23. )Case Title: Victorias Planters v. Victorias Milling Co G.R. No.

L-6648 July 25, 1955

Topic: Fortuitous Event

Ponente: PADILLA, J.

Doctrine: Considering that war is a force majeure or a fortuitous event, the obligee has no legal
right compel the obligor to perform his obligation.

Facts:

Several sugarcane farmers in Negros Occidental entered into a contract with the North Negros
Sugar Co. In. and Victorias Milling Co. Inc. wherein said corporation will construct a sugar
central or mill with the capacity of milling 300 tons of sugar every 24 hours. In the said contract
it is stipulated that the sugar cane planter’s produce will be milled by the said corporation for
the period of 30 years. During the World War II comprising of 4 years and the post war period
comprising of 2 years the petitioners was not able to produce sugarcane and the sugar central
is destroyed. The North Central Sugar Co. Inc. did not reconstruct its destroyed mill but rather
made an arrangement with the planters that their produce will be milled by Victorias Milling
Co. Inc. herein respondent. In view of the 30-year period of the milling contract the petitioner
contended that the contract is deemed terminated. On the other hand the respondent stated
that the contract speaks of “30 years milling period” not “30 years in time” and in view of the
failure of the petitioners to produce sugarcane during the war and post war they still have 6
years milling period. The trial court ruled in favor of the petitioners

Issue:

Is the occurrence of war (fortuitous event ) relieved the petitioners from their obligation?

Held:
Yes, It is impossible in this case for the petitioner to produce crops (Nemo tenetor ad
impossibilia) and the fulfillment of that impossible, if granted will amount to the extension of
the contract. Therefore the judgment appealed is affirmed.

Fortuitious event relieves the obligor from fulfilling a contractual obligation. 1 The fact that the
contracts make reference to "first milling" does not make the period of thirty years one of thirty
milling years. The term "first milling" used in the contracts under consideration was for the
purpose of reckoning the thirty-year period stipulated therein. Even if the thirty-year period
provided for in the contracts be construed as milling years, the deduction or extension of six
years would not be justified. At most on the last year of the thirty-year period stipulated in the
contracts the delivery of sugar cane could be extended up to a time when all the amount of
sugar cane raised and harvested should have been delivered to the appellant's mill as agreed
upon. The seventh paragraph of Annex "C", not found in the earlier contracts (Annexes "A", "B",
and "B-1"), quoted by the appellant in its brief, where the parties stipulated that in the event of
flood, typhoon, earthquake, or other force majeure, war, insurrection, civil commotion,
organized strike, etc., the contract shall be deemed suspended during said period, does not
mean that the happening of any of those events stops the running of the period agreed upon. It
only relieves the parties from the fulfillment of their respective obligations during that time —
the planters from delivering sugar cane and the central from milling it. In order that the central,
the herein appellant, may be entitled to demand from the other parties the fulfillment of their
part in the contracts, the latter must have been able to perform it but failed or refused to do so
and not when they were prevented by force majeure such as war. To require the planters to
deliver the sugar cane which they failed to deliver during the four years of the Japanese
occupation and the two years after liberation when the mill was being rebuilt is to demand
from the obligors the fulfillment of an obligation which was impossible of performance at the
time it became due. Nemo tenetur ad impossibilia. The obligee not being entitled to demand
from the obligors the performance of the latters' part of the contracts under those
circumstances cannot later on demand its fulfillment. The performance of what the law has
written off cannot be demanded and required. The prayer that the plaintiffs be compelled to
deliver sugar cane to the appellant for six more years to make up for what they failed to deliver
during those trying years, the fulfillment of which was impossible, if granted, would in effect be
an extension of the term of the contracts entered into by and between the parties.

112.) Case Title: LAMBERTO SONGCO vs.

GEORGE C. SELLNER G.R. No. L-11513 December 4, 1917

Topic: Contracts

Ponente: Street, J

Doctrine: Misinterpretation upon a mere matter of opinion is not an actionable deceit, nor is it
a sufficient ground for avoiding a contract as fraudulent.

Facts:
Both Defendant, George C. Sellner and the plaintiff, Lamberto Songco owned a farm which was
contiguous to each other’s land. Both properties had the sugar cane ready to be cut. The
Defendant bought the plaintiff’s cane for P12,000 and executed three promissory notes of
P4,000 each. Two of these notes were paid; and the third was was instituted to recover. From a
judgement rendered in favor of the plaintiff, the defendant has appealed.

The defendant denied all the allegations of the complaint. He said that the promissory note was
obtained from him by means of certain false and fraudulent representations therein specified.

It is claimed that the plaintiff estimated that this cane would produce 3,000 piculs of the sugar
and that the defendant bought the crop believing this estimate to be substantially correct. As
the crop turned out it produced 2,017 piculs, gross, and after the toll for milling was deducted
the net left to the defendant was very much less. The court believed it is fairly shown that the
plaintiff knew at the time he made the representation exaggerated the probable produce of his
fields, and it is impossible to believe that his estimate honestly reflected his true opinion. He
knew what these same fields had been producing over a long period of years; and he knew
that, judging from the customary yield, the harvest of this year should fall far below the amount
stated.

Issue:
Was the plaintiff guilty of fraudulent representation of his cane?

Held:

No. It is not every false representation relating to the subject matter of a contract which will
render it void. It must be as to matters of fact substantially affecting the buyer's interest, not as
to matters of opinion, judgment, probability, or expectation. When the purchaser undertakes to
make an investigation of his own, and the seller does nothing to prevent this investigation from
being as full as he chooses to make it, the purchaser cannot afterwards allege that the seller
made misrepresentations

We are aware that where one party to a contract, having special or expert knowledge, takes
advantage of the ignorance of another to impose upon him, the false representation may afford
ground for relief, though otherwise the injured party would be bound. But we do not think that
the fact that Songco was an experienced farmer, while Sellner was, as he claims, a mere novice
in the business, brings this case within that exception.

136.) Case Title: VICENTE L. LUNTAO AND NANETTE L. LUNTAO, v. BAP CREDIT GUARANTY
CORPORATION AND EFREN M. PINEDA G.R. No. 204412, September 20, 2017
Topic: Accessory Contracts
Ponente: LEONEN, J.
Doctrine: The validity of accessory contracts mainly flows from the validity of the principal
contracts. A real estate mortgage is in the nature of an accessory contract. Thus, the validity of
a mortgage contract that was constituted to secure a loan obligation is affected by the validity
of the loan contract.
Facts: This case involves the validity of the real estate mortgage of petitioner Vicente L.
Luntao's (Vicente) property in favor of respondent BAP. The mortgage was executed by
petitioner Nanette L. Luntao by virtue of a Special Power of Attorney that Vicente issued in her
favor.

Vicente was the owner of a real property and he executed a Special Power of Attorney in favor
of his sister Nanette. Nanette applied for a loan with BAP and used Vicente's property as
collateral. The loan was for the improvement of the facilities of her business, the Holy Infant
Medical Clinic. According to Nanette, she was introduced to the lending institution by her sister
Eleanor Luntao, who allegedly had a personal loan with it and whose office was located in the
same building where BAP's office was.

Upon approval of the loan, the amount of P900,000.00, representing the loan proceeds, was
ordered to be released to the clinic through Security Bank. When the loan obligation became
due, BAP sent demand letters. In a letter, Nanette and Eleanor's brother Jesus Luntao (Jesus)
wrote BAP, asking for additional time to settle his sisters’ accounts. He cited cash leakages and
pending accreditation with life insurers as reasons for the clinic’s substantial losses.

However, Nanette's loan was still left unpaid. As a result, BAP applied for Extra-Judicial
Foreclosure of Vicente's property. RTC issued a Notice of Foreclosure and a Notice of
Extrajudicial Sale.

Vicente and Nanette filed a Complaint for Declaration of Nullity of Real Estate Mortgage with a
prayer for the issuance of a Temporary Restraining Order and Writ of Preliminary Injunction
against BAP.

Vicente and Nanette claimed that Eleanor's alleged debt with BAP was separate from Nanette's
debt and was not secured by Vicente's property, which should not be foreclosed if Eleanor
failed to pay her alleged debt.
Petitioners argue that they did not receive any amount from the allegedly approved loan
application, thus they should not be held liable for its payment. They contend that it was
respondent BAP's negligence that caused the release of the loan proceeds to a person not
authorized by petitioners. Petitioners add that neither of them gave authorization for BAP to
release the loan proceeds through Security Bank. There was also no evidence showing that the
power and authority to receive the loan proceeds under the Special Power of Attorney were
delegate to Eleanor.

According to petitioners, the contract was not consummated since they did not receive the loan
proceeds, and therefore, null and void. The principal contract being void, the accessory contract
of mortgage was also null and void. Petitioners add that the mortgage contract also contained
a pactum commissorium provision.

BAP counters that the loan proceeds "were duly received, credited and transferred to the Holy
Infant Medical Clinic/Nanette L. Luntao/Eleonor L. Luntao under Security Bank and Trust
Company Account. Respondent BAP also maintains that Eleanor has no separate personal loan
with them. Respondent BAP contends that the assailed mortgage provision is not pactum
commissorium since it does not "automatically allow the mortgagee to appropriate or own the
mortgage property without the need of ... foreclosure proceedings.”

Issue: Does the Real Estate Mortgage executed by Vicente L. Luntao and Nanette L. Luntao
should be nullified?

Held: As an accessory contract, a mortgage contract's validity depends on the loan contract's
validity.It is, thus, imperative for this Court to determine if the contract of loan between
petitioners and private respondent is valid. This Court held in Pentacapital Investment
Corporation v. Mahinay that "[l]ike any other contract, a contract of loan is subject to the rules
governing the requisites and validity of contracts in general."
The elements of a valid contract are enumerated in Article 1318 of the Civil Code:
ARTICLE 1318. There is no contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.
All elements should be present in a contract; otherwise, it cannot be perfected. In this case,
petitioners insist that they did not receive the loan proceeds, which is the object of the loan
contract.