CONSIDERED, the decision of the Court of Appeals is hereby MODIFIED,
making the City of Manila and the Asiatic Integrated Corporation solidarily liable to pay the
In the same suit, the Supreme Court clarified further that under Article 2189 of the Civil
plaintiff P221.90 actual medical expenses, P900.00 for the amount paid for the operation and
Code, it is not necessary for the liability therein established to attach, that the defective public
management of the school bus, P20,000.00 as moral damages due to pain, sufferings and
works belong to the province, city or municipality from which responsibility is exacted.
sleepless nights and P10,000.00 as attorney's fees. SO ORDEDED.
What said article requires is that the province, city or municipality has either "control or
supervision" over the public building in question.

The Sta.Ana Public Market remained under the control of the City of Manila despite the
presence of the Management and Operating Contract between the City of Manila and Asiatic.
Moreover, the fact of supervision and control of the City over the subject public market was
admitted by Mayor Bagatsing in his letter to the Secretary of Finance Cesar Virata which
reads:

"These cases arose from the controversy over the Management and Operating
Contract entered into on December 28, 1972 by and between the City of Manila
and the Asiatic Integrated Corporation, whereby in consideration of a 􀀶xed
service fee, the City hired the services of the said corporation to undertake the
physical management, maintenance, rehabilitation and development of the City's
public markets and 'Talipapas' subject to the control and supervision of the City.
Xxx
"It is believed that there is nothing incongruous in the exercise of these powers
vis-a-vis the existence of the contract, inasmuch as the City retains the power of
supervision and control over its public markets and talipapas under the terms of
the contract." (Exhibit 7-A.) (Emphasis supplied.) (Rollo, p. 75)

As a defense against liability on the basis of a quasi-delict, one must have exercised the
diligence of a good father of a family.

There is no argument that it is the duty of the City of Manila to exercise reasonable care to
keep the public market reasonably safe for people frequenting the place for their marketing
needs.

While it may be conceded that the fulfillment of such duties is extremely difficult during
storms and floods, it must however, be admitted that ordinary precautions could have been
taken during good weather to minimize the dangers to life and limb under those difficult
circumstances. Sadly, the evidence indicates that long before petitioner fell into the opening,
it was already uncovered, ad five months after the incident, the opening was still uncovered.
The City of Manila is liable for damages under Art. 2189 of the Civil Code having retained
control and supervision over the Sta.Ana Public Market and as tort-feasor under Art. 2176
of the Civil Code on quasi-delict.
Case Number #7 KAREN ● Plaintiff Philippine Bar Association (PBA) contracted the services of third-party
defendant-appellants Juan F. Nakpil & Sons and Juan F. Nakpil (NAKPILS) for the
JUAN F. NAKPIL & SONS and JUAN F. NAKPIL v. THE COURT OF APPEALS, planning, specifications and design in the construction of its 840 sqm. office
UNITED CONSTRUCTION COMPANY, INC., JUAN J. CARLOS, and the building. For the construction of the building, PBA contracted the services of
PHILIPPINE BAR ASSOCIATION United Construction Company, Inc. (UCCI) on an administration basis. The said
GR No. L-47851/L-47863/L-47869 | October 3, 1986 | Paras, J. | Second Division | building was completed in June 1966.
Excuses for Non-Performance: Fortuitous Event
● On August 2, 1968, an unusually strong earthquake hit Manila and its environs and
the building in question sustained major damage. The front columns of the building
Plaintiff: Philippine Bar Association
buckled, causing the building to tilt forward dangerously. As a temporary remedial
Defendants: The Court of Appeals, United Construction Company, Inc., and Juan J.
measure, the building was shored up by United Construction at the cost of
Carlos, and Juan F. Nakpil & Sons and Juan F. Nakpil
P13,661.28
Nature of the Action: Petitions for Review on Certiorari of the Court of Appeal’s
● On November 29, 1968, plaintiff PBA commenced this action for the recovery of
Decision
damages arising from the partial collapse of the building against United
*These are 3 consolidated cases w/ each party (Nakpil, UCCI, & PBA) assailing the CA’s
Construction and its President and General Manager Juan J. Carlos as defendants.
decision
Plaintiff alleged that the collapse was due to defects in the construction, the failure
of the contractors to follow plans and specifications and violations by the
Doctrine:
defendants of the terms of the contract.
An act of God has been defined as an accident, due directly and exclusively to natural
causes without human intervention, which by no amount of foresight, pains or care,
● In turn, defendants filed a third-party complaint against the Nakpils, the architects
reasonably to have been expected, could have been prevented.
who prepared the plans and specifications, alleging in essence that the collapse of
the building was due to the defects in the said plans and specifications.
To exempt the obligor from liability under Art. 1174, for a breach of an obligation due
○ Roman Ozaeta, the then president of the plaintiff Bar Association was
to an “act of God”, the following must concur:
included as a third-party defendant for damages for having included Juan
1. The cause of the breach must be independent of the will of the debtor;
J. Carlos, the president of United Construction.
2. The event must be either unforeseeable or unavoidable;
3. The event must be such as to render it impossible for the debtor to fulfill his
obligation in a normal manner; and
● On March 3, 1969, the plaintiff and third-party defendants (Juan F. Nakpil & Sons
and Juan F. Nakpil) presented a written stipulation consolidating the issues against
4. The debtor must be free from any participation in, or aggravation of the
Juan F. Nakpil & Sons and Juan F. Nakpil with that of United Construction.
injury to the creditor.

● Upon the issues being joined, a pre-trial was conducted and the parties agreed to
Thus, if upon the happening of a fortuitous event or an act of God, there concurs a
refer the technical issues involved in the case to a Commissioner, Mr. Andres O.
corresponding fraud, negligence, delay or violation or contravention in any manner
Hizon, who was appointed by the trial court who was charged with the duty to try
of the tenor of the obligation as provided for in Article 1170 of the Civil Code, which
the technical issues in the case. On the other hand, the non-technical issues were
results in loss or damage, the obligor cannot escape liability.
tried by the Court.

FACTS:
● Plaintiff moved twice for the demolition of the building on the ground that it may ● The applicable law governing the rights and liabilities of the parties herein
topple down in case of another strong earthquake. These motions were opposed by is Art. 1723 of the Civil Code, which provides:
the defendants and the matter was referred to the Commissioner.
○ On April 30, 1979 the building was authorized to be demolished at the Art. 1723. The engineer or architect who drew up the plans and specifications for
a building is liable for damages if within fifteen years from the completion of the
expense of the plaintiff, but not another earthquake of high intensity on
structure the same should collapse by reason of a defect in those plans and
April 7, 1970 followed by other strong earthquakes on April 9, and 12, specifications, or due to the defects in the ground. The contractor is likewise
1970, caused further damage to the property. The actual demolition was responsible for the damage if the edifice falls within the same period on account
undertaken by the buyer of the damaged building. of defects in the construction or the use of materials of inferior quality furnished
by him, or due to any violation of the terms of the contract. If the engineer or
architect supervises the construction, he shall be solidarily liable with the
COMMISSIONER’S FINDINGS: In his September 25, 1970 Report, the Commissioner’s contractor.
findings stated that while the damage sustained by the PBA building was caused directly by
the 7.3 magnitude earthquake on August 2, they were also caused by the defects in the plans Acceptance of the building, after completion, does not imply waiver of any of the
causes of action by reason of any defect mentioned in the preceding paragraph.
and specifications prepared by the third-party defendants' architects, deviations from said
plans and specifications by the defendant contractors and failure of the latter to observe the The action must be brought within ten years following the collapse of the building.
requisite workmanship in the construction of the building and of the contractors, architects
and even the owners to exercise the requisite degree of supervision in the construction of ● On the other hand, the general rule is that no person shall be responsible
subject building. for events which could not be foreseen or which, though foreseen, were
inevitable (Art. 1174, New Civil Code).
RTC FINDINGS: In its Decision, the RTC AGREED with the findings of the
Commissioner except as to the holding that the owner is charged with full time supervision ● An act of God has been defined as an accident, due directly and
of the construction since it sees no legal or contractual basis for such conclusion. exclusively to natural causes without human intervention, which by
no amount of foresight, pains or care, reasonably to have been
INTERMEDIATE APPELLATE COURT: In its Decision, the IAC MODIFIED the expected, could have been prevented.
findings of the lower court, to include an award of P200k in favor of plaintiff PBA to be paid
jointly and severally by the defendants. ● To exempt the obligor from liability under Art. 1174, for a breach of an
obligation due to an “act of God”, the following must concur:
ISSUES:
1. W/N an act of God – an unusually strong earthquake – which caused the failure of 1. The cause of the breach must be independent of the will of the
the building, exempts from liability, parties who are otherwise liable because of their debtor;
negligence? – YES. 2. The event must be either unforeseeable or unavoidable;
2. W/N the Nakpils and United Construction are liable for the damage resulting from 3. The event must be such as to render it impossible for the debtor
the partial and eventual collapse of the PBA building as a result of the earthquakes? – to fulfill his obligation in a normal manner; and
YES. 4. The debtor must be free from any participation in, or
aggravation of the injury to the creditor.
RULING:
1. W/N an act of God – an unusually strong earthquake – which caused the failure of ● Thus, if upon the happening of a fortuitous event or an act of God, there
the building, exempts from liability, parties who are otherwise liable because of their concurs a corresponding fraud, negligence, delay or violation or contravention
negligence? – YES. in any manner of the tenor of the obligation as provided for in Article 1170 of
the Civil Code, which results in loss or damage, the obligor cannot escape ● The record is replete with evidence of defects and deficiencies in the designs and
liability. plans, defective construction, poor workmanship, deviation from plans and
specifications and other imperfections. These deficiencies are attributable to
● The principle embodied in the act of God doctrine strictly requires that the act negligent men and not to a perfect God.
must be one occasioned exclusively by the violence of nature and all human
agencies are to be excluded from creating or entering into the cause of the ● As affirmed by the lower courts, the Commissioner concluded that there were
mischief. When the effect, the cause of which is to be considered, is found to be in deficiencies or defects in the design, plans and specifications of the PBA
part the result of the participation of man, whether it be from active intervention or building which involved appreciable risks with respect to the accidental forces
neglect, or failure to act, the whole occurrence is thereby humanized, as it were, and which may result from earthquake shocks. He conceded, however, that the fact
removed from the rules applicable to the acts of God. that those deficiencies or defects may have arisen from an obsolete or not too
conservative code or even a code that does not require a design for earthquake
2. W/N the Nakpils and United Construction are liable for the damage resulting from forces mitigates in a large measure the responsibility or liability of the architect
the partial and eventual collapse of the PBA building as a result of the earthquakes? – and engineer designer.
YES.
● Within the pardonable limit of the Court's ability to comprehend the meaning of the
● There is no dispute that the earthquake of August 2, 1968 is a fortuitous event or Commissioner's report on this issue, and the objections voiced to the same, the
an act of God. Court sees no compelling reasons to disturb the findings of the Commissioner
that there were defects and deficiencies in the design, plans and specifications
● The negligence of the defendant and the third-party defendants petitioners was prepared by third-party defendants, and that said defects and deficiencies
established beyond dispute both in the lower court and in the Intermediate involved appreciable risks with respect to the accidental forces which may
Appellate Court. Defendant United Construction Co., Inc. was found to have result from earthquake shocks.
made substantial deviations from the plans and specifications, and to have *I inserted the specific technical findings of the Commissioner after the dispositive in case
failed to observe the requisite workmanship in the construction as well as to Atty. Uribe asks.
exercise the requisite degree of supervision; while the third-party defendants
(Nakpils) were found to have inadequacies or defects in the plans and ● The afore-mentioned facts clearly indicate the wanton negligence of both the
specifications prepared by them. defendant and the third-party defendants in effecting the plans, designs,
specifications, and construction of the PBA building and we hold such
● As correctly assessed by both courts, the defects in the construction and in the negligence as equivalent to bad faith in the performance of their respective
plans and specifications were the proximate causes that rendered the PBA tasks.
building unable to withstand the earthquake of August 2, 1968. For this reason
the defendant and third-party defendants cannot claim exemption from liability.
DISPOSITIVE:
● The relevant and logical observations of the trial court as affirmed by the CA that WHEREFORE, the decision appealed from is hereby MODIFIED and considering the
"while it is not possible to state with certainty that the building would not have special and environmental circumstances of this case, We deem it reasonable to render a
collapsed were those defects not present, the fact remains that several buildings decision imposing, as We do hereby impose, upon the defendant and the third- party
in the same area withstood the earthquake to which the building of the plaintiff defendants (with the exception of Roman Ozaeta) a solidary (Art. 1723, Civil Code, Supra,
was similarly subjected," cannot be ignored. p. 10) indemnity in favor of the Philippine Bar Association of FIVE MILLION
(P5,000,000.00) Pesos to cover all damages (with the exception of attorney's fees)
occasioned by the loss of the building (including interest charges and lost rentals) and an
additional ONE HUNDRED THOUSAND (P100,000.00) Pesos as and for attorney's fees,
the total sum being payable upon the finality of this decision. Upon failure to pay on such
finality, twelve (12%) per cent interest per annum shall be imposed upon afore- mentioned
amounts from finality until paid. Solidary costs against the defendant and third-party
defendants (except Roman Ozaeta).

*In case Atty. Uribe asks for the specific technical findings:

The findings of the Commissioner on these issues were as follows:


“We now turn to the construction of the PBA Building and the alleged deficiencies or defects
in the construction and violations or deviations from the plans and specifications. All these
may be summarized as follows:
that the defects and deficiencies in the construction contributed greatly to the damage which
occurred.

Since the execution and supervision of the construction work in the hands of the contractor
is direct and positive, the presence of existence of all the major defects and deficiencies noted
and proven manifests an element of negligence which may amount to imprudence in the
construction work.

Summary of all the defects:

The omission or lack of spirals and ties at the bottom and/or at the top of some of the ground
floor columns contributed greatly to the collapse of the PBA building since it is at these
points where the greater part of the failure occurred. The liability for the cutting of the spirals
in column A5, ground floor, in the considered opinion of the Commissioner rests on the
shoulders of the defendants and the loss of strength in this column contributed to the damage
which occurred.

It is reasonable to conclude, therefore, that the proven defects, deficiencies and violations of
the plans and specifications of the PBA building contributed to the damages which resulted
during the earthquake of August 2, 1968 and the vice of these defects and deficiencies is that
they not only increase but also aggravate the weakness mentioned in the design of the
structure. In other words, these defects and deficiencies not only tend to add but also to
multiply the effects of the shortcomings in the design of the building. We may say, therefore,
Case Number # 8 JAY
Art. 2209, NCC: "If an obligation consists in the payment of a sum of money,
and the debtor incurs a delay, the indemnity for damages, there being no
Gilat Satellite Networks, Ltd. v. UCPB
stipulation to the contrary, shall be the payment of the interest agreed upon,
GR No 189563 | April 7, 2014 | Sereno, C.J.| First Division | Breach
and in the absence of stipulation, the legal interest."

Petitioner/Plaintiff: GILAT SATELLITE NETWORKS, LTD.


FACTS:
Respondent/Defendant: UNITED COCONUT PLANTERS BANK (UCPB)
● One Virtual placed with Gilat Satellite Network (Gilat) a purchase order for
GENERAL INSURANCE CO., INC.
various telecommunications equipment, promising to pay portions of the price
according to a payment schedule. To ensure the prompt payment, it obtained
Nature of the Action: Appeal via a Petition for Review on Certiorari assailing
a surety bond from defendant UCPB General Insurance Co., Inc. (UCPB) in
the Decision and Resolution of the Court of Appeals.
favor of Gilat.

Doctrines: Art. 1169, NCC: Those obliged to deliver or to do something


● One Virtual failed to pay Gilat twice, prompting Gilat to write the surety UCPB two
incur in delay from the time the obligee judicially or extrajudicially
demand letters for payment. However, UCPB failed to settle the amount.
demands from them the fulfillment of their obligation.
● Gilat filed a complaint against UCPB. The RTC, ruling in favor of Gilat, found
However, the demand by the creditor shall not be necessary in order that delay
that Gilat has already complied with it’s end of the obligation, i.e. delivery and
may exist:
installation of the purchased equipment. Demand notwithstanding, One Virtual and
UCPB, as surety, failed to settle the obligation. The lower court reasoned that UCPB,
(1) When the obligation or the law expressly so declare; or
as surety, bound itself to pay in accordance with the Payment Milestones. This
obligation was not made dependent on any condition outside the terms and
(2) When from the nature and the circumstances of the obligation it appears that
conditions of the Surety Bond and Payment Milestones.
the designation of the time when the thing is to be delivered or the service is to
be rendered was a controlling motive for the establishment of the contract; or
● However, the RTC denied Gilat’s claim for interest on the premise that the
interest shall only accrue when the delay or refusal to pay the principal
(3) When demand would be useless, as when the obligor has rendered it beyond
obligation is without any justifiable cause. Here, UCPB failed to pay its surety
his power to perform.
obligation because of the advice of its principal (One Virtual) not to pay. The RTC
then obligated UCPB to pay Gilat the principal debt (US $1.2 Million) under the
In reciprocal obligations, neither party incurs in delay if the other does not
Surety Bond, with legal interest at the rate of 12% per annum computed from the
comply or is not ready to comply in a proper manner with what is incumbent
time the judgment becomes final and executory, plus attorney’s fees and litigation
upon him. From the moment one of the parties fulfills his obligation, delay by
expenses.
the other begins.
● The Court of Appeals (CA) dismissed the appeal of UCPB based on lack of
(TL;DR: Where there has been an extrajudicial demand before an action for
jurisdiction. It ruled that in "enforcing a surety contract, the ‘complementary-
performance was filed, interest on the amount due begins to run, not from the
contracts-construed-together’ doctrine finds application." In this case, the CA
date of the filing of the complaint, but from the date of that extra-judicial demand
considered the arbitration clause contained in the Purchase Agreement (principal
OR: NO DEMAND, NO DELAY)
contract) between Gilat and One Virtual as applicable and binding on the parties to
the suretyship agreement (accessory contract).
concerned. Respondent is hereby ordered to pay legal interest at the rate of 6% per annum
● Hence, the trial court’s Decision was vacated. Gilat and One Virtual were ordered from 5 June 2000 until the satisfaction of its obligation under the Suretyship Contract and
to proceed to arbitration. Purchase Agreement.

ISSUES: WON interest, by way of damages or indemnity, may be awarded to a creditor in


case of inexcusable delay incurred by a debtor in the payment of his obligation. -YES.

RULING:

Article 2209 of the Civil Code is clear: "[i]f an obligation consists in the payment of a sum
of money, and the debtor incurs a delay, the indemnity for damages, there being no
stipulation to the contrary, shall be the payment of the interest agreed upon, and in the
absence of stipulation, the legal interest."

Delay arises from the time the obligee judicially or extrajudicially demands from the obligor
the performance of the obligation, and the latter fails to comply. Delay, as used in Article
1169, is synonymous with default or mora, which means delay in the fulfilment of
obligations. It is the nonfulfillment of an obligation with respect to time.

In order for the debtor (in this case, the surety) to be in default, it is necessary that the
following requisites be present:

1. that the obligation be demandable and already liquidated;


2. that the debtor delays performance; and
3. that the creditor requires the performance judicially or extrajudicially.

If a surety, upon demand, fails to pay, it can be held liable for interest, even if in thus
paying, its liability becomes more than the principal obligation. The increased liability is not
because of the contract, but because of the default and the necessity of judicial collection.

For delay to merit interest, it must be inexcusable in nature.

DISPOSITIVE: WHEREFORE, the Petition for Review on Certiorari is hereby


GRANTED. The assailed Decision and Resolution of the Court of Appeals in CA-G.R. CV
No. 89263 are REVERSED. The Decision of the Regional Trial Court, Branch 141, Makati
City is REINSTATED, with MODIFICATION insofar as the award of legal interest is
Case Number # 9 (JAO) in the amount of -133,454.00 with “cash” as payee. Both checks were dishonored
for the reason “account closed.”
Rivera v. Spouses Chua 3. The Spouses Chua alleged that they have repeatedly demanded payment from
GR No. 184458 | January 14, 2015 | Perez J.| 1st Division | Breach Rivera to no avail. Because of Rivera’s unjustified refusal to pay, the Spouses Chua
were constrained to file a suit before the MeTC, Branch 30, Manila.
4. In his Answer with Compulsory Counterclaim, Rivera countered, among others,
Petitioner/Plaintiff: RODRIGO RIVERA
that the subject Promissory Note was forged and that here was no demand for
Respondent/Defendant: SPOUSES SALVADOR CHUA AND VIOLETA S.
payment of the amount of -120,000.00 prior to the encashment of PCIB Check
CHUA
No. 0132224.
5. The MeTC: ruled in Spouses Chua’s favor.
Nature of the Action: Collection Suit
6. The RTC: affirmed the MeTC decision but deleted the award of attorney’s fees.
7. The CA: Affirmed Rivera’s liability under the Promissory Note but reduced the
Doctrine:
imposition of interest on the loan from 60% to 12% per annum.
There are four instances when demand is not necessary to constitute the debtor
a. Rivera argues that it was grave error on the part of the appellate court to
in default: (1) when there is an express stipulation to that effect; (2) where the
apply Section 70 of the Negotiable Instruments Law (NIL)
law so provides; (3) when the period is the controlling motive or the principal
inducement for the creation of the obligation; and (4) where demand would be
ISSUES: WoN Demand is necessary in this case. No
useless. In the first two paragraphs, it is not sufficient that the law or obligation
fixes a date for performance; it must further state expressly that after the period
RULING:
lapses, default will commence.
1. We agree that the subject promissory note is not a negotiable instrument and the
provisions of the NIL do not apply to this case.
2. The Promissory Note is unequivocal about the date when the obligation falls due
FACTS: and becomes demandable — 31 December 1995. As of 1 January 1996, Rivera had
1. The parties were friends and kumpadres for a long time already. Rivera obtained a already incurred in delay when he failed to pay the amount of P120,000.00 due to
loan from the Spouses Chua evidenced by a Promissory Note. The relevant parts of the Spouses Chua on 31 December 1995 under the Promissory Note.
the note are the following: Article 1169 of the Civil Code explicitly provides:
PROMISSORY NOTE Art. 1169. Those obliged to deliver or to do something incur in
delay from the time the obligee judicially or extrajudicially demands from
120,000.00
FOR VALUE RECEIVED, I, RODRIGO RIVERA promise to pay spouses
them the fulfillment of their obligation.
SALVADOR C. CHUA and VIOLETA SY CHUA, the sum of One Hundred Twenty 3. There are four instances when demand is not necessary to constitute the debtor in
Thousand Philippine Currency (-120,000.00) on December 31, 1995. default: (1) when there is an express stipulation to that effect; (2) where the law
It is agreed and understood that failure on my part to pay the amount of so provides; (3) when the period is the controlling motive or the principal
(-120,000.00) One Hundred Twenty Thousand Pesos on December 31, 1995. (sic) I agree to
pay the sum equivalent to FIVE PERCENT (5%) interest monthly from the date of default
inducement for the creation of the obligation; and (4) where demand would be
until the entire obligation is fully paid for. useless. In the first two paragraphs, it is not sufficient that the law or obligation
2. In October 1998, Rivera issued and delivered to the Spouses Chua, as payee, a check fixes a date for performance; it must further state expressly that after the period
numbered 012467, dated 30 December 1998, in the amount of -25,000.00 and on lapses, default will commence.
21 December 1998, another check numbered 013224, duly signed and dated, but 4. The PN expressly requires the debtor (Rivera) to pay a 5% monthly interest from
blank as to payee. The second check was issued, as per understanding by the parties, the "date of default" until the entire obligation is fully paid for.
a. The parties evidently agreed that the maturity of the obligation at a date
certain, 31 December 1995, will give rise to the obligation to pay interest.
b. The Promissory Note expressly provided that after 31 December 1995,
default commences and the stipulation on payment of interest starts.
5. The date of default under the Promissory Note is 1 January 1996, the day following
31 December 1995, the due date of the obligation. On that date, Rivera became
liable for the stipulated interest which the Promissory Note says is equivalent to 5%
a month.
a. In sum, until 31 December 1995, demand was not necessary before Rivera
could be held liable for the principal amount of P120,000.00. Thereafter,
on 1 January 1996, upon default, Rivera became liable to pay the Spouses
Chua damages, in the form of stipulated interest.

DISPOSITIVE:

WHEREFORE, the petition in G.R. No. 184458 is DENIED. The Decision of the Court of
Appeals in CA-G.R. SP No. 90609 is MODIFIED. Petitioner Rodrigo Rivera is ordered to
pay respondents Spouse Salvador and Violeta Chua the following:

(1) the principal amount of P120,000.00;

(2) legal interest of 12% per annum of the principal amount of P120,000.00 reckoned from
1 January 1996 until 30 June 2013;

(3) legal interest of 6% per annum of the principal amount of P120,000.00 form 1 July 2013
to date when this Decision becomes final and executory; SAHaTc

(4) 12% per annum applied to the total of paragraphs 2 and 3 from 11 June 1999, date of
judicial demand, to 30 June 2013, as interest due earning legal interest;

(5) 6% per annum applied to the total amount of paragraphs 2 and 3 from 1 July 2013 to date
when this Decision becomes final and executor, as interest due earning legal interest;

(6) Attorney's fees in the amount of P50,000.00; and

(7) 6% per annum interest on the total of the monetary awards from the finality of this
Decision until full payment thereof.

Costs against petitioner Rodrigo Rivera.


Case number 10 AGUSTIN On October 8, 1998, respondent averred that petitioner's representative, Bobby Que (Que),
went to the factory and saw that the boxes were ready for pick up. On February 20, 1999,
SOLAR HARVEST, INC. V. DAVAO CORRUGATED CARTON CORP., Que visited the factory again and supposedly advised respondent to sell the boxes as rejects
G.R. No. 176868 | 26 July 2010| Nachura, J. | Second Division | Excuses for Non- to recoup the cost of the unpaid 14,000 boxes, because petitioner's transaction to ship bananas
Performance to China did not materialize. Respondent claimed that the boxes were occupying warehouse
space and that petitioner should be made to pay storage fee at P60.00 per square meter for
every month from April 1998. As counterclaim, respondent prayed that judgment be
Petitioner: Solar harvest, INC.
Respondent: Davao Corrugated Carton Corporation rendered ordering petitioner to pay $15,400.00, plus interest, moral and exemplary damages,
Nature of the Action: Petition for review on certiorari of the decision and resolution of attorney's fees, and costs of the suit.
the Court of Appeals.
The Regional Trial Court (RTC) ruled that respondent did not commit any breach of faith
Doctrine: In reciprocal obligations, as in a contract of sale, the general rule is that the that would justify rescission of the contract and the consequent reimbursement of the amount
fulfillment of the parties' respective obligations should be simultaneous. Hence, no paid by petitioner. The RTC said that respondent was able to produce the ordered boxes but
demand is generally necessary because, once a party fulfills his obligation and the other petitioner failed to obtain possession thereof because its ship did not arrive.
party does not fulfill his, the latter automatically incurs in delay. But when different dates
for performance of the obligations are fixed, the default for each obligation must be Petitioner filed a notice of appeal with the CA. However, the CA denied the appeal for lack
determined by the rules given in the first paragraph of the present article, that is, the other of merit. The appellate court held that petitioner failed to discharge its burden of proving
party would incur in delay only from the moment the other party demands fulfillment of what it claimed to be the parties' agreement with respect to the delivery of the boxes.
the former's obligation. Thus, even in reciprocal obligations, if the period for the According to the CA, it was unthinkable that, over a period of more than two years, petitioner
fulfillment of the obligation is fixed, demand upon the obligee is still necessary before the did not even demand for the delivery of the boxes. The CA added that even assuming that
obligor can be considered in default and before a cause of action for rescission will accrue. the agreement was for respondent to deliver the boxes, respondent would not be liable for
breach of contract as petitioner had not yet demanded from it the delivery of the boxes.

FACTS: ISSUE: Whether or not respondent is in default.

Solar Harvest, entered into an agreement with respondent, Davao Corrugated Carton RULING:
Corporation (DCCC), for the purchase of corrugated carton boxes, specifically designed for
petitioners business of exporting fresh bananas. The agreement was not reduced into writing. No. The right to rescind a contract arises once the other party defaults in the performance of
To start the production, Solar deposited in DCCC’s US Dollar Savings Account with his obligation. In determining when default occurs, Art. 1191 should be taken in conjunction
Westmont bank, as full payment for the ordered boxes. Despite such payment, Solar did not with Art. 1169 of the same law, which provides:
receive any boxes from DCCC.
Art. 1169. Those obliged to deliver or to do something incur in delay from the time the
Solar wrote a demand letter for reimbursement of the amount paid. DCCC replied that the obligee judicially or extrajudicially demands from them the fulfillment of their obligation.
boxes had been completed as early as April 3, 1998 the production of the 36,500 boxes,
contrary to petitioner's allegation. According to respondent, petitioner, in fact, made an
additional order of 24,000 boxes, out of which, 14,000 had been completed without waiting
for petitioner's payment. Respondent stated that petitioner was to pick up the boxes at the However, the demand by the creditor shall not be necessary in order that delay may exist:
factory as agreed upon, but petitioner failed to do so.
(1) When the obligation or the law expressly so declares; or
(2) When from the nature and the circumstances of the obligation it appears that the put a rest to this dispute, we therefore relieve respondent from the burden of having to keep
designation of the time when the thing is to be delivered or the service is to be rendered was the boxes within its premises and, consequently, give it the right to dispose of them, after
a controlling motive for the establishment of the contract; or petitioner is given a period of time within which to remove them from the premises.
(3) When demand would be useless, as when the obligor has rendered it beyond his power
to perform. DISPOSITIVE:

In reciprocal obligations, neither party incurs in delay if the other does not comply or is not WHEREFORE, premises considered, the petition is DENIED. The Court of Appeals
ready to comply in a proper manner with what is incumbent upon him. From the moment Decision dated September 21, 2006 and Resolution dated February 23, 2007 are AFFIRMED.
one of the parties fulfills his obligation, delay by the other begins. In addition, petitioner is given a period of 30 days from notice within which to cause the
removal of the 36,500
In reciprocal obligations, as in a contract of sale, the general rule is that the fulfillment of the
parties' respective obligations should be simultaneous. Hence, no demand is generally boxes from respondent's warehouse. After the lapse of said period and petitioner fails to
necessary because, once a party fulfills his obligation and the other party does not fulfill his, effect such removal, respondent shall have the right to dispose of the boxes in any manner it
the latter automatically incurs in delay. But when different dates for performance of the may deem fit.
obligations are fixed, the default for each obligation must be determined by the rules given
in the first paragraph of the present article, that is, the other party would incur in delay only SO ORDERED.
from the moment the other party demands fulfillment of the former's obligation. Thus, even
in reciprocal obligations, if the period for the fulfillment of the obligation is fixed, demand
upon the obligee is still necessary before the obligor can be considered in default and before
a cause of action for rescission will accrue.

Evident from the records and even from the allegations in the complaint was the lack of
demand by petitioner upon respondent to fulfill its obligation to manufacture and deliver the
boxes. The Complaint only alleged that petitioner made a "follow-up" upon respondent,
which, however, would not qualify as a demand for the fulfillment of the obligation.
Petitioner's witness also testified that they made a follow-up of the boxes, but not a demand.
Note is taken of the fact that, with respect to their claim for reimbursement, the Complaint
alleged and the witness testified that a demand letter was sent to respondent. Without a
previous demand for the fulfillment of the obligation, petitioner would not have a cause of
action for rescission against respondent as the latter would not yet be considered in breach
of its contractual obligation.

Even assuming that a demand had been previously made before filing the present case,
petitioner's claim for reimbursement would still fail, as the circumstances would show that
respondent was not guilty of breach of contract.

In sum, the Court finds that petitioner failed to establish a cause of action for rescission, the
evidence having shown that respondent did not commit any breach of its contractual
obligation. As previously stated, the subject boxes are still within respondent's premises. To
Case Number # 11 (KANG) refused to pay in the same amount thereafter. He also asked his homeless friend to stay in
the house in behalf of him with all the necessary approval.
Agcaoili v. GSIS 3. When GSIS ordered the appellee to vacate the area for failure to comply with their
GR No L-30056| August 30, 1988 conditions, Agcaoili filed a case to CFI manila which ruled in favor of the latter.
|Narvasa. J. | First Division| Manner of Breach: 4. GSIS, aggrieved raised this case to SC, countered the claim of Agcaoili by stating the
following:
- Agcaoili has no right to suspend the payment of amortization because the contract already
Plaintiff-Appellee: Marcello Agcaoili
stated that the housing unit be sold in the current condition existing. Which made him
Defendant-Appellant: Government Service Insurance System (GSIS)
accepted the conditions.
- contract was never perfected because it is not Agcaoili himself who occupied the said
Nature of the Action: Petition for appeal the decision of the CFI-Manila
housing unit
Doctrine:
Issue: w/n Agcaoili is entitled to damages and specific performance by the GSIS - YES.
"(i)in reciprocal obligations, neither party incurs in delay if the other does not comply
HELD: Yes. Agcaoili is entitled to damages and performance.
or is not ready to comply in a proper manner with what is incumbent upon him." (Art.
1169, last paragraph, Civil Code)
The letter of acceptance which was then sent to the appellee made the latter clearly assume
that the housing unit was indeed habitable, and more so, the appellee made his best efforts
The party to a contract who is responsible for alleged imprecision or ambiguity in its terms
to comply with the given conditions by the GSIS. Hence, there was a perfected contract
will not be permitted to make capital of such imprecision or ambiguity; the question of
between the parties.
interpretation arising therefrom should be resolved against it.

In reciprocal obligations, a party incurs delay if the other does not comply or is nor ready to
Where specific performance according to the literal terms of a contract would result in
comply in a proper manner with what is incumbent upon him. The defendant did not fulfill
inequity by reason of the circumstances obtaining at the time of judgment being significantly
its obligation to deliver the house in a habitable state, therefore, it cannot invoke the
different from those existing at the generation of the rights litigated, the Court may exercise
plaintiff’s suspension of payment as a cause to cancel the contract between them.
its equity jurisdiction to adjust those rights and, in determining the precise relief to be given,
- GSIS to provide reasonable amortization for the land and the unfinished house.
"balance the equities" or the respective interests of the parties and take account of the relative
hardship that one form of relief or another may occasion to them.
DP: WHEREFORE, the judgment of the Court a quo insofar as it invalidates and sets aside the cancellation by
respondent GSIS of the award in favor of petitioner Agcaoili of Lot No. 26, Block No. (48) 2 of the GSIS low cost
housing project at Nangka, Marikina, Rizal, and orders the former to respect the aforesaid award and to pay damages
FACTS: in the amounts specified, is AFFIRMED as being in accord with the facts and the law. Said judgment is however
Ruling of the CFI-mnl was in favor of Agcaoili declaring cancellation of the award of the modified by deleting the requirement for respondent GSIS "to complete the house in question so as to make the
said house and lot, completion of house, GSIS to pay for damages, atty’s fees. same habitable," and instead it is hereby ORDERED that the contract between the parties relative to the property
above described be modified by adding to the cost of the land, as of the time of perfection of the contract, the cost
of the house in its unfinished state also as of the time of perfection of the contract, and correspondingly adjusting
1. GSIS approved the low cost project of housing and lot applied by the appellee by sending the amortizations to be paid by petitioner Agcaoili, the modification to be effected after determination by the Court
a letter of acceptance to Agcaoili which stated that the applicant must occupy the said area a quo of the value of said house on the basis of the agreement of the parties, or if this is not possible, by such
within 3 days. commissioner or commissioners as the Court may appoint. No pronouncement as to costs.
2. Agcaoili tried to fulfill the condition set forth by GSIS, but the said house was
uninhabitable. (4 walls, and 1 roof). He then paid for 1 month from the installment, and
Case Number # 12 ( RUTH ) · In accordance with Section 13 of Republic Act No. 3452, "the National Rice
and Corn Administration (NARIC) is hereby abolished and all its assets,
Arrieta v. Nat’l rice and corn Corp liabilities, functions, powers which are not inconsistent with the provisions of
GR No. 15645 | Jan. 31, 1964 | Regala, J. | En Banc | Breach of Obligation – Liability this Act, and all personnel are transferred" to the Rice and Corn Administration
for non-performance (RCA).
· On May 19, 1952, plaintiff-appellee participated in the public bidding called
by the NARIC for the supply of 20,000 metric tons of Burmese rice. As her bid
Petitioner/Plaintiff: PAZ P. ARRIETA and VITALIADO ARRIETA
of $203.00 per metric ton was the lowest, she was awarded the contract for the
Respondent/Defendant:
same. Accordingly, on July 1, 1952, plaintiff-appellee Paz P. Arrieta and the
NATIONAL RICE AND CORN CORPORATION, defendant-appellant,
appellant corporation entered into a Contract of Sale of Rice, under the terms
MANILA UNDERWRITERS INSURANCE CO., INC., defendant-appellee.
of which the former obligated herself to deliver to the latter 20,000 metric tons
of Burmese Rice at $203.00 per metric ton, CIF Manila. In turn, the defendant
Nature of the Action: This is an appeal of the defendant-appellant NARIC from the
Corporation committed itself to pay for the imported rice "by means of an
decision of the trial court
irrevocable, confirmed and assignable letter of credit in U.S. currency in favor
of the plaintiff-appellee and/or supplier in Burma, immediately."
Doctrine:
· Despite the commitment to pay immediately "by means of an irrevocable,
LIABILITY FOR NON-PERFORMANCE;
confirmed and assignable Letter of Credit," however, it was only on July 30,
FAILURE TO PUT UP LETTER OF CREDIT WITHIN AGREED PERIOD. —
1952, or a full month from the execution of the contract, that the defendant
One who assumes a contractual obligation and fails to perform the same on account of his
corporation, thru its general manager, took the first step to open a letter of credit
inability to meet certain bank requirements, which inability he knew and was aware of
by forwarding to the Philippine National Bank its Application for Commercial
when he entered into the contract, should be held liable in damages for breach of contract.
Letter of Credit. The application was accompanied by a transmittal letter, the
relevant paragraphs of which read:
LIABILITY OF NON-PERFORMANCE. —
o "In view of the fact that we do not have sufficient deposit with your
Under Article 1170 of the Civil Code, not only debtors guilty of fraud, negligence or
institution with which to cover the amount required to be deposited as
default but also every debtor, in general, who fails in the performance of his obligations
a condition for the opening of letters of credit, we will appreciate it if
is bound to indemnify for the losses and damages caused thereby
this application could be considered a special case.
o "We understand that our supplier, Mrs. Paz P. Arrieta, has a deadline to
MEANING OF PHRASE "IN ANY MANNER CONTRAVENE THE
TENOR" OF THE OBLIGATION IN ART. 1170, CIVIL CODE. — The phrase "in meet which is August 4, 1952, and in order to comply therewith, it is
any manner contravene the tenor" of the obligation in Art. 1170, Civil Code, includes any imperative that the L/C be opened prior to that date. We would
illicit task which impairs the strict and faithful fulfillment of the obligation, or every kind therefore request your full cooperation on this matter."
of defective performance. · On the same day, July 30, 1952, Mrs. Paz P. Arrieta, thru counsel, advised the
appellant corporation of the extreme necessity for the immediate opening of
WAIVER OF BREACH OF CONTRACT NOT PRESUMED. — Waivers are not the letter of credit since she had by then made a tender to her supplier in
presumed, but must be clearly and convincingly shown, either by express stipulation or Rangoon, Burma "equivalent to 5% of the F.O.B. price of 20,000 tons at
acts admitting of no other reasonable explanation. $180.70 and in compliance with the regulations in Rangoon this 5% will be
confiscated if the required letter of credit is not received by them before August
4, 1952."
FACTS: · On August 4, 1952, the Philippine National Bank informed the appellant
corporation that its application, "for a letter of credit for $3,614,000.00 in favor
of Thiri Setkya has been approved by the Board of Directors with the condition defendant to hold it liable on the performance bond it executed in favor of the
that 50% marginal cash deposit be paid and that drafts are to be paid upon plaintiff-appellees.
presentment" Furthermore, the Bank represented that it "will hold your
application in abeyance pending compliance with the above stated ISSUE: W/N the lower court erred in holding NARIC liable for damages for breach
requirement." of contract?
· As it turned out, however, the appellant corporation was not in any financial
position to meet the condition. As a matter of fact, in a letter dated August 2, HELD:
1952, the NARIC bluntly confessed to the appellee its dilemma: "In this · It is clear upon the records that the sole and principal reason for the
connection, please be advised that our application for the opening of the letter cancellation of the allocation contracted by the appellee herein in Rangoon,
of credit has been presented to the bank since July 30th but the latter requires Burma was the failure of the letter of credit to be opened within the
that we first deposit 50% of the value of the letter amounting to approximately contemplated period. This failure must, therefore, be taken as the
$3,614,000.00 which we are not in a position to meet." immediate cause for the consequent damage which resulted. As it is then,
· Consequently, the credit instrument applied for was opened only on September the disposition of this case depends on a determination of who was
8, 1952 "in favor of Thiri Setkya, Rangoon, Burma, and/or assignee for responsible for such failure. Stated differently, the issue is whether
$3,614,000.00," (which is more than two months from the execution of the appellant's failure to open immediately the letter of credit in dispute
contract) the party named by the appellee as beneficiary of the letter of credit. amounted to a breach of the contract of July 1, 1952 for which it may be
· As a result of the delay, the allocation of appellee's supplier in Rangoon was held liable in damages.
cancelled and the 5% deposit, amounting to 524,000 kyats or approximately · We do not think the appellant corporation can refute the fact that had it
P200,000.00 was forfeited. In this connection, it must be made of record that been able to put up the 50% marginal cash deposit demanded by the bank,
although the Burmese authorities had set August 4, 1952 as the deadline for the then the letter of credit would have been approved, opened and released as
remittance of the required letter of credit, the cancellation of the allocation and early as August 4, 1952. The letter of the Philippine National Bank to the
the confiscation of the 5% deposit were not effected until August 20, 1952, or, NARIC was plain and explicit that as of the said date, appellant's
a full half month after the expiration of the deadline. And yet, even with that "application for a letter of credit . . . has been approved by the Board of
15-day grace, appellant corporation was unable to make good its commitment Directors with the condition that 50% marginal cash deposit be paid and
to open the disputed letter of credit. that drafts are to be paid upon presentment."
· The appellee endeavored, but failed, to restore the cancelled Burmese rice · The liability of the appellant, however, stems not alone from this failure or
allocation. When the futility of reinstating the same became apparent, she inability to satisfy the requirements of the bank. Its culpability arises from
offered to substitute Thailand rice instead to the defendant NARIC, its willful and deliberate assumption of contractual obligations even as it
communicating at the same time that the offer was "a solution which should be was well aware of its financial incapacity to undertake the presentation.
beneficial to the NARIC and to us at the same time." This offer for substitution, We base this judgment upon the letter which accompanied the application
however, was rejected by the appellant in a resolution dated November 15, filed by the appellant with the bank, a part of which letter was quoted
1952. earlier in this decision. In the said accompanying correspondence,
· On the foregoing, the appellee sent a letter to the appellant, demanding appellant admitted and owned that it did "not have sufficient deposit with
compensation for the damages caused her in the sum of $286,000.00, U.S. your institution (the PNB) with which to cover the amount required to be
currency, representing unrealized profit. The demand having been rejected, she deposited as a condition for the opening of letters of credit. . . .
instituted this case now on appeal. · A number of logical inferences may be drawn from the aforementioned
· At the instance of the NARIC, a counterclaim was filed and the Manila admission. First, that the appellant knew the bank requirements for
Underwriters Insurance Company was brought to the suit as a third party opening letters of credit; second, that appellant also knew it could not meet
those requirements. When, therefore, despite this awareness that it was
financially incompetent to open a letter of credit immediately, appellant
agreed in paragraph 8 of the contract to pay immediately "by means of an
irrevocable, confirmed and assignable letter of credit," it must be similarly
be held to have bound itself too answer far all and every consequences that
would result from the representation.
· In relation to the aforequoted observation of the trial court, We would like
to make reference also to Article 1170 of the Civil Code which provides:
o "Those who in the performance of their obligation are guilty of
fraud, negligence, or delay, and those who in any manner
contravene the tenor thereof, are liable in damages."
· Under this provision, not only debtors guilty of fraud, negligence or default
in the performance of obligations are decreed liable: in general, every
debtor who fails in the performance of his obligations is bound to
indemnify for the losses and damages caused thereby. The phrase "in any
manner contravene the tenor" of the obligation includes any illicit act
which impairs the strict and faithful fulfillment of the obligation, or every
kind of defective performance.
· The NARIC would also have this Court hold that the subsequent offer to
substitute Thailand rice for the originally contracted Burmese rice
amounted to a waiver by the appellee of whatever rights she might have
derived from the breach of the contract. We disagree. Waivers are not
presumed, but must be clearly and convincingly shown, either by express
stipulation or acts admitting no other reasonable explanation. In the case
at bar, no such intent to waive has been established.
· We have carefully examined and studied the oral and documentary evidence
presented in this case and upon which the lower court based its award.
Under the contract, the NARIC bound itself to buy 20,000 metric tons of
Burmese rice at "$203.00 U. S. Dollars per metric ton, all net shipped
weight, and all in U. S. currency, C.I.F. Manila. . . ." On the other
Case #13 (RV) commonly believed but it must be one impossible to foresee or to avoid. The mere difficulty
Sicam v. Jorge to foresee the happening is not impossibility to foresee the same.
G.R. No. 159617 | August 8, 2007 | Third Division | Austria-Martinez, J. | Breach;
Negligence v. Fortuitous event To constitute a fortuitous event, the following elements must concur:
(a) the cause of the unforeseen and unexpected occurrence or of the failure of the debtor
PETITIONER: Roberto Sicam and Agencia de R.C. Sicam, Inc. to comply with obligations must be independent of human will;
RESPONDENT: Spouses Jorge (b) it must be impossible to foresee the event that constitutes the caso fortuito or, if it can
be foreseen, it must be impossible to avoid;
FACTS: (c) the occurrence must be such as to render it impossible for the debtor to fulfill
1. On different dates, Lulu Jorge pawned several pieces of jewelry with Agencia de R. obligations in a normal manner; and,
C. Sicam located in Parañaque to secure a loan. (d) the obligor must be free from any participation in the aggravation of the injury or loss.
2. On October 19, 1987, two armed men entered the pawnshop and took away
whatever cash and jewelry were found inside the pawnshop vault. The burden of proving that the loss was due to a fortuitous event rests on him who invokes
3. On the same date, Sicam sent Lulu a letter informing her of the loss of her jewelry it. And, in order for a fortuitous event to exempt one from liability, it is necessary that one
due to the robbery incident in the pawnshop. Respondent Lulu then wroteback has committed no negligence or misconduct that may have occasioned the loss.
expressing disbelief, then requested Sicam to prepare the pawned jewelry for
withdrawal on November 6, but Sicam failed to return the jewelry. Sicam had testified that there was a security guard in their pawnshop at the time of the
4. Lulu, joined by her husband Cesar, filed a complaint against Sicam with the RTC robbery. He likewise testified that when he started the pawnshop business in 1983, he thought
of Makati seeking indemnification for the loss of pawned jewelry and payment of of opening a vault with the nearby bank for the purpose of safekeeping the valuables but was
AD, MD and ED as well as AF. discouraged by the Central Bank since pawned articles should only be stored in a vault inside
5. The RTC rendered its Decision dismissing respondents’ complaint as well as the pawnshop. The very measures which petitioners had allegedly adopted show that to them
petitioners’ counterclaim. Respondents appealed the RTC Decision to the CA the possibility of robbery was not only foreseeable, but actually foreseen and anticipated.
which reversed the RTC, ordering the appellees to pay appellants the actual value Sicam’s testimony, in effect, contradicts petitioners’ defense of fortuitous event.
of the lost jewelry and AF. Petitioners MR denied, hence the instant petition for Moreover, petitioners failed to show that they were free from any negligence by which the
review on Certiorari. loss of the pawned jewelry may have been occasioned.
6. (Petitioners insist that they are not liable since robbery is a fortuitous event and they
are not negligent at all.) Robbery per se, just like carnapping, is not a fortuitous event. It does not foreclose the
possibility of negligence on the part of herein petitioners.
ISSUE: Are the petitioners liable for the loss of the pawned articles in their possession? - Petitioners merely presented the police report of the Parañaque Police Station on the robbery
YES committed based on the report of petitioners’ employees which is not sufficient to establish
robbery. Such report also does not prove that petitioners were not at fault. On the contrary,
RULING: The Decision of the CA is AFFIRMED. by the very evidence of petitioners, the CA did not err in finding that petitioners are guilty
Art. 1174. Except in cases expressly specified by the law, or when it is otherwise of concurrent or contributory negligence as provided in Article 1170 of the CC:
declared by stipulation, or when the nature of the obligation requires the assumption of
risk, no person shall be responsible for those events which could not be foreseen or Art. 1170. Those who in the performance of their obligations are guilty of fraud,
which, though foreseen, were inevitable. negligence, or delay, and those who in any manner contravene the tenor thereof, are
Fortuitous events by definition are extraordinary events not foreseeable or avoidable. It is liable for damages.
therefore, not enough that the event should not have been foreseen or anticipated, as is
**
Article 2123 of the Civil Code provides that with regard to pawnshops and other
establishments which are engaged in making loans secured by pledges, the special laws and DISPOSITIVE:
regulations concerning them shall be observed, and subsidiarily, the provisions on pledge, WHEREFORE, except for the insurance aspect, the Decision of the Court of Appeals dated
mortgage and antichresis. March 31, 2003 and its Resolution dated August 8, 2003, are AFFIRMED.

The provision on pledge, particularly Article 2099 of the Civil Code, provides that the NOTES:
creditor shall take care of the thing pledged with the diligence of a good father of a family. SC does not agree with CA when found petitioners negligent for not taking steps to insure
themselves against loss of the pawned jewelries.
In this connection, Article 1173 of the Civil Code further provides: Under Section 17 of Central Bank Circular No. 374, Rules and Regulations for Pawnshops,
Art. 1173. The fault or negligence of the obligor consists in the omission of that diligence which took effect on July 13, 1973, and which was issued pursuant to Presidential Decree
which is required by the nature of the obligation and corresponds with the circumstances of No. 114, Pawnshop Regulation Act, it is provided that pawns pledged must be insured, to
the persons, of time and of the place. When negligence shows bad faith, the provisions of wit:
Articles 1171 and 2201, paragraph 2 shall apply. Sec. 17. Insurance of Office Building and Pawns- The place of business of a pawnshop
If the law or contract does not state the diligence which is to be observed in the and the pawns pledged to it must be insured against fire and against burglary as well as
performance, that which is expected of a good father of a family shall be required. for the latter(sic), by an insurance company accredited by the Insurance Commissioner.
However, this Section was subsequently amended by CB Circular No. 764 which took effect
A review of the records clearly shows that petitioners failed to exercise reasonable care and on October 1, 1980, to wit:
caution that an ordinarily prudent person would have used in the same situation. Petitioners Sec. 17 Insurance of Office Building and Pawns – The office building/premises and
were guilty of negligence in the operation of their pawnshop business. pawns of a pawnshop must be insured against fire. (emphasis supplied).
Sicam’s testimony revealed that there were no security measures adopted by petitioners where the requirement that insurance against burglary was deleted. Obviously, the
in the operation of the pawnshop. Central Bank considered it not feasible to require insurance of pawned articles against
Evidently, no sufficient precaution and vigilance were adopted by petitioners to protect the burglary.
pawnshop from unlawful intrusion. There was no clear showing that there was any security The robbery in the pawnshop happened in 1987, and considering the amendment, there is no
guard at all. Or if there was one, that he had sufficient training in securing a pawnshop. statutory duty imposed on petitioners to insure the pawned jewelry in which case it was error
Further, there is no showing that the alleged security guard exercised all that was necessary for the CA to consider it as a factor in concluding that petitioners were negligent.
to prevent any untoward incident or to ensure that no suspicious individuals were allowed to
enter the premises. Nevertheless, the preponderance of evidence shows that petitioners failed to exercise the
In fact, it is even doubtful that there was a security guard, since it is quite impossible that he diligence required of them under the Civil Code.
would not have noticed that the robbers were armed with caliber .45 pistols each, which were
allegedly poked at the employees. Significantly, the alleged security guard was not presented
at all to corroborate petitioner Sicam’s claim; not one of petitioners’ employees who were
present during the robbery incident testified in court.

Furthermore, petitioner Sicam’s admission that the vault was open at the time of robbery
is clearly a proof of petitioners’ failure to observe the care, precaution and vigilance that the
circumstances justly demanded.

The robbery in this case happened in petitioners’ pawnshop and they were negligent in
not exercising the precautions justly demanded of a pawnshop.
Case Number # 14 Andrew ○ to construct the proposed 2nd Ipo-Bicti Tunnel, Intake and Outlet
Structures, and Appurtenant Structures, and Appurtenant Features at
National Power Corporation V. CA Norzagaray, Bulacan and to complete said works within 800 calendar days.
GR No L- 47379 | May 16, 1988 | Ponente | Division or En Banc | Topic (Angat Hydro-electric Project and Dam)
● The project involves two (2) major phases: (1) tunnel work covering a distance of
7 kilometres and (2) the outworks at both ends of the tunnel.
Petitioner/Plaintiff: National Power Corporation
● The ECI already had completed the first major phase of the work (Tunnel
Respondent/Defendant: Honorable Court of Appeals and Engineering
Excavation Work), all the equipment no longer needed there were transferred to
Construction, INC.
another site where some projects were yet to be completed. Some portion of the
Bicti site were still under construction (2nd phase).
Nature of the Action: These consolidated petitions seek to set aside the decision
● [IMPORTANT] On November 4, 1967, Typhoon “Welming” hit Central Luzon,
of the respondent Court of Appeals which adjudged the National Power
passing through corporations’ Angat Hydro-electric Project and Dam.
Corporation liable for damages against Engineering Construction, Inc. The
● Due to the heavy downpour, the water in the reservoir of the Angat Dam was rising
appellate court, however, reduced the amount of damages awarded by the trial
perilously at the rate of 60 cm per hour. To prevent an overflow of water from the
court. Hence, both parties filed their
dam, the National Power Corporation(NPC) caused the opening of the spillway
respective petitions: the National Power Corporation (NPC) in G.R. No. 47379,
gates.
questioning the decision of the Court of Appeals for holding it liable for damages
● Extraordinary large volume of water rushed out of the gates, and hit the installations
and the Engineering Construction, Inc. (ECI) in G.R. No. 47481, questioning the
and construction works of ECI at Ipo site with terrific impact, as a result of which
same decision for reducing the consequential damages and attorney's fees and for
the latter’s stockpile of materials supplies, camp facilities and permanent structures
eliminating the exemplary damages.
and accessories whether washed away, lost or destroyed.

ISSUES:
Doctrine: It is clear from the appellate court's decision that based on its findings
1. W/N the destruction and loss of ECI’s equipment and facilities were due to force
of fact and that of the trial court's, petitioner NPC was undoubtedly negligent
majeure which will exempt NPC from liability. - NO
because it opened the spillway gates of the Angat Dam only at the height of
RULING:
typhoon "Welming" when it knew very well that it was safer to have opened the
1. NPC will not be exempted from liability. NPC was undoubtedly negligent because
same gradually and earlier, as it was also undeniable that NPC knew of the
it opened the spillway gates of the Angat Dam only at the height of typhoon
coming typhoon at least four days before it actually struck. And even though
“Welming” when it knew very well that it was safer to have opened the same
the typhoon was an act of God or what we may call force majeure, NPC
gradually and earlier, as it was also undeniable that NPC know of the coming
cannot escape liability because its negligence was the proximate cause of the
typhoon at least four days before it actually struck.
loss and damage.

The typhoon was an act of God or what we may call force majeure, NPC cannot escape
liability because its negligence was the proximate cause of the loss and damage.
FACTS:
● Engineering Construction, Inc. (petitioner, ECI for brevity), being a successful As we have ruled in Juan F. Nakpil & Sons v. Court of Appeals:
bidder, executed a contract in Manila with the National Waterworks and Sewerage
Authority (NAWASA), whereby the former undertook: “If upon the happening of a fortuitous event or an act of God, there concurs a
○ to furnish all tools, labor, equipment and materials, and corresponding fraud, negligence, delay or violation or contravention in any manner of the
tenor of the obligation, which results in loss or damage, the obligor cannot escape liability.
The principle embodied in the act of God doctrine strictly requires that the act must be one
occasioned exclusively by the violence of nature and human agencies are to be excluded
from creating or entering into the cause of the mischief. When the effect, the cause of which
is to be considered, is found to be in part the result of the participation of man, whether it be
from active intervention or neglect, or failure to act, the whole occurrence is thereby
HUMANIZED, as it were, and removed from the rules applicable to the acts of God.

DISPOSITIVE:
WHEREFORE, the petitions in G.R. No. 47379 and G.R. No. 47481 are both
DISMISSED for LACK OF MERIT. The decision appealed from is AFFIRMED.
Case Number #15 Celina HLURB favored the respondents. LURB, through Arbiter Atty. Joselito F. Melchor,
rendered judgment ordering petitioners to jointly and severally pay respondents the
Fil-Estate Properties v Spouses Ronquillo following amount:
GR No185798 | Jan 13 2014 | Perez, J | Second Division | Breach of Obli
a) The amount of TWO MILLION ONE HUNDRED NINETY-EIGHT
THOUSAND NINE HUNDRED FORTY NINE PESOS & 96/100
Petitioners:FIL-ESTATE PROPERTIES, INC. AND FIL-ESTATE (P2,198,949.96) with interest thereon at twelve percent (12%) per annum to be
NETWORK, INC. computed from the time of the complainants’ demand for refund on October
Respondent: Spouses Conrado and Maria Victoria Ronquillo 08, 1998 until fully paid
Xxxxx
Nature of the Action: Petition for Review on Certiorari under Rule 45
e) An administrative fine of TEN THOUSAND PESOS (P10,000.00)
Doctrine: The Asian Financial Crisis is NOT a fortuitous event and it cannot payable to this Office fifteen (15) days upon receipt of this decision, for violation
excuse the petitioner’s delay in their obligation. Because of the delay of the of Section 20 in relation to Section 38 of PD 957
petitioners, the respondents can rescind the obligation.
xxx plus damages and attorney’s fees. Petitioners invoked that 1997 Asian Financial
Crisis as a Fortuitous event that rendered the obligation to be impossible to comply
thus exempting them from liability.
FACTS: Petitioners appealed and the Board of Commissioners of the HLURB denied the petition.
Petitioner Fil-Estate Properties, Inc. is the owner and developer of the Central Park Place
Petitioner’s subsequent MR was also denied.
Tower while co-petitioner Fil-Estate Network, Inc. is its authorized marketing agent.
Respondent
On Notice of Appeal with the Office of the President, it was dismissed. MR was also denied
Spouses Ronquillo purchased from petitioners condominium unit at Central Park Place
They appealed to the CA via petition for review under Rule 43 but the petition and the
Tower in Mandaluyong City for a pre-selling contract price of (P5,174,000.00).
subsequent MR was denied.
Respondents religiously paid their dues however the Petitioners stopped the construction of
the condominium. Hence, this petition for review on certiorari under Rule 45

Upon learning that construction works had stopped, respondents likewise stopped paying ISSUES:
their monthly amortization. Claiming to have paid a total of P2,198,949.96 to petitioners, Whether or not the Asian Financial Crisis constitute a fortuitous event which would justify
respondents through two (2) successive letters, demanded a full refund of their payment with delay by petitioners in the performance of their contractual obligation - NO
interest. When their demands went unheeded, respondents were constrained to file a
Complaint for Refund and Damages before the Housing and Land Use Regulatory Board Whether or not the non-performance of the petitioner’s obligation entitles the respondents to
(HLURB). a recision - YES
RULING:
Respondents prayed for reimbursement/refund of P2,198,949.96 representing the total ISSUE 1
amortization payments, P200,000.00 as and by way of moral damages, attorney’s fees and The Asian Financial Crisis did not constitute a valid justification to renege on obligations for
other litigation expenses. The petitioners defense was that the Asian financial crisis it is NOT a fortuitous event. In previous cases, the SC held:
constitutes a fortuitous event which could excuse them from the performance of their Also, we cannot generalize that the Asian Financial crisis in 1997 was
contractual and statutory obligations. unforeseeable and beyond the control of a business corporation. It is unfortunate
that petitioner apparently met with considerable difficulty e.g., increase cost of
materials and labor, even before the scheduled commencement of its real estate
project as early as 1995. However, a real estate enterprise engaged in the pre-
selling of condominium units is concededly a master in projections on
commodities and currency movements and business risks. The fluctuating
movement of the Philippine peso in the foreign exchange market is an everyday
occurrence, and fluctuations in currency exchange rates happen everyday, thus,
not an instance of caso fortuito.

ISSUE 2
Art. 1191 of the NCC provides:
Article 1191. The power to rescind obligations is implied in reciprocal ones, in
case one of the obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the
obligation, with payment of damages in either case. He may also seek rescission,
even after he has chosen fulfillment, if the latter should become impossible.

Moreover, Sec.23 of PD 957 governing the sale of condominiums provides:

Section 23. Non-Forfeiture of Payments. — No installment payment made by a


buyer in a subdivision or condominium project for the lot or unit he contracted to
buy shall be forfeited in favor of the owner or developer when the buyer, after due
notice to the owner or developer, desists from further payment due to the failure of
the owner or developer to develop the subdivision or condominium project
according to the approved plans and within the time limit for complying with the
same. Such buyer may, at his option, be reimbursed the total amount paid
including amortization interests but excluding delinquency interests, with
interest thereon at the legal rate. (Emphasis supplied).

Conformably with these provisions of law, respondents are entitled to rescind the contract
and demand reimbursement for the payments they had made to petitioners.

DISPOSITIVE:WHEREFORE, the petition is PARTLY GRANTED . The appealed


Decision is AFFIRMED with the MODIFICATION that the legal interest to be paid is SIX
PERCENT (6%) on the amount due computed from the time of respondents' demand for
refund on 8 October 1998.
Case Number #16 (KAREN) ● Since TMBI did not own any delivery trucks, it subcontracted the services of
Benjamin Manalastas’ company, BMT Trucking Services to transport the shipment
TORRES-MADRID BROKERAGE, INC. v. FEB MITSUI MARINE INSURANCE from the port to Sony’s warehouse in Biñan. TMBI then notified Sony who had no
CO., INC. and BENJAMIN P. MANALASTAS doing business under the name of BMT objections to the arrangement.
TRUCKING SERVICES
GR No. 194121 | July 11, 2016 | Brion, J. | Second Division | Exceptions of a ● On the said day of shipment at 11AM, four BMT trucks picked up the shipment.
Fortuitous Event However, it could not immediately deliver to Sony’s warehouse because of the
truck ban and because the following day was a Sunday. Thus, it scheduled the
delivery to October 9.
Petitioner: Torres-Madrid Brokerage, Inc.
Respondents: FEB Mitsui Marine Co., Inc. and Benjamin P. Manalastas, doing
● In the early morning of October 9, four trucks left BMT’s garage for Laguna.
business under the name of BMT TRUCKING SERVICES
However, only three trucks arrived at Sony’s warehouse.
○ At around 12NN, the truck driven by Rufo Reynaldo Lapesura was found
Nature of the Action: Petition for Review on Certiorari challenging the CA’s decision
abandoned along the Diversion Road in Filinvest, Alabang. Both the driver
which found petitioner TMBI and respondent Benjamin P. Malastas solidarily liable to
and shipment were missing.
respondent FEB Mitsui Marine Insurance Co., Inc. for damages from the loss of
transported cargo
● Later that evening, BMT’s Operations Manager informed TMBI’s General
Manager of the development. They then went to Muntinlupa together to inspect the
Doctrine:
truck and report the matter to the police.
The theft or the robbery of goods is not considered a fortuitous event of a force
○ TMBI’s General Manager also filed a complaint with the NBI against the
majeure.
missing driver, Lapesura for “hijacking”. The NBI then recommended the
prosecution of Lapesura for qualified theft.
Nevertheless, a common carrier may absolve itself of liability for a resulting loss:
1. If it proves that it exercised extraordinary diligence in transporting and
● On October 10, TMBI notified Sony of the loss through a letter. It also sent BMT a
safekeeping the goods; or
letter dated March 29, 2001, demanding payment for the lost shipment.
2. If it stipulated with the shipper/owner of the goods to limit its liability for
○ However, BMT refused to pay, insisting that the goods were “hijacked.”
the loss, destruction, or deterioration of the goods to a degree less than
extraordinary diligence.
● In the meantime, Sony filed an insurance claim with Mitsui, the insurer of the goods.
○ After evaluating the merits of the claim, Mitsui paid Sony P7.2M
However, a stipulation diminishing or dispensing with the common carrier’s liability
corresponding to the value of the lost goods.
for acts committed by thieves or robbers who do not act with grave or irresistible
threat, violence, or force is void under Art. 1745 of the Civil Code for being contrary
● After being subrogated to Sony’s rights, Mitsui sent TMBI a demand letter dated
to public policy.
August 30, 2001 for payment of the lost goods but the latter refused to pay Mitsui's
claim.
FACTS: ○ As a result, Mitsui filed a complaint against TMBI on November 6, 2001.
● On October 7, 2000, a shipment of electronic goods arrived at the Port of Manila
for Sony Philippines, Inc. Previous to the arrival, Sony had engaged the services of ● In turn, TMBI impleaded Benjamin Manalastas, the proprietor of BMT, as a third-
petitioner Torres-Madrid Brokerage, Inc. (TMBI) to facilitate, process, withdraw, party defendant. TMBI alleged that BMT's driver, Lapesura, was responsible for
and deliver the shipment to its warehouse in Biñan, Laguna. the theft/hijacking of the lost cargo and claimed BMT's negligence as the proximate
cause of the loss. It prayed that in the event it is held liable to Mitsui for the loss, it 2. Act of the public enemy in war, whether international or civil;
should be reimbursed by BMT. 3. Act of omission of the shipper or owner of the goods;
4. The character of the goods or defects in the packing or in the
● At the trial, it was revealed that BMT and TMBI have been doing business with containers;
each other since the early 80's. It also came out that there had been a previous 5. Order or act of competent public authority.
hijacking incident involving Sony's cargo in 1997, but neither Sony nor its insurer
filed a complaint against BMT or TMBI. ● For all other cases, such as theft or robbery, a common carrier is presumed to
have been at fault or to have acted negligently, unless it can prove that it
RTC’s RULING: In its Decision, it ruled that TMBI and Manalastas were common observed extraordinary diligence.
carriers and had acted negligently. It found both of them jointly and solidarily liable to
pay Mitsui PHP7,293,386.23 as actual damages, attorney's fees equivalent to 25% of the ● Simply put, the theft or the robbery of goods is not considered a fortuitous event
amount claimed, and the costs of the suit. of a force majeure.

CA’s RULING: On appeal, the CA AFFIRMED the RTC’s decision but reduced the award ● Nevertheless, a common carrier may absolve itself of liability for a resulting
of attorney’s fees to PHP200,000. loss:
○ If it proves that it exercised extraordinary diligence in transporting and
ISSUES: safekeeping the goods; or
1. W/N the theft or the robbery of goods is considered a fortuitous event which will ○ If it stipulated with the shipper/owner of the goods to limit its liability
absolve a common carrier from liability? – NO. for the loss, destruction, or deterioration of the goods to a degree less
2. W/N TMBI and BMT are solidarily liable to Mitsui? – NO. than extraordinary diligence.
3. W/N BMT is liable to TMBI for breach of their contract of carriage? – YES.
● However, a stipulation diminishing or dispensing with the common carrier’s
RULING: liability for acts committed by thieves or robbers who do not act with grave or
1. W/N the theft or the robbery of goods is considered a fortuitous event which will absolve irresistible threat, violence, or force is void under Art. 1745 of the Civil Code
a common carrier from liability? – NO. for being contrary to public policy.
● Common carriers are persons, corporations, firms or associations engaged in ○ Jurisprudence, too, has expanded Article 1734's five exemptions. De
the business of transporting passengers or goods or both, by land, water or air, Guzman v. Court of Appeals interpreted Article 1745 to mean that a
for compensation, offering their services to the public. By the nature of their robbery attended by "grave or irresistible threat, violence or force" is a
business and for reasons of public policy, they are bound to observe extraordinary fortuitous event that absolves the common carrier from liability.
diligence in the vigilance over the goods and in the safety of their passengers.
● Under Art. 1736, a common carrier’s extraordinary responsibility over the
● As long as an entity holds itself to the public for the transport of goods as a business, shipper's goods lasts from the time these goods are unconditionally placed in
it is considered a common carrier regardless of whether it owns the vehicle used or the possession of, and received by, the carrier for transportation, until they are
has to actually hire one. delivered, actually or constructively, by the carrier to the consignee.
● In this case, instead of showing that it had acted with extraordinary diligence,
● TMBI, the common carrier should be held responsible for the loss, destruction, TMBI simply argued that it was not a common carrier bound to observe
or deterioration of the goods it transports UNLESS it results from: extraordinary diligence. Its failure to successfully establish this premise
1. Flood, storm, earthquake, lightning, or other natural disaster or carries with it the presumption of fault or negligence, thus rendering it liable
calamity; to Sony/Mitsui for breach of contract.
2. W/N TMBI and BMT are solidarily liable to Mitsui? – NO.
● TMBI’s liability to Mitsui does NOT stem from a quasi-delict (culpa aquiliana)
but from its breach of contract (culpa contractual). The tie that binds TMBI with
Mitsui is contractual, albeit one that passed on to Mitsui as a result of TMBI's
contract of carriage with Sony to which Mitsui had been subrogated as an insurer
who had paid Sony's insurance claim. The legal reality that results from this
contractual tie precludes the application of quasi-delict based Article 2194.

3. W/N BMT is liable to TMBI for breach of their contract of carriage? – YES.
● This is not to say that TMBI must absorb the loss. By subcontracting the cargo
delivery to BMT, TMBI entered into its own contract of carriage with a fellow
common carrier.

● Following Art. 1735, BMT is presumed to be at fault. Since BMT failed to


prove that it observed extraordinary diligence in the performance of its
obligation to TMBI, it is liable to TMBI for breach of their contract of carriage.

● In these lights, TMBI is liable to Sony (subrogated by Mitsui) for breaching the
contract of carriage. In turn, TMBI is entitled to reimbursement from BMT due to
the latter's own breach of its contract of carriage with TMBI.
○ The proverbial buck stops with BMT who may either:
a. Absorb the loss; or
b. Proceed after its missing driver, the suspected culprit, pursuant to
Art. 2181.

DISPOSITIVE: WHEREFORE, the Court hereby ORDERS petitioner Torres-Madrid


Brokerage, Inc. to pay the respondent FEB Mitsui Marine Insurance Co., Inc. the following:

a. Actual damages in the amount of PHP7,293,386.23 plus legal interest from the time
the complaint was filed until it is fully paid;
b. Attorney's fees in the amount of PHP200,000.00; and
c. Costs of suit.

Respondent Benjamin P. Manalastas is in turn ORDERED to REIMBURSE


Torres-Madrid Brokerage, Inc. of the above-mentioned amounts.
Case Number # 18 (JAO) 7. CFI of Albay: Magdalena Estate to pay the Myrick the sum of P2,596.08 with legal
interest from December 14, 1932 until paid and costs, and dismissing defendant's
MAGDALENA ESTATE, INC., v. LOUIS J. MYRICK counterclaim.
Gr. No. 47774 | March 14, 1941 | LAUREL, J | En Banc | Remedies 8. Court of Appeals: Affirmed
ISSUES: WoN the Magdalena Estate retain the prior payment made by Myrick. NO.
RULING:
Petitioner/Plaintiff: MAGDALENA ESTATE, INC.,
1. It is next argued that contract SJ-639, being a bilateral agreement, in the absence
Respondent/Defendant: LOUIS J. MYRICK
of a stipulation permitting its cancellation, may not be resolved by the mere act
of the petitioner.
Doctrine:
2. The fact that the contracting parties herein did not provide for resolution is now of
These remedies are alternative and not cumulative, and the petitioner in this case,
no moment, for the reason that the obligations arising from the contract of sale being
having elected to cancel the contract, cannot avail himself of the other remedy of
reciprocal, such obligations are governed by article 1124 of the Civil Code which
exacting performance.
declares that the power to resole, in the event that one of the obligors should not
perform his part, is implied.
FACTS: 3. The contract of sale, contract SJ-639, contains no provision authorizing the vendor,
1. On January 2, 1928, the Magdalena Estate, Inc., sold to Louis J. Myrick lots Nos. in the event of failure of the vendee to continue in the payment of the stipulated
28 and 29 of Block 1, Parcel 9 of the San Juan Subdivision, San Juan, Rizal, their monthly installments, to retain the amounts paid to him on account of the purchase
contract of sale providing that the price of P7,953 shall be payable in 120 equal price.
monthly installments of P96.39 each on the 2nd day of every month beginning the 4. The claim, therefore, of the petitioner that it has the right to forfeit said sums in its
date of execution of the agreement. favor is untenable. Under article 1124 of the Civil Code however, he may choose
2. Simultaneously, the vendee executed and delivered to the vendor a promissory note between demanding the fulfillment of the contract or its resolution.
for the whole purchase price. 5. These remedies are alternative and not cumulative, and the petitioner in this case,
3. In pursuance of said agreement, the vendee made several monthly payments having elected to cancel the contract, cannot avail himself of the other remedy of
amounting to P2,596.08, the last being on October 4, 1930, although the first exacting performance.
installment due and unpaid was that of May 2, 1930. 6. As a consequence of the resolution, the parties should be restored, as far as
4. By reason of this default, the vendor, through its president, K. H. Hemady, on practicable, to their original situation which can be approximated only by ordering,
December 14, 1932, notified the vendee that, in view of his inability to comply with as we do now, the return of the things which were the object of the contract, with
the terms of their contract, said agreement had been cancelled as of that date, their fruits and of the price, with its interest, computed from the date of the
thereby relieving him of any further obligation thereunder, and that all amounts paid institution of the action.
by him had been forfeited in favor of the vendor, who assumes the absolute right
over the lots in question. DISPOSITIVE:
5. To this communication, the vendee did not reply, and it appears likewise that the The writ prayed for is hereby denied, with costs against the petitioner. So ordered.
vendor thereafter did not require him to make any further disbursements on account
of the purchase price.
6. On July 22, 1936, Louis J. Myrick, respondent herein, commenced the present
action in the Court of First Instance of Albay, praying for an entry of judgment
against the Magdalena Estate, Inc. for the sum of P2,596.08 with legal interest
thereon from the filing of the complaint until its payment, and for costs of the suit.
informed ALUMCO on Jul 19, 1965 that UP considered the logging agreement as rescinded
Case number 19 AGUSTIN and of no further legal effect. UP filed a complaint for the collection of money in accordance
to the stipulations in the instrument. UP also began looking for another concessionaire to
SOLAR HARVEST, INC. V. DAVAO CORRUGATED CARTON CORP., take over the logging operation by advertising an invitation to bid.
G.R. No. L-28602| 29 September 1970 | REYES, J.B.L., J. | Supreme Court En Banc|
Judicial Remedies ISSUE: Whether or not U.P. can treat its contract with ALUMCO rescinded, and disregard
the same, before any judicial pronouncement to that effect.
Petitioner: University of the Philippines
Respondent: Walfrido De Los Angeles RULING:
Nature of the Action: A petition for certiorari and prohibition.
Doctrine: In the first place, UP and ALUMCO had expressly stipulated in the "Acknowledgment of
In other words, the party who deems the contract violated may consider it resolved or Debt and Proposed Manner of Payments" that, upon default by the debtor ALUMCO, the
rescinded, and act accordingly, without previous court action, but it proceeds at its own creditor (UP) has "the right and the power to consider, the Logging Agreement dated 2
risk. For it is only the final judgment of the corresponding court that will conclusively and December 1960 as rescinded without the necessity of any judicial suit.” X x x
finally settle whether the action taken was or was not correct in law. But the law definitely
does not require that the contracting party who believes itself injured must first file suit In other words, the party who deems the contract violated may consider it resolved or
and wait for a judgment before taking extrajudicial steps to protect its interest. Otherwise, rescinded, and act accordingly, without previous court action, but it proceeds at its own risk.
the party injured by the other's breach will have to passively sit and watch its damages For it is only the final judgment of the corresponding court that will conclusively and finally
accumulate during the pendency of the suit until the final judgment of rescission is settle whether the action taken was or was not correct in law. But the law definitely does not
rendered when the law itself requires that he should exercise due diligence to minimize its require that the contracting party who believes itself injured must first file suit and wait for
own damages (Civil Code, Article 2203). a judgment before taking extrajudicial steps to protect its interest. Otherwise, the party
injured by the other's breach will have to passively sit and watch its damages accumulate
during the pendency of the suit until the final judgment of rescission is rendered when the
FACTS: law itself requires that he should exercise due diligence to minimize its own damages (Civil
Code, Article 2203). X x x
UP and ALUMCO entered into a logging agreement under which ALUMCO was granted
exclusive authority from the date of agreement (Nov. 2, 1960) to Dec. 31, 1965 (extendible In the light of the foregoing principles, and considering that the complaint of petitioner
by 5 years by mutual agreement), to cut, collect and remove timber from the Land Grant University made out a prima facie case of breach of contract and defaults in payment by
(situated at the Lubayat areas in Laguna and Quezon), in consideration of payment to UP of respondent ALUMCO, to the extent that the court below issued a writ of preliminary
royalties and forest fees, etc. As of Dec. 8 1964, ALUMCO incurred an unpaid account of injunction stopping ALUMCO's logging operations, and repeatedly denied its motions to lift
P219,362.94 which it had failed to pay despite repeated demands. After UP sent a notice of the injunction; that it is not denied that the respondent company had profited from its
rescission or termination of the logging agreement, ALUMCO executed an instrument operations previous to the agreement of 5 December 1964 ("Acknowledgment of Debt and
entitled “Acknowledgement of Debt and Proposed Manner of Payments” dated Dec. 9, 1964 Proposed Manner of Payment"); that the excuses offered in the second amended answer,
which was approved by the UP president. The instrument stipulated the following: “5. In the such as the misconduct of its former manager Cesar Guy, and the rotten condition of the logs
event that the DEBTOR fails to comply with any of its promises or undertakings in this in private respondent's pond, which said respondent was in a better position to know when it
document, the DEBTOR agrees without reservation that the CREDITOR shall have the right executed the acknowledgment of indebtedness, do not constitute on their face sufficient
and the power to consider the Logging Agreement dated December 2, 1960 as rescinded excuse for non-payment; and considering that whatever prejudice may be suffered by
without the necessity of any judicial suit, and the CREDITOR shall be entitled as a matter respondent ALUMCO is susceptibility of compensation in damages, it becomes plain that
of right to Fifty Thousand Pesos (P50,000.00) by way of and for liquidated damages;” After the acts of the court a quo in enjoining petitioner's measures to protect its interest without
ALUMCO again incurred an additional unpaid account amounting to P61 133.74, UP
first receiving evidence on the issues tendered by the parties, and in subsequently refusing
to dissolve the injunction, were in grave abuse of discretion, correctible by certiorari, since
appeal was not available or adequate. Such injunction, therefore, must be set aside.

DISPOSITIVE:

WHEREFORE, the writ of certiorari applied for is granted, and the order of the respondent
court of 25 February 1966, granting the Associated Lumber Company's petition for
injunction, is hereby set aside. Let the records be remanded for further proceedings
conformably to this opinion.
OWNER's right to collect from BUYER whatever other monthly installments and other money obligations
which may have been paid until BUYER vacates the aforesaid premises; upon his failure to comply with
Case Number # 20 (KANG)
any of the herein conditions BUYER forfeits all money claims against OWNER and shall pay a
monthly rental equivalent to his monthly installment under Condition 1 of this Contract from the date
Zulueta v. Mariano of the said failure to the date of recovery of physical possession by OWNER of the land, building and other
improvements which are the subject of this Contract; BUYER shall not remove his personal properties
GR No L-29360| January 30, 1982 |Melencio-Herrera J. | First Division| Extrajudicial-
without the previous written consent of OWNER, who, should he take possession of such properties
Remedies following the aforesaid failure of BUYER, shall return the same to BUYER only after the latter shall have
fulfilled all money claims against him by OWNER; in all cases herein, demand is waived;"

Petitioner: Jose Zulueta 4. Avellana occupied the property from December, 1964, but the title remained with Zulueta.
Respondents: Hon. Hermino Mariano, in his capacity as Presiding Judge of Branch X
of the CFI-Rizal, and Lamberto Avellana 5. Avellana failed to comply with the monthly amortization stipulated in the contract, despite
demands to pay and to vacate the premises. Hence, the contract was converted into lease
Nature of the Action: Action for Mandamus and Prohibition, seeking to compel contract.
respondent Judge to assume appellate jurisdiction over an Ejectment case appealed from
the MTC of Pasig, and an issuance of Writ of Execution. 6. Zulueta commenced an Ejectment suit against Avellana before Municipal Court of Pasig,
praying that judgment be rendered ordering Avellana to: 1) vacate the premises; 2) to pay
Doctrine: petitioner the sum of P11,751.30 – balance owing as of May, 1966; 3) to pay petitioner the
Even if the contract between the parties provided for extrajudicial rescission, this has sum of P630 every month after May, 1966, and costs.
legal effect only where the other party does not oppose it. Where it is objected to, a
judicial determination of the issue is still necessary. 7. Avellana, contended that:
In other words, resolution of reciprocal obligations may be made extrajudicially unless, (1) MC had no jurisdiction over the nature of the action as it involved the interpretation
successfully impugned in Court. and/or rescission of the contract.
(2) Also a counterclaim against Zulueta the total sum of P42,629.99 representing
Zulueta’s indebtedness to him (2 movies that he made for Zulueta when the latter
FACTS: ran for Congressman, and costs for borrowing the projector that the latter never
1. Petitioner is the registered owner of a residential house and lot situated within the returned = amounting to P31,269), claim for moral damages, and atty’s fees.
Antonio Subdivision, Pasig, Rizal. Private respondent, Avellana is a movie director. Zulueta strongly denied of any indebtedness.

2. On November 6, 1964, petitioner and the private respondent entered into a “Contract to 8. The MC dismissed the counterclaim of Avellana for being in an amount beyond its
Sell” the property of the petitioner for P75,000 payable in 20 years, and to pay a down- jurisdiction, and that it should be held separately against the petitioner. However, in a special
payment of P5,000 and a monthly installment of P630 payable in advance before the 5 th defense, Avellana sought to offset the sum of P31,269 against his obligation to Zulueta.
day of the corresponding month, starting December, 1964.
9. (May 10, 1967) MC: ordered Avellana to vacate the premises and deliver the possession
3. The contract further stipulated that: thereof to Zulueta, and to pay the latter the sum of P21,093.88 representing the arrearages as
"12) That upon failure of the BUYER to fulfill any of the conditions herein stipulated, BUYER
of April 1967 and P630 as monthly rental from and after May 1967 until the delivery of
automatically and irrevocably authorizes OWNER to recover extra-judicially, physical possession of
the land, building and other improvements which are the subject of this contract, and to take possession possession of the premises to the same.
also extra-judicially whatever personal properties may be found within the aforesaid premises from the
date of said failure to answer for whatever unfulfilled monetary obligations BUYER may have with
OWNER; and this contract shall be considered as without force and effect also from said date; all
payments made by the BUYER to OWNER shall be deemed as rental payments without prejudice to
10. Avellana appealed to the CFI-Rizal. Thereat, Zulueta moved for execution alleging dismissing the case, the Court of First Instance may try the case on the merits, if the parties therein file
their pleadings and go to trial without any objection to such jurisdiction."
Avellana’s failure to deposit in advance the monthly rentals, which the latter denied. CFI
judge held resolution thereof in abeyance.
2. The contract between the parties provided for extrajudicial rescission. This has legal
effect, however, where the other party does not oppose it. Where it is objected to, a judicial
11. (February 19, 1968) Avellana filed a Motion to Dismiss Appeal alleging that he had not
determination of the issue is still necessary.
breached his contract with Zulueta. Since the case necessarily involved the interpretation
and/or rescission of the contract and, therefore, beyond the jurisdiction of the MC.
In the present case, due to the objection of Avellana, it resorted to a judicial determination
of the issue on rescission of the contract. And since CFI does not have original jurisdiction
12. Zulueta opposed by claiming that the Complaint had set out a clear case of unlawful
to try the case but only to dismiss the case for lack of jurisdiction of the MC, the SC ruled:
detainer considering that judicial action for the rescission of the contract was unnecessary.
This is due to the automatic rescission clause, and that he cancelled the contract, hence
The foregoing premises considered, petitioner's prayer for a Writ of Execution of the
Avellana’s right in the premise had already ceased.
judgment of the Municipal Court of Pasig must perforce be denied.
13. CFI: dismissed the case on the ground of lack of jurisdiction of the MC. And the
DP: WHEREFORE, the Writ of Mandamus is denied, but the Writ of Prohibition is granted
subsequent MR filed by Zulueta was denied. Hence this action.
and respondent Court hereby permanently enjoined from taking cognizance of Civil Case
No. 10595 in the exercise of its original jurisdiction. No costs.
ISSUE:
SO ORDERED.
1. w/n the action was for rescission or annulment of the contract, to vest CFI with authority
to litigate the case? – Yes. The action was for rescission or annulment of the contract which
gave CFI authority to investigate the case, but not original jurisdiction.

2. w/n the contract between the parties provided for extrajudicial rescission – YES.

HELD:

1. In the Complaint filed by Zulueta, he alleged the violation by respondent Avellana of the
stipulations of their agreement to sell and thus unilaterally considered the contract
rescinded. Thus, the basic issue is not possession but one of rescission or annulment of a
contract, which is beyond the jurisdiction of the Municipal Court to hear and determine.

But while respondent Judge correctly ruled that the Municipal Court had no jurisdiction over
the case and correctly dismissed the appeal, he erred in assuming original jurisdiction, in
the face of the objection interposed by petitioner.

There was no other recourse left for the respondent Judge, therefore, except to dismiss
the appeal. Unless the parties agree to the exercise by the CFI of its original jurisdiction to
try the case on the merits, as provided under Section 11, Rule 40 of the RoC.

"Section 11. Lack of jurisdiction. — A case tried by an inferior court without jurisdiction
over the subject matter shall be dismissed on appeal by the Court of First Instance. But instead of
Case Number # 21 ( RUTH )
had no freedom to stipulate. A waiver must be certain and unequivocal, and intelligently
made; such waiver follows only where liberty of choice has been fully accorded.
Palay v. Clave
Moreover, it is a matter of public policy to protect buyers of real estate on installment
GR No. L-56076 | Sept. 21, 1983 | Melencio-Herrera, J. | 2nd Division | Remedies
payments against onerous and
Petitioner/Plaintiff: PALAY, INC. and ALBERT ONSTOTT oppressive conditions. Waiver of notice is one such onerous and oppressive condition to
Respondent/Defendant: JACOBO C. CLAVE, Presidential Executive Assistant, buyers of real estate on installment payments.
NATIONAL HOUSING AUTHORITY and NAZARIO DUMPIT

Doctrine:
WRITTEN NOTICE STILL REQUIRED THOUGH JUDICIAL ACTION NOT
NECESSARY FOR RESCISSION. — Well settled is the rule, as held in previous
jurisprudence Torralba vs. de Los Angeles, 96 SCRA 69) that judicial action for the
rescission of a contract is not necessary where the contract provides that it may be revoked
and canceled for violation of any of its terms and conditions. However, even in the cited
case, there was at least a written notice sent to the defaulter informing him of the
rescission. As stressed in University of the Philippines vs. Walfrido de los Angeles, 33
SCRA 102 (1970) the act of a party in treating a contract as cancelled should be made
known to the other.

EXTRAJUDICIAL RESCISSION; EFFECTIVE IF NOT OPPOSED. — A


stipulation entitling one party to take possession of the land and building if the other party
violates the contract does not ex proprio vigore confer upon the former the right to take
possession thereof if objected to without judicial intervention and determination (Nera vs.
Vacante, 3 SCRA 505 (1961]). This was reiterated in Zulueta vs. Mariano (111 SCRA
206 [1982]) where we held that extrajudicial rescission has legal effect where the other
party does not oppose it (Tolentino, Civil Code of the Philippines, Vol. IV, 1962 ed., p.
168, citing Magdalena Estate vs. Myrick, 71 Phil. 344). In other words, resolution of
reciprocal contracts may be made extrajudicially unless successfully impugned in Court.
If the debtor impugns the declaration, it shall be subject to judicial determination (UP vs.
de los Angeles, supra).

WAIVER OF RIGHT TO BE NOTIFIED; VALID ONLY WHERE


LIBERTY OF CHOICE FULLY ACCORDED. — The indispensability of notice of FACTS:
cancellation to the buyer was to be later underscored in Republic Act No. 6551 entitled · The Resolution, dated May 2, 1980, issued by Presidential Executive Assistant
"An Act to Provide Protection to Buyers of Real Estate on Installment Payments" which Jacobo Clave in O.P. Case No. 1459, directing petitioners Palay, Inc. and
took effect on September 14, 1972. The contention that private respondent had waived his Alberto Onstott, jointly and severally, to refund to private respondent, Nazario
right to be notified under paragraph 6 of the contract is neither meritorious because it was Dumpit, the amount of P13,722.50 with 12% interest per annum, as resolved
a contract of adhesion, a standard form of petitioner corporation, and private respondent by the National Housing Authority in its Resolution of July 10, 1979 in Case
No. 2167, as well as the Resolution of October 28, 1980 denying petitioners'
Motion for Reconsideration of said Resolution of May 2, 1980, are being However, even in the cited cases, there was at least a written notice sent to the
assailed in this petition. defaulter informing him of the rescission. As stressed in University of the
· On March 28, 1965, petitioner Palay, Inc., through its President, Albert Onstott, Philippines vs. Walfrido de los Angeles the act of a party in treating a contract
executed in favor of private respondent, Nazario Dumpit, a Contract to Sell a as cancelled should be made known to the other. We quote the pertinent excerpt:
parcel of Land (Lot No. 8, Block IV) of the Crestview Heights Subdivision in o "Of course, it must be understood that the act of a party in treating a
Antipolo, Rizal, with an area of 1,165 square meters, covered by TCT No. contract as cancelled or resolved in account of infractions by the other
90454, and owned by said corporation. The sale price was P23,300.00 with 9% contracting party must be made known to the other and is always
interest per annum, payable with a downpayment of P4,660.00 and monthly provisional being ever subject to scrutiny and review by the proper
installments of P246.42 until fully paid. Paragraph 6 of the contract provided court. If the other party denies that rescission is justified it is free to
for automatic extrajudicial rescission upon default in payment of any monthly resort to judicial action in its own behalf, and bring the matter to court.
installment after the lapse of 90 days from the expiration of the grace period of Then, should the court, after due hearing, decide that the resolution of
one month, without need of notice and with forfeiture of all installments paid. the contract was not warranted, the responsible party will be sentenced
· Respondent Dumpit paid the downpayment and several installments amounting to damages; in the contrary case, the resolution will be affirmed, and
to P13,722.50. The last payment was made on December 5, 1967 for the consequent indemnity awarded to the party prejudiced.
installments up to September 1967. o In other words, the party who deems the contract violated may consider
· On May 10, 1973, or almost six (6) years later, private respondent wrote it resolved or rescinded, and act accordingly, without previous court
petitioner offering to update all his overdue accounts with interest, and seeking action, but it proceeds at its own risk. For it is only the final judgment
its written consent to the assignment of his rights to a certain Lourdes Dizon. of the corresponding court that will conclusively and finally settle
He followed this up with another letter dated June 20, 1973 reiterating the same whether the action taken was or was not correct in law. But the law
request. Replying, petitioners informed respondent that his Contract to Sell had definitely does not require that the contracting party who believes
long been rescinded pursuant to paragraph 6 of the contract, and that the lot itself injured must first file suit and wait for a judgment before taking
had already been resold. extrajudicial steps to protect its interest. Otherwise, the party injured
· Questioning the validity of the rescission of the contract, respondent filed a by the other's breach will have to passively sit and watch its damages
letter complaint with the National Housing Authority (NHA) for reconveyance accumulate during the pendency of the suit until the final judgment of
with an alternative prayer for refund. In a Resolution, dated July 10, 1979, the rescission is rendered when the law itself requires that he should
NHA, finding the rescission void in the absence of either judicial or notarial exercise due diligence to minimize its own damages (Civil Code,
demand, ordered Palay, Inc. and Alberto Onstott, in his capacity as President Article 2203).
of the corporation, jointly and severally, to refund immediately to Nazario o We see no conflict between this ruling and the previous jurisprudence
Dumpit the amount of P13,722.50 with 12% interest from the filing of the of this Court invoked by respondent declaring that judicial action is
complaint on November 8, 1974. Petitioners' Motion for Reconsideration of necessary for the resolution of a reciprocal obligation since in every
said Resolution was denied by the NHA in its Order dated October 23, 1979. case where the extrajudicial resolution is contested only the final
ISSUE: award of the court of competent jurisdiction can conclusively
Whether or not demand is necessary to rescind a contract regardless of the express stipulation settle whether the resolution was proper or not. It is in this sense
in the contract that demand is not needed? that judicial action will be necessary, as without it, the extrajudicial
resolution will remain contestable and subject to judicial invalidation
HELD: unless attack thereon should become barred by acquiescence, estoppel
· Well settled is the rule, as held in previous jurisprudence, that judicial action or prescription.
for the rescission of a contract is not necessary where the contract provides that o Fears have been expressed that a stipulation providing for a unilateral
it may be revoked and cancelled for violation of any of its terms and conditions. rescission in case of breach of contract may render nugatory the
general rule requiring judicial action but, as already observed, in case
of abuse or error by the rescinder, the other party is not barred
from questioning in court such abuse or error, the practical effect
of the stipulation being merely to transfer to the defaulter the
initiative of instituting suit, instead of the rescinder."
· In this case, private respondent has denied that rescission is justified and has
resorted to judicial action. It is now for the Court to determine whether
resolution of the contract by petitioners was warranted. We hold that resolution
by petitioners of the contract was ineffective and inoperative against private
respondent for lack of notice of resolution. The contention that private
respondent had waived his right to be notified under paragraph 6 of the contract
is neither meritorious because it was a contract of adhesion, a standard form of
petitioner corporation, and private respondent had no freedom to stipulate. A
waiver must be certain and unequivocal, and intelligently made; such waiver
follows only where liberty of choice has been fully accorded. Moreover, it is
a matter of public policy to protect buyers of real estate on installment
payments against onerous and oppressive conditions. Waiver of notice is one
such onerous and oppressive condition to buyers of real estate on installment
payments.

DISPOSITIVE:
WHEREFORE, the questioned Resolution of respondent public official, dated May 2, 1980,
is hereby modified. Petitioner Palay, Inc. is directed to refund to respondent
Nazario M. Dumpit the amount of P13,722.50, with interest at twelve (12%) percent per
annum from November 8, 1974, the date of the filing of the Complaint. The temporary
Restraining Order heretofore issued is hereby lifted.
Case #22 (RV)
Angeles v. Calasanz
G.R. No. L-42283 | March 18, 1985 | Gutierrez, Jr., J. | First Division | Remedies for
Breach

PETITIONERS: Buenaventura Angeles and Teofila Juani, plaintiffs-appellees


RESPONDENTS: Ursula Torres Calasanz and To!as Calasanz, defendants-appellants

DOCTRINE:
Case Number # 23 Andrew ● On September 1, 1961, Araneta assigned his managerial rights to Alfredo J.
Boysaw V. Interphil Yulo, Jr.
G.R No. L- 22590| March 20 ,1987 | Fernan, J. | Remedies ● On September 5, 1961, Yulo wrote to Sarreal, informing him of his acquisition of
the managerial rights over Boysaw and indicating his and Boysaw's readiness to
Plaintiffs/appellants: Solomon Boysaw; Alfredo Yulo, Jr.
comply with the boxing contract of May 1, 1961.
Respondent/Defendant: INTERPHIL PROMOTIONS, INC., LOPE SARREAL, SR.,
● On the same date, on behalf of Interphil, Sarreal wrote a letter to the Games and
and MANUEL NIETO, JR.
Amusement Board [GAB] expressing concern over reports that there had been a
switch of managers in the case of Boysaw, of which he had not been formally
Doctrine:
notified, and requesting that Boysaw be called to an inquiry to clarify the situation.
While the contract imposed no penalty for such violation, this does not grant any of the
● The GAB called a series of conferences of the parties concerned culminating in the
parties the unbridled liberty to breach it with impunity. Our law on contracts recognizes
issuance of its decision to schedule the Elorde-Boysaw fight for November 4, 1961.
the principle that actionable injury inheres in every contractual breach (A1170; A1191,
The USA National Boxing Association which has supervisory control of all world
par.1).
title fights approved the date set by the GAB.
● Yulo, Jr. refused to accept the change in the fight date, even after Sarreal on
The power to rescind is given to the injured party. "Where the plaintiff is the party who
September 26, 1961, offered to advance the fight date to October 28, within the 30-
did not perform the undertaking which he was bound by the terms of the agreement to
day period of allowable postponements provided in the principal boxing contract.
perform, he is not entitled to insist upon the performance of the contract by the defendant,
● Early in October 1961, Yulo exchanged communications with Mamerto Besa, a
or recover damages by reason of his own breach." (Seva vs. Alfredo Berwin)
local boxing promoter, for a possible promotion of the projected Elorde-Boysaw
title bout. Yulo informed Besa that he was willing to approve the fight date of
November 4, 1961 provided the same was promoted by Besa.
FACTS: ● While an Elorde-Boysaw fight was eventually staged, the fight contemplated in the
May 1, 1961 boxing contract never materialized.
● On May 1, 1961, Solomon Boysaw and his then Manager, Willie Ketchum, signed ● As a result, Boysaw and Yulo, Jr. sued Interphil, Sarreal, Sr. and Manuel Nieto, Jr.
with Interphil Promotions, Inc., represented by Lope Sarreal, Sr., a contract to for damages allegedly occasioned by the refusal of Interphil and Sarreal, aided and
engage Gabriel "Flash" Elorde in a boxing contest for the junior lightweight abetted by Nieto, Jr., then GAB Chairman, to honor their commitments under the
championship of the world. boxing contract of May 1, 1961.
○ They stipulated that (a) the fight will be held on Sept. 30, 1961 or not ● Boysaw left the country without informing the court and, as alleged, his counsel.
later than 30 days thereafter, should a postponement be mutually agreed Thus, he was not able to take the witness stand.
upon and, (b) Boysaw would not engage in any other contest before the ● When defendants’ counsel was about to present their case, plaintiffs' counsel after
bout without Interphil's written consent. asking the court's permission, took no further part in the proceedings. The lower
● On May 3, 1961, a supplemental agreement on certain details not covered by the court ordered plaintiffs to jointly and severally awarded Nieto P25,000.00, broken
principal contract was entered into by Ketchum and Interphil. Thereafter, Interphil down into P20,000.00 as moral damages and P5,000.00 as attorney's fees; Interphil
signed Elorde to a similar agreement, that is, to engage Boysaw in a title fight at the and Sarreal, P250,000.00 as unrealized profits, P33,369.72 as actual damages and
Rizal Memorial Stadium on September 30, 1961. P5,000.00 as attorney's fees; and Sarreal, the P20,000.00 as moral damages aside
● On June 19, 1961, Boysaw fought and defeated Louis Avila in Las Vegas. from costs.
● On July 2, 1961, Ketchum assigned to J. Amado Araneta his managerial rights ● The plaintiffs moved for a new trial. The motion was denied, hence, this appeal
over Boysaw. taken directly to this Court by reason of the amount involved.
● On July 31, 1961, Boysaw arrived in the Philippines.
ISSUE:
1. W/N there was a violation of the fight contract of May 1,1961, and if there was,
who was guilty of such violation
HELD:
● YES, and Boysaw violated the contract. He fought Avila without Interphil's consent.
While the contract imposed no penalty for such violation, this does not grant any of
the parties the unbridled liberty to breach it with impunity. Our law on contracts
recognizes the principle that actionable injury inheres in every contractual breach
(A1170; A1191, par.1).
● The power to rescind is given to the injured party. "Where the plaintiff is the party
who did not perform the undertaking which he was bound by the terms of the
agreement to perform, he is not entitled to insist upon the performance of the
contract by the defendant, or recover damages by reason of his own breach." (Seva
vs. Alfredo Berwin)
● Another violation of the contract in question was the assignment and transfer, first
to Araneta, and subsequently, to Yulo, Jr., of the managerial rights over Boysaw
without Interphil’s knowledge or consent. The assignments were in fact novations
of the original contract which, to be valid, should have been consented to by
Interphil (Art. 1293).
● Under the law when a contract is unlawfully novated by an applicable and
unilateral substitution of the obligor by another, the aggrieved creditor is not bound
to deal with the substitute.
● The defendants, instead of availing themselves of the options given to them by law
of rescission or refusal to recognize the substitute obligor Yulo, really wanted to
postpone the fight date owing to an injury that Elorde sustained in a recent bout.
That defendants had the justification to renegotiate the original contract,
particularly the fight date is undeniable from the facts. Under the circumstances, the
defendants’ desire to postpone the fight date could neither be unlawful nor
unreasonable.
● The refusal of plaintiffs to accept a postponement without any other reason but the
implementation of the terms of the original boxing contract entirely overlooks the
fact that by virtue of the violations they have committed of the terms thereof, they
have forfeited any right to its enforcement.

·
DISPOSITIVE:
WHEREFORE, except for the award of moral damages which is herein deleted, the decision
of the lower court is hereby affirmed.
Case Number # 24 Celina The Dioknos filed Complaint for Specific Performance with Damages to compel petitioner
to execute a deed of sale.
PILIPINAS BANK V IAC
GR No L-67881| June 30 1987 | Paras, J | Second Division | Remedies After trial, the lower court rendered a decision in Dioknos’s favor, holding that petitioner
could not rescind the contract to sell, because: (a) petitioner waived the automatic rescission
clause by accepting payment and by sending letters advising private respondents of the
Petitioner-Appellant: balances due, thus, looking forward to receiving payments thereon.
PILIPINAS BANK as Successor-In-Interest Of And/Or In substitution to, The
MANUFACTURERS BANK AND TRUST COMPANY Said decision was affirmed on appeal. Hence, this Petition For Review on Certiorari
Respondent-Appellees:
INTERMEDIATE APPELLATE COURT (Fourth Civil Cases Division), and
ISSUES: Whether or not the Contract to Sell was rescinded, under the automatic recission
JOSE W. DIOKNO and CARMEN I. DIOKNO
clause contained therein
Nature of the Action: Petition for Review on Certiorari

RULING:
Doctrine: A contractual provision allowing “automatic rescission” is VALID,
We find the petition meritless. While it is true that in the leading case of Luzon Brokerage
the remedy of one who feels aggrieved being to go to Court for the cancellation
Co., Inc. vs. Maritime Building Co., Inc. and Myers Building Co., 43 SCRA 93 the Supreme
of the rescission itself, in case the rescission is found unjustified under the
Court reiterated among other things that a contractual provision allowing "automatic
circumstances, still in the instant case there is a clear WAIVER of the stipulated
rescission" (without prior need of judicial rescission, resolution or cancellation) is VALID,
right of "automatic rescission," as evidenced by the many extensions granted
the remedy of one who feels aggrieved being to go to Court for the cancellation of the
private respondents by the petitioner.
rescission itself, in case the rescission is found unjustified under the circumstances, still in
the instant case there is a clear WAIVER of the stipulated right of "automatic rescission," as
evidenced by the many extensions granted private respondents by the petitioner. In all these
extensions, the petitioner never called attention to the proviso on "automatic rescission."
FACTS:
DISPOSITIVE:
Hacienda Benito, Inc. as vendor, and private respondents, as vendees executed Contract to
WHEREFORE the assailed decision is hereby AFFIRMED but the actual damages are
Sell No. over a parcel of land in Antipolo on monthly installments subject to the condition:
hereby reduced to P250,000.00 (the profit private respondents could have earned had the
“The contract shall be considered automatically rescinded and cancelled and of no further
land been delivered to them at the time they were ready to pay all their arrearages) minus
force and effect upon failure of the vendee to pay when due, three or more consecutive
whatever private respondents still owe the petitioner (with the stipulated 6% annual interest
installments as stipulated therein or to comply with any of the terms and conditions thereof,
up to March 25, 1974) as a result of the contract.
in which case the vendor shall have right to resell the said parcel of land to any person
interested, forfeiting payments made by the vendee as liquidated damages.”

The petitioner sent series of notices to Private Respondent Dioknos for their latter’s
balances/arrearages. From time to time, PR partially complied with this and requested for
extensions. On May 19, 1970, the petitioner, for the last time, reminded the Dioknos to pay
their balance. After more than two years, PR sent a letter expressing their desire to settle
their desire to fully settle their obligation. On March 27, 1974, petitioner wrote a letter to
Case Number #25 (KAREN)
PR , informing them that the contract to sell had been rescinded.
CENTRAL BANK OF THE PHILIPPINES and ACTING DIRECTOR ANTONIO T. period amounting to P4,800.00 was also deducted from the partial release of
CASTRO, JR. OF THE DEPARTMENT OF COMMERCIAL AND SAVINGS P17,000.00.
BANK, in his capacity as statutory receiver of Island Savings Bank v. THE ○ However, on July 23, the pre-deducted interest was refunded to Sulpicio
HONORABLE COURT OF APPEALS and SULPICIO M. TOLENTINO after being informed by the bank that there was no fund yet available for
GR No. L-45710 | October 3, 1985 | Makasiar, C.J. | Second Division | Remedies for the release of the P63,000.00 balance. Nevertheless, the bank repeatedly
Breach of Obligations promised the release of the said balance.

● On August 13, 1965, after finding Island Savings Bank was suffering liquidity
Petitioners: Central Bank of the Philippines and Acting Director Antonio T. Castro,
problems, the Monetary Board of the Central Bank issued Resolution No. 1049
Jr. of the Department of Commercial and Savings Bank, in his capacity as statutory
which provides:
receiver of Island Savings Bank
Respondents: The Honorable Court of Appeals and Sulpicio M. Tolentino
“In view of the chronic reserve deficiencies of the Island Savings Bank against its deposit
liabilities, the Board, by unanimous vote, decided as follows:
Nature of the Action: Petition for Review on Certiorari to set aside as null and void the
Decision of the Court of Appeals modifying the Decision of the CFI of Agusan which 1. To prohibit the bank from making new loans and investments [except investments
in government securities] excluding extensions or renewals of already approved
dismissed the petition of respondent Sulpicio M. Tolentino for injunction, specific
loans, provided that such extensions or renewals shall be subject to review by the
performance or rescission, and damages with preliminary injunction Superintendent of Banks, who may impose such limitations as may be necessary
to insure correction of the bank's deficiency as soon as possible; …”
Doctrine:
Article 1192 of the Civil Code provides that in case both parties have committed a ● On June 14, 1968, after finding that Island Savings Bank failed to put up the
breach of their reciprocal obligations, the liability of the first infractor shall be required capital to restore its solvency, the Monetary Board issued Resolution No.
equitably tempered by the courts. 967 which prohibited Island Savings Bank from doing business in the Philippines
and instructed the Acting Superintendent of Banks to take charge of its assets.

● On August 1, 1968, Island Savings Bank, in view of non-payment of the P17,000.00


FACTS: covered by Sulpicio’s promissory note, filed an application for the extra-judicial
● On April 28, 1965, the Island Savings Bank approved Sulpicio Tolentino’s loan foreclosure of the real estate mortgage covering the 100-hectare land of Sulpicio.
application for P80,000.00 as an additional capital to develop his property into a Thereafter, the sheriff scheduled the auction.
subdivision. On the same day, he executed a real estate mortgage over his 100-
hectare land covered by a TCT, as a security for the said loan, and which mortgage ● On January 20, 1969, Sulpicio filed a petition with the CFI of Agusan for injunction,
was annotated on the said title the next day. specific performance or rescission and damages with preliminary injunction,
○ The approved loan application called for a lump sum P80,000.00 loan, alleging that since Island Savings Bank failed to deliver the P63,000.00 balance of
repayable in semi-annual installments for a period of 3 years, with 12% the P80,000.00 loan, he is entitled to specific performance by ordering the bank to
annual interest. deliver the P63,000.00 with interest, and if said balance cannot be delivered, to
rescind the real estate mortgage.
● On May 22, 1965, a mere P17,000.00 partial release of the said loan was made by
the bank. Thereafter, Sulpicio and his wife signed a promissory note for the released ● Upon the filing of a P5,000.00 surety bond, the CFI issued a temporary restraining
amount at 12% annual interest, payable within 3 years from the date of execution order enjoining the Island Savings Bank from continuing with the foreclosure of the
of the contract. An advance interest for the P80,000.00 loan covering a 6-month mortgage.
CFI’s RULING: In its Decision, it found unmeritorious the petition of Sulpicio, ordering ● The mere pecuniary inability on the part of the bank to fulfill the engagement
him to pay Island Savings Bank the amount of P17,000.00 plus legal interest and legal does not discharge the obligation of the contract, nor does it constitute any
charges due thereon, and lifting the restraining order so that the sheriff may proceed with the defense to a decree of specific performance. And, the mere fact of insolvency of
foreclosure. a debtor is never an excuse for the non-fulfillment of an obligation but instead it is
taken as a breach of the contract by him.
CA’s RULING: On appeal, it MODIFIED the CFI’s Decision by AFFIRMING the
dismissal of Sulpicio’s petition for specific performance, but it ruled that Island Savings ● The fact that Sulpicio demanded and accepted the refund of the pre-deducted
Bank can neither foreclose the real estate mortgage nor collect the P17,000.00 loan. interest of the supposed P80,000.00 loan cannot be taken as a waiver of his right
to collect the P63,000.00 balance.
ISSUES:
1. W/N Sulpicio’s action for specific performance will prosper? – NO. ● On the other hand, the act of the bank, in asking the advance interest on the
2. W/N Sulpicio is liable to pay the P17,000.00 debt covered by the promissory note? supposed P80,000.00 loan was improper considering that only P17,000.00 out of
– YES. the P80,000.00 loan was released.
3. W/N Sulpicio’s real estate mortgage can be foreclose to satisfy the debt, if his ○ A person cannot be legally charged interest for a non-existing debt.
liability to pay subsists? – YES.
● Thus, the receipt by Sulpicio of the pre-deducted interest was an exercise of his
RULING: right to it, which right exists independently of his right to demand the completion
1. W/N Sulpicio’s action for specific performance will prosper? – NO. of the P80,000.00 loan.
● When Island Savings Bank and Sulpicio entered into a loan agreement, they ○ The exercise of one right does not affect, much less neutralize, the
undertook reciprocal obligations. exercise of the other.

● In reciprocal obligations, the obligation or promise to pay of each party is the ● Since the bank was in default in fulfilling its reciprocal obligation under their loan
consideration for that of the other; and when one party has performed or is agreement, Sulpicio, under Article 1191 of the Civil Code, may choose between
ready and willing to perform his part of the contract, the other party who has specific performance or rescission with damages in either case.
not performed or is not ready and willing to perform incurs in delay (Art. 1169 ○ But since the bank is now prohibited from doing further business by
of the Civil Code). Monetary Board Resolution No. 967, WE cannot grant specific
performance in favor of Sulpicio.
● The bank’s delay in furnishing the entire loan started on April 28, 1965, and
lasted for a period of 3 years or when the Monetary Board of the Central Bank ● Rescission is the only alternative remedy left. However, that rescission is only
issued Resolution No. 967 on June 14, 1968, which prohibited Island Savings Bank for the P63,000.00 balance of the original P80,000.00 loan since the bank is in
from doing further business. Such prohibition made it legally impossible for Island default.
Savings Bank to furnish the P63,000.00 balance of the P80,000.00 loan.
○ However, the Monetary Board Resolution No. 1049 cannot interrupt the 2. W/N Sulpicio is liable to pay the P17,000.00 debt covered by the promissory note? – YES.
bank’s default in complying with its obligation of releasing the balance ● As far as the partial release of P17,000.00, which Sulpicio accepted and
because said resolution merely prohibited the Bank from making new executed a promissory note to cover it, the bank was deemed to have complied
loans and investments, and nowhere did it prohibit Island Savings Bank with its reciprocal obligation to furnish a P17,000.00 loan.
from releasing the balance of loan agreements previously contracted. ○ The promissory note gave rise to Sulpicio’s reciprocal obligation to
pay the P17,000.00 loan when it falls due.
● His failure to pay the overdue amortizations under the promissory note made or subsequent matter. But when the consideration is subsequent to the
him a party in default, hence not entitled to rescission (Article 1191 of the Civil mortgage, the mortgage can take effect only when the debt secured by it is
Code). created as a binding contract to pay.

● If there is a right to rescind the promissory note, it shall belong to the aggrieved ● When there is partial failure of consideration, the mortgage becomes
party, that is, Island Savings Bank. If Tolentino had not signed a promissory note unenforceable to the extent of such failure.
setting the date for payment of P17,000.00 within 3 years, he would be entitled to ○ Where the indebtedness actually owing to the holder of the mortgage is
ask for rescission of the entire loan because he cannot possibly be in default as there less than the sum named in the mortgage, the mortgage cannot be enforced
was no date for him to perform his reciprocal obligation to pay. for more than the actual sum due.

● Since both parties were in default in the performance of their respective ● Since Island Savings Bank failed to furnish the P63,000.00 balance of the
reciprocal obligations, that is, Island Savings Bank failed to comply with its P80,000.00 loan, the real estate mortgage of Sulpicio M. Tolentino became
obligation to furnish the entire loan and Sulpicio M. Tolentino failed to comply unenforceable to such extent. P63,000.00 is 78.75% of P80,000.00, hence the
with his obligation to pay his P17,000.00 debt within 3 years as stipulated, they real estate mortgage covering 100 hectares is unenforceable to the extent of
are both liable for damages. 78.75 hectares. The mortgage covering the remainder of 21.25 hectares subsists
as a security for the P17,000.00 debt. 21.25 hectares is more than sufficient to
● Article 1192 of the Civil Code provides that in case both parties have secure a P17,000.00 debt.
committed a breach of their reciprocal obligations, the liability of the first
infractor shall be equitably tempered by the courts. DISPOSITIVE: WHEREFORE, THE DECISION OF THE COURT OF APPEALS
DATED FEBRUARY 11, 1977 IS HEREBY MODIFIED, AND:
● The liability of the bank damages in not furnishing the entire loan is offset by
the liability of Sulpicio for damages, in the form of penalties and surcharges, 1. SULPICIO M. TOLENTINO IS HEREBY ORDERED TO PAY IN FAVOR OF
for not paying his overdue P17,000.00 debt. The liability of Sulpicio for interest HEREIN PETITIONERS THE SUM OF P17,000.00, PLUS P41,210.00
on his P17,000.00 debt shall not be included in offsetting the liabilities of both REPRESENTING 12% INTEREST PER ANNUM COVERING THE PERIOD
parties. FROM MAY 22, 1965 TO AUGUST 22, 1985, AND 12% INTEREST ON THE
○ Since Sulpicio derived some benefit for his use of the P17,000.00, it is just TOTAL AMOUNT COUNTED' FROM AUGUST 22, 1985 UNTIL PAID;
that he should account for the interest thereon. 2. IN CASE SULPICIO M. TOLENTINO FAILS TO PAY, HIS REAL ESTATE
MORTGAGE COVERING 21.25 HECTARES SHALL BE FORECLOSED TO
3. W/N Sulpicio’s real estate mortgage can be foreclose to satisfy the debt, if his liability to SATISFY HIS TOTAL INDEBTEDNESS; AND
pay subsists? – YES. 3. THE REAL ESTATE MORTGAGE COVERING 78.75 HECTARES IS HEREBY
● The real estate mortgage of Sulpicio CANNOT BE ENTIRELY foreclosed to DECLARED UNENFORCEABLE AND IS HEREBY ORDERED RELEASED
satisfy his P17,000.00 debt. IN FAVOR OF SULPICIO M. TOLENTINO.

● The fact that when Sulpicio M. Tolentino executed his real estate mortgage, no
consideration was then in existence, as there was no debt yet because Island Savings
Bank had not made any release on the loan, does not make the real estate mortgage
void for lack of consideration.
○ It is not necessary that any consideration should pass at the time of
the execution of the contract of real mortgage. It may either be a prior
Case Number # 27 (JAO) 5. The OP, through the Executive Secretary Ermita, granted petitioner’s motion and
set aside Deputy Executive Secretary Gaite’s decision
SWIRE REALTY DEVELOPMENT CORPORATION v. JAYNE YU ISSUES: Whether or not rescission of the contract is proper in the instant case.
Gr. NO. 207133 | March 09, 2015 | PERALTA, J | 3rd Division | Remedies RULING:
1. Article 1191 of the Civil Code sanctions the right to rescind the obligation in the
event that specific performance becomes impossible.
Petitioner/Plaintiff: SWIRE REALTY DEVELOPMENT CORPORATION
2. Basic is the rule that the right of rescission of a party to an obligation under Article
Respondent/Defendant: JAYNE YU
1191 of the Civil Code is predicated on a breach of faith by the other party who
violates the reciprocity between them.
Doctrine:
a. The breach contemplated in the said provision is the obligor's failure to
The breach contemplated in the said provision is the obligor's failure to comply
comply with an existing obligation.
with an existing obligation. When the obligor cannot comply with what is
b. When the obligor cannot comply with what is incumbent upon it, the
incumbent upon it, the obligee may seek rescission and, in the absence of any
obligee may seek rescission and, in the absence of any just cause for the
just cause for the court to determine the period of compliance, the court shall
court to determine the period of compliance, the court shall decree the
decree the rescission.
rescission.
3. The CA aptly found that the completion date of the condominium unit was
November 1998 pursuant to License No. 97-12-3202 dated November 2, 1997 but
was extended to December 1999 as per License to Sell No. 99-05-3401 dated May
FACTS:
8, 1999. However, at the time of the ocular inspection conducted by the HLURB
1. Respondent Jayne Yu and petitioner Swire Realty Development Corporation
ENCRFO, the unit was not yet completely finished as the kitchen cabinets and
entered into a Contract to Sell on July 25, 1995 covering Condo Unit 3007 of the
fixtures were not yet installed and the agreed amenities were not yet available.
Palace of Makati, with an area of 137.30 square meters for the total contract price
4. From the foregoing, it is evident that the report on the ocular inspection conducted
of P7,519,371.80, payable in equal monthly instalments until September 24, 1997.
on the subject condominium project and subject unit shows that the amenities under
Respondent likewise purchased a parking slot in the same condominium building
the approved plan have not yet been provided as of May 3, 2002, and that the subject
for P600,000.00.
unit has not been delivered to respondent as of August 28, 2002, which is beyond
2. On September 24, 1997, respondent paid the full purchase price of P7,519,371.80
the period of development of December 1999 under the license to sell.
for the unit while making a down payment of P20,000.00 for the parking lot.
5. Incontrovertibly, petitioner had incurred delay in the performance of its obligation
a. However, notwithstanding full payment, petitioner failed to complete and
amounting to breach of contract as it failed to finish and deliver the unit to
deliver the subject unit on time prompting respondent to file a Complaint
respondent within the stipulated period.
for Rescission of Contract with Damages before HLURB.
6. The delay in the completion of the project as well as of the delay in the delivery of
3. On October 19, 2004, the HLURB rendered a Decision dismissing respondent’s
the unit are breaches of statutory and contractual obligations which entitle
complaint. It ruled that rescission is not permitted for slight or casual breach of the
respondent to rescind the contract, demand a refund and payment of damages.
contract but only for such breaches as are substantial and fundamental as to defeat
the object of the parties in making the agreement
DISPOSITIVE:
4. The HLURB Board of Commissioners reversed and set aside the ruling stating that
he delay in the completion of the project as well as of the delay in the delivery of
WHEREFORE, premises considered, the instant petition is DENIED. The Decision dated January 24, 2013
the unit are breaches of statutory and contractual obligations which entitles and Resolution dated April 30, 2013 of the Court of Appeals in CA-G.R. SP No. 121175 are hereby
respondent to rescind the contract, demand a refund and payment of damages. AFFIRMED, with MODIFICATION that moral damages be awarded in the amount of P20,000.00.
a. MR was filed but was denied.
Case number 28 AGUSTIN However, the corporation only paid 2,500,000.00 of the purchase price and failed to comply
with the terms of the conditional sale. Despite demand, Olivarez Realty Corporation refused
OLIVAREZ REALTY V. CASTILLO to fully pay the purchase price. In their answer, Olivarez Realty Corporation and Dr. Olivarez
G.R. No. 196251| 09 July 2014 | LEONEN, J. | Third Division | Judicial Remedies - admitted that the corporation only paid P2,500,000.00 of thepurchase price. In their defense,
Rescission defendants alleged that Castillofailed to "fully assist" the corporation in filing an action
against the Philippine Tourism Authority. Neither did Castillo clear the property of the
tenants within six months from the signing of the deed of conditional sale.
Petitioner: Olivarez Realty Corporation and Dr. Pablo Olivarez
Respondent: Benjamin Castillo
Nature of the Action: A petition for review on certiorari of the CA decision. ISSUE: Whether Castillo is entitled to rescind the “contract of conditional sale” which is
Doctrine: actually a Contract to sell.
Article 1191 of the Civil Code on the right to rescind reciprocal obligations does not apply
to contracts to sell. As this court explained in Ong v. Court of Appeals, failure to fully pay RULING:
the purchase price in contracts to sell is not the breach of contract under Article 1191.
Failure to fully pay the purchase price is "merely an event which prevents the [seller’s] No. Rescission is not an appropriate remedy but cancellation of the contract. In both contracts
obligation to convey title from acquiring binding force." This is because "there can be no to sell and contracts of conditional sale, title to the property remains with the seller until the
rescission of an obligation that is still nonexistent, the suspensive condition not having
buyer fully pays the purchase price. Both contracts are subject to the positive suspensive
[happened]."
condition of the buyer’s full payment of the purchase price.

FACTS: In a contract of conditional sale, the buyer automatically acquires title to the property upon
full payment of the purchase price. This transfer of title is "by operation of law without any
Benjamin Castillo was the registered owner of a parcel of land located in Laurel, Batangas, further act having to be performed by the seller."
covered by Transfer Certificate of Title No. T-19972. The Philippine Tourism Authority
allegedly claimed ownership of the same parcel of land based on Transfer Certificate of Title In a contract to sell, transfer of title to the prospective buyer is not automatic. "The
No. T-18493. prospective seller [must] convey title to the property [through] a deed of conditional sale."

On April 5, 2000, Castillo and Olivarez Realty Corporation, represented by Dr. Pablo R. Since Olivarez Realty Corporation illegally withheld payments of the purchase price,
Olivarez, entered into a contract of conditional sale over the property. Under the deed of Castillo is entitled to cancel his contract with petitioner corporation. However, we properly
conditional sale, Castillo agreed to sell his property to Olivarez Realty Corporation for characterize the parties’ contract as a contract to sell, not a contract of conditional sale.
P19,080,490.00 and Olivarez Realty Corporation assumes the responsibility of taking
necessary legal action thru Court to have the claim/title TCT T-18493 of Philippine Tourism xxx
Authority over the above-described property be nullified and voided with the full assistance
of Castillo. Specifically, Article 1191 of the Civil Code on the right to rescind reciprocal obligations
does not apply to contracts to sell. As this court explained in Ong v. Court of Appeals, failure
On September 2, 2004, Castillo filed a complaint for action for rescission against Olivarez to fully pay the purchase price in contracts to sell is not the breach of contract under Article
Realty Corporation and Dr. Olivarez with the Regional Trial Court of Tanauan City, 1191. Failure to fully pay the purchase price is "merely an event which prevents the [seller’s]
Batangas. Castillo alleged that Dr. Olivarez convinced him into selling his property to obligation to convey title from acquiring binding force." This is because "there can be no
Olivarez Realty Corporation on the representation that the corporation shall be responsible rescission of an obligation that is still nonexistent, the suspensive condition not having
in clearing the property of the tenants and in paying them disturbance compensation. [happened]."
In this case, Castillo reserved his title to the property and undertook to execute a deed of
absolute sale upon Olivarez Realty Corporation’s full payment of the purchase price. Since
Castillo still has to execute a deed of absolute sale to Olivarez Realty Corporation upon full
payment of the purchase price, the transfer of title is not automatic. The contract in this case
is a contract to sell.

As this case involves a contract to sell, Article 1191 of the Civil Code of the Philippines does
not apply. The contract to sell is instead cancelled, and the parties shall stand as if the
obligation to sell never existed.

DISPOSITIVE:

WHEREFORE, the petition for review on certiorari is DENIED. The Court of Appeals’
decision dated July 20, 2010 and in CA-G.R. CV No. 91244 is AFFIRMEDwith
MODIFICATION.

The deed of conditional sale dated April 5, 2000 is declared CANCELLED. Petitioner
Olivarez Realty Corporation shall RETURN to respondent Benjamin Castillo the possession
of the property covered by Transfer Certificate of Title No. T-19972 together with all the
improvements that petitioner corporation introduced on the property. The amount of
₱2,500,000.00 is FORFEITED in favor of respondent Benjamin Castillo as reasonable
compensation for the use of petitioner Olivarez Realty Corporation of the property.

Petitioner Olivarez Realty Corporation shall PAY respondent Benjamin Castillo


₱500,000.00 as moral damages, ₱50,000.00 as exemplary damages, and ₱50,000.00 as
attorney's fees with interest at 6% per annum from the time this decision becomes final and
executory until petitioner
corporation fully pays the amount of damages.
SO ORDERED.