ELEMENTS OF OBLIGATION

Pelayo v. Lauron
G.R. No. 4089. January 12, 1909.
Torres, J.

FACTS:

On or about the 13th of October 1906, Pelayo was called by Lauron to their
house and was requested to render medical assistance to their daughter-in-
law who was about to give birth to a child. After the operation, Pelayo visited
the patient several times and is demanding from the defendants PhP 500.00
as value of the services. The defendants refused to pay said amount.

ISSUES:

Whether or not the defendants are bound to pay the bills.

RULING:

The Supreme Court ruled in the negative. According to Article 1089 of the
Civil Code, obligations are created by law, by contracts by quasi-contracts,
and by illicit acts and omissions or by those in which any kind of fault or
negligence occurs. Obligations arising from law are not presumed. Those
expressly determined in the code or in special laws, etc. are the only
demandable ones. Obligations arising from contracts have legal force
between the contracting parties and must be fulfilled in accordance with their
stipulations (Articles 1090 and 1091).

Therefore, the plaintiff must direct his action against the husband who is
under obligation to furnish medical assistance to his lawful wife in such
emergency.
 Perez vs. Pomar
G.R. No. L-1299, November 16, 1903
Torres, J.

Facts:

The petitioner Don Vicente Perez filed before the Court of First
Instance of Laguna a complaint asking the court to determine the amount
due to him for the services he rendered in the Tabacalera Company and that
the defendant Eugenio Pomar be condemned to the payment of damages
amounting to $3,200, gold, together with the costs of suit. Prior to this event,
the petitioner was asked to be an English interpreter between the defendant
and the military authorities and that after that incident, the petitioner
continued to render his services to the respondent and that he obtained
passes and accompanied Pomar upon his journeys to some of the towns in
Province of Laguna( e.g conferences between the respondent and the
colonel commanding the local garrison, conferences with Captain Lemen in
the town of Pilar, major in command in Pagsanjan about the shipment of
goods from Manila) and that the plaintiff was assured by the respondent that
in every rendered service to the said company, there would be such
payment. Thus, caused him to abandon his soap business and suffered
damages in the sum of $3,200. The defendant filed for dismissal of the
complaint denying the allegations stated by the petitioner. He also stated that
Perez borrowed from time to time money amounting to $175 for his soap
business, that Perez purposes in accompanying him is to extend his
business and mercantile relations, free transportation, and that Perez had
acted as interpreter of his own free will without any offer of payment and
therefore no legal relation between them existed.

Issue:
Whether or not the respondent is oblige to pay the continued service
rendered by the petitioner.
Held:
Yes. The Court decision is that the judgement should be rendered
against Don Eugenio Pomar for the payment to the plaintiff of the sum of 200
Mexican pesos.

Ratio:
The Court ruled out that if there is a tacit and mutual consent as to the
rendition of the services, the defendant is still obliged to pay such
compensation to the petitioner even if there is no written contract entered
between the two parties on the basis of quasi-contract. When one party
knowingly receives something for nothing, the courts may impose a quasi
contract. Under a quasi contract, neither party is originally intended to create
an agreement. Instead, an arrangement is imposed by a judge to rectify an
occurrence of unjust enrichment. On the services rendered by the petitioner
in the province of Laguna, it follows that there was a bilateral obligation on
the part of both parties because the defendant accepted the benefit of the
service rendered by the petitioner and that in turn the petitioner expected him
to pay his rendition of service. Provided in Article 22 of the Civil Code, Every
person who through an act of performance by another, or any other means,
acquires or comes into possession of something at the expense of the latter
without just or legal ground, shall return the same to him. The fact that the
defendant consented to accept an interpreter's services on various
occasions, rendered in his behalf and not considered as free, it is just that
he should pay the reasonable payment because it is well-known principle of
law that no one should be permitted to enrich himself to the damage of
another.

PNB V. Court of Appeals

256 SCRA 491, October 29, 1968
Kapunan, J.

FACTS:
 DECS issued a check in favor of Abante Marketing containing a
specific serial number, drawn against PNB. The check was deposited by
Abante in its account with Capitol and the latter consequently deposited
the samewith its account with PBCOM which later deposited it with
petitioner for clearing. The check was thereafter cleared. However, on a
relevant date, petitioner PNB returned the check on account that there
had been a material alteration on it. Subsequent debits were made but
Capitol cannot debit the account of Abante any longer for the latter had
withdrawn all the money already from the account. This prompted Capitol
to seek reclarification from PBCOM and demanded the recrediting of
its account. PBCOM followed suit by doing the same against PNB.
Demands unheeded,it filed an action against PBCOM and the latter filed a
third-party complaint against petitioner.

HELD:

An alteration is said to be material if it alters the effect of the instrument. It

means an unauthorized change in the instrument that purports to modify in
any respect the obligation of a party or an unauthorized addition of
words or numbers or other change to an incomplete instrument relating to
the obligation of the party. In other words, a material alteration is
one which changes the items which are required to be stated under Section
1 of the NIL.

In this case, the alleged material alteration was the alteration of the serial
number of the check in issue—which is not an essential element of
a negotiable instrument under Section 1. PNB alleges that the alteration
was material since it is an accepted concept that a TCAA check by
its very nature is the medium of exchange of governments,
instrumentalities and agencies. As a safety measure, every government
office or agency is assigned checks bearing different serial numbers.

But this contention has to fail. The check’s serial number is not the sole
indicia of its origin. The name of the government agency issuing the check
is clearly stated therein. Thus, the check’s drawer is sufficiently identified,
rendering redundant the referral to its serial number.
Therefore, there being no material alteration in the check committed, PNB
could not return the check to PBCOM. It should pay the same.

Felisa Toribio vs.Dolores Foz, Et al.

G.R. No. 11039 , September 13, 1916
TORRES, J.

FACTS

On August 22, 1914, counsel for Felisa Toribio filed a complaint in the said
court alleging as a cause of action, that the plaintiff sold to the defendant
Dolores Foz and to her husband Buenaventura Toribio his rights to
redemption and lease in the property having certificate of title No. 2263,
issued by the register of deeds of the city of Manila, for the sum of P2,200,
less that of P700 which the plaintiff owed to the defendant spouses.

The record shows, it to have been duly proven that the plaintiff, Felisa
Toribio, was the owner of a parcel of urban property situated at the
intersection of Calles Raon and Sales of the district of Santa Cruz, Manila,
having certificate of title No. 2263; that said parcel was sold under right of
repurchase to Carlos Rodriguez Pomar, the plaintiff retaining, however, the
right to continue to occupy the house thereon on the condition of her paying
to the purchaser sa monthly rental of P38 and, of course, on that of her
redeeming the property.

The plaintiff admitted that the defendant Dolores Foz had paid P307 on
account, as proven by the receipt in defendant’s possession signed by the
plaintiff on April 18, 1914, but she denied that she had received the price of
the sale, P2,200, as set forth in the instrument Exhibit 2, signed by herself
on June 30, 1914.
The defendants, however, swore that they paid the whole of the said
amount of P2,200 before the deed of sale, Exhibit 2, was made out; that
this is shown by the plaintiff’s own statement contained therein of having
received to her entire satisfaction from the defendant Buenaventura Toribio
the price of the sale P2,200. Dolores Foz also testified that, after deducting
the P700 which the plaintiff owed her, the remainder still due for the
purchase of the rights in the property in question was only P1,500, which
entire sum was paid prior to the execution of the proper deed of sale in the
following manner: P307 on April 18, 1914, according to the receipt issued
by the plaintiff and marked as Exhibit 1; P693 on a subsequently date; and
finally, the additional sum of P500, which she delivered the plaintiff before
the execution of the said deed of sale, Exhibit 2. The defendant Dolores
Foz further testified that as the said partial payments were made to the
plaintiff in the presence of the notary Ramon Muyot, she, Dolores, being in
a hurry, forgot to require receipts for the sums delivered, and also through
thoughtlessness she failed to require the return of her certificate of
indebtedness of the P1,500 that she had delivered to the plaintiff on
January 26, 1914. However, the notary Ramon Muyot, having been called
to the stand for the purpose of explaining the point in controversy, denied
having seen the defendant Dolores Foz made any payment of money to the
plaintiff Feliza Toribio.

ISSUE

Whether the sum of P1,500, which the defendant spouses owed to the
plaintiff from January 26, 1914, was or was not wholly paid to her.

HELD

The defendants, in view of the certainty of the debt mentioned in the receipt
of January 26, 1914, were in duty bound to prove that not only had they
paid P307 on account on April 18th of the same year as they did by Exhibit
1, but also that they had paid the whole of the balance of the amount
claimed by presenting the receipt or receipts of the payments made, which
they did not do, when it was their strict duty to furnish such proof. (Sec.
297, Code of Civ. Proc.; Behn, Meyer & Co. vs. Rosatzin, 5 Phil. Rep., 660;
and Miller, Sloss & Scott vs. Jones, 9 Phil. Rep., 648.)

If it is true that the whole sum specified in the said certificate of

indebtedness was paid, no explanation has been offered why the receipt of
January 26, 1914, remained in possession of the creditor and was not
canceled in the deed of sale, if the debt, as well as the price of the sale,
was really paid. The existence in the hands of the creditor of an instrument
of credit, is evidence that the debt is still unpaid, unless the contrary be fully
proven. (Sec. 334, No. 8, Code of Civ. Proc.; Bantug vs. Del Rosario, 11
Phil. Rep., 511; Ramos vs. Ledesma, 12 Phil. Rep., 656; and Ormachea
Tin-Congco vs. Trillana, 13 Phil. Rep., 194.)

For the foregoing reasons, whereby the errors assigned by the appellants
to the judgment appealed from have been refuted, we hereby affirm the
said judgment with the costs against the defendant-appellant. So ordered.

Manuel M. Serrano vs. Central Bank of the Philippines, Et al.

G.R. No. 135451. September 30, 1999
Pardo, J.

Facts:
Petitioner, Serrano had worth 350,000 pesos with interest of time deposits
in Overseas Bank of Manila. He tried to recover the time deposit with
interest multiple times but failed. He filed a case against Overseas Bank,
Central Bank, and its stockholders so they’ll all be liable on the alleged failure
of the Overseas Bank of Manila to return the time deposits made by petitioner
and assigned to him, on the ground that respondent Central Bank failed in
its duty to exercise strict supervision over respondent Overseas Bank of
Manila to protect depositors and the general public. The petition is dismissed
for lack of merit, with costs against the petitioner.

Issue:
Whether or not the central bank is liable for the failure of encashment worth
350,ooo including interest.
Held:
No, because there was no breach of trust from a bank’s failure to return the
subject matter of the deposit. Bank deposits are in nature of irregular
deposits. They are really loans because they earn interest. All kinds of bank
deposits are to be treated as loans. The petitioner here in the making time
deposits that earn interests with respondent Overseas Bank of Manila was
in reality a creditor of the respondent bank and not a depositor. The
respondent bank was in turn a debtor of petitioner. Failure of the bank to
honor the time deposit is failure to pay obligation as a debtor and not a
breach of trust arising from depository’s failure to return the subject matter
of the deposit.
CONCEPTS AND SOURCES OF
OBLIGATION
 LEUNG BEN VS. P. J. O’BRIEN
G.R. No. L-13602 April 6, 1918
Street, J.

FACTS:

On December 12, 1917, an action was instituted in the Court of First Instance
of Manila by P.J. O’Brien to recover of Leung Ben the sum of P15,000, all
alleged to have been lost by the plaintiff to the defendant in a series of
gambling, banking, and percentage games conducted during the two or three
months prior to the institution of the suit. The plaintiff asked for an attachment
against the property of the defendant, on the ground that the latter was about
to depart from the Philippines with intent to defraud his creditors. This
attachment was issued. The provision of law under which this attachment
was issued requires that there should be a cause of action arising upon
contract, express or implied. The contention of the petitioner is that the
statutory action to recover money lost at gaming is not such an action as is
contemplated in this provision, and he insists that the original complaint
shows on its face that the remedy of attachment is not available in aid
thereof; that the Court of First Instance acted in excess of its jurisdiction in
granting the writ of attachment; that the petitioner has no plain, speedy, and
adequate remedy by appeal or otherwise; and that consequently the writ of
certiorari supplies the appropriate remedy for this relief.

ISSUE: Whether or not the statutory obligation to restore money won at

gaming is an obligation arising from contract, express or implied.

RULING: Yes. In permitting the recovery money lost at play, Act No. 1757
has introduced modifications in the application of Articles 1798, 1801, and
1305 of the Civil Code.

The first two of these articles relate to gambling contracts, while article 1305
treats of the nullity of contracts proceeding from a vicious or illicit
consideration. Taking all these provisions together, it must be apparent that
the obligation to return money lost at play has a decided affinity to contractual
obligation; and the Court believes that it could, without violence to the
doctrines of the civil law, be held that such obligations is an innominate
quasi-contract.
It is however, unnecessary to place the decision on this ground. In the
opinion of the Court, the cause of action stated in the complaint in the court
below is based on a contract, express or implied, and is therefore of such
nature that the court had authority to issue the writ of attachment. The
application for the writ of certiorari must therefore be denied and the
proceedings dismissed.

Pengson vs. IAC

G.R. No. L-3489, September 7, 1907
Torres, J.

Facts:

Pacific Merchandising Corp (PMC) owning shares in the Aluminum Product

(Alpro) up to 96% share. PMC indebted to Reynold’s Corp more than
800,000, because of such PMC pledged with Reynolds his shares in Alpro
as collateral. Because PMC needs money, it decided to sell its shares with
Alpro to plaintiff Pengson as evidenced by a Deed of Sale. Plaintiff
assumed the obligation of PMC to Reynold which was reduced to 500,000.
The consent of Reynolds was obtained since the certificate covering the
share was pledged to him. Pengson paid the debt in installment and as a
security he mortgaged a parcel of land. Upon failure to pay despite the
demands, the mortgage was foreclosed by Reynolds. Plaintiff filed a suit for
the declaration of nullity and inefficacy of sale or rescission of sale and
mortgage with damages. Trial Court rendered judgment in favor of the
plaintiff because of the refusal of Reynold to deliver the certificate subject
of sale which renders the deed of sale ineffective. CA reversed upon
appeal.

Issue: W/o there is an existing obligation between plaintiff and Reynolds in

returning the certificate of stocks in order not to invalidate the sale.

Held: No. Reynold was not a party of the contract between PMC and
plaintiff having no obligation on the strength of such contract. While plaintiff
undertook the obligation of PMC to Reynolds, the latter and the former has
no reciprocal obligations. Reynold has no obligation to return the certificate
of stocks pledged by PMC because there was no absolute agreement by
Reynold to that effect in the consent it gave to the sale by PMC of the said
shares in favor of the plaintiff. Furthermore, SC ordered the case to be
returned to IAC to make a complete findings of the facts.

Gonzales vs. Philippine National Bank

GR L-33320, 30 May 1983
Plana, J.

Facts:

Ramon A. Gonzales initially instituted several cases in the Supreme Court

questioning different transactions entered into by the Bank with other parties.
First among them is Civil Case 69345 filed on 27 April 1967, by Gonzales as
a taxpayer versus Sec. Antonio Raquiza of Public Works and
Communications, the Commissioner of Public Highways, the Bank,
Continental Ore Phil., Inc., Continental Ore, Huber Corporation, Allis
Chalmers and General Motors Corporation. In the course of the hearing of
said case on 3 August 1967, the personality of Gonzales to sue the bank and
question the letters of credit it has extended for the importation by the
Republic of the Philippines of public works equipment intended for the
massive development program of the President was raised. In view thereof,
he expressed and made known his intention to acquire one share of stock
from Congressman Justiniano Montano which, on the following day, 30
August 1967, was transferred in his name in the books of the Bank.
Subsequent to his aforementioned acquisition of one share of stock of the
Bank, Gonzales, in his dual capacity as a taxpayer and stockholder, filed the
following cases involving the bank or the members of its Board of Directors
to wit: (1) On 18 October 1967, Civil Case 71044 versus the Board of
Directors of the Bank; the National Investment and Development Corp.,
Marubeni Iida Co., Ltd., and Agro-Inc. Dev. Co. or Saravia; (2) On 11 May
1968, Civil Case 72936 versus Roberto Benedicto and other Directors of the
Bank, Passi (Iloilo) Sugar Central, Inc., Calinog-Lambunao Sugar Mill
Integrated Farming, Inc., Talog sugar Milling Co., Inc., Safary Central, Inc.,
and Batangas Sugar Central Inc.; and (3) On 8 May 1969, Civil Case 76427
versus Alfredo Montelibano and the Directors of both the PNB and DBP.

On 11 January 1969, however, Gonzales addressed a letter to the President

of the Bank, requesting submission to look into the records of its transactions
covering the purchase of a sugar central by the Southern Negros
Development Corp. to be financed by Japanese suppliers and financiers; its
financing of the Cebu-Mactan Bridge to be constructed by V.C. Ponce, Inc.
and the construction of the Passi Sugar Mills in Iloilo. On January 23, 1969,
the Asst. Vice President and Legal Counsel of the Bank answered
petitioner's letter denying his request for being not germane to his interest as
a one share stockholder and for the cloud of doubt as to his real intention
and purpose in acquiring said share. In view of the Bank's refusal, Gonzales
instituted the petition for mandamus. The Court of First Instance of Manila
denied the prayer of Gonzales that he be allowed to examine and inspect
the books and records of PNB regarding the transactions mentioned on the
grounds that the right of a stockholder to inspect the record of the business
transactions of a corporation granted under Section 51 of the former
Corporation Law (Act No. 1459, as amended) is not absolute, but is limited
to purposes reasonably related to the interest of the stockholder, must be
asked for in good faith for a specific and honest purpose and not gratify
curiosity or for speculative or vicious purposes; that such examination would
violate the confidentiality of the records of the bank as provided in Section
16 of its charter, RA 1300, as amended; and that Gonzales has not
exhausted his administrative remedies. Gonzales filed the petition for
review.

Issue:
1. Whether Gonzales' can ask for an examination of the books and
records of PNB, in light of his ownership of one share in the bank.
2. Whether the inspection sought to be exercised by Gonzales
would be violative of the provisions of PNB's charter.
Held:

1. The unqualified provision on the right of inspection previously contained

in Section 51, Act No. 1459, as amended, no longer holds true under the
provisions of the present law. The argument of Gonzales that the right
granted to him under Section 51 of the former Corporation Law should not
be dependent on the propriety of his motive or purpose in asking for the
inspection of the books of PNB loses whatever validity it might have had
before the amendment of the law. If there is any doubt in the correctness of
the ruling of the trial court that the right of inspection granted under Section
51 of the old Corporation Law must be dependent on a showing of proper
motive on the part of the stockholder demanding the same, it is now
dissipated by the clear language of the pertinent provision contained in
Section 74 of Batas Pambansa Bilang 68. Although Gonzales has claimed
that he has justifiable motives in seeking the inspection of the books of the
PNB, he has not set forth the reasons and the purposes for which he desires
such inspection, except to satisfy himself as to the truth of published reports
regarding certain transactions entered into by the respondent bank and to
inquire into their validity. The circumstances under which he acquired one
share of stock in the PNB purposely to exercise the right of inspection do not
argue in favor of his good faith and proper motivation. Admittedly he sought
to be a stockholder in order to pry into transactions entered into by the PNB
even before he became a stockholder. His obvious purpose was to arm
himself with materials which he can use against the PNB for acts done by
the latter when Gonzales was a total stranger to the same. He could have
been impelled by a laudable sense of civic consciousness, but it could not
be said that his purpose is germane to his interest as a stockholder.

2. Section 15 of the PNB's Charter (RA 1300, as amended) provides that

"Inspection by Department of Supervision and Examination of the Central
Bank. — The National Bank shall be subject to inspection by the Department
of Supervision and Examination of the Central Bank." Section 16 thereof
providest that "Confidential information. — The Superintendent of Banks and
the Auditor General, or other officers designated by law to inspect or
investigate the condition of the National Bank, shall not reveal to any person
other than the President of the Philippines, the Secretary of Finance, and the
Board of Directors the details of the inspection or investigation, nor shall they
give any information relative to the funds in its custody, its current accounts
or deposits belonging to private individuals, corporations, or any other entity,
except by order of a Court of competent jurisdiction." On the other hand,
Section 30 of the same provides that "Penalties for violation of the provisions
of this Act. — Any director, officer, employee, or agent of the Bank, who
violates or permits the violation of any of the provisions of this Act, or any
person aiding or abetting the violations of any of the provisions of this Act,
shall be punished by a fine not to exceed ten thousand pesos or by
imprisonment of not more than five years, or both such fine and
imprisonment." The Philippine National Bank is not an ordinary corporation.
Having a charter of its own, it is not governed, as a rule, by the Corporation
Code of the Philippines. The provision of Section 74 of Batas Pambansa Blg.
68 of the new Corporation Code with respect to the right of a stockholder to
demand an inspection or examination of the books of the corporation may
not be reconciled with the above quoted provisions of the charter of the PNB.
It is not correct to claim, therefore, that the right of inspection under Section
74 of the new Corporation Code may apply in a supplementary capacity to
the charter of the PNB

Philippine School of Business Administration vs. CA

205 SCRA 729 GR No. 84698. February 4, 1942
Ladd, J.

Facts:

A 3rd year commerce student named Carlitos Bautista was stabbed to death
while on the 2nd floor premises of PSBA. This prompt the parents of the
deceased to file a suit in the RTC of Manila for damages against PSBA and
its corporate officers. It was established that his assailants were not
members of the school’s academic community but were elements from the
outside. The plaintiffs (private respondents) alleged that the defendants
(petitioners) liable for the victim’s death due to their negligence, recklessness
and lack of security precautions before, during and after the attack. The
defendants sought for its dismissal since they are presumably sued under
Art. 2180 of the Civil code, the complaint states no cause of action and as it
is not within the scope of the provision of Art 2180 since it is an academic
institution. Respondent court overruled petitioner’s contention and denied
their motion to dismiss. Motion for reconsideration was denied and the
appellant court affirmed the decision, hence the appeal.

Issue:

Whether the decision of the appellate court primarily anchored on the law of
quasi-delicts is valid.

Held:

Although the Supreme Court agreed to the decision of the Court of Appeals
to deny the petition of motion to dismiss by the PSBA, they do not agree to
the premises of the appellate court’s ruling. Article 2180, in conjunction with
Article 2176 of the Civil Code, establishes the rule in in loco parentis. Article
2180 provides that the damage should have been caused or inflicted by
pupils or students of the educational institution sought to be held liable for
the acts of its pupils or students while in its custody. However, this material
situation does not exist in the present case for, as earlier indicated, the
assailants of Carlitos were not students of the PSBA, for whose acts the
school could be made liable. But it does not necessarily follow that PSBA is
absolved form liability. When an academic institution accepts students for
enrollment, there is established a contract between them, resulting in
bilateral obligations which both parties is bound to comply with. For its part,
the school undertakes to provide the student with an education that would
presumably suffice to equip him with the necessary tools and skills to pursue
higher education or a profession. This includes ensuring the safety of the
students while in the school premises. On the other hand, the student
covenants to abide by the school’s academic requirements and observe its
rules and regulations. Because the circumstances of the present case
evince a contractual relation between the PSBA and Carlitos Bautista, the
rules on quasi-delict do not really govern. A perusal of Article 2176 shows
that obligations arising from quasi-delicts or tort, also known as extra-
contractual obligations, arise only between parties not otherwise bound by
contract, whether express or implied. The SC dismissed the petition and the
case was remanded to the trail court to determine if the school neglected its
obligation to perform based on the contractual relation of them and the
students

Picart vs. Smith, Jr.

G.R. No. L-12219, March 15, 1918
Street, J.

Facts:

On 12 December 1912, plaintiff (appellant) was riding on his pony over said
bridge Carlatan Bridge, at San Fernando, La Union. Before he had gotten
half way across, approached from the opposite direction in an automobile
going at the rate of about 10 or 12 miles per hour. As defendant (appellee)
neared the bridge he saw a horseman on it and blew his horn to
give warning of his approach. It appeared to him that the man on
horseback before him was not observing the rule of the road. Plaintiff saw
the automobile coming and heard the warning signals. However, being
perturbed by the novelty of the apparition or the rapidity of the approach, he
pulled the pony closely up against the railing on the right side of the bridge
instead of going to the left. As the automobile approached, defendant
guided it toward his left, that being the proper side of the road for the
machine. The pony had not as yet exhibited fright, and the rider had made
no sign for the automobile to stop. Seeing that the pony was apparently
quiet, defendant, instead of veering to the right while yet some distance
away or slowing down, continued to approach directly toward the horse
without diminution of speed. When the defendant had gotten quite near,
there being then no possibility of the horse getting across to the other side,
defendant quickly turned his car sufficiently to the right to escape hitting the
horse alongside of the railing where it was then standing; but in so doing
the automobile passed in such close proximity to the animal that it became
frightened and turned its body across the bridge with its head toward the
railing. In so doing, it was struck on the hock of the left hind leg by the
flange of the car and the limb was broken. The horse fell and its rider was
thrown off with some violence. As a result of its injuries the horse died.
Plaintiff received contusions which caused temporary unconsciousness and
required medical attention for several days. CFI of La Union rendered
judgment absolving defendant from liability hence the appeal.

ISSUE:

WON the defendant was guilty of negligence such as to give rise to a civil
obligation to repair the damage done

Held:

YES the defendant was guilty. The test by which to determine the
existence of negligence in a particular case may be stated as follows: Did
the defendant in doing the alleged negligent act use that person would
have used in the same situation? If not, then he is guilty of negligence. The
question is as to what would constitute the conduct of a prudent man in a
given situation must of course be always determined in the light of human
experience and in view of the facts involved in the particular case. Stated in
these terms, the proper criterion for determining the existence of
negligence in a given case is this: Conduct is said to be negligent when a
prudent man in the position of the tortfeasor would have foreseen that an
effect harmful to another was sufficiently probable to warrant his foregoing
conduct or guarding against its consequences.

Applying this test to the conduct of the defendant in the present case we
think that negligence is clearly established. A prudent man, placed in the
position of the defendant, would in our opinion, have recognized that the
course which he was pursuing was fraught with risk, and would therefore
have foreseen harm to the horse and the rider as reasonable consequence
of that course. Under these circumstances the law imposed on the
defendant the duty to guard against the threatened harm. It goes without
saying that the plaintiff himself was not free from fault, for he was guilty of
antecedent negligence in planting himself on the wrong side of the road.
But as we have already stated, Smith was also negligent; and in such case
the problem always is to discover which agent is immediately and directly
responsible. It will be noted that the negligent acts of the two parties were
not contemporaneous, since the negligence of the defendant succeeded
the negligence of the plaintiff by an appreciable interval. Under these
circumstances the law is that the person who has the last fair chance to
avoid the impending harm and fails to do so is chargeable with the
consequences, without reference to the prior negligence of the other party.
CONCEPTS AND DEFAULTS OF
OBLIGATION
 Rufina Causing vs. Alfonso Bencer
G.R. No. L-11328, January 15, 1918
Street,J,

Facts:

Rufina Causing, the plaintiff of this case, owned a land for rice
and sugar cane in the Province of Iloilo, having an area of 70
hectares. In the year 1909, negotiations were made between
her and Alfonso Bencer, the defendant, with a view of sale to
the land to him and an agreement was formed by which
Causing undertook to convey the property to him for the sum
of P1, 200. In order for the conveyance to be made, they sought
the plaintiff’s relative, Casiano Causing, attorney, for legal
assistance. Since the plaintiff had nieces of hers who were then
minors and whom she seems to have exercised an informal
guardianship and who had interest in the property, he informed
the parties that the conveyance could not be legalized without
judicial sanction.

The effort to effect the transfer of the title of the deed was
abandoned for the time being but Bencer had already paid her
P800 of the purchase price upon August 14, 1909, took
possession of the land, with the understanding that he was to
pay the balance later and she would have to procure the judicial
approval of the sale as regards to the interests of the minors.
In 1910, a new engagement was made with regard to the price
paid, which was Bencer should pay P600 in addition of the
P800 he had already paid or P1, 400 in all, provided that the
plaintiff would give him an extension of time to May 1911 to pay
the balance.

Time went on and neither of the parties performed the

engagement; as the plaintiff alleges, Bencer’s failure may have
been due to his lack of ready money or, as the defendant
alleges, it may have been due to the plaintiff’s reluctance to
carry out the engagement, and she also did not appear to
collect the money at the place stipulated as the place of
payment. However, it also may have been due to the fact that
the plaintiff was not yet in position to execute a deed as no
steps had been taken to get a judicial approval for the sale of
the shares of the minors. However, as the heirs reached
majority, the plaintiff successively acquired their respective
interests by purchase, and before the action in this case was
instituted, she had become possessor of all their shares. The
property meanwhile increased in value—possibly because of
the improvements which the defendant claims to have made on
the property. In view of the changed contract, the plaintiff
appears to have become desirous of rescinding the contract,
and brought this suit to annul the contract, recover the property,
together with the sum of P3, 850, alleged to be due as damages
for the use and occupation of the land by the defendant during
the time he has been in possession. The plaintiff also prayed
for general relief.

Issue:

The delay in the part of the plaintiff, which was she never
procured the judicial approval for the sale of the land, and the
delay of the defendant, which was he did not pay the balance
per se to the agreement resulted to the non-fulfillment of the
obligations of the two parties. So, Rufina Causing filed this suit
to annul the contract for the sale of a parcel of land, recover the
property itself from Alfonso Bencer, and collect the sum of P3,
850 alleged to be due as damages for the use and occupation
of the land by the defendant during the time he has been in
possession.

Decision:

The court dismissed the action for the recovery of the land and
damages for use and occupation but gave judgment in
plaintiff’s favor for P600 with interest at 6% from August 14,
1910 until paid.

Ratio Decidendi:
The court can see no valid reason for the plaintiff to rescind the
contract because this has been a case that entailed a mutual
obligation. That is according to Article 1100 of the Civil Code,
that no party shall be deemed to be in default if the other does
not fulfill, or offer to fulfill his own obligation, and from the time
one person obligated fulfills his obligation, the default begins
for the other party. Moreover, it was actually Causing who was
in default here rather than the defendant Bencer, as the
contract contemplated a conveyance of the entire interest of
the land and the plaintiff clearly obligated herself to that extent.
Thus, she was not in position to compel Bencer to pay until she
could offer him a deed nor is she permitted to rescind the
contract on the ground that the defendant failed to pay the
balance.
For the prayer of general relief, the court gave judgment in favor
of the plaintiff for the sum of P600 with an interest of 6% per
annum from August 14, 1910 for the unpaid balance of the
purchase money. The right of the plaintiff to recover interest for
the period prior to the institution of the suit is questionable in
point of law, but the justice of allowing it is evident, in view of
the fact that the defendant has had continuous use of the
property.
Malayan Insurance Corp vs CA
 G.R. 119599 March 20, 1997
J. Romero

Facts:

TKC Marketing imported 3,000 metric tons of soya from Brazil

to Manila. It was insured by Malayan at the value of almost 20
million pesos. The vessel, however, was stranded on South
Africa because of a lawsuit regarding the possession of the
soya. TKC consulted Malayan on recovery of the amount, but
the latter claimed that it wasn’t covered by the policy. The soya
was sold in Africa for Php 10 million, but TKC wanted Malayan
to shoulder the remaining value of 10 million as well.
Petitioner filed suit due to Malayan’s reticence to pay. Malayan
claimed that arrest by civil authorities wasn’t covered by the
policy. The trial court ruled in TKC’s favor with damages to
boot. The appellate court affirmed the decision under the
reason that clause 12 of the policy regarding an excepted risk
due to arrest by civil authorities was deleted by Section 1.1 of
the Institute War Clauses which covered ordinary arrests by
civil authorities. Failure of the cargo to arrive was also covered
by the Theft, Pilferage, and Non-delivery Clause of the
contract. Hence this petition.

Issues:

1. WON the arrest of the vessel was a risk covered under the
subject insurance policies.
2. WON the insurance policies must strictly construed against
the insurer.

Held: Yes. Yes. Petition dismissed.

Ratio:
1. Section 12 or the "Free from Capture & Seizure Clause"
states: "Warranted free of capture, seizure, arrest, restraint or
detainment, and the consequences thereof or of any attempt
thereat… Should Clause 12 be deleted, the relevant current
institute war clauses shall be deemed to form part of this
insurance.”
This was really replaced by the subsection 1.1 of section 1 of
Institute War Clauses (Cargo) which included “the risks
excluded from the standard form of English Marine Policy by
the clause warranted free of capture, seizure, arrest, restraint
or detainment, and the consequences thereof of hostilities or
warlike operations, whether there be a declaration of war or
not.”
The petitioner’s claim that the Institute War Clauses can be
operative in case of hostilities or warlike operations on account
of its heading "Institute War Clauses" is not tenable. It
reiterated the CA’s stand that “its interpretation in recent years
to include seizure or detention by civil authorities seems
consistent with the general purposes of the clause.” This
interpretation was regardless of the fact whether the arrest was
in war or by civil authorities.
The petitioner was said to have confused the Institute
War clauses and the F.C.S. in English law.
“It stated that "the F.C. & S. Clause was "originally incorporated
in insurance policies to eliminate the risks of warlike
operations". It also averred that the F.C. & S. Clause applies
even if there be no war or warlike operations. In the same vein,
it contended that subsection 1.1 of Section 1 of the Institute
War Clauses (Cargo) "pertained exclusively to warlike
operations" and yet it also stated that "the deletion of the F.C.
& S. Clause and the consequent incorporation of subsection
1.1 of Section 1 of the Institute War Clauses (Cargo) was to
include "arrest, etc. even if it were not a result of hostilities or
warlike operations."
The court found that the insurance agency tried to interpret
executive and political acts as those not including
ordinary arrestsin the exceptions of the FCS clause ,
and claims that the War Clauses now included executive and
political acts without including ordinary arrests in the new
stipulation.
“A strained interpretation which is unnatural and forced, as to
lead to an absurd conclusion or to render the policy
nonsensical, should, by all means, be avoided.”
2. Indemnity and liability insurance policies are construed in
accordance with the general rule of resolving
any ambiguitytherein in favor of the insured, where the contract
or policy is prepared by the insurer. A contract of insurance,
being a contract of adhesion, means that any ambiguity should
be resolved against the insurer.

ALLIED BANKING CORPORATION vs. BANK OF THE

PHILIPPINE ISLANDS
G.R. No. 188363, February 27, 2013
Leonardo-De Castro, J.

FACTS:
On October 10, 2002, a check in the amount of
P1,000,000.00 payable to "Mateo Mgt. Group
International" (MMGI) was presented for deposit and
accepted at petitioner's (Allied Bank) Kawit Branch. The
check, post-dated "Oct. 9, 2003", was drawn against the
account of Marciano Silva, Jr. (Silva) with respondent BPI
Bel-Air Branch. Upon receipt, petitioner sent the check for
clearing to respondent through the Philippine Clearing
House Corporation (PCHC).
The check was cleared by respondent and petitioner
credited the account of MMGI with P1,000,000.00. On
October 22, 2002, MMGI’s account was closed and all the
funds therein were withdrawn. A month later, Silva
discovered the debit of P1,000,000.00 from his account.
In response to Silva’s complaint, respondent credited his
account with the aforesaid sum.
Petitioner filed a complaint before the Arbitration
Committee, asserting that respondent should solely bear
the entire face value of the check due to its negligence in
failing to return the check to petitioner within the 24-hour
reglementary period as provided in Section 20.1of the
Clearing House Rules and Regulations (CHRR) 2000. In
its Answer with Counterclaims, respondent charged
petitioner with gross negligence for accepting the post-
dated check in the first place. It contended that petitioner’s
admitted negligence was the sole and proximate cause of
the loss.
ISSUE: What does the Doctrine of Last Clear Chance
enunciate?
RULING:
The doctrine of last clear chance, stated broadly, is that
the negligence of the plaintiff does not preclude a recovery
for the negligence of the defendant where it appears that
the defendant, by exercising reasonable care and
prudence, might have avoided injurious consequences to
the plaintiff notwithstanding the plaintiff’s negligence. The
doctrine necessarily assumes negligence on the part of
the defendant and contributory negligence on the part of
the plaintiff, and does not apply except upon that
assumption. Stated differently, the antecedent negligence
of the plaintiff does not preclude him from recovering
damages caused by the supervening negligence of the
defendant, who had the last fair chance to prevent the
impending harm by the exercise of due diligence.
Moreover, in situations where the doctrine has been
applied, it was defendant’s failure to exercise such
ordinary care, having the last clear chance to avoid loss or
injury, which was the proximate cause of the occurrence
of such loss or injury.
ISSUE: Does the Doctrine of Last Clear Chance apply
in this case?
RULING: YES. In this case, the evidence clearly shows
that the proximate cause of the unwarranted encashment
of the subject check was the negligence of respondent
who cleared a post-dated check sent to it thru the PCHC
clearing facility without observing its own verification
procedure. As correctly found by the PCHC and upheld by
the RTC, if only respondent exercised ordinary care in the
clearing process, it could have easily noticed the glaring
defect upon seeing the date written on the face of the
check "Oct. 9, 2003". Respondent could have then
promptly returned the check and with the check thus
dishonored, petitioner would have not credited the amount
thereof to the payee’s account. Thus, notwithstanding the
antecedent negligence of the petitioner in accepting the
 post-dated check for deposit, it can seek reimbursement
from respondent the amount credited to the payee’s
account covering the check.

Elcano vs. Hill

77 SCRA 100 – May 26, 1977
Barredo,J.

Facts:
Reginald Hill, a minor, caused the death of Agapito (son of
Elcano). Elcano filed a criminal case against Reginald but
Reginald was acquitted for “lack of intent coupled with
mistake.” Elcano then filed a civil action against Reginald and
his dad (Marvin Hill) for damages based on Article 2180 of the
Civil Code. Hill argued that the civil action is barred by his son’s
acquittal in the criminal case; and that if ever, his civil liability
as a parent has been extinguished by the fact that his son is
already an emancipated minor by reason of his marriage.
ISSUE: Whether or not Marvin Hill may be held civilly liable
under Article 2180.

HELD:

Yes. The acquittal of Reginald in the criminal case does not bar
the filing of a separate civil action. A separate civil action lies
against the offender in a criminal act, whether or not he is
criminally prosecuted and found guilty or acquitted, provided
that the offended party is not allowed, if accused is actually
charged also criminally, to recover damages on both scores,
and would be entitled in such eventuality only to the bigger
award of the two, assuming the awards made in the two cases
vary. In other words, the extinction of civil liability referred to in
Par. (e) of Section 3, Rule 111, refers exclusively to civil liability
founded on Article 100 of the Revised Penal Code, whereas
the civil liability for the same act considered as a quasi-
delict only and not as a crime is not extinguished even by a
declaration in the criminal case that the criminal act charged
has not happened or has not been committed by the accused.
Briefly stated, culpa aquiliana includes voluntary and negligent
acts which may be punishable by law.
While it is true that parental authority is terminated upon
emancipation of the child (Article 327, Civil Code), and under
Article 397, emancipation takes place “by the marriage of the
minor child”, it is, however, also clear that pursuant to Article
399, emancipation by marriage of the minor is not really full or
absolute. Thus “Emancipation by marriage or by voluntary
concession shall terminate parental authority over the child’s
person. It shall enable the minor to administer his property as
though he were of age, but he cannot borrow money or alienate
or encumber real property without the consent of his father or
mother, or guardian. He can sue and be sued in court only with
the assistance of his father, mother or guardian.” Therefore,
Article 2180 is applicable to Marvin Hill – the SC however ruled
since at the time of the decision, Reginald is already of age,
Marvin’s liability should be subsidiary only – as a matter of
equity.
Abella vs Francisco
55 Phil 447, November 29, 1955
Bengzon, J.
FACTS
Guillermo Francisco (defendant) purchased from the
Government on installments, lots 937-945 of the Tala Estate in
Novaliches, Caloocan, Rizal.He was behind in payment for
these installments and on October 31, 1928, he signed a
document stating that he received P500 from Julio Abella
(plaintiff) on account of lots no. 937-945, containing an area of
221 hectares, at the rate of 100/hectare, the balance of which
is due on or before December 15 of the same year, extendible
fifteen days thereafter

On Novemer 13, 1928, Abella made another payment of

P415.31, upon demand made by Francisco. On December
27,1928, Francisco, being in Cebu, wrote a letter to Roman.
Mabanta, attaching a power of attorney authorizing him to sign
in behalf of the defendant all the documents required by the
Bureau of Land for the transfer of lots to the plaintiff. In the
same letter, defendant instructed Mabanta to inform the plaintiff
that the option would be considered cancelled, and to return
the amount of P915.31, in the event that the plaintiff failed to
pay the remainder of the selling price

On January 3, 1929, Mabanta notified the plaintiff that he had

received the power of attorney to sign the deed of conveyance
of the lots to him, and that he was willing to execute the deed
of sale upon payment of the balance due .The plaintiff asked
for a few days’ time, but Mabanta only gave him until January
5. Plaintiff failed to pay the rest of the price on January 5, but
attempted to do so on January 9, but Mabanta refused to
accept it and instead returned by check the sum of P915.31.
Plaintiff brought an action to compel the defendant to execute
the deed of sale upon receipt of the balance of the price, and
asked that he be judicially declared the owner of said lots, and
that the defendant be ordered to deliver it to him. The CFI
absolved the defendant from the complaint, and the plaintiff
appealed
ISSUE
WON the time was an essential element in the contract, and
therefore, the defendant was entitled to rescind the contract for
failure of plaintiff to pay the price within the time specified

HELD
Yes. The defendant is entitled to resolve the contract for failure
to pay the price within the time specified.

In holding that the time was an essential element in the

contract, the CFI considered that the agreement in question
was an option for the purchase of the lots. The SC, however,
was divided on the question of whether the agreement was an
option or a sale. But the SC ruled that regardless of whether it
was an option or a sale, having agreed that the selling price
would be paid not later than December, 1928, and in view of
the fact that the vendor executed the contract to pay off with
the proceeds thereof certain obligations which fell due in the
same month of December, the time fixed for the payment of the
selling price was essential in the transaction.
DUTY TO EXERCISE NEGLIGENCE
 THE ROMAN CATHOLIC BISHOP OF JARO vs. GREGORIO DE LA
PEÑA
G.R. No. L-17585 June 5, 1922
Moreland, J.

FACTS:

In 1898 Fr. De la Peña assigned as trustee of the sum of P6,641, collected

by him for the charitable purposes he deposited in his personal account
P19,000 in the Hongkong and Shanghai Bank at Iloilo. During the war of
the revolution, Father De la Peña was arrested by the military authorities as
a political prisoner. The arrest of Father De la Peña and the confiscation of
the funds in the bank were the result of the claim of the military authorities
that he was an insurgent and that the funds deposited had been collected
by him is for revolutionary purposes. The money was taken from the bank
by the military authorities by virtue of such order, was confiscated and
turned over to the Government.

ISSUES: Whether or not Father De la Peña is liable for the loss of the
funds?

RULLING:

No, he is not liable because there is no negligent act on the part of Fr. De
la Peña. It was so happened that during that time the money was taken
from him by the U.S. military forces which is unforeseen event. Although
the Civil Code states that “a person obliged to give something is also bound
to preserve it with the diligence pertaining to a good father of a family”, it
also provides, following the principle of the Roman law that “no one shall be
liable for events which could not be foreseen, or which having been
foreseen were inevitable, with the exception of the cases expressly
mentioned in the law or those in which the obligation so declares.”
 Africa vs. Caltex
G.R. No. L-12986 March 31, 1966
Makalintal, J.

Facts:

In the afternoon of March 18, 1948, a fire broke out at the Caltex service
station at the corner of Antipolo St. and Rizal Avenue, Manila. It started
while gasoline was being hosed from a tank truck into the underground
storage, right at the opening of the receiving tank where the nozzle of the
hose was inserted. The fire spread to and burned several houses. The
owners, among them petitioner spouses Africa and heirs of Ong, sued
respondents Caltex Phil., Inc., the alleged owner of the station, and Mateo
Boquiren, the agent in charge of its operation, for damages. The CFI and
CA found that the petitioners failed to prove negligence of the respondents,
and that there was due care in the premises and with respect to the
supervision of their employees.

Issue: Whether or not, without proof as to the cause and origin of the fire,
the doctrine of res ipsa loquitur should apply so as to presume negligence
on the part of the respondents.

Held:

Yes. Res ipsa loquitur literally means “the thing or transaction speaks for
itself.” For the doctrine of res ipsa loquitur to apply, the following requisites
should be present: (a) the accident is of a kind which ordinarily does not
occur in the absence of someone’s negligence; (b) it is caused by an
instrumentality within the exclusive control of the defendant or defendants;
and (c) the possibility of contributing conduct which would make the plaintiff
responsible is eliminated. In the case at bar, the gasoline station, with all its
appliances, equipment and employees, was under the control of
respondents. A fire occurred therein and spread to and burned the
neighboring houses. The persons who knew or could have known how the
fire started were respondents and their employees, but they gave no
explanation thereof whatsoever. It is a fair and reasonable inference that
the incident happened because of want of care. The negligence of the
employees was the proximate cause of the fire, which in the ordinary
course of things does not happen. Therefore, the petitioners are entitled to
the award for damages.

Placido C. Ramos and Augusto L. Ramos vs.PEPSI-COLA Bottling Co.

of the P.I. and Andres Bonifacio
G.R. No. L-22533 February 9, 1967
BENGZON, J.P., J.

FACTS:

The car driven by Augusto Ramos (son of co-plaintiff Placido Ramos)

collided with the truck of PEPSI, driven by the driver and co-defendant
Andres Bonifacio. As a result, the Ramoses sued Bonifacio and Pepsi.

The trial court found Bonifacio negligent and declared that PEPSI-COLA
had not sufficiently proved that it exercised the due diligence of a good
father of a family to prevent the damage. PEPSI-COLA and Bonifacio,
solidarily, were ordered to pay the plaintiffs damages.

The defendants appealed to the Court of Appeals. CA affirmed the decision

of the trial court, but absolved PEPSI-COLA from liability, finding that it
sufficiently proved due diligence in the selection of its driver Bonifacio. In its
decision, CA stated the basis for its decision:

“The uncontradicted testimony of Juan T. Anasco, personnel manager of

defendant company, was to the effect that defendant driver was first hired
as a member of the bottle crop in the production department; that when he
was hired as a driver, 'we had size [sic] him by looking into his background,
asking him to submit clearances, previous experience, physical
examination and later on, he was sent to the pool house to take the usual
driver's examination, consisting of: first, theoretical examination and
second, the practical driving examination, all of which he had undergone,
and that the defendant company was a member of the Safety Council. Our
Supreme Court had put it down as a rule that ‘In order that the defendant
may be considered as having exercised all the diligence of a good father of
a family, he should not have been satisfied with the mere possession of a
professional driver's license; he should have carefully examined the
applicant for employment as to his qualifications, his experiences and
record of service.’ Defendant Company has taken all these steps.”

ISSUE:

Whether PEPSI-COLA exercised due diligence in the selection of its

employee.

HELD:

The appellants contended that Añasco, being PEPSI-COLA's employee, is

a biased and an interested witness. This is a question of fact, and the SC
would not disturb the findings of CA.

It should perhaps be stated that in the instant case no question is raised as

to due diligence in the supervision by PEPSI-COLA of its driver. Article
2180 points out that the owners and managers of an establishment or
enterprise are likewise responsible for damages caused by their employees
in the service of the branches in which the latter are employed or on the
occasion of their functions. This responsibility shall cease when the
employers prove that they observed the diligence of a good father of a
family to prevent damage; hence, PEPSI-COLA shall be relieved from
liability (rebuttable presumption of negligence).

The decision of the Court of Appeals is hereby affirmed.

RESOLUTION ON MOTION FOR RECONSIDERATION

BENGZON, J.P., J.:

Petitioners impute to PEPSI-COLA the violation of subpars M.V.O.

Administrative Order No. 1 in that at the time of the collision, the trailer-
truck, which had a total weight of 30,000 kgms., was (a) being driven at a
speed of about 30 k.p.h. or beyond the 15 k.p.h. limit set and (b) was not
equipped with a rear-vision mirror nor provided with a helper for the driver.
There is no finding that the tractor-truck did not have a rear-vision mirror.

Petitioners also charge PEPSI-COLA with having violated par. (b) of Sec.
8-A of the Rev. Motor Vehicle Law, alleging that the truck exceeded the
dimensions allowed. It is not enough that the width of the tractor-truck
exceed the limit in Sec. 8-A; in addition, it must also appear that there was
no special permit granted under Sec. 9. Unfortunately for petitioners, that
vital factual link is missing. There was no proof much less any finding to
that effect.

We are urged to apply the Anglo-American doctrine of respondent superior.

We cannot however, abandon the Bahia ruling without going against the
explicit mandate of the law. A motor vehicle owner is not an absolute
insurer against all damages caused by its driver. Article 2180 of our Civil
Code is very explicit that the owner's responsibility shall cease once it
proves that it has observed the diligence of a good father of a family to
prevent damage. The Bahia case merely clarified what that diligence
consists of, namely, diligence in the selection and supervision of the driver-
employee.

Under Article 2180 of the Civil Code, the basis of an employer's liability is
his own negligence, not that of his employees. The former is made
responsible for failing to properly and diligently select and supervise his
erring employees. We do not — and have never — followed the respondent
superior rule.8 So, the American rulings cited by petitioners, based as they
are on said doctrine, are not authoritative here.

In view of the foregoing, the motion for reconsideration is hereby denied.

 Equitable Leasing vs. Suyom
G.R. No. 143360. September 5, 2002
Panganiban, J.
Facts:

A Fuso Road tractor driven by Tutor rammed into the house cum of
Tamayo which resulted in the death of Tamayo’s son and Oledan’s
daughter. Failure to claim from a criminal case finding Tutor guilty of
reckless imprudence, respondents filed a civil case based on quasi delict
against Equitable Leasing Corp, the registered owner of the tractor, among
others. Equitable contends that it should not be held liable for such
damages which arose from the negligence of the driver Fuso Road. That
such tractor was already sold to the owner of Fuso Road at the time of the
accident. Thus, not having employed driver Tutor, it could not have
controlled or supervised him.

Issue:

WON Equitable should be held liable for damages in an action based on

quasi delict for the negligent acts of a driver who was not its employee.

Held:

Yes, Equitable should be held liable because it was the registered owner at
the time of the accident.

The Court has consistently ruled that, regardless of sales made of a motor
vehicle, the registered owner is the lawful operator insofar as the public and
third persons are concerned; consequently, it is directly and primarily
responsible for the consequences of its operation. In contemplation of law,
the owner/operator of record is the employer of the driver, the actual
operator and employer being considered as merely its agent. The same
principle applies even if the registered owner of any vehicle does not use it
for public service.

The main aim of motor vehicle registration is to identify the owner so that if
any accident happens, or that any damage or injury is caused by the
vehicle on the public highways, responsibility therefor can be fixed on a
definite individual, the registered owner.

BA Finance Corp vs. CA

G.R. No. 98275 November 13, 1992
Vitug, J.

Facts:

Amare, the driver of an Isuzu truck was involved in an accident which

caused the death of three persons. Amare was found guilty beyond
reasonable doubt of reckless imprudence. BA Finance was found liable for
damages since the truck was registered in its name. BA Finance contends
that it should not be held liable since it was not Amare’s employer at the
time of the accident. It also contends that the Isuzu truck was in the
possession of Rock Component Phil, by virtue of a lease agreement.
Hence, BA Finance wants to prove who the actual/real owner is at the time
of the accident, and in accordance with such proof, evade liability and lay
the same on the person actually owning the vehicle.

Issues:

1 WON BA Finance should be held liable.

2 WON BA Finance can escape liability by proving the actual/real owner of

the truck.

Held:

1 Yes, BA Finance is liable.

The registered owner of a certificate of public convenience is liable to the

public for the injuries or damages suffered by passengers or third persons
caused by the operation of said vehicle, even though the same had been
transferred to a third person. Under the same principle the registered owner
of any vehicle, even if not used for a public service, should primarily be
responsible to the public or to the third persons for injuries caused the latter
while the vehicle is being driven on the highways or streets.

2 No, the law does not allow him. The law, with its aim and policy in mind,
does not relieve him directly of the responsibility that the law fixes and
places upon him as an incident or consequence of registration. This may
appear harsh but nevertheless, a registered owner who has already sold or
transferred a vehicle has the recourse to a third-party complaint, in the
same action brought against him to recover for the damage or injury done,
against the vendee or transferee of the vehicle.

While the registered owner is primarily responsible for the damage caused,
he has a right to be indemnified by the real or actual owner of the amount
that he may be required to pay as damage for the injury caused.
 CONCEPT TO GIVE
DETERMINATE THINGS
 Yu Tek & Co. v. Gonzales
29 Phil 384 February 15, 1951
Trent, J.

Facts:

A contract was executed between the herein parties, whereby Mr. Basilio
Gonzales acknowledges the receipt of P3,000 from Yu Tek & Co., and that
in consideration of which he obligates himself to deliver to the latter 600
piculs of sugar of the first and second grade, according to the result of
polarization, within 3 months. There is a stipulation providing for rescission
with P1,200 penalty in case of failure to deliver. No sugar was delivered, so
plaintiff filed a case praying for the judgment of P3,000 plus P1,200. P3,000
was awarded, thus, both parties appealed.

Issues:

(1) Whether compliance of the obligation to deliver depends upon the

production in defendant’s plantation

(2) Whether there is a perfected sale

(3) Whether liquidated damages of P1,200 should be awarded to the plaintiff

Held:

(1) There is not the slightest intimation in the contract that the sugar was to
be raised by the defendant. Parties are presumed to have reduced to writing
all the essential conditions of their contract. While parol evidence is
admissible in a variety of ways to explain the meaning of written contracts, it
cannot serve the purpose of incorporating into the contract additional
contemporaneous conditions which are not mentioned at all in the writing,
unless there has been fraud or mistake. It may be true that defendant owned
a plantation and expected to raise the sugar himself, but he did not limit his
obligation to his own crop of sugar. Our conclusion is that the condition which
the defendant seeks to add to the contract by parol evidence cannot be
considered. The rights of the parties must be determined by the writing itself.
(2) We conclude that the contract in the case at bar was merely an executory
agreement; a promise of sale and not a sale. At there was no perfected sale,
it is clear that articles 1452, 1096, and 1182 are not applicable. The
defendant having defaulted in his engagement, the plaintiff is entitled to
recover the P3,000 which it advanced to the defendant, and this portion of
the judgment appealed from must therefore be affirmed.

(3) The contract plainly states that if the defendant fails to deliver the 600
piculs of sugar within the time agreed on, the contract will be rescinded and
he will be obliged to return the P3,000 and pay the sum of P1,200 by way of
indemnity for loss and damages. There cannot be the slightest doubt about
the meaning of this language or the intention of the parties. There is no room
for either interpretation or construction. Under the provisions of article 1255
of the Civil Code contracting parties are free to execute the contracts that
they may consider suitable, provided they are not in contravention of law,
morals, or public order. In our opinion there is nothing in the contract under
consideration which is opposed to any of these principles.

Roman vs. Grimalt

6 Phil 96, April 1906
Torres, J.

FACTS:

In between the 13th to the 23d of June, 1904, petitioner Pedro Roman, the
owner, and respondent Andres Grimalt, the purchaser, verbally agreed upon
the sale of the schooner Santa Marina. In his letter on June 23, Grimalt
agreed to buy the vessel and offered to pay in three installments of P500
each on July 15, September 15, and November 15, provided the title papers
to the vessel were in proper form. The title of the vessel, however, was in the
name of one Paulina Giron and not in the name of Roman as the alleged
owner. Roman promised to perfect his title to the vessel, but failed so the
papers he presented did not show that he was the owner of the vessel. On
June 25, 1904, the vessel sank in the Manila harbor during a severe storm,
even before Roman was able to produce for Grimalt the proper papers
showing that the former was in fact the owner of the vessel in question and
not Paulina Giron. As a result, Grimalt refused to pay the purchase price
when Roman made a demand on June 30, 1904.
On July 2, 1904, Roman filed this complaint in the CFI of Manila, which found
that the parties had not arrived at a definite understanding, and later
dismissed said complaint.

ISSUE:

Who should bear the risk of loss?

COURT RULING:

The Supreme Court affirmed the decision of the lower court and declared
Roman as the one who should bear the risk of lost because there was no
actual contract of sale. If no contract of sale was actually executed by the
parties, the loss of the vessel must be borne by its owner and not by a party
who only intended to purchase it and who was unable to do so on account
of failure on the part of the owner to show proper title to the vessel and thus
enable them to draw up the contract of sale. Grimalt was under no obligation
to pay the price of the vessel, the purchase of which had not been concluded.
The conversations between the parties and the letter Grimalt had written to
Roman did not establish a contract sufficient in itself to create reciprocal
rights between the parties.

Chavez vs. Gonzalez

G.R. No. L-27454 April 30, 1970
Reyes, J.B. L., J

Facts:

On July 1963, Rosendo Chavez brought his typewriter to Fructuoso

Gonzales a typewriter repairman for the cleaning and servicing of the said
typewriter but the latter was not able to finish the job. During October 1963,
the plaintiff gave the amount of P6.00 to the defendant which the latter
asked from the plaintiff for the purchase of spare parts, because of the
delay of the repair the plaintiff decided to recover the typewriter to the
defendant which he wrapped it like a package. When the plaintiff reached
their home he opened it and examined that some parts and screws was
lost. That on October 29, 1963 the plaintiff sent a letter to the defendant for
the return of the missing parts, the interior cover and the sum of P6.00
(Exhibit D). The following day, the defendant returned to the plaintiff some
of the missing parts, the interior cover and the P6.00. The plaintiff brought
his typewriter to Freixas Business Machines and the repair cost the amount
of P89.85. He commenced this action on August 23, 1965 in the City Court
of Manila, demanding from the defendant the payment of P90.00 as actual
and compensatory damages, P100.00 for temperate damages, P500.00 for
moral damages, and P500.00 as attorney’s fees. The defendant made no
denials of the facts narrated above, except the claim of the plaintiff that the
cost of the repair made by Freixas Business Machines be fully chargeable
against him.

Issue:

Whether or not the defendant is liable for the total cost of the repair made
by Freixas Business Machines with the plaintiff typewriter?

Ruling:

No, he is not liable for the total cost of the repair made by Freixas Business
Machines instead he is only liable for the cost of the missing parts and
screws. The defendant contravened the tenor of his obligation in repairing
the typewriter of the plaintiff that he fails to repair it and returned it with the
missing parts, he is liable under “ART. 1167. If a person obliged to do
something fails to do it, the same shall be executed at his cost.

This same rule shall be observed if he does it in contravention of the tenor

of the obligation. Furthermore it may be decreed that what has been poorly
done he undone.”
CONCEPT OF EVENTS
 Lasam vs Smith
G.R. No. L-1949, February 2, 1924
Ostrand, J.

Facts:

The defendant was the owner of a public garage in the town of San
Fernando, La Union, and engaged in the business of carrying passengers
for hire from one point to another in the Province of La Union and the
surrounding provinces. Defendant undertook to convey the plaintiffs from
San Fernando to Currimao, Ilocos Norte, in a Ford automobile.

On leaving San Fernando, the automobile was operated by a licensed

chauffeur, but after having reached the town of San Juan, the chauffeur
allowed his assistant, Bueno, to drive the car. Bueno held no driver’s license,
but had some experience in driving.The car functioned well until after the
crossing of the Abra River in Tagudin, when, according to the testimony of
the witnesses for the plaintiffs, defects developed in the steering gear so as
to make accurate steering impossible, and after zigzagging for a distance of
about half kilometer, the car left the road and went down a steep
embankment. The automobile was overturned and the plaintiffs pinned down
under it. Mr. Lasam escaped with a few contusions and a dislocated rib, but
his wife, Joaquina, received serious injuries, among which was a compound
fracture of one of the bones in her left wrist. She also suffered nervous
breakdown from which she has not fully recovered at the time of trial. 7.

The complaint was filed about a year and a half after and alleges that the
accident was due to defects in the automobile as well as to the incompetence
and negligence of the chauffeur.The trial court held, however, that the cause
of action rests on the defendant’s breach of the
contract of carriage and that, consequently, articles 1101-1107 of the Civil
Code, and not article 1903, are applicable. The court further found that the
breach of contract was not due to fortuitous events and that, therefore the
defendant was liable in damages.
Issue:

1. Is the trial court correct in its findings that the breach of contract was
not due to a fortuitous event?

Ruling:

Yes. It is sufficient to reiterate that the source of the defendant’s legal liability
is the contract of carriage; that by entering into that contract he bound himself
to carry the plaintiffs safely and securely to their destination; and that having
failed to do so he is liable in damages unless he shows that the failure to
fulfill his obligation was due to causes mentioned in article 1105 of the Civil
Code, which reads:

“No one shall be liable for events which could not be foreseen or which, even
if foreseen, were inevitable, with the exception of the cases in which the law
expressly provides otherwise and those in which the obligation itself imposes
such liability.”

As will be seen, some extraordinary circumstances independent of the will of

the obligor, or of his employees, is an essential element of a caso fortuito. In
the present case, this element is lacking. It is not suggested that the accident
in question was due to an act of God or to adverse road conditions which
could have been foreseen. As far as the record shows, the accident was
caused either by defects in the automobile or else through the negligence of
its driver. That is not a caso fortuito.

Republic of the Philippines vs Luzon Stevedoring Corporation

G.R. No. L-21749 , September 29, 1967
Reyes, J.B.L., J

Facts

In the early afternoon of August 17, 1960, barge L- 1892, owned by the
Luzon StevedoringCorporation was being towed down the Pasig River by
two tugboats when the barge rammedagainst one of the wooden piles of
the Nagtahan bailey bridge, smashing the posts and causingthe bridge to
list. The river, at the time, was swollen and the current swift, on account of
theheavy downpour in Manila and the surrounding provinces on August 15
and 16, 1960. The Republic of the Philippines sued Luzon Stevedoring for
actual and consequential damagecaused by its employees, amounting to
P200,000.Defendant Corporation disclaimed liability on the grounds that it
had exercised due diligence inthe selection and supervision of its
employees that the damages to the bridge were caused byforce majeure,
that plaintiff has no capacity to sue, and that the Nagtahan bailey bridge is
anobstruction to navigation.4.

After due trial, the court rendered judgment on June 11, 1963, holding the
defendant liable forthe damage caused by its employees and ordering it to
pay plaintiff the actual cost of the repairof the Nagtahan bailey bridge which
amounted to P192,561.72, with legal interest from the dateof the filing of
the complaint.

Issue

1. Was the collision of appellant's barge with the supports or piers of the
Nagtahan bridge causedby fortuitous event or force majeure?

Ruling

1 .No. Considering that the Nagtahan bridge was an immovable and

stationary object and uncontrovertedly provided with adequate openings for
the passage of water craft, including barges like of appellant's, it was
undeniable that the unusual event that the barge, exclusively controlled by
appellant, rammed the bridge supports raises a presumption of negligence
on the part of appellant or its employees manning the barge or the tugs that
towed it.

2. For in the ordinary course of events, such a thing will not happen if
proper care is used. In Anglo American Jurisprudence, the inference arises
by what is known as the "res ipsa loquitur" rule.The appellant strongly
stressed the precautions taken by it on the day in question: that it assigned
two of its most powerful tugboats to tow down river its barge L- 1892; that it
assigned to the task the more competent and experienced among its
patrons, had the towlines, engine sand equipment double-checked and
inspected' that it instructed its patrons to take extra precautions; and
concludes that it had done all it was called to do, and that the accident,
therefore, should be held due to force majeure or fortuitous event.

3. These very precautions, however, completely destroyed the appellant's

defense. For caso fortuito or force majeure (which in law are identical in
so far as they exempt an obligor from liability) by definition, are
extraordinary events not foreseeable or avoidable, "events thatcould not be
foreseen, or which, though foreseen, were inevitable " (Art. 1174, Civ.
Code of the Philippines). It was, therefore, not enough that the event
should not have been foreseen oranticipated, as was commonly believed
but it must be one impossible to foresee or to avoid. The mere difficulty to
foresee the happening was not impossibility to foresee the same. The very
measures adopted by appellant prove that the possibility of danger was not
only foreseeable, but actually foreseen, and was not caso fortuito.

Candida Virata vs Victorio Ochoa

G.R. No. L-46179 January 31, 1978
Fernandez, J.

FACTS:

In September 1975, Borilla was driving a jeep when he hit Arsenio Virata
thereby causing the latter’s death. The heirs of Virata sued Borilla through
an action for homicide through reckless imprudence in the CFI of Rizal.
Virata’s lawyer reserved their right to file a separate civil action the he later
withdrew said motion. But in June 1976, pending the criminal case, the
Viratas again reserved their right to file a separate civil action. Borilla was
eventually acquitted as it was ruled that what happened was a mere
accident. The heirs of Virata then sued Borilla and Ochoa (the owner of the
jeep and employer of Borilla) for damages based on quasi delict. Ochoa
assailed the civil suit alleging that Borilla was already acquitted and that the
Virata’s were merely trying to recover damages twice. The lower court
agreed with Ochoa and dismissed the civil suit.
ISSUE:
Whether or not the heirs of Virata may file a separate civil suit.
HELD:
Yes. It is settled that in negligence cases the aggrieved parties may choose
between an action under the Revised Penal Code or of quasi-delict under
Article 2176 of the Civil Code of the Philippines. What is prohibited by Article
2177 of the Civil Code of the Philippines is to recover twice for the same
negligent act. Therefore, under the proposed Article 2177, acquittal from an
accusation of criminal negligence, whether on reasonable doubt or not, shall
not be a bar to a subsequent civil action, not for civil liability arising from
criminal negligence, but for damages due to a quasi-delict or ‘culpa
aquiliana’. But said article forestalls a double recovery.

Ong vs. Metropolitan Water District

G.R. No. L-7664. 29 August 1958
Baustista, Angelo J.

Facts:

Plaintiff spouses seek to recover from defendant, damages, funeral

expenses and attorney’s fees for the death of their son, Dominador Ong, in
one of the swimming pools of the latter. After trial, the CFI dismissed the
complaint for it found the action of the plaintiffs-appellants untenable.

Issues:

(1) WON plaintiffs have clearly established the fault/negligence of the

defendants so as to make it liable for the damages sought; (2) WON the
Doctrine of Last Clear Chance applies in the case at bench.

Ruling:

Judgment affirmed.

(1) The person/s claiming damages has/have the burden of proving that the
damages is caused by the fault/negligence of the person from whom the
damages is claimed. Plaintiffs failed to overcome the burden. Defendant
employed 6 well-trained lifeguards, male nurse, sanitary inspector and
security guards to avoid danger to the lives of their patrons. The swimming
pools are provided with ring buoy, tag roof and towing line. Also,
conspicuously displayed in the pool area the rules and regulations for pool
use. In that, it appears that defendant has taken all the necessary
precautions to avoid/prevent danger/accidents which may cause injury to or
even death of its patrons.
(2) The Doctrine of last Clear Chance means that, “a person who has the
last clear chance to avoid the accident, notwithstanding the negligent acts
of his opponent, is considered in law solely responsible for the
consequences of the accident.” Since minor Ong has went to the big
swimming pool w/o any companion in violation of the rules and regulations
of the defendant as regards the use of pools, and it appearing that the
lifeguard responded to the call for help as soon as his attention was called
to it, applying all efforts into play in order to bring minor Ong back to life, it
is clear that there is no room for the application of the Doctrine to impute
liability to appellee. Minor Ong’s fault/negligence is the proximate and only
cause of his death.

Barredo vs Garcia and Almario

G.R. No. L-48006 , July 8, 1942
Bocobo, J.

FACTS:
At about 1:30am on May 3, 1936, Fontanilla’s taxi collided with a “kalesa”
thereby killing the 16 year old Faustino Garcia. Faustino’s parents filed a
criminal suit against Fontanilla and reserved their right to file a separate civil
suit. Fontanilla was eventually convicted. After the criminal suit, Garcia filed
a civil suit against Barredo – the owner of the taxi (employer of Fontanilla).
The suit was based on Article 1903 of the civil code (negligence of employers
in the selection of their employees). Barredo assailed the suit arguing that
his liability is only subsidiary and that the separate civil suit should have been
filed against Fontanilla primarily and not him.

ISSUE: Whether or not Barredo is just subsidiarily liable.

HELD:
No. He is primarily liable under Article 1903 which is a separate civil action
against negligent employers. Garcia is well within his rights in suing Barredo.
He reserved his right to file a separate civil action and this is more
expeditious because by the time of the SC judgment Fontanilla is already
serving his sentence and has no property. It was also proven that Barredo is
negligent in hiring his employees because it was shown that Fontanilla had
had multiple traffic infractions already before he hired him – something he
failed to overcome during hearing. Had Garcia not reserved his right to file a
separate civil action, Barredo would have only been subsidiarily liable.
Further, Barredo is not being sued for damages arising from a criminal act
(his driver’s negligence) but rather for his own negligence in selecting his
employee (Article 1903).
CONCEPT OF TRANSMISSIBLE
RIGHTS
 Estate of K.H. Hemady vs Luzon Surety Co., Inc.
G.R. No. L-13031 May 30, 1961
Dizon, J.

FACTS:
Luzon Surety filed a claim against the estate of K.H. Hemady based on
indemnity agreements (counterbonds) subscribed by distinct principals and
by the deceased K.H. Hemady as surety (solidary guarantor). As a
contingent claim, Luzon Surety prayed for the allowance of the value of
the indemnity agreements it had executed. The lower court dismissed the
claim of Luzon Surety on the ground that “whatever losses may occur after
Hemady’s death, are not chargeable to his estate, because upon his death
he ceased to be a guarantor.”
ISSUES:
What obligations are transmissible upon the death of the decedent? Are
contingent claims chargeable against the estate?
HELD:
Under the present Civil Code (Article 1311), the rule is that “Contracts take
effect only as between the parties, their assigns and heirs, except in case
where the rights and obligations arising from the contract are not
transmissible by their nature, or by stipulation or by provision of law.” While
in our successional system the responsibility of the heirs for the debts of their
decedent cannot exceed the value of the inheritance they receive from him,
the principle remains intact that these heirs succeed not only to the rights of
the deceased but also to his obligations. Articles 774 and 776 of the New
Civil Code expressly so provide, thereby confirming Article 1311.
In Mojica v. Fernandez, the Supreme Court ruled — “Under the Civil Code
the heirs, by virtue of the rights of succession are subrogated to all the rights
and obligations of the deceased (Article 661) and can not be regarded as
third parties with respect to a contract to which the deceased was a party,
touching the estate of the deceased x x x which comes in to their hands by
right of inheritance; they take such property subject to all the obligations
resting thereon in the hands of him from whom they derive their rights.” The
third exception to the transmissibility of obligations under Article 1311 exists
when they are ‘not transmissible by operation of law.’ The provision makes
reference to those cases where the law expresses that the rights or
obligations are extinguished by death, as is the case in legal support,
parental authority, usufruct, contracts for a piece of work, partnership and
agency. By contrast, the articles of the Civil Code that regulate guaranty or
suretyship contain no provision that the guaranty is extinguished upon the
death of the guarantor or the surety.
The contracts of suretyship in favor of Luzon Surety Co. not being rendered
intransmissible due to the nature of the undertaking, nor by stipulations of
the contracts themselves, nor by provision of law, his eventual liability
therefrom necessarily passed upon his death to his heirs. The contracts,
therefore, give rise to contingent claims provable against his estate. A
contingent liability of a deceased person is part and parcel of the mass of
obligations that must be paid if and when the contingent liability is converted
into a real liability. Therefore, the settlement or final liquidation of the estate
must be deferred until such time as the bonded indebtedness is paid.

HERBERT BROWNELL, JR. vs SUN LIFE ASSURANCE COMPANY OF

CANADA
G.R. No. L-5731 – June 22, 1954
Labrador, J.

FACTS:

Subject of this petition is the endowment policy which insured Aihara

andGayapan and upon its maturity the proceeds were payable to said
insured.Brownell instituted this case to compel Sun Life to comply with the
demand topay representing the half of the proceeds of endowment policy
and payable toone Naogiro Aihara, a Japanese national. Such claim is based
on Section 5(b)(2) of the Trading with the Enemy Act of the United States.
Which claim wasapproved and granted by the lower court ordering SLACOC
to pay hereinpetitioner.

ISSUE:

Whether or not such Act is still binding despite the completeindependence

of the Philippines from American government?

HELD:
 Yes. The extension of the Philippine Property Act of 1946 is clearly
impliedfrom the acts of the President of the Philippines and the Secretary of
ForeignAffairs, as well as by the enactment of R.A. Nos. 7, 8 and 477.

DKC Holdings v. CA
G.R. No. 118248. April 5, 2000
Ynares-Santiago,J.

FACTS:

On March 16, 1998, petitioner DKC Holdings Corporation (DKC) entered into
a Contract of Lease with Option to Buy with Encarnacion Bartolome,
decedent herein, whereby petitioner was given the option to lease or lease
with purchase the subject land.

Encarnacion died. Thereafter, petitioner coursed its payment to private

respondent Victor Bartolome, being the sole heir of Encarnacion. Victor,
however, refused to accept these payments. On March 14, 1990, petitioner
served upon Victor, via registered mail, notice that it was exercising its option
to lease the property, tendering the amount of P15,000.00 as rent. Again,
Victor refused to accept the tendered rental fee and to
surrender possession of the property to petitioner. On April 23, 1990,
petitioner filed a complaint for specific performance and damages against
Victor and the Register of Deeds

ISSUE:

Whether or not the rights under a Contact of Lease with Option to Buy were
transmissible.

YES. The general rule, therefore, is that heirs are bound by contracts
entered into by their predecessors-in-interest except when the rights
and obligations arising therefrom are not transmissible by (1) their nature, (2)
stipulation or (3) provision of law. The Court held that there is
neither contractual stipulation nor legal provision making the rights
and obligations under the lease contract intransmissible. More importantly,
the nature of the rights and obligations therein are, by their nature,
transmissible.
In the case at bar, the subject matter of the contract is a lease, which is a
property right. The death of a party does not excuse nonperformance of a
contract which involves a property right, and the rights
and obligations thereunder pass to the personal representatives of the
deceased. Similarly, nonperformance is not excused by the death of the
party when the other party has a property interest in the subject matter of the
contract.

Therefore, Victor is bound by the subject Contract of Lease with Option

to Buy.

Ayala Corporation vs. Rosa Diana Realty

G.R. No. 134284, December 1, 2000

346 SCRA 663

FACTS:

Petitioner Ayala Corporation (Ayala) was the registered owner of a

parcel of land located in Alfaro Street, Salcedo Village, Makati City with an
area of 840 square meters more or less and covered by TCT no. 233435 of
the Register of Deeds of Rizal.

On April 20, 1976, Ayala sold the lot to Manuel Sy married to Vilma Po
and Sy Ka Kieng married to Rosa Chan. The Deed of Sale executed
between Ayala and the buyers contained Special Conditions of Sale and
Deed Restrictions. Manuel Sy and Sy Ka Kieng failed to construct the
building in violation of the Special Conditions of Sale. Notwithstanding the
violation, Manuel Sy and Sy Ka Kieng were able to sell the lot to respondent
Rosa-Diana Realty and Development Corp. with Ayala’s approval. As a
consideration for Ayala to release the certificate of title of the subject
property, Rosa-Diana, executed an undertaking promising to abide by said
Special Condition of Sale executed between Ayala and the original vendees.
Upon the submission of the undertaking, together with the building plans for
a condominium project, known as the Peak, Ayala released title to the lot,
thereby enabling Rosa-Diana to register the Deed of Sale on its favor and
obtain certificate of Title in its name.

Thereafter, Rosa-Diana submitted to the building official of Makati

another set of building plans which were substantially different from those
that it earlier submitted to Ayala for approval. During the construction of
Rosa-Diana’s condominium project, Ayala filed an action with the RTC of
Makati for specific performance with application for a writ of preliminary
injunction seeking to compel the latter to comply with the contractual
obligations under the Deed of Restriction annotated on the title as well as
with the building plans it submitted to the latter. In the alternative, Ayala
prayed for rescission of the sale of the subject lot to Rosa-Diana Realty. The
lower court denied Ayala’s prayer for injunctive relief; thus, enabling Rosa-
Diana to complete the construction of the building. Ayala tried to cause the
annotation a notice of lis pendens on Rosa-Diana’s title but the Register of
Deed of Makati refused registration on the ground that the case pending
before the trial court being an action for specific performance and or
rescission is an action in personam which does not involve the title, use or
possession of the property. The Land Registration Authority reversed the
ruling of the Register of Deeds. The decision of the LRA, however, was
reversed by the CA.

ISSUE:

The issue is whether or not respondent Rosa-Diana has the obligation

to enforce the Deed of Restrictions contained in the contract it entered with
Ayala.

HELD:

Contractual obligations between parties have the force of law between

them and absent any allegation that the same are contrary to law, morals,
good customs, public order or public policy, they must be complied with in
good faith. Hence, Article 1159 of the new Civil Code provides “obligations
arising from contracts have the force of law between the contracting parties
and should be complied with in good faith.

Hence, respondent Rosa-Diana has the obligation to enforce the Deed

of Restrictions contained in the contract it entered with Ayala.

Pilipinas Hino vs. Court of Appeals

G.R. No. 126570, August 18, 2000

338 SCRA 355

FACTS:
The plaintiff, Pilipinas Hino, Inc., is a corporation duly organized and
existing under the laws of the Philippines, with office address at PMI Building
EDSA, Mandaluyong, Metro Manila, The plaintiff filed an action for sum of
money and damages against the defendants.
The contract of lease was entered into between herein parties, under
which the defendants, as lessor, leased real property located at Bigaa,
Balagtas Bulacan, to plaintiff for a term of 2 years. Pursuant to the contract
of lease, plaintiff-lessee deposited with the defendants-lessor the amount of
P400, 000.00 to answer for repairs and damages that may be caused by the
lessee on the leased premises during the period of the lease. After the
expiration of the lease contract, the plaintiff and defendants made a joint
inspection of the premises to determine the extent of the damages thereon.
Both agreed that the cost of repairs would amount to P60, 000.00 and that
the amount of P340, 000.00 shall then be returned by the defendants to
plaintiff. However, defendants returned to plaintiff only the amount of P200,
000.00 still having a balance of P140, 000.00.
On August 10, 1990, plaintiff and defendants entered into a contract to
sell denominated as a memorandum of agreement to sell whereby the latter
agreed to sell to the former the leased property subject of this suit in the
amount of P45, 611,000.00. The aforesaid memorandum of agreement to
sell granted the owner (defendants) the option to rescind the same upon
failure of the buyer (plaintiff) to pay any of the six installments with the
corresponding obligation to return to the buyer any amount paid by the buyer
in excess of the down payment. Pursuant to the said memorandum of
agreement, plaintiff remitted on August 10, 1990 to the defendants the
amount of P1, 811,000.00 as down payment. Subsequently, plaintiff paid the
first and second installments in the amount of P1, 800,000.00 and P5,
250,000.00 with the total amount of P7, 050,000.00. Unfortunately, plaintiff
failed to pay the third and subsequent installments; and thereupon,
defendants decided to, and in fact did rescind and terminate, the contract
promised to return to the plaintiff all the amounts paid in excess of the down
payment after deducting the interest due from the third to sixth installments,
inclusive.
The trial court rendered a decision ruling in favor of respondents
Reyes, et. al. Petitioner Pilipinas Hino elevated the case to the Court of
Appeals. The appellate court, however, sustained the findings of the trial
court.

ISSUE:
Whether or not the private respondent has the right to retain the
interest due for the unpaid installments, despite the fact that the respondent
has exercised his option to rescind the memorandum of agreement.

HELD:
In justifying the withholding of the amount of P924, 000.00 representing
the interest due of the unpaid installments, both the trial and the appellate
court relied on paragraph 6 of the memorandum of agreement entered into
by the parties. However, both courts failed to consider paragraph 9 contained
in the same memorandum of agreement which provides in very clear terms
that “when the owners exercise their option to forfeit the down payment, they
shall return to the buyer any amount paid by the buyer in excess of the down
payment with no obligation to pay interest thereon.” This should include all
amounts paid, including interest. Had it been the intention of the parties to
exclude the interest from the amount to be returned to the buyer in the event
that the owner exercises its option to terminate or rescind the agreement,
then such should have been stated in categorical terms. Thus, there is no
basis in the conclusion reached by the lower courts that “interest paid” should
not be returned to the buyer. Moreever, the private respondents’ withholding
of the amount corresponding to the interest violated the specific and clear
stipulation in paragraph 9 of the memorandum of agreement that except for
the down payment, all amounts paid shall be returned to the buyer “with no
obligation to pay interest thereon.” The parties are bound by their
agreement. Thus Article 1159 of the Civil Code expressly provides:
Obligation arising from contracts have the force of law between the
contracting parties and should be complied with in good faith.
PURE AND CONDITIONAL
OBLIGATION
 Floriano vs Delgado
11 Phil 154, August 27, 1908
Torres, J.

Facts:

On February 17, 1907, Floriano filed a complaint against Delgado and

Bertumen, alleging that the latter were indebted to the plaintiff in the sum of
P1,352.80, who engaged to pay it together with interest at the rate of ten
percent per annum, as appears in their promissory note on January 20, 1907.
The said amount was not paid, not withstanding demand. Thus constitute
this case.

Issue:

Whether or not the obligation contracted by both parties are pure obligation.

Held:

Yes. In accordance with the old laws in force in the Islands prior to the
enactment of the present Civil Code, when an obligation is pure, simple and
unconditional and no particular day has been fixed for its fulfillment payment
payment of the same may be demanded ten days after it is contracted.

TRILLANA VS QUEZON COLLEGES

GR No. L-5003, June 27, 1953
Paras, J.

FACTS:
On June 1, 1948, Damasa Crisostomo applied for 200 shares of
stock worth PhP100.00 each at Quezon Colleges, Inc. Within her letter of
application, she stipulated, “You will find (Babayaran kong lahat
pagkatapos na ako ay makapag-pahuli ng isda) pesos as my initial
payment and the balance payable in accordance with law and the rules and
regulations of the Quezon College.” Damasa died on October 26, 1948.
Since no payment was rendered on the subscription made in the foregoing
letter, Quezon College presented a claim of PhP20,000.00 on her intestate
proceedings. The petitioner – administrator of the estate then contests the
validity of said proceedings?

ISSUE:
Is the condition laid down by Damasa Crisostomo valid?

RULING:
There is nothing in the record to show that the Quezon College,
Inc. accepted the term of payment suggested by Damasa Crisostomo, or
that if there was any acceptance the same came to her knowledge during
her lifetime. As the application of Damasa Crisostomo is obviously at
variance with the terms evidenced in the form letter issued by the Quezon
College, Inc., there was absolute necessity on the part of the College to
express its agreement to Damasa's offer in order to bind the latter.
Conversely, said acceptance was essential, because it would be unfair to
immediately obligate the Quezon College, Inc. under Damasa's promise to
pay the price of the subscription after she had caused fish to be caught.
Thus, it cannot be said that the letter ripened into a contract.

Indeed, the need for express acceptance on the part of the

Quezon College, Inc. becomes the more imperative, in view of the proposal
of Damasa Crisostomo to pay the value of the subscription after she has
harvested fish, a condition obviously dependent upon her sole will and,
therefore, facultative in nature, rendering the obligation void. Under the
Civil Code it is provided that if the fulfillment of the condition should depend
upon the exclusive will of the debtor, the conditional obligation shall be
void.

Ernest Berg vs. Magdalena Estate, Inc.

G.R. No. L-3784, October 17, 1952
Bautista Angelo, J.
FACTS:
The complaint avers that plaintiff and defendant are co-owners of
said property, the former being the owner of one-third interest and the latter
of the remaining two-thirds. The division is asked because plaintiff and
defendant are unable to agree upon the management of the property and
upon the partition thereof.

Defendant answered setting up a special defense and

counterclaim. As a special defense, defendant claims that on September
22, 1943, it sold to plaintiff one-third of the property in litigation subject to
the express condition that should either vendor or vendee decide to sell his
undivided share, the party selling would grant to the other party first an
irrevocable option to purchase the same at the seller’s price. It avers that
in January 1946, plaintiff fixed the sum of P200, 000 as the price of said
share and offered to sell it to defendant, which offer was accepted and for
the payment of said price plaintiff gave defendant a period of time which,
including the extensions granted would expire on May 31, 1947. Defendant
claims that in spite of its acceptance of the offer, plaintiff refused to accept
the payment of the price, and for this refusal defendant suffered damages
in the amount of P100, 000. For these reasons, defendant asks for specific
performance.

ISSUE:
Whether or not the obligation is one subject to a term.
HELD:
The obligation is rather subject to a condition. Under Article 1125
of the old Civil Code, obligations with a term, for the fulfillment of which a
day certain has been fixed, shall be demandable only when the day arrives.
A day certain is understood to be that which must necessarily arrive, even
though it is not known when. In order that an obligation may be with a
term, it is, therefore, necessary that it should arrive, sooner or later;
otherwise, if its arrival is uncertain, the obligation is conditional.

Viewing in this light the clause on which defendant relies for the
enforcement of its right to buy the property, it would seem that it is not a
term, but a condition. Considering the first alternative, that is, until
defendant shall have obtained a loan from the National City Bank of New
York, it is clear that the granting of such loan is not definite and cannot be
held to come within the terms “day certain.” And if it is considered that the
period given was until such time as defendant could raise money from
other sources, then it is also to be indefinite and contingent, and so it is
also a condition and not a term within the meaning of the law. In any event,
it is apparent that the fulfillment of the condition contained in this second
alternative is made to depend upon defendant’s exclusive will, and viewed
in this light, the plaintiff’s obligation to sell did not arise, for, under article
1115 of the old Civil Code, “when the fulfillment of the condition depends
upon the exclusive will of the debtor the conditional obligation shall be
void.”

Felipe Agoncillo vs. Crisanto Javier

G.R. No. L-12611, August 7, 1918
38 Phil 124
Fisher, J.

FACTS:

On February 27 1904, Anastasio Alano, Jlose Alano and Florencio

Alano executed in favor of the plaintiff, Dra. Marcela Marino a document
stipulating that the Alanos as testamentary heirs of deceased Rev.
Anastacio Cruz, would pay the sum of P2, 730.50 within one (1) year with
interest of 12 percent per annum representing the amount of debt incurred
by Cruz. Moreover, the agreement provided that the Alanos are to convey
the house and lot bequeathed to them by Cruz in the event of failure to pay
the debt in money at its maturity.

No part of interest or principal due has been paid except the sum of
P200 paid in 1908 by Anastacio Alano. In 1912, Anastasio died intestate.
On August 8, 1914, CFI of Batangas appointed Crisanto Javier as
administrator of Anastasio’s estate. On March 17, 1916, the plaintiffs filed
the complaint against Florencio, Jose and Crisanto praying that unless
defendants pay the debt for the recovery of which the action was brought,
they be required to convey to plaintiffs the house and lot described in the
agreement, that the property be appraised and if its value is found to be
less than the amount of the debt, with accrued interest at the stipulation
rate, judgment be rendered in favor of the plaintiffs for the balance.

ISSUE:
The issue is whether or not the agreement that the defendant-
appellant, at the maturity of the debt, will pay the sum of the money lent by
the appellees or will transfer the rights to the ownership and possession of
the house and lot bequeathed to the former by the testator in favor of the
appellees, is valid.

HELD:
This stipulation is valid because it is simply an alternative
obligation, which is expressly allowed by law. The agreement to convey the
house and lot on an appraised value in the event of failure to pay the debt
in money at its maturity is valid. It is simply an undertaking that if debt is not
paid in money, it will be paid in another way. The agreement is not open to
the objection that the agreement is pacto comisorio. It is not an attempt to
permit the creditor to declare the forfeiture of the security upon the failure of
the debtor to pay at its maturity. It is simply provided that if the debt is not
paid in money, it shall be paid by the transfer of the property at a valuation.
Such an agreement unrecorded, creates no right in rem, but as between
the parties, it is perfectly valid and specific performance by its terms may
be enforced unless prevented by the creation of superior rights in favor of
third persons.

The contract is not susceptible of the interpretation that the title to

the house and lot in question was to be transferred to the creditor ipso facto
upon the mere failure of the debtors to pay the debt at its maturity. The
obligations assumed by the debtors were in the alternative, and they had
the right to elect which they would perform. The conduct of parties shows
that it was not their understanding that the right to discharge the obligation
by the payment of the money was lost to the debtors by their failure to pay
the debt at its maturity. The plaintiff accepted the payment from Anastacio
in 1908, several years after the debt matured.

It is quite clear therefore that under the terms of the contract, and
the parties themselves have interpreted it, the liability of the defendant as
to the conveyance of the house and lot is subsidiary and conditional, being
dependent upon their failure to pay the debt in money. It must follow
therefore that if the action to recover the debt was prescribed, the action to
compel a conveyance of the house and lot is likewise barred, as the
agreement to make such conveyance was not an independent principal
undertaking, but merely a subsidiary alternative pact relating to the method
by which the debt must be paid.
OBLIGATION WITH
PERIOD
 PURITA ALIPIO vs. COURT OF APPEALS
G.R. No. 134100. September 29, 2000
Mendoza, J.

FACTS:

Respondent Romeo Jaring was the lessee of a 14.5 hectare fishpond

in Barito, Mabuco, Hermosa, Bataan, for a period of five years ending on
September 12, 1990. On June 19, 1987, he subleased the fishpond, for the
remaining period of his lease, to the spouses Placido and Purita Alipio and
the spouses Bienvenido and Remedios Manuel. The stipulated amount of
rent was P485,600.00, payable in two installments of P300,000.00 and
P185,600.00, with the second installment falling due on June 30, 1989.
Each of the four sublessees signed the contract.
The first installment was duly paid, but of the second installment, the
sublessees only satisfied a portion thereof, leaving an unpaid balance of
P50,600.00. Despite due demand, the sublessees failed to comply with
their obligation, so that, on October 13, 1989, private respondent sued the
Alipio and Manuel spouses for the collection of the said amount before the
Regional Trial Court. In the alternative, he prayed for the rescission of the
sublease contract should the defendants fail to pay the balance.

Petitioner Purita Alipio moved to dismiss the case because her

husband had passed away. And that any action for recovery of money,
debt or interest thereon, shall be dismissed when the defendant dies before
final judgment.The trial court denied petitioner's motion and held that the
obligation is solidary. On appeal, the Court of Appeals affirmed the
decision.
ISSUE:
Whether a creditor can sue the surviving spouse for the collection of
a debt which is owed by the conjugal partnership of gains, or whether such
claim must be filed in proceedings for the settlement of the estate of the
decedent.

RULING:
The Court held that the respondent cannot sue the surviving spouse
of a decedent in an ordinary proceeding for the collection of a sum of
money chargeable against the conjugal partnership. Because when the
husband died, their conjugal partnership was automatically dissolved and
debts chargeable against it is to be paid in the settlement of estate
proceedings.
Moreover, respondent does not cite any provision of law which provides
that when there are two or more lessees, or in this case, sublessees, the
latter's obligation to pay the rent is solidary.Thus, the liability of the
sublessees is merely joint. Since the obligation of the Manuel and Alipio
spouses is chargeable against their respective conjugal partnerships, the
unpaid balance of P50,600.00 should be divided into two so that each
couple is liable to pay the amount of P25,300.00. Hence, the petition is
granted.

PH CREDIT CORP VS CA
GR No. 109648 November 22, 2001
Panganiban, J.

FACTS:

PH Credit Corp., filed a case against Pacific Lloyd Corp., Carlos

Farrales, Thomas H. Van Sebille and Federico C. Lim, for [a] sum of
money. The case was docketed as Civil Case No. 83-17751 before the
Regional Trial Court, Branch 51, Manila. After service of summons upon
the defendants, they failed to file their answer within the reglementary
period, hence they were declared in default. PH Credit Corp., was then
allowed to present its evidence ex-parte. The RTC judged in favor of PH
Credit Corp.

On July 27, 1990, a motion for the issuance of a writ of possession

was filed and on October 12, 1990, the same was granted. The writ of
possession itself was issued on October 26, 1990. Said order and writ of
possession are now the subject of this petition. Petitioner claims that
Respondent Judge erred in applying the presumption of a joint obligation in
the face of the conclusion of fact and law contained in the decision showing
that the obligation is solidary.

ISSUE:
Is the petitioner’s contention tenable?
RULING:

The Rules of Court requires that all available objections to a

judgment or proceeding must be set up in an Omnibus Motion assailing it;
otherwise, they are deemed waived. In the case at bar, the objection of
private respondent to his solidary liability became available to him, only
after his real property was sold at public auction. At the time his personal
properties were levied and sold, it was not evident to him that he was being
held solely liable for the monetary judgment rendered against him and his
co-respondents. That was why his objections then did not include those he
asserted when his solidary liability became evident.

In the dispositive portion of the January 31, 1984 Decision of the trial
court, the word solidary neither appears nor can it be inferred therefrom.
The fallo merely stated that the following respondents were liable: Pacific
Lloyd Corporation, Thomas H. Van Sebille, Carlos M. Farrales and
Federico C. Lim. Under the circumstances, the liability is joint, as provided
by the Civil Code.

We should stress that respondent’s obligation is based on the

judgment rendered by the trial court. The dispositive portion or the fallo is
its decisive resolution and is thus the subject of execution. The other parts
of the decision may be resorted to in order to determine the ratio decidendi
for the disposition. Where there is a conflict between the dispositive part
and the opinion of the court contained in the text or body of the decision,
the former must prevail over the latter on the theory that the dispositive
portion is the final order, while the opinion is merely a statement ordering
nothing. Hence the execution must conform with that which is ordained or
decreed in the dispositive portion of the decision.

ASSET BUILDERS CORPORATION vs. STRONGHOLD INSURANCE

COMPANY, INC.
G.R. No. 187116 , October 18, 2010
Mendoza, J.

FACTS:
(Lucky Star) as part of the completion of its project to construct the ACG
Commercial On April 28, 2006, Asset Builders Corporation (ABC) entered
into an agreement with Lucky Star Drilling & Construction Corporation
Complex 3 Lucky Star was to supply labor, materials, tools, and equipment
including technical supervision to drill one (1) exploratory production well
on the project site. The total contract price for the said project was
P1,150,000.00. To guarantee faithful compliance with their agreement,
Lucky Star engaged respondent Stronghold which issued two (2) bonds in
favor of petitioner. The first, SURETY BOND G(16) No. 141558, dated May
9, 2006, covers the sum of P575,000.004 or the required downpayment for
the drilling work. On May 20, 2006, ABC paid Lucky Star P575,000.00 (with
2% withholding tax) as advance payment, representing 50% of the contract
price. Lucky Star, thereafter, commenced the drilling work. By July 18,
2006, just a few days before the agreed completion date of 60 calendar
days, Lucky Star managed to accomplish only ten (10) % of the drilling
work. On the same date, petitioner sent a demand letter to Lucky Star for
the immediate completion of the drilling work with a threat to cancel the
agreement and forfeit the bonds should it still fail to complete said project
within the agreed period.

On August 3, 2006, ABC sent a Notice of Rescission of Contract with

Demand for Damages to Lucky Star

ISSUE:
Whether or not Stronghold should be held liable.

RULING:
Suretyship, in essence, contains two types of relationship – the
principal relationship between the obligee (petitioner) and the obligor
(Lucky Star), and the accessory surety relationship between the principal
(Lucky Star) and the surety (respondent). In this arrangement, the obligee
accepts the surety’s solidary undertaking to pay if the obligor does not pay.
Such acceptance, however, does not change in any material way the
obligee’s relationship with the principal obligor. Neither does it make the
surety an active party to the principal obligee-obligor relationship. Thus, the
acceptance does not give the surety the right to intervene in the principal
contract. The surety’s role arises only upon the obligor’s default, at which
time, it can be directly held liable by the obligee for payment as a solidary
obligor.

In the case at bench, when Lucky Star failed to finish the drilling
work within the agreed time frame despite petitioner’s demand for
completion, it was already in delay. Due to this default, Lucky Star’s liability
attached and, as a necessary consequence, respondent’s liability under the
surety agreement arose. In fine, respondent should be answerable to
petitioner on account of Lucky Star’s non-performance of its obligation as
guaranteed by the performance bond.

Finally, Article 1217 of the New Civil Code acknowledges the right of
reimbursement from a co-debtor (the principal co-debtor, in case of
suretyship) in favor of the one who paid (the surety). Thus, respondent is
entitled to reimbursement from Lucky Star for the amount it may be
required to pay petitioner arising from its bonds.

CERNA VS CA
GR No. L-48359 March 30, 1993
Medialdea, J.
FACTS:

On or about October 16, 1972, Celerino Delgado (Delgado) and

Conrad Leviste (Leviste) entered into a loan agreement which was
evidenced by a promissory note worded as follows:
FOR VALUE RECEIVED, I, CELERINO DELGADO, with postal address at
98 K-11 St., Kamias Rd., Quezon City, promise to pay to the order of
CONRAD C. LEVISTE, NINETY (90) DAYS after date, at his office at 215
Buendia Ave., Makati, Rizal, the total sum of SEVENTEEN THOUSAND
FIVE HUNDRED (P17,500.00) PESOS, Philippine Currency, without
necessity of demand, with interest at the rate of TWELVE (12%) PERCENT
per annum
On the same date, Delgado executed a chattel mortgage over a Willy's
jeep owned by him. And acting as the attorney-in-fact of herein petitioner,
Manolo P. Cerna (petitioner), he also mortgaged a "Taunus" car owned by
the latter. The period lapsed without Delgado paying the loan. This
prompted Leviste to file a collection suit docketed as Civil Case No. 17507
with the Court of First Instance of Rizal, Branch XXII against Delgado and
petitioner as solidary debtors. The Court of Appeals held that petitioner and
Delgado were solidary debtors.
ISSUE:
Are petitioner and Delgado solidary debtors?

RULING:
Only Delgado signed the promissory note and accordingly, he was
the only one bound by the contract of loan. Nowhere did it appear in the
promissory note that petitioner was a co-debtor. The law is clear that
"(c)ontracts take effect only between the parties. But by some stretch of the
imagination, petitioner was held solidarily liable for the debt allegedly
because he was a co-mortgagor of the principal debtor, Delgado. This
ignores the basic precept that "(t)here is a solidary liability only when the
obligation expressly so states, or when the law or the nature of the
obligation requires solidarity." We have already stated that the contract of
loan, as evidenced by the promissory note, was signed by Delgado only.
Petitioner had no part in the said contract. Thus, nowhere could it be seen
from the agreement that petitioner was solidarily bound with Delgado for
the payment of the loan.

THERESA MACALALAG vs. PEOPLE OF THE PHILIPPINES

G.R. No. 164358 December 20, 2006
Chico-Nazario,J.

FACTS:
On two separate occasions, particularly on 30 July 1995 and 16
October 1995, petitioner Theresa Macalalag obtained loans from Grace
Estrella (Estrella), each in the amount of P100,000.00, each bearing an
interest of 10% per month. Macalalag consistently paid the interests.
Finding the interest rates so burdensome, Macalalag requested Estrella for
a reduction of the same to which the latter agreed. On 16 April 1996 and 1
May 1996, Macalalag executed Acknowledgment/Affirmation Receipts
promising to pay Estrella the face value of the loans in the total amount of
P200,000.00 within two months from the date of its execution plus 6%
interest per month for each loan. Under the two
Acknowledgment/Affirmation Receipts, she further obligated herself to pay
for the two (2) loans the total sum of P100,000.00 as liquidated damages
and attorney's fees in the total sum of P40,000.00 as stipulated by the
parties the moment she breaches the terms and conditions thereof.

As security for the payment of the aforesaid loans, Macalalag issued

two Philippine National Bank (PNB) Checks on 30 June 1996, each in the
amount of P100,000.00, in favor of Estrella. However, the said checks were
dishonored for the reason that the account against which the same was
drawn was already closed. Estrella sent a notice of dishonor and demand
to make good the said checks to Macalalag, but the latter failed to do so.
Hence, Estrella filed two criminal complaints for Violation of Batas
Pambansa Blg. 22 before the Municipal Trial Court in Cities (MTCC) of
Bacolod City.The MTCC found the accused Theresa Macalalag guilty
beyond reasonable doubt of the crime charged and is likewise ordered to
pay as civil indemnity the total amount of P200,000.00 with interest at the
legal rate from the time of the filing of the informations until the amount is
fully paid; less whatever amount was thus far paid and validly deducted
from the principal sum originally claimed. On appealed, the Court of
Appeals, affirmed the RTC and the MTCC decisions with modification to
the effect that accused was convicted only of one (1) count of Violation of
Batas Pambansa Blg. 22.

ISSUE:
Whether petitioner`s payments over and above the value of the
said checks would free her from criminal liability.

RULING:
 The Court argued that, “Even if we agree with petitioner Macalalag
that the interests on her loans should not be imputed to the face value of
the checks she issued, petitioner Macalalag is still liable for Violation of
Batas Pambansa Blg. 22. Petitioner Macalalag herself declares that before
the institution of the two cases against her, she has made a total payment
of P156,000.00. Applying this amount to the first check (No. C-889835),
what will be left is P56,000.00, an amount insufficient to cover her
obligation with respect to the second check. As stated above, when Estrella
presented the checks for payment, the same were dishonored on the
ground that they were drawn against a closed account. Despite notice of
dishonor, petitioner Macalalag failed to pay the full face value of the second
check issued.

Only a full payment of the face value of the second check at the
time of its presentment or during the five-day grace period15 could have
exonerated her from criminal liability. A contrary interpretation would defeat
the purpose of Batas Pambansa Blg. 22, that of safeguarding the interest of
the banking system and the legitimate public checking account user,16 as
the drawer could very well have himself exonerated by the mere
expediency of paying a minimal fraction of the face value of the check.
Hence, the Petition is denied.
ALTERNATIVE OBLIGATION
 Felipe Agoncillo vs. Crisanto Javier
G.R. No. L-12611, August 7, 1918
38 Phil 124
Fisher, J.

FACTS:

On February 27 1904, Anastasio Alano, Jlose Alano and Florencio

Alano executed in favor of the plaintiff, Dra. Marcela Marino a document
stipulating that the Alanos as testamentary heirs of deceased Rev.
Anastacio Cruz, would pay the sum of P2, 730.50 within one (1) year with
interest of 12 percent per annum representing the amount of debt incurred
by Cruz. Moreover, the agreement provided that the Alanos are to convey
the house and lot bequeathed to them by Cruz in the event of failure to pay
the debt in money at its maturity.

No part of interest or principal due has been paid except the sum of
P200 paid in 1908 by Anastacio Alano. In 1912, Anastasio died intestate.
On August 8, 1914, CFI of Batangas appointed Crisanto Javier as
administrator of Anastasio’s estate. On March 17, 1916, the plaintiffs filed
the complaint against Florencio, Jose and Crisanto praying that unless
defendants pay the debt for the recovery of which the action was brought,
they be required to convey to plaintiffs the house and lot described in the
agreement, that the property be appraised and if its value is found to be
less than the amount of the debt, with accrued interest at the stipulation
rate, judgment be rendered in favor of the plaintiffs for the balance.

ISSUE:
The issue is whether or not the agreement that the defendant-
appellant, at the maturity of the debt, will pay the sum of the money lent by
the appellees or will transfer the rights to the ownership and possession of
the house and lot bequeathed to the former by the testator in favor of the
appellees, is valid.

HELD:
This stipulation is valid because it is simply an alternative
obligation, which is expressly allowed by law. The agreement to convey the
house and lot on an appraised value in the event of failure to pay the debt
in money at its maturity is valid. It is simply an undertaking that if debt is not
paid in money, it will be paid in another way. The agreement is not open to
the objection that the agreement is pacto comisorio. It is not an attempt to
permit the creditor to declare the forfeiture of the security upon the failure of
the debtor to pay at its maturity. It is simply provided that if the debt is not
paid in money, it shall be paid by the transfer of the property at a valuation.
Such an agreement unrecorded, creates no right in rem, but as between
the parties, it is perfectly valid and specific performance by its terms may
be enforced unless prevented by the creation of superior rights in favor of
third persons.

The contract is not susceptible of the interpretation that the title to

the house and lot in question was to be transferred to the creditor ipso facto
upon the mere failure of the debtors to pay the debt at its maturity. The
obligations assumed by the debtors were in the alternative, and they had
the right to elect which they would perform. The conduct of parties shows
that it was not their understanding that the right to discharge the obligation
by the payment of the money was lost to the debtors by their failure to pay
the debt at its maturity. The plaintiff accepted the payment from Anastacio
in 1908, several years after the debt matured.

It is quite clear therefore that under the terms of the contract, and
the parties themselves have interpreted it, the liability of the defendant as
to the conveyance of the house and lot is subsidiary and conditional, being
dependent upon their failure to pay the debt in money. It must follow
therefore that if the action to recover the debt was prescribed, the action to
compel a conveyance of the house and lot is likewise barred, as the
agreement to make such conveyance was not an independent principal
undertaking, but merely a subsidiary alternative pact relating to the method
by which the debt must be paid.

Ong Guan Can vs. The Century Insurance Company, Ltd.

G.R. No. 21196, February 6, 1924
46 Phil 592
Johnson, J.

FACTS:

A building of the plaintiff was insured against fire by the defendant in

the sum of P30,000.00 as well as the goods and merchandise therein
contained in the sum of P15,000.00. The house and merchandise insured
were burnt early in the morning of February 28, 1923 while the policies
issued by the defendant in favor of the plaintiff were in force.
The appellants contend that under clause 14 of the conditions of the
policies, it amay rebuild the house burnt and although the house may be
smaller, yet it would be sufficient indemnity to the insured for the actual loss
suffered by him.

ISSUE:

Whether or not the defendant company may perform the alternative

obligation despite the fact that the plaintiff’s consent was not secured.

HELD:

It must be noted that in alternative obligations, the debtor, the

insurance company in this case, must notify the creditor of his election,
stating which of the two prestations he is disposed to fulfill, in accordance
with the law. The object of this notice is to five the creditor, that is , the
plaintiff in the instant case, opportunity to expr3ss his consent. The record
shows that the appellant company did not give a formal notice of its
selection to rebuild and while the witnesses speaks of the propped
reconstruction of the house destroyed, yet the plaintiff id d not give his
assent to the proposition, for the reason that the new house would be
smaller and of materials of lower kind than those employed in the
construction of the house destroyed.

LEGARDA VS MIAILHE
GR No. L-3435 April 28, 1951
Bautista Angelo, J.

FACTS:
 On June 3, 1944, plaintiffs filed a complaint against the original
defendant William J.B. Burke, alleging defendant’s unjustified refusal to
accept payment in discharge of a mortgage indebtedness in his favor, and
praying that the latter be order (1) to receive the sum of P75,920.83; (2) to
execute the corresponding deed of release of mortgage, and; (3) to pay
damages in the sum of P1,000. The Court then decided in favor of plaintiff
Legarda. After the war and the subsequent defeat of the Japanese
occupants, defendant filed a case in court claiming that plaintiff Clara de
Legarda violated her agreement with defendant, by forcing to deposit
worthless Japanese military notes when they originally agreed that the
interest was to be condoned until after the occupation and that payment
was rendered either in Philippine or English currency. Defendant was later
substituted upon death by his heir Miailhe and the Courts judged in
defendant’s favor. Plaintiff now assails said decision.

ISSUE:

Is the tender of payment by plaintiff valid?

RULING:

On February 17, 1943, the only currency available was the Philippine
currency, or the Japanese Military notes, because all other currencies,
including the English, were outlawed by a proclamation issued by the
Japanese Imperial Commander on January 3, 1942. The right to election
ceased to exist on the date of plaintiff’s payment because it had become
legally impossible. And this is so because in alternative obligations there is
no right to choose undertakings that are impossible or illegal. In other
words, the obligation on the part of the debtor to pay the mortgage
indebtedness has since then ceased to be alternative. It appears therefore,
that the tender of payment in Japanese Military notes was a valid tender
because it was the only currency permissible at the time and its payment
was tantamount to payment in Philippine currency.

However, payment with the clerk of court did not have any legal
effect because it was made in certified check, and a check does not meet
the requirements of legal tender. Therefore, her consignation did not have
the effect of relieving her from her obligation of the defendant.
 COMMISSION ON ELECTIONS petitioner, vs. JUDGE MA.
LUISA QUIJANO-PADILLA respondents.
389 SCRA 353

FACTS:

The Philippine Congress passed Republic Act No. 8189, otherwise known
as the "Voter's Registration Act of 1996," providing for the modernization and
computerization of the voters' registration list and the appropriate of funds
therefor "in order to establish a clean, complete, permanent and updated list
of voters."
The COMELEC issued invitations to pre-qualify and bid for the supply and
installations of information technology equipment and ancillary services for
its VRIS Project. Private respondent Photokina Marketing Corporation
(PHOTOKINA) won the bid however the budget appropriated by the
Congress for the COMELEC’s modernization project was only 1B which was
not sufficient to PHOTOKINA bid in the amount of 6.588B.
Senator Edgardo J. Angara directed the creation of a technical working group
to “assist the COMELEC in evaluating all programs for the modernization of
the COMELEC which will also consider the PHOTOKINA contract as an
alternative program and various competing programs for the purpose.”
PHOTOKINA filed a petition for mandamus, prohibition and damages (with
prayer for temporary restraining order, preliminary prohibitory injunction and
preliminary mandatory injunction) against the COMELEC and all its
Commissioners.
Judge Luisa Quijano-Padilla rendered her decision in favor of PHOTOKINA.

ISSUE:

May a successful bidder compel a government agency to formalize a

contract with it notwithstanding that its bid exceeds the amount
appropriated by Congress for the project?

RULING:

The SC cannot accede to PHOTOKINA's contention that there is

already a perfected contract. While we held in Metropolitan Manila
Development Authority vs. Jancom Environmental Corporation[50] that "the
effect of an unqualified acceptance of the offer or proposal of the bidder is to
perfect a contract, upon notice of the award to the bidder," however, such
statement would be inconsequential in a government where the acceptance
referred to is yet to meet certain conditions. To hold otherwise is to allow a
public officer to execute a binding contract that would obligate the
government in an amount in excess of the appropriations for the purpose for
which the contract was attempted to be made.
In the case at bar, there seems to be an oversight of the legal requirements
as early as the bidding stage. The first step of a Bids and Awards Committee
(BAC) is to determine whether the bids comply with the requirements. The
BAC shall rate a bid "passed" only if it complies with all the requirements and
the submitted price does not exceed the approved budget for the contract.”
The SC ruled that PHOTOKINA, though the winning bidder, cannot compel
the COMELEC to formalize the contract. Since PHOTOKINA’s bid is beyond
the amount appropriated by Congress for the VRIS Project, the proposed
contract is not binding upon the COMELEC and is considered void; and that
in issuing the questioned preliminary writs of mandatory and prohibitory
injunction and in not dismissing Special Civil Action No. Q-01-45405,
respondent judge acted with grave abuse of discretion. Petitioners cannot
be compelled by a writ of mandamus to discharge a duty
that involves the exercise of judgment and discretion, especially where
disbursement of public funds is concerned.

SPS. FELIPE AND LETICIA CANNU versus SPS. GIL AND

FERNANDINA GALANG AND NATIONAL HOME MORTGAGE FINANCE
CORPORATION
G.R. No. 139523 2005 May 26

FACTS:

Respondents-spouses Gil and Fernandina Galang obtained a

loan from Fortune Savings & Loan Association for P173,800.00 to
purchase a house and lot located at Pulang Lupa, Las Piñas, in the names
of respondents-spouses. To secure payment, a real estate mortgage was
constituted on the said house and lot in favor of Fortune Savings & Loan
Association. In early 1990, NHMFC purchased the mortgage loan of
respondents-spouses from Fortune Savings & Loan Association for
P173,800.00. Petitioner Leticia Cannu agreed to buy the property for
P120,000.00 and to assume the balance of the mortgage obligations with
the NHMFC and with CERF Realty (the Developer of the property).
 A Deed of Sale with Assumption of Mortgage Obligation dated
20 August 1990 was made and entered into by and between spouses
Fernandina and Gil Galang (vendors) and spouses Leticia and Felipe
Cannu (vendees) over the house and lot and petitioners immediately took
possession and occupied the house and lot. However, despite requests
from Adelina R. Timbang and Fernandina Galang to pay the balance of
P45,000.00 or in the alternative to vacate the property in question,
petitioners refused to do so. Because the Cannus failed to fully comply with
their obligations, respondent Fernandina Galang, on 21 May 1993, paid
P233,957.64 as full payment of her remaining mortgage loan with NHMFC.

From 1991 until the present, no other payments were made by

plaintiffs-appellants to defendants-appellees spouses Galang. Out of the
P250,000.00 purchase price which was supposed to be paid on the day of
the execution of contract in July, 1990 plaintiffs-appellants have paid, in the
span of eight (8) years, from 1990 to present, the amount of only
P75,000.00. Plaintiffs-appellants should have paid the P250,000.00 at the
time of the execution of contract in 1990. Eight (8) years have already
lapsed and plaintiffs-appellants have not yet complied with their obligation.

ISSUE:

Whether or not the action for rescission was subsidiary, and

that there was a substantial breach of the obligation.

RULING:

Rescission or, more accurately, resolution, of a party to an

obligation under Article 1191 is predicated on a breach of faith by the other
party that violates the reciprocity between them. Art. 1191 states that 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 the payment of damages in either case. He may also seek
rescission, even after he has chosen fulfillment, if the latter should become
impossible. The court shall decree the rescission claimed, unless there be
just cause authorizing the fixing of a period.
 Rescission will not be permitted for a slight or casual breach of the
contract. Rescission may be had only for such breaches that are substantial
and fundamental as to defeat the object of the parties in making the
agreement. The question of whether a breach of contract is substantial
depends upon the attending circumstances and not merely on the
percentage of the amount not paid.Thus, the petitioners’ failure to pay the
remaining balance of P45,000.00 is substantial. Even assuming arguendo
that only said amount was left out of the supposed consideration of
P250,000.00, or eighteen percent thereof, this percentage is still substantial.
Their failure to fulfill their obligation gave the respondents-spouses Galang
the right to rescission.
JOINT AND SOLIDARY
OBLIGATIONS
MARSMAN DRYSDALE LAND, INC. VS. PHILIPPINE GEOANALYTICS,
INC. AND GOTESCO PROPERTIES, INC.
June 29, 2010
CARPIO MORALES, J.

FACTS:

On February 12, 1997, Marsman Drysdale Land, Inc. (Marsman Drysdale)

and Gotesco Properties, Inc. (Gotesco) entered into a Joint Venture
Agreement (JVA) for the construction and development of an office building
on a land owned by Marsman Drysdale in Makati City. Under the JVA,
Marsman Drysdale shall contribute the Property which is appraised for
P420,000,000.00. while Gotesco shall contribute the amount of
P420,000,000.00 (P50,000,000.00. upon the signing of the agreement and
the balance shall be paid based on progress billings, relative to the
development of the building).
Via Technical Services Contract (TSC) dated July 14, 1997, the joint venture
engaged the services of Philippine Geoanalytics, Inc. (PGI) to provide
subsurface soil exploration, laboratory testing, seismic study and
geotechnical engineering for the project. PGI, was, however, able to drill
only four of five boreholes needed to conduct its subsurface soil exploration
and laboratory testing, justifying its failure to drill the remaining borehole to
the failure on the part of the joint venture partners to clear the area where
the drilling was to be made. PGI was able to complete its seismic study
though. PGI then billed the joint venture on November 24, 1997 for
P284,553.50 representing the cost of partial subsurface soil exploration; and
on January 15, 1998 for P250,800 representing the cost of the completed
seismic study.
Despite repeated demands from PGI, the joint venture failed to pay its
obligations. Meanwhile, due to unfavorable economic conditions at the time,
the joint venture was cut short and the planned building project was
eventually shelved. PGI subsequently filed on November 11, 1999 a
complaint for collection of sum of money and damages at the Regional Trial
Court (RTC) of Quezon City against Marsman Drysdale and Gotesco.
In its Answer with Counterclaim and Cross-claim, Marsman Drysdale passed
the responsibility of paying PGI to Gotesco which, under the JVA, was solely
liable for the monetary expenses of the project.
Gotesco, on the other hand, countered that PGI has no cause of action
against it as PGI had yet to complete the services enumerated in the
contract; and that Marsman Drysdale failed to clear the property of debris
which prevented PGI from completing its work.
Issue:
The core issue to be resolved then is which between joint venturers Marsman
Drysdale and Gotesco bears the liability to pay PGI its unpaid claims.
Ruling:
The Court finds Marsman Drysdale and Gotesco jointly liable to PGI.
PGI executed a technical service contract with the joint venture and was
never a party to the JVA. While the JVA clearly spelled out, inter alia, the
capital contributions of Marsman Drysdale (land) and Gotesco (cash) as well
as the funding and financing mechanism for the project, the same cannot be
used to defeat the lawful claim of PGI against the two joint venturers-
partners.
The TSC clearly listed the joint venturers Marsman Drysdale and Gotesco
as the beneficial owner of the project, and all billing invoices indicated the
consortium therein as the client.
As the appellate court held, Articles 1207 and 1208 of the Civil Code, which
respectively read:
Art. 1207. The concurrence of two or more creditors or of two or more
debtors in one and the same obligation does not imply that each one of the
former has a right to demand, or that each one of the latter is bound to render,
entire compliance with the prestations. There is a solidary liability only when
the obligation expressly so states, or when the law or nature of the obligation
requires solidarity.
Art. 1208. If from the law, or the nature or the wording of the obligations to
which the preceding article refers the contrary does not appear, the credit or
debt shall be presumed to be divided into as many equal shares as there are
creditors or debtors, the credits or debts being considered distinct from one
another, subject to the Rules of Court governing the multiplicity of suits.
(emphasis and underscoring supplied), presume that the obligation owing to
PGI is joint between Marsman Drysdale and Gotesco.
The only time that the JVA may be made to apply in the present petitions is
when the liability of the joint venturers to each other would set in. A joint
venture being a form of partnership, it is to be governed by the laws on
partnership.
Article 1797 of the Civil Code provides:
Art. 1797. The losses and profits shall be distributed in conformity with the
agreement. If only the share of each partner in the profits has been agreed
upon, the share of each in the losses shall be in the same proportion.
In the absence of stipulation, the share of each in the profits and losses shall
be in proportion to what he may have contributed, but the industrial partner
shall not be liable for the losses. As for the profits, the industrial partner shall
receive such share as may be just and equitable under the circumstances.
If besides his services he has contributed capital, he shall also receive a
share in the profits in proportion to his capital. (emphasis and underscoring
supplied)
In the JVA, Marsman Drysdale and Gotesco agreed on a 50-50 ratio on the
proceeds of the project. They did not provide for the splitting of losses,
however. Applying the above-quoted provision of Article 1797 then, the
same ratio applies in splitting the P535,353.50 obligation-loss of the joint
venture.
The appellate court’s decision must be modified, however. Marsman
Drysdale and Gotesco being jointly liable, there is no need for Gotesco to
reimburse Marsman Drysdale for “50% of the aggregate sum due” to PGI.
Allowing Marsman Drysdale to recover from Gotesco what it paid to PGI
would not only be contrary to the law on partnership on division of losses but
would partake of a clear case of unjust enrichment at Gotesco’s expense.
The grant by the lower courts of Marsman Drysdale cross-claim against
Gotesco was thus erroneous.
Marsman Drysdale’s supplication for the award of attorney’s fees in its favor
must be denied. It cannot claim that it was compelled to litigate or that the
civil action or proceeding against it was clearly unfounded, for the JVA
provided that, in the event a party advances funds for the project, the joint
venture shall repay the advancing party.
Marsman Drysdale was thus not precluded from advancing funds to pay for
PGI’s contracted services to abate any legal action against the joint venture
itself. It was in fact hardline insistence on Gotesco having sole responsibility
to pay for the obligation, despite the fact that PGI’s services redounded to
the benefit of the joint venture, that spawned the legal action against it and
Gotesco.
Finally, an interest of 12% per annum on the outstanding obligation must be
imposed from the time of demand as the delay in payment makes the
obligation one of forbearance of money, conformably with this Court’s ruling
in Eastern Shipping Lines, Inc. v. Court of Appeals. Marsman Drysdale and
Gotesco should bear legal interest on their respective obligations.

Nikko Hotel Manila Garden vs. Roberto Reyes

G.R. No. 154259, February 28, 2005
452 SCRA 532
FACTS:

Respondent herein Roberto Reyes, more popularly known by the

screen name “Amay Bisaya,” alleged that while he was having coffee at the
lobby of Hotel Nikko, he was spotted by Dr. Violeta Filart, his friend of
several years, invited him to join her in a party at the hotel’s penthouse in
celebration of the natal day of the hotel’s manager, Mr. Masakazu
Tsuruoka. Mr. Reyes asked if she could vouch for him for whom she
replied: “of course.” Reyes then went up with the party of Dr. Filart carrying
the basket of fruits which was the latter’s present for the celebrant. At the
penthouse, they first had their picture taken with the celebrant after which
Reyes sat with the party of Dr. Filart. After a couple of hours, when the
buffet dinner was ready, Mr. Reyes lined-up at the buffet table but, to his
great shock, shame and embarrassment, he was stopped by Ruby Lim, the
Executive Secretary of Hotel Nikko. Reyes alleged that Ruby Lim, in a loud
voice and within the presence and hearing of the other guests who were
making a queue at the buffet table, told him to leave the party because he
was not invited. Mr. Reyes tried to explain that he was invited by Dr. Filart
but the latter, who was within hearing distance, completely ignored him
thus adding to his shame and humiliation. Afterwards, while he was still
recovering from the traumatic experience, a Makati policeman approached
and asked him to step out of the hotel. Like a common criminal, he was
escorted out of the party by the policeman. Claiming damages, Mr. Reyes
asked for One Million Pesos actual damages, One Million Pesos moral
and/or exemplary damages and Two Hundred Thousand Pesos attorney’s
fees.

Petitioners Lim and Hotel Nikko contend that pursuant to the doctrine
of volenti non fit injuria, they cannot be made liable for damages as
respondent Reyes assumed the risk of being asked to leave (and being
embarrassed and humiliated in the process) as he was a “gate-crasher.”

ISSUE:
Whether or not Hotel Nikko and Ruby Lim are jointly and severally
liable with Dr. Filart for damages under Articles 19 and 21 of the Civil Code.

HELD:
The doctrine of volenti non fit injuria (“to which a person assents is
not esteemed in law as injury”) refers to self-inflicted injury or to the
consent to injury which precludes the recovery of damages by one who has
knowingly and voluntarily exposed himself to danger, even if he is not
negligent in doing so.

The Supreme Court agreed with the lower court’s ruling that Ms. Lim
did not abuse her right to ask Mr. Reyes to leave the party as she talked to
him politely and discreetly. Considering the closeness of defendant Lim to
plaintiff when the request for the latter to leave the party was made such
that they nearly kissed each other, the request was meant to be heard by
him only and there could have been no intention on her part to cause
embarrassment to him. In the absence of any proof of motive on the part of
Ms. Lim to humiliate Mr. Reyes and expose him to ridicule and shame, it is
highly unlikely that she would shout at him from a very close distance. Ms.
Lim having been in the hotel business for twenty years wherein being polite
and discreet are virtues to be emulated, the testimony of Mr. Reyes that
she acted to the contrary does not inspire belief and is indeed incredible.
Ms. Lim, not having abused her right to ask Mr. Reyes to leave the party to
which he was not invited, cannot be made liable to pay for damages under
Articles 19 and 21 of the Civil Code. Necessarily, neither can her
employer, Hotel Nikko, be held liable as its liability springs from that of its
employee. Had respondent simply left the party as requested, there was no
need for the police to take him out.

People of the Philippines vs. Rosauro Sia

G.R. No. 137457, November 21, 2001
370 SCRA 123

FACTS:

This is an automatic review of a decision of the Regional Trial Court

finding the accused Johnny Balalio y Deza and Jimmy Ponce y Tol guilty
beyond reasonable doubt as principals by conspiracy for violation of RA
6539 (Anti- Carnapping law) as amended, and sentenced them to suffer the
penalty of death.

Accused are likewise adjudged jointly and severally liable to pay

Agripina Bermudez, the mother of the deceased Christian Bermudez the
sums of: (a) P50, 000.00 as compensatory damages for the death of
Christian Bermudez; (b) P200, 000.00 as burial and other expenses
incurred in connection with the death of Christian; and (c) P3, 307,199.60
(2/3 x [80-27] x 300 per day x 26 days (excluding Sundays) x 12 months)
representing the loss of earning capacity of Christian Bermudez as taxi
driver.

ISSUE:
The issue is whether or not the trial courts’ award for damages is
proper.

HELD:

The decision is partly correct. The Court finds the amount of P50,
000.00 as death indemnity proper, following prevailing jurisprudence, and
in line with controlling policy. The award of civil indemnity may be granted
without any need of proof other than the death of the victim. Though not
awarded by the trial court, the victim’s heirs are likewise entitled to moral
damages, pegged at P50, 000.00 by controlling case law, taking into
consideration the pain and anguish of the victim’s family brought about by
his death.
However, the award of P200, 000.00 as burial and other expenses
incurred in connection with the death of the victim must be deleted. The
records are bereft of any receipt or voucher to justify the trial court’s award
of burial and other expenses incurred in connection with the victim’s death.
The rule is that every pecuniary loss must be established by credible
evidence before it may be awarded. Credence can be given only to claims,
which are duly supported, by receipts or other credible evidence.
The trial court was correct in awarding damages for loss of earning
capacity despite the non-availability of documentary evidence. The court
based on testimony in several cases has awarded damages representing
net earning capacity. However the amount of the trial court’s award needs
to be re computed and modified accordingly.
In determining the amount of lost income, the following must be taken
into account: (1) the number of years for which the victim would otherwise
have lived; and (2) the rate of the loss sustained by the heirs of the
deceased. The second variable is computed by multiplying the life
expectancy by the net earnings of the deceased meaning total earnings
less expenses necessary in the creation of such earnings or income less
living and other incidental expenses considering that there is no proof of
living expenses of the deceased, net earnings are computed at fifty percent
of the gross earnings.
In this case, the court notes that the victim was 27 years old at the
time of his death and his mother testified that as a driver of the Tamaraw
FX taxi, he was earning P650.00 a day.
Based on the foregoing computation, the award of the trial court with regard
to lost income is thus modified accordingly.
The court ordered the accused to pay the heirs of the victim Christian
Bermudez the sum of P50, 000.000 as civil indemnity, the sum of P50,
000.00 as moral damages, and the sum of P2, 996,867.20 representing
lost earnings. The award of P200, 000.00 as burial and other expenses is
deleted for lack of substantial proof.

THERMOCHEM INCORPORATED vs. LEONORA NAVAL

G.R. No. 131541
OCTOBER 20, 2000

FACTS:

"On May 10, 1992, at around 12:00 o'clock midnight, Eduardo Edem
was driving a "Luring Taxi" along Ortigas Avenue, near Rosario, Pasig,
going towards Cainta. Thereafter, the driver executed a U-turn to traverse
the same road, going to the direction of EDSA. At this point, the Nissan
Pathfinder traveling along the same road going to the direction of Cainta
collided with the taxicab. The point of impact was so great that the taxicab
was hit in the middle portion and was pushed sideward, causing the driver
to lose control of the vehicle. The taxicab was then dragged into the nearby
Question Tailoring Shop, thus, causing damage to the said tailoring shop,
and its driver, Eduardo Eden, sustained injuries as a result of the incident."

Private respondent, as owner of the taxi, filed a damage suit against

petitioner, Thermochem Incorporated, as the owner of the Nissan
Pathfinder, and its driver, petitioner Jerome Castro. After trial, the lower
court adjudged petitioner Castro negligent and ordered petitioners, jointly
and severally, to pay private respondent actual, compensatory and
exemplary damages plus attorney's fees and costs of suit.
ISSUE:
What are the liabilities of both parties?

RULING:

The driver of the oncoming Nissan Pathfinder vehicle was liable and
the driver of the U-turning taxicab was contributorily liable. It is established
that Castro was driving at a speed faster than 50 kilometers per hour
because it was a downhill slope. But as he allegedly stepped on the brake,
it locked causing his Nissan Pathfinder to skid to the left and consequently
hit the taxicab. Malfunction or loss of brake is not a fortuitous event.
Between the owner and his driver, on the one hand, and third parties such
as commuters, drivers and pedestrians, on the other, the former is
presumed to know about the conditions of his vehicle and is duty bound to
take care thereof with the diligence of a good father of the family. A
mechanically defective vehicle should avoid the streets. As petitioner's
vehicle was moving downhill, the driver should have slowed down since a
downhill drive would naturally cause the vehicle to accelerate. Moreover,
the record shows that the Nissan Pathfinder was on the wrong lane when
the collision occurred.

The taxi driver is contributorily liable since he took a U-turn where it is

not generally advisable. The taxi was hit on its side which means that it had
not yet fully made a turn to the other lane. The driver of the taxi ought to
have known that vehicles coming from the Rosario bridge are on a downhill
slope. Obviously, there was lack of foresight on his part, making him
contributorily liable. Considering the contributory negligence of the driver of
private respondent's taxi, the award of P47,850.00, for the repair of the taxi,
should be reduced in half. All other awards for damages are deleted for
lack of merit.

MERCURY DRUG CORPORATION VS. HUANG

GR No. 172122 June 22, 2007

FACTS:
 Petitioner Mercury Drug is the registered owner of a six-wheeler 1990
Mitsubishi Truck. It has in its employ petitioner Rolando Del Rosario as
driver. Respondent spouses Richard and Carmen Huang are the parents of
respondent Stephen Huang and own the red 1991 Toyota Corolla. These
two vehicles figured in a road accident. At the time of the accident,
petitioner Del Rosario only had a Traffic Violation Receipt. A driver’s
license had been confiscated because he had been previously
apprehended for reckless driving. Respondent Stephen Huang sustained
massive injuries to his spinal cord, head, face and lung. He is paralyzed for
life from his chest down and requires continuous medical and rehabilitation
treatment. Respondent’s fault petitioner Del Rosario for committing gross
negligence and reckless imprudence while driving, and petitioner Mercury
Drug for failing to exercise the diligence of a good father of a family in the
selection and supervision of its driver.

The trial court found Mercury Drug and Del Rosario jointly and
severally liable to pay respondents. The Court of Appeals affirmed the said
decision.

ISSUE:

Whether or not petitioner Mercury Drug is liable for the negligence of

its employee.

RULING:

Article 2176 and 2180 of the Civil Code provide:

“Whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damages done. Such
fault or negligence, if there is no pre-existing contractual relationship
between the parties, is called a quasi-delict and is governed by the
provisions of this Chapter.”
“The obligation imposed by article 2176 is demandable not only
for one’s own acts or omissions, but also for those of persons for whom
one is responsible.”

The liability of the employer under Article 2180 is direct and

immediate. It is not conditioned on a prior recourse against the negligent
employee, or a prior showing of insolvency of such employee. It is also joint
and solidary with the employee. To be relieved f the liability, petitioner
should show that it exercised the diligence of a good father of a family, both
in the selection of the employee and in the supervision of the performance
of his duties.

In this case, the petitioner Mercury Drug does not provide for back-up
driver for long trips. As the time of the accident, Del Rosario has been
driving for more than thirteen hours, without any alternate. Moreover, Del
Rosario took the driving test and psychological exam for the position of
Delivery Man and not as Truck Man.

With this, petitioner Mercury Drug is liable jointly and severally liable
to pay the respondents.

CEREZO VS. TUAZON

GR No. 141538 March 23, 2004

FACTS:

Country Bus Lines passenger bus collided with a tricycle. Tricycle

driver Tuazon filed a complaint for damages against Mrs. Cerezo, as owner
of the bus line, her husband Attorney Juan Cerezo, and bus driver Danilo
A. Foronda.

After considering Tuazon’s testimonial and documentary evidence,

the trial court ruled in Tuazon’s favor. The trial court made no
pronouncement on Foronda’s liability because there was no service of
summons on him. The trial court did not hold Atty. Cerezo liable as Tuazon
failed to show that Mrs. Cerezo’s business benefited the family, pursuant to
Article 121(3) of the Family Code. The trial court held Mrs. Cerezo solely
liable for the damages sustained by Tuazon arising from the negligence of
Mrs. Cerezo’s employee, pursuant to Article 2180 of the Civil Code.

ISSUE:
Whether petitioner is solidarily liable.

RULING:

Contrary to Mrs. Cerezo’s assertion, Foronda is not an indispensable

party to the case. An indispensable party is one whose interest is affected
by the court’s action in the litigation, and without whom no final resolution of
the case is possible. However, Mrs. Cerezo’s liability as an employer in an
action for a quasi-delict is not only solidary, it is also primary and direct.
Foronda is not an indispensable party to the final resolution of Tuazon’s
action for damages against Mrs. Cerezo.
The responsibility of two or more persons who are liable for a quasi-
delict is solidary. Where there is a solidary obligation on the part of debtors,
as in this case, each debtor is liable for the entire obligation. Hence, each
debtor is liable to pay for the entire obligation in full. There is no merger or
renunciation of rights, but only mutual representation. Where the obligation
of the parties is solidary, either of the parties is indispensable, and the
other is not even a necessary party because complete relief is available
from either. Therefore, jurisdiction over Foronda is not even necessary as
Tuazon may collect damages from Mrs. Cerezo alone.
Moreover, an employer’s liability based on a quasi-delict is primary
and direct, while the employer’s liability based on a delict is merely
subsidiary. The words “primary and direct,” as contrasted with “subsidiary,”
refer to the remedy provided by law for enforcing the obligation rather than
to the character and limits of the obligation. Although liability under Article
2180 originates from the negligent act of the employee, the aggrieved party
may sue the employer directly.
When an employee causes damage, the law presumes that the
employer has himself committed an act of negligence in not preventing or
avoiding the damage. This is the fault that the law condemns. While the
employer is civilly liable in a subsidiary capacity for the employee’s criminal
negligence, the employer is also civilly liable directly and separately for his
own civil negligence in failing to exercise due diligence in selecting and
supervising his employee. The idea that the employer’s liability is solely
subsidiary is wrong.
To hold the employer liable in a subsidiary capacity under a
delict, the aggrieved party must initiate a criminal action where the
employee’s delict and corresponding primary liability are established. If the
present action proceeds from a delict, then the trial court’s jurisdiction over
Foronda is necessary.
However, the present action is clearly for the quasi-delict of Mrs.
Cerezo and not for the delict of Foronda.
Thus, the petition was denied ordering the defendant Hermana
Cerezo to pay the plaintiff.
 PROFESSIONAL SERVICES, INC. VS. COURT OF APPEALS
GR No. 126297 February 11, 2008

FACTS:

On April 04, 1984, Natividad Agana was admitted at the Medical City
General Hospital because of difficulty of bowel movement and bloody anal
discharge. Dr. Ampil diagnosed her to be suffering from “cancer of the
sigmoid”. Thus, Dr. Ampil, assisted by the medical staff of Medical City,
performed a surgery upon her. During the surgery, he found that the
malignancy in her sigmoid area had spread to her left ovary, necessitating
the removal of certain portions of it. Thus, Dr. Ampil obtained the consent
of Natividad’s husband topermit Dr. Fuentes to perform hysterectomy upon
Natividad. Dr. Fuentes performed and completed the hysterectomy.
Afterwards, Dr. Ampil took over, completed the operation and closed the
incision. The operation, however, appeared to be flawed as the attending
nurses entered in the corresponding Record of Operation that there were 2
lacking sponge and announced that it was searched by the surgeon but to
no avail.

After a couple of days, Natividad complained excruciating pain in her

anal region. She consulted both Dr. Ampil and Dr. Fuentes. They told her
that the pain was the natural consequence of the surgical operation
performed upon her. Dr. Ampil recommended that she consult an
oncologist to treat the cancerous nodes which were not removed. Natividad
and her husband went to the US to seek further treatment. After 4 months
she was told that she was free of cancer. They then flew back to the
Philippines. Two weeks thereafter , Natividad’s daughter found a piece of
gauze protruding from her vagina. Dr. Ampil saw immediately informed. He
proceeded to Natividad’s house where he extracted by hand a piece of
gauze. Natividad sought the treatment of Polymedic General Hospital
thereat Dr. Gutierrez detected a foreign object in her vagina - a foul-
smelling gauze which infected her vaginal vault. A recto-vaginal fistula had
formed in her reproductive organ which forced stool to excrete in her
vagina. Another surgical operation was performed upon her.

Spouses Agana filed a complaint against PSI (owner of Medical City),

Dr. Ampil and Dr. Fuentes. The Trial Court found the respondents jointly
and severally liable. The CA affirmed said decision with modification that
Dr. Fuentes was dismissed.

ISSUE:
Whether there is an employee-employer relationship in order to hold
PSI solidary liable.

RULING:

In general, a hospital is not liable for the negligence of an

independent contractor-physician. However, the hospital may be held liable
if the physician is the “ostensible” agent of the hospital. This exception is
also known as the “doctrine of apparent authority”. The doctrine of
apparent authority involves two factors to determine the liability of an
independent contractor-physician. First factor focuses on the hospital’s
manifestations and is sometimes described as an inquiry whether the
hospital acted in a manner which would lead a responsible person to
conclude that the individual who was alleged to be negligent was an
employee or agent of the hospital. The second factor focuses on the
patient’s reliance. It is sometimes characterized as an inquiry on whether
the plaintiff acted in reliance upon the conduct of the hospital or its agent,
consistent with ordinary care and prudence. In this case, it has been
proven that the two factors were present. The hospital indeed made it
appear that Dr. Ampil was its employee when they advertise and displayed
his name in the directory at the lobby of the said hospital and that Natividad
relied on such knowledge that Dr. Ampil was indeed an employee of the
hospital.

Wherefore PSI and Dr. Ampil are liable jointly and severally.

PURITA ALIPIO vs. COURT OF APPEALS

G.R. No. 134100. September 29, 2000

FACTS:

Respondent Romeo Jaring was the lessee of a 14.5 hectare fishpond

in Barito, Mabuco, Hermosa, Bataan, for a period of five years ending on
September 12, 1990. On June 19, 1987, he subleased the fishpond, for the
remaining period of his lease, to the spouses Placido and Purita Alipio and
the spouses Bienvenido and Remedios Manuel. The stipulated amount of
rent was P485,600.00, payable in two installments of P300,000.00 and
P185,600.00, with the second installment falling due on June 30, 1989.
Each of the four sublessees signed the contract.
The first installment was duly paid, but of the second installment, the
sublessees only satisfied a portion thereof, leaving an unpaid balance of
P50,600.00. Despite due demand, the sublessees failed to comply with
their obligation, so that, on October 13, 1989, private respondent sued the
Alipio and Manuel spouses for the collection of the said amount before the
Regional Trial Court. In the alternative, he prayed for the rescission of the
sublease contract should the defendants fail to pay the balance.

Petitioner Purita Alipio moved to dismiss the case because her

husband had passed away. And that any action for recovery of money,
debt or interest thereon, shall be dismissed when the defendant dies before
final judgment.The trial court denied petitioner's motion and held that the
obligation is solidary. On appeal, the Court of Appeals affirmed the
decision.

ISSUE:

Whether a creditor can sue the surviving spouse for the collection of
a debt which is owed by the conjugal partnership of gains, or whether such
claim must be filed in proceedings for the settlement of the estate of the
decedent.

RULING:

The Court held that the respondent cannot sue the surviving spouse
of a decedent in an ordinary proceeding for the collection of a sum of
money chargeable against the conjugal partnership. Because when the
husband died, their conjugal partnership was automatically dissolved and
debts chargeable against it is to be paid in the settlement of estate
proceedings.
Moreover, respondent does not cite any provision of law which provides
that when there are two or more lessees, or in this case, sublessees, the
latter's obligation to pay the rent is solidary.Thus, the liability of the
sublessees is merely joint. Since the obligation of the Manuel and Alipio
spouses is chargeable against their respective conjugal partnerships, the
unpaid balance of P50,600.00 should be divided into two so that each
couple is liable to pay the amount of P25,300.00. Hence, the petition is
granted.

PH CREDIT CORP VS CA
GR No. 109648 November 22, 2001

FACTS:

PH Credit Corp., filed a case against Pacific Lloyd Corp., Carlos

Farrales, Thomas H. Van Sebille and Federico C. Lim, for [a] sum of
money. The case was docketed as Civil Case No. 83-17751 before the
Regional Trial Court, Branch 51, Manila. After service of summons upon
the defendants, they failed to file their answer within the reglementary
period, hence they were declared in default. PH Credit Corp., was then
allowed to present its evidence ex-parte. The RTC judged in favor of PH
Credit Corp.

On July 27, 1990, a motion for the issuance of a writ of possession

was filed and on October 12, 1990, the same was granted. The writ of
possession itself was issued on October 26, 1990. Said order and writ of
possession are now the subject of this petition. Petitioner claims that
Respondent Judge erred in applying the presumption of a joint obligation in
the face of the conclusion of fact and law contained in the decision showing
that the obligation is solidary.

ISSUE:

Is the petitioner’s contention tenable?

RULING:

The Rules of Court requires that all available objections to a

judgment or proceeding must be set up in an Omnibus Motion assailing it;
otherwise, they are deemed waived. In the case at bar, the objection of
private respondent to his solidary liability became available to him, only
after his real property was sold at public auction. At the time his personal
properties were levied and sold, it was not evident to him that he was being
held solely liable for the monetary judgment rendered against him and his
co-respondents. That was why his objections then did not include those he
asserted when his solidary liability became evident.

In the dispositive portion of the January 31, 1984 Decision of the trial
court, the word solidary neither appears nor can it be inferred therefrom.
The fallo merely stated that the following respondents were liable: Pacific
Lloyd Corporation, Thomas H. Van Sebille, Carlos M. Farrales and
Federico C. Lim. Under the circumstances, the liability is joint, as provided
by the Civil Code.

We should stress that respondent’s obligation is based on the

judgment rendered by the trial court. The dispositive portion or the fallo is
its decisive resolution and is thus the subject of execution. The other parts
of the decision may be resorted to in order to determine the ratio decidendi
for the disposition. Where there is a conflict between the dispositive part
and the opinion of the court contained in the text or body of the decision,
the former must prevail over the latter on the theory that the dispositive
portion is the final order, while the opinion is merely a statement ordering
nothing. Hence the execution must conform with that which is ordained or
decreed in the dispositive portion of the decision.

INDUSTRIAL MANAGEMENT VS NLRC

GR No. 101723 May 11, 2000

FACTS:

This is a petition for certiorari assailing the Resolution dated

September 4, 1991 issued by the National Labor Relations Commission in
RAB-VII-0711-84 on the alleged ground that it committed a grave abuse of
discretion amounting to lack of jurisdiction in upholding the Alias Writ of
Execution issued by the Labor Arbiter which deviated from the dispositive
portion of the Decision dated March 10, 1987, thereby holding that the
liability of the six respondents in a case adjudicated by the NLRC is
solidary despite the absence of the word "solidary" in the dispositive portion
of the Decision, when their liability should merely be joint.

ISSUE:

Is the petitioner’s liability pursuant to the Decision of the Labor

Arbiter dated March 10, 1987, solidary or not?

RULING:

In the dispositive portion of the Labor Arbiter, the word "solidary"

does not appear. The said fallo expressly states the following respondents
therein as liable, namely: Filipinas Carbon and Mining Corporation,
Gerardo Sicat, Antonio Gonzales, Industrial Management Development
Corporation (petitioner INIMACO), Chiu Chin Gin, and Lo Kuan Chin. Nor
can it be inferred therefrom that the liability of the six (6) respondents in the
case below is solidary, thus their liability should merely be joint.

Moreover, it is already a well-settled doctrine in this jurisdiction

that, when it is not provided in a judgment that the defendants are liable to
pay jointly and severally a certain sum of money, none of them may be
compelled to satisfy in full said judgment. Granting that the Labor Arbiter
has committed a mistake in failing to indicate in the dispositive portion that
the liability of respondents therein is solidary, the correction -- which is
substantial -- can no longer be allowed in this case because the judgment
has already become final and executory.
DIVISIBLE AND INDIVISIBLE
OBLIGATION
 NAZARENO VS. COURT OF APPEALS
G.R. No. 131641, February 23, 2000

FACTS:

Maximino Nazareno, Sr. and Aurea Poblete were husband and

wife. Aurea died on April 15, 1970, while Maximino, Sr. died on December
18, 1980. After the death of Maximino, Sr., Romeo filed an intestate case in
the Court of First Instance of Cavite, Branch XV, where the case was
docketed as Sp. Proc. No. NC-28. Upon the reorganization of the courts in
1983, the case was transferred to the Regional Trial Court of Naic, Cavite.
Romeo was appointed administrator of his father’s estate. In the course of
the intestate proceedings, Romeo discovered that his parents had
executed several deeds of sale conveying a number of real properties in
favor of his sister, Natividad. One of the deeds involved six lots in Quezon
City which were allegedly sold by Maximino, Sr., with the consent of Aurea,
to Natividad on January 29, 1970 for the total amount of P47,800.00.

ISSUE:

Whether or not the Deed of Absolute of Sale can be equated as a

divisible obligation.

HELD:

The Supreme court held that the Deed of Absolute Sale is an

indivisible contract founded on an indivisible obligation. As such, it being
indivisible, it can not be annulled by only one of them. And since this suit
was filed only by the estate of Maximino A. Nazareno, Sr. without including
the estate of Aurea Poblete, the present suit must fail. The estate of
Maximino A. Nazareno, Sr. can not cause its annulment while its validity is
sustained by the estate of Aurea Poblete. An obligation is indivisible when it
cannot be validly performed in parts, whatever may be the nature of the
thing which is the object thereof. The indivisibility refers to the prestation
and not to the object. The Deed of Sale of January 29, 1970 supposedly
conveyed the six lots to Natividad. The obligation is clearly indivisible
because the performance of the contract cannot be done in parts,
otherwise the value of what is transferred is diminished. Petitioners are
mistaken in basing the indivisibility of a contract on the number of obligors.
In any case, if petitioners’ only point is that the estate of Maximino, Sr.
alone cannot contest the validity of the Deed of Sale because the estate of
Aurea has not yet been settled, the argument would nonetheless be without
merit. The validity of the contract can be questioned by anyone affected by
it. A void contract is inexistent from the beginning. Hence, even if the
estate of Maximino, Sr. alone contests the validity of the sale, the outcome
of the suit will bind the estate of Aurea as if no sale took place at all.

TANAY RECREATION CENTER AND DEVELOPMENT CORP.

vs. CATALINA MATIENZO FAUSTO
April 12, 2005
FACTS:
Petitioner Tanay Recreation Center and Development Corp. (TRCDC)
is the lessee of a 3,090-square meter property located in Sitio Gayas, Tanay,
Rizal, owned by Catalina Matienzo Fausto, under a Contract of Lease. On
this property stands the Tanay Coliseum Cockpit operated by petitioner. The
lease contract provided for a 20-year term, subject to renewal within sixty
days prior to its expiration. The contract also provided that should Fausto
decide to sell the property, petitioner shall have the “priority right” to purchase
the same.
On June 17, 1991, petitioner wrote Fausto informing her of its intention
to renew the lease. However, it was Fausto’s daughter, respondent
Anunciacion F. Pacunayen, who replied, asking that petitioner remove the
improvements built thereon, as she is now the absolute owner of the
property. It appears that Fausto had earlier sold the property to Pacunayen
and title has already been transferred in her name. Petitioner filed an
Amended Complaint for Annulment of Deed of Sale, Specific Performance
with Damages, and Injunction
In her Answer, respondent claimed that petitioner is estopped from
assailing the validity of the deed of sale as the latter acknowledged her
ownership when it merely asked for a renewal of the lease. According to
respondent, when they met to discuss the matter, petitioner did not demand
for the exercise of its option to purchase the property, and it even asked for
grace period to vacate the premises.
ISSUE:
 The contention in this case refers to petitioner’s priority right to
purchase, also referred to as the right of first refusal.
RULING:
When a lease contract contains a right of first refusal, the lessor is
under a legal duty to the lessee not to sell to anybody at any price until after
he has made an offer to sell to the latter at a certain price and the lessee has
failed to accept it. The lessee has a right that the lessor's first offer shall be
in his favor. Petitioner’s right of first refusal is an integral and indivisible part
of the contract of lease and is inseparable from the whole contract. The
consideration for the lease includes the consideration for the right of first
refusal and is built into the reciprocal obligations of the parties.
It was erroneous for the CA to rule that the right of first refusal does
not apply when the property is sold to Fausto’s relative. When the terms of
an agreement have been reduced to writing, it is considered as containing
all the terms agreed upon. As such, there can be, between the parties and
their successors in interest, no evidence of such terms other than the
contents of the written agreement, except when it fails to express the true
intent and agreement of the parties. In this case, the wording of the
stipulation giving petitioner the right of first refusal is plain and unambiguous,
and leaves no room for interpretation. It simply means that should Fausto
decide to sell the leased property during the term of the lease, such sale
should first be offered to petitioner. The stipulation does not provide for the
qualification that such right may be exercised only when the sale is made to
strangers or persons other than Fausto’s kin. Thus, under the terms of
petitioner’s right of first refusal, Fausto has the legal duty to petitioner not to
sell the property to anybody, even her relatives, at any price until after she
has made an offer to sell to petitioner at a certain price and said offer was
rejected by petitioner.
PAYMENT OR PERFORMANCE
 VICELET LALICON AND VVICELEN LALICON, PETITIONERS, VS.
NATIONAL HOUSING AUTHORITY, RESPONDENT.
July 13, 2011
ABAD, J.

In November 25, 1980 the National Housing Authority (NHA) executed a

Deed of Sale with Mortgage over a Quezon City lot in favor of the spouses
Isidro and Flaviana Alfaro (the Alfaros). The deed of sale provided, among
others, that the Alfaros could sell the land within five years from the date of
its release from mortgage without NHA’s prior written consent. Thus:
x x x. 5. Except by hereditary succession, the lot herein sold and
conveyed, or any part thereof, cannot be alienated, transferred or
encumbered within five (5) years from the date of release of herein mortgage
without the prior written consent and authority from the VENDOR-
MORTGAGEE (NHA). x x x.
The mortgage and the restriction on sale were annotated on the Alfaros’ title
on April 14, 1981.
About nine years later or on November 30, 1990, while the mortgage on the
land subsisted, the Alfaros sold the same to their son, Victor Alfaro, who had
taken in a common-law wife, Cecilia, with whom he had two daughters,
petitioners Vicelet and Vicelen Lalicon (the Lalicons). Cecilia, who had the
means, had a house built on the property and paid for the amortizations.
After full payment of the loan or on March 21, 1991 the NHA released the
mortgage. Six days later or on March 27 Victor transferred ownership of the
land to his illegitimate daughters.
About four and a half years after the release of the mortgage or on October
4, 1995, Victor registered the November 30, 1990 sale of the land in his favor,
resulting in the cancellation of his parents’ title. On December 14, 1995 Victor
mortgaged the land to Marcela Lao Chua, Rosa Sy, Amparo Ong, and Ida
See. Subsequently, on February 14, 1997 Victor sold the property to Chua,
one of the mortgagees, resulting in the cancellation of his TCT 140646 and
the issuance of TCT N-172342 in Chua’s name.
A year later or on April 10, 1998 the NHA instituted a case before the Quezon
City Regional Trial Court (RTC) for the annulment of the NHA’s 1980 sale of
the land to the Alfaros, the latter’s 1990 sale of the land to their son Victor,
and the subsequent sale of the same to Chua, made in violation of NHA rules
and regulations.
On February 12, 2004 the RTC rendered a decision in the case. It ruled that,
although the Alfaros clearly violated the five-year prohibition, the NHA could
no longer rescind its sale to them since its right to do so had already
prescribed, applying Article 1389 of the New Civil Code.
Issue:
Whether or not the period to rescind the same has already prescribed.
Ruling:
Invoking the RTC ruling, the Lalicons claim that under Article 1389 of the
Civil Code the “action to claim rescission must be commenced within four
years” from the time of the commission of the cause for it.
But an action for rescission can proceed from either Article 1191 or Article
1381. It has been held that Article 1191 speaks of rescission in reciprocal
obligations within the context of Article 1124 of the Old Civil Code which uses
the term “resolution.” Resolution applies only to reciprocal obligations such
that a breach on the part of one party constitutes an implied resolutory
condition which entitles the other party to rescission. Resolution grants the
injured party the option to pursue, as principal actions, either a rescission or
specific performance of the obligation, with payment of damages in either
case.
Rescission under Article 1381, on the other hand, was taken from Article
1291 of the Old Civil Code, which is a subsidiary action, not based on a
party’s breach of obligation. The four-year prescriptive period provided in
Article 1389 applies to rescissions under Article 1381..
Here, the NHA sought annulment of the Alfaros’ sale to Victor because they
violated the five-year restriction against such sale provided in their contract.
Thus, the CA correctly ruled that such violation comes under Article 1191
where the applicable prescriptive period is that provided in Article 1144 which
is 10 years from the time the right of action accrues. The NHA’s right of
action accrued on February 18, 1992 when it learned of the Alfaros’ forbidden
sale of the property to Victor. Since the NHA filed its action for annulment of
sale on April 10, 1998, it did so well within the 10-year prescriptive period.
Lastly, since mutual restitution is required in cases involving rescission under
Article 1191, the NHA must return the full amount of the amortizations it
received for the property, plus the value of the improvements introduced on
the same, with 6% interest per annum from the time of the finality of this
judgment. The Court will no longer dwell on the matter as to who has a better
right to receive the amount from the NHA: the Lalicons, who paid the
amortizations and occupied the property, or Chua, who bought the subject
lot from Victor and obtained for herself a title to the same, as this matter was
not raised as one of the issues in this case. Chua’s appeal to the Court in a
separate case having been denied due course and NHA failing to file its own
petition for review, the CA decision ordering the restitution in favor of the
Lalicons has now become final and binding against them.

DOMEL TRADING CORPORATION V. COURT OF APPEALS and

G.R. No. 84813, September 22, 1999

FACTS:

On June 3, 1981, private respondent NDC-NACIDA Raw Materials

Corporation (NNRMC) ordered from petitioner Domel Trading Corporation
(DOMEL) 22,000 bundles of buri midribs at P16.00 per bundle to be
delivered within 30 working days from the date of the opening of a letter of
credit. On June 4, 1981, private respondent again ordered 300,000 pieces
of rattan poles at P9.65 per piece for a total price of P2,895,000.00, also to
be delivered within 60 days from the date of the opening of a letter of credit.
The specifications and provisions of both transactions, which served as their
agreement, were printed in two separate purchase orders.

In accordance with their agreement, NNRMC, on July 9, 1981, opened a

letter of credit with Philippine National Bank (PNB) in favor of DOMEL in the
amount of P1,997,000.00 to cover its order for 206,943 pieces of rattan
poles. On July 13, 1981, NNRMC opened another letter of credit in favor of
DOMEL in the amount of P1,236,000.00 to cover the price of 93,057 pieces
of rattan poles and 22,000 bundles of buri midribs.
In violation of their agreement, DOMEL failed to deliver the buri midribs and
rattan poles within the stipulated period. Thus, on September 23, 1981,
DOMEL and NNRMC agreed to restructure the latter’s purchase orders in a
Memorandum of Agreement. Under the agreement, NNRMC extended the
expiry date of its two letters of credit to November 5, 1981. It also reduced
the quantity of the rattan poles from 300,000 to only 100,000 pieces while
the quantity of buri midribs remained at 22,000 bundles. Further, DOMEL
undertook to deliver the goods on or before October 31, 1981. However, no
deliveries were again made on the said date. Consequently, demands were
made by NNRMC on January 19, 1982 for the payment of damages, which
demands were ignored by DOMEL. Hence, NNRMC filed a complaint for
damages before the Regional Trial Court of Pasig. After trial, judgment was
rendered in favor of plaintiff and against defendant.

Both DOMEL and NNRMC assail the above-quoted decision in separate

petitions which have been consolidated before this Court. Based on the
pleadings submitted by the parties, this Court has resolved to give due
course to the petition and decides the same. DOMEL submits it has not
breached its contractual obligation to NNRMC inasmuch as it was the fault
of the latter for not inspecting and examining the rattan poles as well as the
buri midribs already shipped by the suppliers and stored in the former’s
warehouse. In short, DOMEL claims that NNRMC must first inspect the
ordered items before delivery could be made.

ISSUE:

Whether or not the decision of the Court of Appeals in CA-G.R. CV No.

08952 which modified the decision of the lower court granting private
respondent’s prayer for damages, was correct.

RULING:

While the Supreme Court did not agree with the Court of Appeals that
the failure of NNRMC to conduct the inspection mitigated DOMEL’s liability
for liquidated damages, nevertheless, it agreed in the reduction of the
amount of liquidated damages to only P150,000.00. The amount of
P2,000.00 as penalty for every day of delay is excessive and
unconscionable.

Article 1229 of the Civil Code states, thus:“The judge shall equitably reduce
the penalty when the principal obligation has been partly or irregularly
complied with by the debtor. Even if there has been no performance, the
penalty may also be reduced by the courts if it is iniquitous or
unconscionable.”

Article 2227 of the Civil Code likewise states, thus: “Liquidated damages,
whether intended as an indemnity or a penalty, shall be equitably reduced if
they are iniquitous or unconscionable.”

In determining whether a penalty clause is “iniquitous and unconscionable,”

a court may very well take into account the actual damages sustained by a
creditor who was compelled to sue the defaulting debtor, which actual
damages would include the interest and penalties the creditor may have had
to pay on its own from its funding source. In this case, NNRMC was only
able to prove that it incurred the amounts of P5,995.83 as opening charges
on the two Letters of Credit and an additional P1,911.85 as amendment
charges on the same Letters of Credit. Other than that, NNRMC failed to
prove it had suffered actual damages resulting from the nondelivery of the
specified buri midribs and rattan poles. In fact, what it allegedly suffered are
what it calls “Foregone Interest Income” and “Foregone Profit” from the two
Letters of Credit. Such could not be considered as actual damages.

RESTITUTA IMPERIAL VS. ALEX JAUCIAN

G.R. No. 149004, April 14, 2004
427 SCRA 517

FACTS:

The present controversy arose from a case for collection of money,

filed by Alex A. Jaucian against Restituta Imperial, on October 26, 1989. The
complaint alleges, inter alia, that defendant obtained from plaintiff six (6)
separate loans for which the former executed in favor of the latter six (6)
separate promissory notes and issued several checks as guarantee for
payment. When the said loans became overdue and unpaid, especially
when the defendant’s checks were dishonored, plaintiff made repeated oral
and written demands for payment.
The loans were covered by six (6) separate promissory notes executed
by defendant. The face value of each promissory notes is bigger [than] the
amount released to defendant because said face value already included the
interest from date of note to date of maturity. Said promissory notes indicate
the interest of 16% per month, date of issue, due date, the corresponding
guarantee checks issued by defendant, penalties and attorney’s fees. The
trial court’s clear and detailed computation of petitioner’s outstanding
obligation to respondent was affirmed by the CA for being convincing and
satisfactory. However, the CA held that without judicial inquiry, it was
improper for the RTC to rule on the constitutionality of Section 1, Central
Bank Circular No. 905, Series of 1982.

ISSUES:

(1) Whether or not the penalties charged per month is in the guise of
hidden interest.
(2) Whether or not the reduction of attorney’s fees by the RTC is
reasonable.

RULING:

Iniquitous and unconscionable stipulations on interest rates, penalties

and attorney’s fees are contrary to morals. Consequently, courts are granted
authority to reduce them equitably. If reasonably exercised, such authority
shall not be disturbed by appellate courts.
Article 1229 of the Civil Code states thus:“The judge shall equitably
reduce the penalty when the principal obligation has been partly or irregularly
complied with by the debtor. Even if there has been no performance, the
penalty may also be reduced by the courts if it is iniquitous or
unconscionable.”
In exercising this power to determine what is iniquitous and
unconscionable, courts must consider the circumstances of each case.
What may be iniquitous and unconscionable in one may be totally just and
equitable in another. In the present case, iniquitous and unconscionable was
the parties’ stipulated penalty charge of 5 percent per month or 60 percent
per annum, in addition to regular interests and attorney’s fees. Also, there
was partial performance by petitioner when she remitted P116,540 as partial
payment of her principal obligation of P320,000. Under the circumstances,
the trial court was justified in reducing the stipulated penalty charge to the
more equitable rate of 14 percent per annum.
The Promissory Note carried a stipulation for attorney’s fees of 25
percent of the principal amount and accrued interests. Strictly speaking, this
covenant on attorney’s fees is different from that mentioned in and regulated
by the Rules of Court. “Rather, the attorney’s fees here are in the nature of
liquidated damages and the stipulation therefor is aptly called a penal
clause.” So long as the stipulation does not contravene the law, morals,
public order or public policy, it is binding upon the obligor. It is the litigant,
not the counsel, who is the judgment creditor entitled to enforce the judgment
by execution.
Nevertheless, it appears that petitioner’s failure to comply fully with her
obligation was not motivated by ill will or malice. The twenty-nine partial
payments she made were a manifestation of her good faith. Again, Article
1229 of the Civil Code specifically empowers the judge to reduce the civil
penalty equitably, when the principal obligation has been partly or irregularly
complied with. Upon this premise, we hold that the RTC’s reduction of
attorney’s fees -- from 25 percent to 10 percent of the total amount due and
payable -- is reasonable.

PASCUAL VS. RAMOS

G.R. No. 144712, July 4, 2002
384 SCRA 105

FACTS:

Ramos alleged that on June 3, 1987, for and in consideration of

P150,000, the Spouses Pascual executed in his favor a Deed of Absolute
Sale with Right to Repurchase over 2 parcels of land and the improvements
thereon located in Bambang, Bulacan, Bulacan. This document was
annotated at the back of the title. The Pascuals did not exercise their right to
repurchase the property within the stipulated one-year period; hence, Ramos
prayed that the title or ownership over the subject parcels of land and
improvements thereon be consolidated in his favor.
In their Answer, the Pascuals admitted having signed the Deed of
Absolute Sale with Right to Repurchase for a consideration of P150, 000 but
averred that what the parties had actually agreed upon and entered into was
a real estate mortgage. They further alleged that there was no agreement
limiting the period within which to exercise the right to repurchase and that
they had even overpaid Ramos. The trial court found that the transaction
between the parties was actually a loan in the amount of P150, 000.00, the
payment of which was secured by a mortgage of the property covered by
TCT No. 305626. It also found that the Pascuals had made payments in the
total sum of P344,000.00, and that with interest at 7% per annum, they had
overpaid the loan by P141,500.00. Accordingly, in its Decision of March 15,
1995 the trial court ruled in favor of the defendants. The Pascuals interposed
the following defenses: (a) the trial court had no jurisdiction over the subject
or nature of the petition; (b) Ramos had no legal capacity to sue; (c) the
cause of action, if any, was barred by the statute of limitations; (d) the petition
stated no cause of action; (e) the claim or demand set forth in Ramos’s
pleading had been paid, waived, abandoned, or otherwise extinguished; and
(f) Ramos has not complied with the required confrontation and conciliation
before the barangay.

ISSUE:

Whether or not the contract entered into was a contract of loan and not
a contract of sale.

HELD:

After the trial court sustained petitioners’ claim that their agreement
with Ramos was actually a loan with real estate mortgage, the Pascuals
should not be allowed to turn their back on the stipulation in that agreement
to pay interest at the rate of 7% per month. The Pascuals should accept not
only the favorable aspect of the court’s declaration that the document is
actually an equitable mortgage but also the necessary consequence of such
declaration, that is, that interest on the loan as stipulated by the parties in
that same document should be paid. Besides, when Ramos moved for a
reconsideration of the decision of the trial court pointing out that the interest
rate to be used should be 7% per month, the Pascuals never lifted a finger
to oppose the claim. It was only in their motion for the reconsideration of the
decision of the Court of Appeals that the Pascuals made an issue of the
interest rate and prayed for its reduction to 12% per annum.
It is a basic principle in civil law that parties are bound by the
stipulations in the contracts voluntarily entered into by them. Parties are free
to stipulate terms and conditions which they deem convenient provided they
are not contrary to law, morals, good customs, public order, or public policy.
The interest rate of 7% per month was voluntarily agreed upon by
Ramos and the Pascuals. There is nothing from the records and, in fact,
there is no allegation showing that petitioners were victims of fraud when
they entered into the agreement with Ramos. Neither is there a showing that
in their contractual relations with Ramos, the Pascuals were at a
disadvantage on account of their moral dependence, ignorance, mental
weakness, tender age or other handicap, which would entitle them to the
vigilant protection of the courts as mandated by Article 24 of the Civil Code.