Bunge Corp and Universal Commercial Agencies v.

Elena Camenforte and Company doing business or trading under the name and style of Visayan Products Company, et al/ August 1952/ BAlabastro

copra from any part of the Philippines. The sale simply refers to 500 long tons of Philippine copra. The subject-matter is, therefore, generic, not specific. It is apparent that the copra which ELENA CAMENFORTE & COMPANY claim to have gathered and stored in a bodega at San Ramon, Samar, sometime in December, 1947 cannot be deemed to be the one contemplated in the contract. It may be the one chosen by appellants in the exercise of the discretion given to them under the contract, which they could exercise in a manner suitable to their interest and convenience, but it cannot certainly be considered as the copra contemplated by the parties in the contract. This must be so because the copra contemplated in the contract is generic and not specific. This obligation cannot be deemed extinguished by the destruction or disappearance of the copra stored in San Ramon, Samar. Their obligation subsists as long as that commodity is available. A generic obligation is not extinguished by the loss of a thing belonging to a particular genus. Genus nunquan perit. Wherefore, the decision appealed from is affirmed, with costs against appellants. NOTE: Manresa explains the distinction between determinate and generic thing in his comment on article 1096 of the Civil Code of Spain, saying that the first is a concrete, particularized object, indicated by its own individuality, while a generic thing is one whose determination is confined to that of its nature, to the genus (genero) to which it pertains, such as a horse, a chair. Jimmy Co v. CA and Broadway Motor Sales Corp/ June 1998/ MMAndoy

FACTS:
On October 22, 1947, in the City of Cebu, Visayan Products Company and Bunge Corporation (represented by the Universal Commercial Agencies) entered into a contract whereby the VPC sold to the Bunge 500 long tons of merchantable Philippine copra in bulk at the prices of USD $188.80 per ton, less 1 per cent brokerage per short ton of 2,000 pounds. According to the terms and conditions of the contract, the vendor (VPC) should ship the stipulated copra during the month of November or December 1947, to San Francisco, California, U. S. A. for delivery to the vendee (Bunge). Despite repeated demands made by the vendee, the vendor failed to ship and deliver the copra during the period agreed upon. Believing in good faith that the vendor would ship and deliver the copra on time, the vendee sold to El Dorado Oil Works the quantity of copra it had purchased at the same price agreed upon. Due to the failure of the vendor to fulfil its contract to ship and deliver the quantity of copra agreed upon within the period stipulated, the vendee has suffered damages in the amount of P180,000. ELENA CAMENFORTE & COMPANY denied that the Visayan Products Company has ever entered into a contract of sale of copra. They aver that if a contract of that tenor has ever been entered into between said company and the plaintiffs, the truth is that Vicente Kho who signed for and in behalf of the company never had any authority to act for that company either expressly or impliedly. Vicente Kho, on his part, after admittingthat the commercial transaction mentioned in the complaint had actually taken place, avers that he did his best to comply with the contract, but he failed because of force majeure- on December 1947, a strong storm visited the place causing the bodega where the copra was stored to be destroyed and the copra washed away into the sea; and that, because of this force majeure, he cannot now be held liable for damages. The lower court rendered decision ordering defendant Elena Camenforte & Company to pay to the plaintiffs the sum of P79,744, with legal interest thereon from the filing of the complaint. On appeal, Elena Camenforte & Company contends that the lower court erred in condemning them for damages despite the fact that their failure to fulfil the contract is due to force majeure. [So now they admit the existence of a contract but the only defense on which they now rely is that the copra they had gathered and stored for delivery to the appellees in Samar was destroyed by force majeure which under the law has the effect of exempting them from liability for damages.]

FACTS:
On July 18, 1990,Petitioner entrusted his Nissan pick-up car 1988 model to private respondent which is engaged in the sale, distribution & repair of motor vehicles for the job repair services & supply of parts. Private respondent undertook to return the vehicle on July 21, 1990. Petitioner paid in full the repair bill of P1,397.00, & private respondent issued to him a gate pass for the release of the vehicle. On July 21, 1990, the latter could not release the vehicle as its battery was weak & was not yet replaced so petitioner himself bought a new battery. However, the battery was not installed & the delivery of the car was rescheduled three (3) days later. When petitioner reclaims his car on July 24, 1990, he was told that it was carnapped earlier that morning while being road-tested by private respondents employee and that the incident was reported to the police. Having failed to recover his car, petitioner filed a suit for damages against private respondent anchoring his claim on the latters alleged negligence. While, private respondent contended that it has no liability because the car was lost as a result of a fortuitous event [the carnapping]. RTC rule that respondent is guilty of delay in the performance of its obligation & should pay the petitioner damages. CA reversed the decision & ordered the dismissal of the suit because it cannot pass the issue on delay & there was a fortuitous event. Hence, this appeal.

ISSUE:
WON Elena Camenforte & Company may be made liable for the 500 long tons of copra.

HELD:
Yes. The subject-matter of the contract is Philippine copra. The sale is to be made by weight, 500 long tons. It does not refer to any particular or specific lot of copra, nor does it mention the place where the copra is to be acquired. No portion of the copra has been earmarked or segregated. The vendor was at liberty to acquire the

ISSUE:
W/N a repair shop can be held liable for the loss of a customers vehicle while the same is in its custody for repair or other job services

HELD:
The Court resolves the query in favor of the customer. Petitioners imputation of negligence to private respondent is premised on delay which is the very basis of the formers complaint. It is a not a defense for a repair shop of motor vehicles to escape liability simply because the damage or loss of a thing lawfully placed in its possession was due to carnapping. Carnapping per se cannot be considered as a fortuitous event. The fact that a thing was unlawfully & forcefully taken from anothers rightful possession, as in cases of carnapping, does not automatically give rise to a fortuitous event. To be considered as such, carnapping entails more than the mere forceful taking of anothers property. It must be proved & established that the event was an act of God or was done solely by third parties & that neither the claimant nor the person alleged to be negligent has any participation. The burden of proving that the loss was due to a fortuitous event rests on him who invokes it, the private respondent. However, other than the police report of the alleged carnapping incident, no other evidence was presented. It does not prove that there was no fault on the part of private respondent notwithstanding the parties agreement that the car was carnapped. Carnapping does not foreclose the possibility of fault or negligence on the part of private respondent. Even assuming arguendothat carnapping was duly established as a fortuitous event, still private respondent cannot escape liability. Article 1165 of the New Civil Code makes an obligor who is guilty of delay responsible even for a fortuitous event until he has effected the delivery. In this case, private respondent was already in delay as it was supposed to deliver petitioners car three (3) days before it was lost. Petitioners agreement to the rescheduled delivery does not defeat his claim as private respondent had already breached its obligation. Assuming further that there was no delay, still working against private respondent is the legal presumption under Article 1265 that its possession of the thing at the time it was lost was due to its fault. This presumption is reasonable since he who has the custody & care of the thing can easily explain the circumstances of the loss. In this case, private respondents possession at the time of the loss is undisputed. Consequently, the burden shifts to the possessor who needs to present evidence sufficient enough to overcome that presumption. Moreover, repair shops are required to first register with the Department of Trade & Industry (DTI) & to secure an insurance policy for the shop covering the property entrusted by its customer for repair, service or maintenance as a pre-requisite for such registration/accreditation. Violation of which constitutes negligence per se. Having taken custody of the vehicle, private respondent is obliged not only to repair the vehicle but must also provide the customer with some form of security for his property over which he loses immediate control. An owner who cannot exercise the seven (7) jusesor attributes of ownership the right to possess, to use & enjoy, to abuse or consume, to accessories, to dispose or alienate, to recover or vindicate& to the fruits is a crippled owner. WHEREFORE, premises considered, the decision of the Court Appeals is REVERSED & SET ASIDE & the decision of the court a quo is REINSTATED.

Equatorial Realty Devt and Carmelo & Bauermann Inc. v. Mayfair Theater/ November 1996/ JAstillo

FACTS:
Mother Case (264 s 483) Carmelo and Bauermann, Inc. (Carmelo) owned a parcel of land with 2-storey buildings thereon. Carmelo entered into a contract of lease on June 1, 1967 with Mayfair Theater, Inc. (Mayfair) for a period of 20 years. The lease covered a portion of the second floor used as a movie house known as Maxim Theater. Two years later, Mayfair entered into a second contract of lease on March 31, 1969 with Carmelo, also for a period of 20 years, for the lease of another portion of the latters property to be used as another movie house known as Miramar Theater. Both the first and the second contract of lease contained a provision granting Mayfair a right of first refusal to purchase the subject properties. However, on July 30, 1978 within the 20-year-lease-term- the subject properties were sold by Carmelo to Equatorial for P11,300,000 without first being offered to Mayfair. Mayfair filed a complaint before the RTC for the annulment of the Deed of Sale between Carmelo and Equatorial. RTC ruled that the Deed of Absolute Sale is valid, rendered in favor of Carmelo and Equatorial. CA, however, completely set aside and reversed such decision. Mayfair filed a petition for review before the SC, to which the SC held that the said Deed of Absolute Sale is hereby rescinded, ordered Carmelo to return to Equatorial the purchase price of P11,300,000, directed Equatorial to execute the deeds and documents necessary to return ownership to Carmelo of the disputed lots, and ordered Carmelo to allow Mayfair to buy the said lots also for P11,300,000. Such decision became final and executory. Daughter Case (370 s 56) Equatorial questioned the legality of the above ruling. CA alleged that Carmelo is obliged to return the entire purchase price to Equatorial. On the other hand, Mayfair may not deduct from the purchase price the amount of the withholding tax. Equatorial filed an action for the collection of sum of money against Mayfair. CA alleged that the lease contact covering the premises occupied by Maxim Theater expired on May 31, 1987 and the premises occupied by Miramar Theater lapsed on March 31, 1989. Representing itself as the owner of the subject premises by reason of the contract of sale on July 30, 1978, it claimed rentals arising from Mayfairs occupation thereof. RTC dismissed the complaint. The lower court debunked the claim of Equatorial for unpaid back rentals, holding that the rescission of the Deed of Absolute sale in the mother case did not confer on Equatorial any vested or residual proprietary rights, even an expectancy. It held that the critical issue was whether Equatorial was the owner of the subject property and thus enjoy the fruits or rentals therefrom and declared that the rescinded Deed of Absolute Sale as void at its inception as though it did not happen.

ISSUE:
WON the rescission of the Deed of Absolute Sale confers Equatorial any vested right nor any residual proprietary rights even in expectancy?

HELD:
NO.

It does not mean that despite the judgment rescinding the sale, the right to the fruits still belonged to and remained enforceable by Equatorial. ARTICLE 1385 o the Civil Code provides that rescission creates the obligation to return the things which were the object of the contact, together with their fruits, and the price with interest, The fact that Mayfair paid rentals to Equatorial during the litigation should not be interpreted to mean either actual deliver or ipso facto recognition of Equatorials title. They were made merely to avoid imminent eviction. Thus, Equatorial never acquired ownership, not because the sale was void, as erroneously claimed by the trial court, but because the sale was not consummated by a legally effective delivery of the property sold. There was no valid delivery because it is clear that Equatorial never took actual control and possession of the property sold. By a contract of sale, one of the contracting parties obligates himself to transfer ownership of and to deliver a determinate thing and the other to pay therefor a price certain in money or its equivalent. Ownership of the thing sold is a real right, which the buyer acquires only upon delivery of the thing to him in any of the ways specified in Articles 1497 to 1501, or in any other manner signifying an agreement that possession is transferred from the vendor to the vendee. The right is transferred not by contract alone, but by tradition or delivery. The execution of a public instrument gives rise, therefore, only to a prima facie presumption of delivery. Such presumption is destroyed when the instrument itself expresses or implies that deliver was not intended, or when by other means it is shown that such delivery was not effected because a third person was actually in possession of the thing. In the latter case, the sale cannot be considered consummated. FURTHERMORE, assuming for the sake of argument that there was delivery, Equatorial is not entitled to any benefits from the rescinded Deed of Absolute Sale because of its BAD FAITH. The contract of sale between Equatorial and Carmelo was characterized by bad faith because it was entered into in violation of the rights of and to the prejudice of Mayfair. Equatorial admitted that its lawyers had studied the contact of lease prior to the sale. Equatorials knowledge of the stipulations therein should have cautioned it to look further into the agreement to determine if it involved stipulations that would prejudice its own interests. Thus, Equatorial was and still is entitled solely to the return of the purchase price it paid to Carmelo, no more, no less. Neither of them is entitled to any consideration of equity, as both took unconscientious advantage of Mayfair. Chavez v. Gonzales/ April 30, 1970/ LBenjamin

wrapped package. Upon reaching home, he examined the it, he found out that it was in shambles, with the interior cover and some parts and screws are missing. On Oct. 29, 19663, he sent a letter to the defendant formally demanding the return of the missing parts, the interior cover and the sum of P6.00. The following day, the defendant returned to the plaintiff some of the missing parts, the interior cover and the P6.00 On August 29, 1964, the plaintiff had it repair which cost P89.00. On August 23, 1965, the plaintiff commenced this action before the city court of Manila, demanding from the defendant the payment of P90.00 as actual and compensatory damqas, P100.00 for temperate damages, P500.00 for moral damages, and P500.00 as Attorneys fees. The court ordered the defendant to pay the plaintiff the sum of P31.10 (the value of the missing parts) According the plaintiff, what must be awarded to him is not only the value of the missing parts instead the whole cost of labor and materials citing Article 1167 of the CC. On the other hand, the position of the defendant is that he is not liable at all, not even for the sum of P31.10 because his contract wit plaintiff did not contain a period, so that plaintiff should first filed a petition for the court to fix the period, under Article 1197 of the cc, with contracts before said defendant could be held liable for breach of contract.

ISSUE:
Whether or not the defendant is only liable for the total amount of the Missing materials.

HELD:
Under Article 1167 of the Civil Code, a person who is obliged to do something and fails to do it shall be liable for the cost of executing the obligation in a proper manner. The cost of obligation to repair a typewriter is the cost of the labor or service expended in the repair of the typewriter. In addition, the obligor, under Article 1170 of the Code, is liable for the cost of the missing parts because in his obligation to repair the typewriter he is bound to return the typewriter in the same condition it was he received it. Where the defendant virtually admitted non-performance by returning the typewriter he was obliged to repair in a non working condition, with essential parts missing, he cannot invoke Article 1197 of the CC. the time for compliance having evidently expired, and there being a breach of contract by non-performance, it was academic for the plaintiff to have first petitioned the court t fix a period for the performance of the contract before filing his complaint in this case. The fixing of a periods would thus be a mere formality and would serve no purpose than to delay. Claims for damages and Attys fees must be pleaded, and the existence of the actual basis thereof must be proved. Where there is no findings of the fact on the claims for damages and Attys fees in the lower courts decision, there is no factual basis upon which to make an award thereof.

FACTS:
This is a direct appeal by the party who prevailed in suit for breach of oral contract and recovery of damages.On July, 1663, the plaintiff delivered to the defendant (typewriter repairer) a portable typewriter for routine cleaning and servicing. The defendant failed to finish the job despite repeated reminders by the plaintiff. In October 1963, the defendant asked for the plaintiff the sum of P6.00 for the purchase of spare parts.On Oct. 26, 1963, after getting exasperated with the delay of the repair of the typewriter, the plaintiff went to the house of the defendant and asked for the return of the typewriter. The defendant delivered the typewriter in a

In view of the foregoing reasons, the appealed judgement is hereby modified, by ordering the defendant to pay the plaintiff the sum of P89.85, with interest at the legal rate from the filing of the complaint. Tanguilig v. CA/ January 1997/ JCanada

FACTS:
This case involves the proper interpretation of the contract entered into between the parties. Sometime in April 1987 petitioner Jacinto M. Tanguilig doing business under the name and style J. M. T. Engineering and General Merchandising proposed to respondentVicente Herce Jr. to construct a windmill system for him. After some negotiations they agreed on the construction of the windmill for a consideration of P60,000.00 with a one-year guaranty from the date of completion and acceptance by respondent Herce Jr. of the project. Pursuant to the agreement respondent paid petitioner a down payment of P30,000.00 and an installment payment of P15,000.00, leaving a balance of P15,000.00. On 1988, due to the refusal and failure of respondent to pay the balance, petitioner filed a complaint to collect the amount. Respondent denied the claim saying that he had already paid this amount to the San Pedro General Merchandising Inc. (SPGMI) which constructed the deep well to which the windmill system was to be connected. Moreover, assuming that he owed petitioner a balance of P15,000.00, this should be offset by the defects in the windmill system which caused the structure to collapse after a strong wind hit their place. Petitioner denied that the construction of a deep well was included in the agreement to build the windmill system , for the contract price of P60,000.00 was solely for the windmill assembly and its installation, exclusive of other incidental materials needed for the project. He also disowned any obligation to repair or reconstruct the system and insisted that he delivered it in good and working condition to respondent who accepted the same without protest. Besides, its collapse was attributable to a typhoon, a force majeure, which relieved him of any liability. TC - held that the construction of the deep well was not part of the windmill project as evidenced clearly by the letter proposals submitted by petitioner to respondent. CA reversed the trial court. It ruled that the construction of the deep well was included in the agreement of the parties because the term "deep well" was mentioned in both proposals.

The preponderance of evidence supports the finding of the trial court that the installation of a deep well was not included in the proposals of petitioner to construct a windmill system for respondent. Notably, nowhere in either proposal is the installation of a deep well mentioned, even remotely. Neither is there an itemization or description of the materials to be used in constructing the deep well. There is absolutely no mention in the two (2) documents that a deep well pump is a component of the proposed windmill system. The contract prices fixed in both proposals cover only the features specifically described therein and no other. While the words "deep well" and "deep well pump" are mentioned in both, these do not indicate that a deep well is part of the windmill system. For if the real intent of petitioner was to include a deep well in the agreement to construct a windmill, he would have used instead the conjunctions "and" or "with." Since the terms of the instruments are clear and leave no doubt as to their meaning they should not be disturbed. The second issue is not a novel one. In a long line of cases this Court has consistently held that in order for a party to claim exemption from liability by reason of fortuitous event under Art. 1174 of the Civil Code the event should be the sole and proximate cause of the loss or destruction of the object of the contract. In Nakpil vs. Court of Appeals, 4 requisites must concur: (a) the cause of the breach of the obligation must be independent of the will of the debtor; (b) the event must be either unforeseeable or unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and, (d) the debtor must be free from any participation in or aggravation of the injury to the creditor. Petitioner failed to show that the collapse of the windmill was due solely to a fortuitous event. The appellate court correctly observed that "given the newlyconstructed windmill system, the same would not have collapsed had there been no inherent defect in it which could only be attributable to the appellee." It emphasized that respondent had in his favor the presumption that "things have happened according to the ordinary course of nature and the ordinary habits of life." This presumption has not been rebutted by petitioner. Finally, petitioner's argument that private respondent was already in default in the payment of his outstanding balance of P15,000.00 and hence should bear his own loss, is untenable. In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. When the windmill failed to function properly it became incumbent upon petitioner to institute the proper repairs in accordance with the guaranty stated in the contract. Thus, respondent cannot be said to have incurred in delay ; instead, it is petitioner who should bear the expenses for the reconstruction of the windmill. Article 1167 of the Civil Code is explicit on this point that if a person obliged to do something fails to do it, the same shall be executed at his cost.

ISSUE:
Whether the agreement to construct the windmill system included the installation of a deep well and, secondly, whether petitioner is under obligation to reconstruct the windmill after it collapsed.

HELD:
We reverse the appellate court on the first issue but sustain it on the second.

La Campania General de Tabacos de Filipina v. Vicente Araza/ Feb 1907/ BAlabastro

in his favor for the sum of P30,000 as damages, with interest and the costs. The defendant bank answered denying the facts contained in the second and following paragraphs of the complaint. After the trial, the court rendered judgment ordering the defendant bank to pay the plaintiff an indemnity of P4,000 and the costs. Both parties appealed from this judgment, the plaintiff assigning the following errors as committed by the trial court: 1. In holding that the sum of P4,000 was a just and reasonable indemnity to the plaintiff. 2. In not ordering the defendant bank to pay the P30,000 prayed for in the complaint. The defendant bank, in turn, assigned the following errors as committed by the trial court: 1. In holding that the date set for the award of prizes is essential in the contract. 2. In ordering that the sum of P4,000 be paid to the plaintiff.

FACTS:
LA COMPAIA GENERAL DE TABACOS DE FILIPINA (plaintiff) brought this action to foreclose a mortgage for 8,000 pesos upon certain land in the Province of Leyte. The contract was executed on the 11th day of June, 1901. By terms thereof VICENTE ARAZA (defendant) promised to pay the plaintiff 8,000 pesos as follows: 500 pesos on the 30th of June, 1901, and the remainder at the rate of 100 pesos a month, payable on the 30th day of each month, until the entire 8,000 pesos was paid. The defendant paid 400 pesos and no more. The defendant answered, alleging that the document, the basis of the plaintiff's claim, was executed through error on his part and through fraud on the part of the plaintiff. A trial was had and judgment was entered in favour of the plaintiff. The findings of the lower court included a finding that there was no fraud on the part of the plaintiff, no mistake on the part of the defendant, and that there was a sufficient consideration for the contract. The defendant moved for a new trial on the ground that the decision was not justified by the evidence, but this motion was denied.

ISSUE:
WON Vicente Araza is liable for the entire unpaid balance. WON Vicente Araza is in delay and liable for interest on the amount due.

ISSUE:
W/n the date set for the award of the prizes was essential in the contract. W/n the failure to award the prizes on said date was breach of contract on the part of the defendant.

HELD:
1.) No. This suit was commenced on the 12th day of June, 1903. We are of the opinion that the obligation can be enforced in this action for only the amount due and payable on the 12th day of June, 1903. There was no provision in the contract by which, upon failure to pay one installment of the debt, the whole debt should thereupon become at once payable. 2.) No. The contract does not provide for the payment of any interest. There is no provision in it declaring expressly that the failure to pay when due should put the debtor in default. There was therefore no default which would make him liable for interest until a demand was made. (Civil Code, Art. 1100/Art. 1169 of NCC) The transaction did not constitute a mercantile loan and article 316 of the Code of Commerce is not applicable. There was no evidence any demand prior to the presentation of the complaint. The plaintiff is therefore entitled to interest only from the commencement of the action. [Syllabus:Where the contract, not being a mercantile loan, does not provide for interest nor expressly say that failure to pay when due constitutes a default, no interest can be recovered until a demand for payment is made.] Dela Rosa v. BPI/ CClimaco

HELD:
We do not find sufficient reason for considering that the date set for the reward of the prizes was the principal inducement to the creation of the obligation. And, taking into consideration the criterion that must be followed in order to judge whether or not the time for the performance of the obligation is the principal inducement in a given case, we hold that it was not in the instant case. The defendant bank cannot be held to have been in default through the mere lapse of time. For this judicial or extrajudicial demand was necessary for the performance of the obligation, and it was not alleged here, nor does it appear that before bringing this action the plaintiff had ever demanded it from the defendant bank in any manner whatsoever. The defendant bank, therefore, was not in default. The plaintiff's allegation that the defendant bank abstained from continuing the contest was not proven. On the contrary, it was proved, and so stated in the decision appealed from, that during the trial of this case in the Court of First Instance the designs were on the way to New York where they were sent to a technical committee. This committee, according to the new evidence before us presented by the defendant bank and which we now hold admissibe and admit, was appointed by the defendant bank for the study and determination of the designs presented and entitled to the prizes advertised, and which rendered its report and awarded the prizes in accordance with the rules and conditions of the contract, except in regard to the date of such award of prizes which, as we have found, is not essential to the contract in question.

FACTS:
This action was instituted on June 11, 1923, by means of a complaint on the ground that the defendant bank started a contest of designs and plans for the construction of a building, announcing that the prizes would be awarded not later that on November 30, 1921; that the plaintiff took part in said contest, having performed work and incurred expenses for that purpose; that said bank refrained from naming judges and awarding the prizes in accordance with the conditions stipulated. The plaintiff prays that judgment be rendered

It appearing that the defendant bank was not in default it is needles to discuss the other questions raised, all depending upon the existence of said default. We find the plaintiff has no cause of action in this case. Veloso v. Fontanosa/ KDelacruz

ISSUE:
W/N the RTC correctly ruled that the interest be computed from the time the defendants ceased to make payments.

HELD:
It is proper to sentence the Defendants to pay the legal interest of 6 per cent per annum by reason of the default incurred by the heirs of Ancajas (art. 1108, Civil Code), but such default cannot date back to September 1893, the time of the last payment was made by the defendants. Article 1100 of the Civil Code reads: Persons obliged . . . are in default from the moment when the creditor demands the fulfillment of their obligation, judicially or extra-judicially, And the judicial demand for the fulfillment of said obligation was only made in 1896; hence, as the date of the complaint interposed in that year has not been fixed, the net amount claimed therein should only commence to bear legal interest from the latter part of 1896, or rather from the beginning of 1897. In a decision of December 3, 1902, the supreme court of Spain held: That it is a principle of law, acknowledge and sanctioned by article 1100, in relation to article 1108 of the Civil Code, that interest upon default only becomes due from the time of the judicial or extrajudicial notice by the creditor to the debtor, unless otherwise expressly provided by law, or by virtue of a contract, or on account of special circumstances depending upon the nature of the obligation. Thus, the legal interest at the rate of 6 per cent per annum should be reckoned from the time the judicial demand for the fulfillment of such obligation was made on 1896 and not on 1893, the time the defendants ceased to make payments. *Note: I noticed an inconsistency with the facts. The part where it says "...that on the death of Buenaventura Veloso, the Defendants, as his sole and lawful heirs..." I think it pertains to the plaintiffs and not the defendants. Isang site lang ang may full text nito since it's a 1909 case pa, so di ko macompare. Central Bank v. CA/ 1985/ RDilangalen

FACTS:
The petitioners are the lawful heirs of Gavino and Buenaventura Veloso (father and brother, respectively) while the respondents are the widow, lawful children and grandson of Roberto Ancajas. At the death of Gavino Veloso, Roberto Ancajas owed him the sum of 5,065 pesos which he had borrowed prior to the year 1881; that in the apportionment of the estate, this debt of 5,065 pesos went to Buenaventura Veloso as his portion; that in the year 1882, Roberto Ancajas, after having acknowledged the transfer of his indebtedness by inheritance to Buenaventura Veloso, continued to receive sums of money from the latter of the same conditions, that is, as loans, and bound himself to make annual payments in sugar; that on the 11th of October, 1883, the debt of Roberto Ancajas amounted to 10,449. 18 pesos, as shown by a liquidation of accounts made between them and ratified by Roberto Ancajas in the said month of October, 1883; that on August 4, 1884, this balance amounted to 12,199. 65 pesos; that on May 31, 1887, it rose to 14,439. 40 pesos, which sum, however, was reduced to 12,365. 20 pesos by the payment of 2,074. 20 pesos on account; that up to the year 1893 the Defendants made payments amounting to 642. 27 pesos which reduced the amount owing to 11,722. 43 pesos; that on the death of Buenaventura Veloso, the Defendants, as his sole and lawful heirs, inherited, and that same year divided between them all his property with the exception of the above-mentioned credit, which is at present held pro indiviso between them, and they, as the lawful heirs of Buenaventura Veloso, the creditor, have repeatedly called upon the Defendants to pay the said credit, but the latter have constantly refused to do so, thus giving rise to the filing of the complaint; that on account of their delinquency in payment they have cause the Plaintiffs damages to the value of 14,068. 48 pesos; they therefore asked the court below to sentence the Defendants to pay both sums, with legal interest thereon from the time they ceased to make payments, and the costs. RTC: ...that, it being proven the Buenaventura Veloso, the Plaintiffs principal, had brought suit against the Defendants in the year 1896 for the payment of said debt, it must be concluded that the prescription of the action for recovery has been legally interrupted, in conformity with the provisions of article 1973 of the Civil Code. that, it being proven the Buenaventura Veloso, the Plaintiffs principal, had brought suit against the Defendants in the year 1896 for the payment of said debt, it must be concluded that the prescription of the action for recovery has been legally interrupted, in conformity with the provisions of article 1973 of the Civil Code; that the debt of P11,722. 43 is a credit which originated from a mercantile contract, and as the interest due the Plaintiffs cannot be determined, they are entitled to recover the legal interest on said amount from the Defendants at the rate of 6 per cent per annum from the month of September, 1893, until the full payment thereof.

FACTS:
April 28, 1965 -- Island Savings Bank (ISB), upon favorable recommendation of its legal department, approved the loan application for P80,000.00 of Sulpicio Tolentino, who, as a security loan, executed on the same day a real estate mortgage over his 100 hectare land(at Cubo, Las Nieves, Agusan covered by TCT No. T305,). The approved loan application called for a lump sum P80,000.00 loan repayable in semi-annual installments for a period of 3years with 12% interest. However May 22, 1965 -- A mere P17,000.00 as partial release from 80, 0000 loan was made by the Bank in which Tolentino and his wife Editha signed the promissory note paying the said P17,000.00 at 12% interest within 3years from the date of execution of the contract at semi-annual installments. The Bank, on the other hand thru its Vice President and Treasurer, promised repeatedly the release of the P63,000.00 balance. August 13, 1965 -- The Monetary Board of the Central Bank after finding Island Savings Bank was suffering liquidity problem issued Resolution which prohibits the Bank from doing business in

Philippines and instructed the Acting Superintendent Bank to take charge. Three years after August 1, 1968 -- In view of non-payment of the P17,000.00 covered by the promissory note, Island Savings Bank filed an application for the extra- judicial foreclosure of the real estate mortgage covering the 100-hectare land of Sulpicio M. Tolentino; January 20, 1969 -- Sulpicio M. Tolentino filed a petition with the Court of First Instance of Agusan alleging that since Island Savings Bank failed to deliver the P63,000.00 balance of the P80,000.00 loan, he is entitled to specific performance by ordering Island Savings Bank to deliver the P63,000.00 and if said balance cannot be delivered, to rescind the real estate mortgage. The trial court ruled the case in favor of the Island Savings Bank. Sulpicio Tolentino thereby appealed to the court for the petition of specific performance but CA dismissed the same with modifications that Island Savings Bank can neither foreclose the real estate mortgage nor collect the P17,000.00 loan. Hence, this instant petition by the central Bank.

performed or is not ready and willing to perform incurs in delay (Art. 1169 of the Civil Code). The promise of Sulpicio M. Tolentino to pay was the consideration for the obligation of Island Savings Bank to furnish the P80,000.00 loan. When Sulpicio M. Tolentino executed a real estate mortgage on April 28, 1965, he signified his willingness to pay the P80,000.00 loan. From such date, the obligation of Island Savings Bank to furnish the P80,000.00 loan accrued. Thus, the Bank's delay in furnishing the entire loan started on April 28, 1965, and lasted for a period of 3 years or when the Monetary Board of the Central Bank issued Resolution No. 967 on June14, 1968, which prohibited Island Savings Bank from doing further business. Such prohibition made it legally impossible for ISB to furnish the P63,000.00 balance of the P80,000.00 loan. As far as the partial release of P17,000 is concerned, which Sulpicio M. Tolentino accepted and executed a promissory note to cover it, the bank was deemed to have complied with its reciprocal obligation to furnish a P17,000.00 loan. The promissory note in return gave rise to Sulpicio M. Tolentino to pay the P17,000.00 loan as reciprocity of such obligation. Third issue: NO. Since Island Savings Bank failed to furnish the P63, 000 balance of the P8O,000 loan, the real estate mortgage of Sulpicio M. Tolentino became unenforceable to such extent. In computing, P63, 000 is 78.75% of P80,000.00, hence the real estate mortgage covering 100 hectares is unenforceable to the extent of 78.75 hectares. Therefore, it also follows to say that the mortgage covering the remainder of 21.25 hectares shall subsist as a security for the P17, 000 debt. In case Suspicio M. Tolentino fails to pay the said obligation, his real estate mortgage to the extent of 21.25 hectares shall be foreclosed to satisfy total indebtedness. So ordered. Price Stabilization Inc. v. Relloroza/ LEnriquez

ISSUE:
1. Can the action of Sulpicio M. Tolentino for specific performance prosper? Yes 2. Is Sulpicio M. Tolentino liable to pay the P17,000.00 debt covered by the promissory note? Yes 3. If Sulpicio M. Tolentino's liability to pay the P17,000.00 subsists, can his real estate mortgage be foreclosed to satisfy said amount? No

HELD:
First issue: (advance topic/s on Art. 1191-92) YES. Island Savings Bank was in default in not fulfilling the reciprocal obligation under the loan agreement. Tolentino under Article 1191 of the Civil Code may choose between specific performance or recission with damages in either case. But since Island Savings Bank is now prohibited from doing further business by Monetary Board Resolution, it cannot be granted said specific performance in favor of Tolentino. Rescission is the only alternative left. Hence in this case, the rescission available for Tolentino is only for the balance of 63,000.00 of 80,000.00 loan. The obligation of 17, 000 as stipulated in the promissory note executed by Tolentino as well as the interest therefrom is still enforceable. But, since Tolentino failed to comply the same, such failure to pay undue amortization made him also a party in default. Meanwhile, Art.1192 of the Civil Code provides that in case both parties have committed a breach in their reciprocal obligation the liability of the first infraction shall be equitable tempered by the court. Thus, the liability of Island Savings Bank for damages is offset by the liability of Tolentino in the form of penalties and sub charges for not paying his debts. Second issue: YES.When Island Savings Bank and Sulpicio M. Tolentino entered into an P80,000.00 loan agreement on April 28, 1965, they undertook reciprocal obligations. In reciprocal obligations, the obligation or promise of each party is the consideration for that of the other, and when one party has performed or is ready and willing to perform his part of the contract, the other party who has not

FACTS:
On Nov. 19, 1952, the PRISCO(Price Stabilization Corp) filed a suit against George W. Batchelder and his surety, the Manila Surety & Fidelity CO., in the CFI of Manila to recover the price of merchandise sold on credit bought by said Batchelder from PRISCO, a payment of which was guaranteed by the surety company. The defendants failed to file an answer within the time prescribed by the rules. Plaintiff was then declared in default. Judgment was then rendered against them for the amount claimed with costs. On Sep. 8, the surety company filed a motion for reconsideration explaining that its failure to file an answer was due to excusable neglect which ordinary prudence could not have guarded against in that when the complaint and summons were received by one of its employees they were by this employee handed to another employee who was in charge of its bonds department and who instead of forwarding the same to its attorneys kept them in his drawer, and alleging that it had a good and valid defense in the action, namely, a written undertaking executed in its favour by its co-defendant, Batchelder, which could be alleged in a cross complaint. The motion was objected to by the PRISCO on the ground that it did not contain an affidavit of merit showing that if new trial were granted the surety company would have a good defense against the plaintiff, and that the companys neglect was not excusable. Alleging that summons and copy of the complaint in this case was served upon its corporate secretary and that on Feb. 4, 1953 the movant was also served with a copy of the plaintiffs

motion to declare defendants in default, giving the defendants ample opportunity to file an answer and a cross complaint against its co-defendant. The court then denied the motion. The surety company filed a MFR of this order alleging that its previous MFR and new trial was accompanied by an affidavit of its assistant general manager, explaining the companys reasons for its failure to file its answer ad further alleging that for the first time that it had a good defense against plaintiff in that it was apparent on the face of the complaint that under the terms of the surety had already expired. Again the PRISCO opposed the motion. Despite the objections, the court granted the second motion which, together with the first motion, it considered as a petition for relief. Reconsideration of this last order having been denied, PRISCO brought the case in the SC on certiorari.

noticed that some repair works were being undertaken on the engine of the vessel. The vessel departed at around 11:00 in the evening with only one (1) engine running. After an hour of slow voyage, the vessel stopped near Kawit Island and dropped its anchor thereat. After half an hour of stillness, some passengers demanded that they should be allowed to return to Cebu City for they were no longer willing to continue their voyage to Cagayan de Oro City. The captain acceded to their request and thus the vessel headed back to Cebu City. In Cebu City, plaintiff together with the other passengers who requested to be brought back to Cebu City, were allowed to disembark. Thereafter, the vessel proceeded to Cagayan de Oro City. Plaintiff, the next day, boarded the M/V Asia Japan for its voyage to Cagayan de Oro City, likewise a vessel of defendant. On account of this failure of defendant to transport him to the place of destination on November 12, 1991, plaintiff filed before the trial court a complaint for damages against defendant. In his complaint, docketed as Civil Case No. 91-491, plaintiff (hereinafter private respondent) alleged that the engines of the M/V Asia Thailand conked out in the open sea, and for more than an hour it was stalled and at the mercy of the waves, thus causing fear in the passengers. It sailed back to Cebu Cityafter it regained power, but for unexplained reasons, the passengers, including the private respondent, were arrogantly told to disembark without the necessary precautions against possible injury to them. They were thus unceremoniously dumped, which only exacerbated the private respondents mental distress. He further alleged that by reason of the petitioners wanton, reckless, and willful acts, he was unnecessarily exposed to danger and, having been stranded in Cebu City for a day, incurred additional expenses and loss of income. He then prayed that he be awarded P1,100.00, P50,000.00, and P25,000.00 as compensatory, moral, and exemplary damages, respectively. In his pre-trial brief, the private respondent asserted that his complaint was an action for damage & arising from bad faith, breach of contract and from tort, with the former arising from the petitioners failure to carry *him+ to his place of destination as contracted, while the latter from the conduct of the *petitioner+ resulting [in] the infliction of emotional distress to the private respondent.

ISSUE:
WON the lower court acted with grave abuse of discretion and in excess of jurisdiction in granting the second motion for reconsideration?

HELD:
Yes. The Rules of Court requires that a petition for relief under the Rule 38 must be accompanied by an affidavit of merit showing that petitioner has a valid cause of action or defense. The surety companys first MFR does not comply with this requisite because, although accompanied by an affidavit explaining its failure to file an answer, it contained no sworn allegation of a valid defense against the plaintiff. In other words, it was unaccompanied by an affidavit of merit. Its second MFR contains an allegation that it has a valid defense against the plaintiff, but the allegation is not verified. The two motions, therefore, even when taken together, cannot be considered as a petition for relief because of the fatal defect of lack of an affidavit of merit. In this connection it should be stated that an affidavit of merit should state facts and not mere opinion or conclusions of law. It is also to be noted that at the time the first MFR and new trial was filed the alleged valid defense which the surety company wants to set up against the plaintiff was already in existence and available, and yet the same was not set up in the motion. Such being the case, the defense cannot be raised in the petition for relief. As was said in the case of Rili vs. Chunaco, 48 Off. Gaz. 614, the grounds existing and available at the time a motion to set aside a judgment was filed cannot be raised in a petition for relief under Rule 38, because under Rule 26, Sec. 8, a motion attacking a pleading or proceeding shall include all objections then available, and all objections not so included shall be deemed waived. In entertaining the surety companys two motions as a petition for relief under the circumstances mentioned, the lower court then committed a grave abuse of discretion amounting to want of jurisdiction. Petition is GRANTED with costs against the respondent surety company. Trans-Asia Shipping Lines v. CA/ March 1996/ LFordan

ISSUE:
Whether or not the petitioner Trans-Asia incur delay in the performance of its obligation?

HELD:
After due trial, the trial court rendered its decision and ruled that the action was only for breach of contract, with Articles 1170, 1172, and 1173 of the Civil Code as applicable law - not Article 2180 of the same Code. It was of the opinion that Article 1170 made a person liable for damages if, in the performance of his obligation, he was guilty of fraud, negligence, or delay, or in any manner contravened the tenor thereof; moreover, pursuant to Article 2201 of the same Code, to be entitled to damages, the non-performance of the obligation must have been tainted not only by fraud, negligence, or delay, but also bad faith, malice, and wanton attitude. It then disposed of the case as follows:

FACTS:
Respondent Atty. Renato Arroyo, a public attorney, bought a ticket from herein petitioner for the voyage of M/V Asia Thailand vessel to Cagayan de Oro City from Cebu City on November 12, 1991. At around 5:30 in the evening of November 12, 1991, respondent boarded the M/V Asia Thailand vessel. At that instance, plaintiff

WHEREFORE, it not appearing from the evidence that plaintiff was left in the Port ofCebu because of the fault, negligence, malice or wanton attitude of defendants employees, the complaint is DISMISSED. Defendants counterclaim is likewise dismissed it not appearing also that filing of the case by plaintiff was motivated by malice or bad faith. The trial court made the following findings to support its disposition: In the light of the evidence adduced by the parties and of the above provisions of the New Civil Code, the issue to be resolved, in the resolution of this case is whether or not, defendant thru its employee in [sic] the night of November 12, 1991, committed fraud, negligence, bad faith or malice when it left plaintiff in the Port of Cebu when it sailed back to Cagayan de Oro City after it has [sic] returned from Kawit Island. Evaluation of the evidence of the parties tended to show nothing that defendant committed fraud. As early as 3:00 p.m. of November 12, 1991, defendant did not hide the fact that the cylinder head cracked. Plaintiff even saw during its repair. If he had doubts as to the vessels capacity to sail, he had time yet to take another boat. The ticket could be returned to defendant and corresponding cash [would] be returned to him. Neither could negligence, bad faith or malice on the part of defendant be inferred from the evidence of the parties. When the boat arrived at [the] Port of Cebu after it returned from Kawit Island, there was an announcement that passengers who would like to disembark were given ten (10) minutes only to do so. By this announcement, it could be inferred that the boat will [sic] proceed to Cagayan de Oro City. If plaintiff entertained doubts, he should have asked a member of the crew of the boat or better still, the captain of the boat. But as admitted by him, he was of the impression only that the boat will not proceed to Cagayan de Oro that evening so he disembarked. He was instead, the ones [sic] negligent. Had he been prudent, with the announcement that those who will disembark were given ten minutes only, he should have lingered a little by staying in his cot and inquired whether the boat will proceed to Cagayan de Oro City or not. Defendant cannot be expected to be telling [sic] the reasons to each passenger. Announcement by microphone was enough. The defendant got nothing when the boat returned to Cebu to let those who did not want to proceed to Cagayan de Oro City including plaintiff disembarked. On the contrary, this would mean its loss instead because it will have to refund their tickets or they will use it the next trip without paying anymore. It is hard therefore, to imagine how defendant by leaving plaintiff in Cebu could have acted in bad faith, negligently, want only and with malice. Unsatisfied, the private respondent appealed to the Court of Appeals , It did not, however, allow the grant of damages for the delay in the performance of the petitioners obligation as the requirement of demand set forth in Article 1169 of the Civil Code had not been met by the private respondent. Besides, it found that the private respondent offered no evidence to prove that his contract of carriage with the petitioner provided for liability in case of delay in departure, nor that a designation of the time of departure was the controlling motive for the establishment of the contract. On the latter, the court a quo observed that the private respondent even admitted he was unaware of the vessels departure time, and it was only when he boarded the vessel that he became aware of such. Finally, the respondent Court found no reasonable basis for the private respondents belief that demand was useless because the petitioner had rendered it beyond its power to perform

its obligation; on the contrary, he even admitted that the petitioner had been assuring the passengers that the vessel would leave on time, and that it could still perform its obligation to transport them as scheduled. The Court of Appeals did not grant the private respondent actual or compensatory damages, reasoning that no delay was incurred since there was no demand, as required by Article 1169 of the Civil Code. This article, however, finds no application in this case because, as found by the respondent Court, there was in fact no delay in the commencement of the contracted voyage. If any delay was incurred, it was after the commencement of such voyage, more specifically, when the voyage was subsequently interrupted when the vessel had to stop near Kawit Island after the only functioning engine conked out. If plaintiff, therefore, was not able to [m]ake the trip that night of November 12, 1991, it was not because defendant maliciously did it to exclude him [from] the trip. If he was left, it was because of his fault or negligence. PAL v. CA/ JULY 1981/ Galias

FACTS:
Samson is a licensed aviator employed by the Philippine Airlines. He was partnered with another pilot Bustamante. Samson had complained on previous occasions to PAL that Bustamante was slow in reacting and was having lapses of poor judgment during flights. PAL however still allowed Bustamante to continue flying. On a certain flight, Bustamante overshot the airfield while landing the plane at the Daet airport. Samson tried to control the plane, but did not succeed. The plane crash-landed beyond the runway into a mangrove. Samson hit his head on the windshield due to the impact of the crash. He suffered head injuries such as brain concussions and wounds on his forehead. To make matters worse, plaintiff was discharged from employment. Samson then filed an action for damages against PAL.

ISSUE:
Whether or not PAL is liable for damages.

HELD:
The Court held that PAL is liable for damages. There was gross negligence on the part of PAL because despite the knowledge of Bustamantes condition the still allowed him to continue flying. Bustamante had a tumor in his nasopharynx which affected his vision. As provided in Articles 1732, 1733, and 1756 of the NCC, PAL being a common carrier should have exercised extraordinary diligence in the supervision of their employees and utmost diligence in bringing passengers to their destination. The court affirmed the decision of the trial court in awaring damages. Private respondent is entitled to P198,000.00 as unearned income or compulsory damages, P80,000.00 for moral damages, P20,000 as attorneys fees and P5,000 as expenses for litigation. This claim of the plaintiff for loss and impairment of earning capacity is based on the provision of Art. 2205, NCC. Even from the standpoint of the petitioner that there is employer-employee relationship between it and private respondent arising from the contract of employment, private respondent is still entitled to moral damages in view of the finding of bad faith or malice, applying the provisions of Art. 2220 of the NCC.

LEONIDES C. DIO v. LINA JARDINES/ January 2006/ NGumba

i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. Applied to the present case, since the agreed interest rate is void, the parties are considered to have no stipulation regarding the interest rate. Thus, the rate of interest should be 12% per annum to be computed from judicial or extrajudicial demand, subject to the provisions of Article 1169 of the Civil Code, to wit: Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of the obligation. However, the demand by the creditor shall not be necessary in order that delay may exist: (1) When the obligation or the law expressly so declares; or (2) When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or (3) When demand would be useless, as when the obligor has rendered it beyond his power to perform. xxxx The records do not show any of the circumstances enumerated above. Consequently, the 12% interest should be reckoned from the date of extrajudicial demand. Petitioner testified that she went to respondents place several times to try to collect payment, but she (petitioner) failed to specify the dates on which she made such oral demand. The only evidence which clearly shows the date when petitioner made a demand on respondent is the demand letter dated March 19, 1989 (Exh. "C"), which was received by respondent or her agent on March 29, 1989 per the Registry Return Receipt (Exh. "C-1"). Hence, the interest of 12% per annum should only begin to run from March 29, 1989, the date respondent received the demand letter from petitioner. Rodriguez v. Caoibes/ September 1935/ CIncio

FACTS:
On December 14, 1992, Leonides C. Dio (petitioner) filed a Petition for Consolidation of Ownership with the Regional Trial Court of Baguio City, Branch 7 (RTC). She alleged that: on January 31, 1987, Lina Jardines (respondent) executed in her favor a Deed of Sale with Pacto de Retro over a parcel of land with improvements thereon covered by Tax Declaration No. 44250, the consideration for which amounted to P165,000.00; it was stipulated in the deed that the period for redemption would expire in six months or on July 29, 1987; such period expired but neither respondent nor any of her legal representatives were able to redeem or repurchase the subject property; as a consequence, absolute ownership over the property has been consolidated in favor of petitioner. Respondent countered in her Answer that: the Deed of Sale with Pacto de Retro did not embody the real intention of the parties; the transaction actually entered into by the parties was one of simple loan and the Deed of Sale withPacto de Retro was executed just as a security for the loan; the amount borrowed by respondent during the first week of January 1987 was only P50,000.00 with monthly interest of 9% to be paid within a period of six months, but since said amount was insufficient to buy construction materials for the house she was then building, she again borrowed an additional amount of P30,000.00; it was never the intention of respondent to sell her property to petitioner; the value of respondents residential house alone is over a million pesos and if the value of the lot is added, it would be around one and a half million pesos; it is unthinkable that respondent would sell her property worth one and a half million pesos for only P165,000.00; respondent has even paid a total of P55,000.00 out of the amount borrowed and she is willing to settle the unpaid amount, but petitioner insisted on appropriating the property of respondent which she put up as collateral for the loan; respondent has been the one paying for the realty taxes on the subject property

ISSUE:
THE LOWER COURT COMMITTED AN ERROR IN ORDERING THE RESPONDENT TO PAY PETITIONER LEGAL INTEREST DESPITE THE CONFLICTING ADMISSIONS OF THE PARTIES THAT THE AGREED INTERESTS WAS EITHER 9% OR 10%;

HELD:
the inescapable conclusion is that the agreed interest rate of 9% per month or 108% per annum, as claimed by respondent; or 10% per month or 120% per annum, as claimed by petitioner, is clearly excessive, iniquitous, unconscionable and exorbitant. Although respondent admitted that she agreed to the interest rate of 9%, which she believed was exorbitant, she explained that she was constrained to do so as she was badly in need of money at that time. As declared in the Medel case19 and Imperial vs. Jaucian,20 "[i]niquitous and unconscionable stipulations on interest rates, penalties and attorneys fees are contrary to morals." Thus, in the present case, the rate of interest being charged on the principal loan ofP165,000.00, be it 9% or 10% per month, is void. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default,

FACTS:
This is an appeal taken by the defendant Irinea Caoibes from the order of the Court First Instance of Batangas of December 14, 1934, denying the motion of said defendant-appellant of September 25, 1934, asking that the order of the said court of September 10, 1934, be set aside, and that the sale made by the sheriff and the deed executed thereunder be disapproved. [The order to which the defendant-appellant's first alleged assignment of error is that of March 12, 1934, which reads: Motion granted: the defendant is ordered to pay the plaintiff, within three months, the sum of P10,180.97, with legal interest from the date of the complaint, and the costs, and in the event said payment is not made within the period fixed, the properties will be sold in accordance with law in order to make good said amount. So ordered.]

ISSUE:
In support of her appeal, the defendant-appellant assigns the following alleged errors committed by the trial court in its judgment, namely:

1. In amending the judgment of this Honorable Supreme Court by converting an ordinary judgment to pay a sum of money into a foreclosure of a mortgage indebtedness, and in executing it as such. 2. In confirming the sale by the provincial sheriff without trial or notice of trial to the parties in order that they may be fully heard, and notwithstanding the fact: (3) that there has been included in the notice of the public sale interest from November 9, 1931, whereas it should be only from the date of decision of this Honorable Supreme Court, November 22, 1933, when the account of the advertised debit to P1,183.64; 3. In ordering the issuance of a writ of possession in favor of the plaintiff of the properties foreclosed.

In the present case, there was no such waiver because, as has been said, the case was tried as an action to foreclose a mortgage in the Court of First Instance as well as in this court, and the mere fact that in her brief in the first appeal the herein plaintiff-appellee only asked that the appealed judgment be reversed and another be rendered ordering (demand) the defendant-appellant to pay to said plaintiff-appellee the sum of P10,180.97, with legal interest and the costs in both instances, does not constitute a waiver of the action to foreclose the mortgage which had already been commenced and tried in first and second instances. The aforesaid amendatory order (March 12, 1934) not being prejudicial, was not reversed by this Court. As to the question of the date from which interest should be paid on the amount of the judgment, which is the amount of the indebtedness, the same should be the date of the filing of the complaint to recover the mortgage indebtedness and to foreclose the mortgage, because the defendant-appellant was legally in default and the amount owing already liquidated from the said date. (Veloso vs. Fontanosa, 13 Phil., 79; De la Pea vs. Hidalgo, 16 Phil., 450.) Passing on to the third alleged error assigned, the fact that the real property is undivided is no bar to placing the purchaser in possession of the property owned in common by various co-owners in order to take the place of the vendors as to his undivided share. The holding in Pabico vs. Ong Pauco (43 Phil., 572), was that the purchaser of land at the public sale under an ordinary execution is not entitled to the possession of the land sold before the expiration of the period of one year for the consolidation of the sale. (See also Powell vs. National Bank, 54 Phil., 54.) The case at hand being for the judicial foreclosure of a mortgage, there is no right of redemption and the purchaser acquires full ownership of the land sold as soon as the sale is confirmed. (Benedicto vs. Yulo, 26 Phil., 160.) For the foregoing considerations, we are of the opinion and so hold: (1) That the omission to state in the dispositive part of a judgment, rendered in a case for the foreclosure of a mortgage, that the mortgagor should pay the amount of the judgment to the court within a period or not the less than three months, as provided in section 256 of the Code of Civil Procedure, may be corrected even after the said judgment had become final; and (2) that the filing of a written opposition to a motion to approve a sale of mortgaged properties is sufficient compliance with the requirement that the confirmation of the sale be made upon hearing the parties. Wherefore, the appealed order being in accordance with law, it is hereby affirmed in all its parts, with the cost to the appellant. So ordered. Santos Ventura Hocorma Foundation v. Santos/ 2004/ JMacacua

HELD:
In Soriano vs. Enriquez (24 Phil., 584), this court enunciated the following doctrine: 4. ID.; ID.; JUDGMENT UNDER CODE OF CIVIL PROCEDURE. Section 256 of the code of Civil Procedure requires a judgment to be rendered for a specific amount, and that an order be made requiring that the amount, and that an order be made requiring that the amount for which judgment is rendered be paid into court within a specified time.Section 260 requires the rendition of a judgment for the deficiency against the defendant, who shall be personally liable to the plaintiff, and execution may issue thereon at once. The case at hand is for the foreclosure of a mortgage. It was tried as such in the Court of First Instance of Batangas as well as in this court on appeal. In reversing the appealed decision, by an involuntarily omission it was not ordered to deposit the amount of the judgment with the clerk of the court of origin, within the period of not less than three months, and, in default thereof, to sell the mortgaged properties to pay the motgaged indebtedness and the costs. This involuntarily omission of an imperative mandate of section 256 of the Code of Civil Procedure, above quoted, cannot alter the nature of the action, and the amendment of the decision may be asked to correct the defect, inasmuch as said provision is a necessary part hereof. On this point the American jurisprudence has laid down the following doctrine: A judgment or decree of foreclosure may be corrected after its rendition in respect of an error or omission, so as to make it conform to the intention of the court of the facts of the case, . . .. (42 Corpus Juris, 158.) If anything has been omitted from the judgment which is necessarily or properly a part of it, and which was intended and understood to be a part of it, but failed to be incorporated in it through the negligence or inadvertence of the court of counsel, or the clerk, the omission may be supplied by an amendment even after the term. . . . (34 Corpus Juris, 235.) As to whether or not the herein plaintiff-appellee had waived her right to foreclose the mortgage in the first appeal, it was held in Hijos de I. de la Rama vs. Sajo (45 Phil., 703), cited by said plaintiffappellee, that: ACTION; MORTAGE, FORECLOSURE OF. In the absence of statutory provisions of the contrary, the mortgagee may waived his right to foreclose a mortgage, and maintain a personal action for the recovery of his indebtedness.

FACTS:
On October 26, 1990, the parties executed a Compromise Agreement which amicably ended all their pending litigations. The pertinent portions of the Agreement, include the following: (1) Defendant Foundation shall pay Plaintiff Santos P14.5 Million on (a) P1.5 Million immediately upon the execution of this agreement and (b) The balance of P13 Million shall be paid, whether in one lump sum or in installments, at the discretion of the Foundation, within a period of not more than two years from the execution of this agreement; (2) Immediately upon the execution of this agreement (and [the] receipt of the P1.5 Million), plaintiff Santos shall cause the

dismissal with prejudice of Civil Cases; (3) Failure of compliance of any of the foregoing terms and conditions by either or both parties to this agreement shall ipso facto and ipso jure automatically entitle the aggrieved party to a writ of execution for the enforcement of this agreement. In compliance with the Compromise Agreement, respondent Santos moved for the dismissal of the aforesaid civil cases. He also caused the lifting of the notices of lis pendens on the real properties involved. For its part, petitioner SVHFI, paid P1.5 million to respondent Santos, leaving a balance of P13 million. On October 28, 1992, respondent Santos sent another letter to petitioner inquiring when it would pay the balance of P13 million. There was no response from petitioner. Consequently, respondent Santos applied with the Regional Trial Court of Makati City, for the issuance of a writ of execution of its compromise judgment dated September 30, 1991. The RTC granted the writ. Petitioner, however, filed numerous motions to block the enforcement of the said writ. The challenge of the execution of the aforesaid compromise judgment even reached the Supreme Court. All these efforts, however, were futile. On November 22, 1994, petitioner's real properties located in Mabalacat, Pampanga were auctioned. On February 8, 1995, another auction was held for the sale of real properties of petitioner in Bacolod City. On both of these auctions, Riverland, Inc. won as the highest bidder. The Certificates of Sale issued for both properties provided for the right of redemption within one year from the date of registration of the said properties. On June 2, 1995, Santos and Riverland Inc. filed a Complaint for Declaratory Relief and Damages alleging that there was delay on the part of petitioner in paying the balance of P13 million.

adverse resolutions to the appellate court to hinder the execution of a final and executory judgment, and further delay the fulfillment of its obligation. Third, the demand letter sent to the petitioner on October 28, 1992, was in accordance with an extra-judicial demand contemplated by law. Verily, the petitioner is liable for damages for the delay in the performance of its obligation. This is provided for in Article 1170 of the New Civil Code. President of the Phil. Deposit Insurance Corp (PDIC) as Liquidator of Pacific Banking Corp v. Hon. Wilfredo Reyes, Ang Keong Lan and EJ Ang International/ 2005/ AMartinez

FACTS:
PaBC was placed under receivership on the ground of insolvency. On 7 April 1986, the Central Bank of the Philippines, through the Office of the Solicitor General, filed with the Regional Trial Court (RTC) of Manila, Branch 31, a petition for assistance in the liquidation of PaBC. On 17 May 1991, Vitaliano N. Naagas, President of the PDIC, was appointed by the Central Bank as Liquidator. On 26 June 1992, private respondents Ang Eng Joo, Ang Keong Lan, and E.J. Ang International Ltd. (hereafter Singaporeans), then represented by their attorney-in-fact Gonzalo C. Sy, filed their claim before the liquidating court. Citing Republic Act No. 5186, otherwise known as the Investment Incentives Act, they claimed to be preferred creditors and prayed for the return of their equity investment in the amount of US$2,531,632.18 with interest until the closure of the PaBC. After due hearing or on 11 September 1992, the liquidation court, through Presiding Judge Regino Veridiano II, issued an order that reads as follows: At this stage of the liquidation proceedings, the claimants who are foreign investors should already be paid. If there is any doubt as to whether claimants who are foreign investors should be treated as preferred claimants, the doubt should be resolved in favor of claimants since it is of judicial notice that government adopted the policy to entice foreign investors to help boost the economy. Claimants who are foreign investors should be treated with liberality such that they should be categorized among preferred creditors. His motion for reconsideration having been denied. Consequently, the liquidation court, through the pairing judge Hon. Wilfredo D. Reyes, issued an Order dated 13 April 1998 implementing the execution order of 28 October 1992 by directing the President of the Land Bank of the Philippines (LBP) to release to the Sheriff the garnished amount of US$2,531,632.18 or its peso equivalent computed at the current exchange rate, to be paid to the Singaporeans. The Bureau of Internal Revenue (BIR) and the Bangko Sentral ng Pilipinas promptly filed before the liquidation court separate motions to hold in abeyance the liquidation courts orders of 28 October 1992 and 13 April 1998. On 12 May 1998, Judge Reyes issued an Order denying the motions and ordered the payment of accrued legal interest on the Singaporeans equity investment of US$2,531,632.18 at the rate of
6

ISSUE:
WON there was delay on the part of the petitioner.

HELD:
Article 1169 of the New Civil Code provides: Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. In order for the debtor to be in default, it is necessary that the following requisites be present: (1) that the obligation be demandable and already liquidated; (2) that the debtor delays performance; and (3) that the creditor requires the performance judicially or extrajudicially. In the case at bar, the obligation was already due and demandable after the lapse of the two-year period from the execution of the contract. The two-year period ended on October 26, 1992. When the respondents gave a demand letter on October 28, 1992, to the petitioner, the obligation was already due and demandable. Furthermore, the obligation is liquidated because the debtor knows precisely how much he is to pay and when he is to pay it. The second requisite is also present. Petitioner delayed in the performance. It was able to fully settle its outstanding balance only on February 8, 1995, which is more than two years after the extrajudicial demand. Moreover, it filed several motions and elevated

12% per annum computed from 15 October 1981, the date the outward remittance and the investment were actually made, until its full payment, at the exchange rate prevailing at the time of payment. Finally, on 15 May 1998, Judge Reyes issued another Order directing the President of the Philippine National Bank (PNB) to release the garnished amount sufficient to cover the additional sum of P172,374,220.64. Aggrieved by these orders, the BIR, PDIC, and the Liquidator filed before the Court of Appeals. Consequently, the writ of preliminary injunction issued on September 14, 1998 is hereby DISSOLVED. By virtue hereof, the garnished amount from the savings/current account with the Land Bank of the Philippines or any other bank in which funds released from the garnished accounts of PaBC, LBP and PNB have been deposited may now be released only to private respondents, Singaporeans, directly or through their new attorney-in-fact and legal counsel, the law firm of Fornier & Fornier. Hence this instant petition
7

ISSUE:
1) WON the Singaporeans are deemed preferred creditors; and 2) WON they are entitled to the payment of their total investment amounting to US$2,531,632.18.

HELD:
We take note of the fact that when the trial court, in its Order of 11 September 1992, declared the Singaporeans to have the status of preferred creditors, it did so only for the purpose of giving them priority in the order of payment upon the liquidation of the PaBC. Relying only on the Investment Incentive Act, the trial court did not decide whether the Singaporeans investment was a loan or equity. Since the Singaporeans were declared preferred creditors for a limited purpose, it does not follow that the court likewise implied that the original remittance of the Singaporeans was in the nature of a loan or forbearance of money, goods, or credit. The Court of Appeals found that the equity investment of US$2,531,632.18 was not a loan or forbearance of money; hence, Central Bank Circular No. 416, prescribing 12% interest per annum on loans or forbearance of money, goods, or credit is inapplicable. It applied Article 2209 of the Civil Code, which provides for the legal interest of 6% per annum in the absence of a stipulation to the contrary. Thus, the Court of Appeals modified the Order of 12 May 1998 and reduced the rate of interest on the investment of US$2,531,632.18 from 12% to 6% to run from 15 October 1981 when the outward remittance and equity investment was actually made up to the closure of PaBC. Also, following Eastern Shipping Lines,Inc. v. Court of Appeals it upheld the grant of 12% interest on the monetary award of US$2,531,632.18 to run from the date of the finality of the 11 September 1992 Order until its satisfaction. InEastern Shipping Lines, Inc. v. Court of Appeals, we laid down the following guidelines: I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasidelicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages.

II. With regard particularly to an award of interest, in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows: 1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. 2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged. 3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit. It is undisputed that the amount of US$2,531,632.58 remitted by the Singaporeans represented the 154,462 PaBC common shares previously issued to, and owned by, Mandarin Development Corporation bought by the Singaporeans at the price of US$16.39 per share. The investment was approved by the Central Bank under Monetary Board Resolution No. 323 dated 19 February 1982 and constituted about 11% of the total subscribed capital stock of PaBC. Clearly, the amount remitted to PaBC by the Singaporeans was an investment. An "investment" is an expenditure to acquire property or other assets in order to produce revenue. It is the placing of capital or laying out of money in a way intended to secure income or profit from its employment. "To invest" is to purchase securities of a more or less permanent nature, or to place money or property in business ventures or real estate, or otherwise lay it out, so that it may 21 produce a revenue or income. Thus, unlike a deposit of money or a loan that earns interest, the investment of the Singaporeans cannot be assured of a dividend or an interest on the amount invested. For, interests or dividends are granted only after profits or gains are generated. We therefore agree with the Court of Appeals in holding that the amount of US$2,531,632.18 remitted by the Singaporeans to PaBC was not a loan or forbearance of money in favor of PaBC. Hence No.

II-1 of the above-quoted guidelines in Eastern Shipping Lines does not come into play. Neither can we apply Central Bank Circular No. 416, which imposes the rate of 12% per annum on loans and forbearance of money. Nor can No. II-2 of the above-quoted guidelines be invoked because, as correctly pointed out by the Liquidator, the closure of the PaBC did not constitute a breach of obligation. Article 2209 of the Civil Code, which was relied upon by the Court of Appeals, does not find application either. That Article, which provides for 6% interest per annum, governs when there is a delay in the payment of a sum of money. Such is not the case here. Thus, the Court of Appeals award of 6% interest on the Singaporeansequity investment as actual or compensatory damages from the date of its remittance until the closure of PaBC has no leg to stand on and must, therefore, be deleted. WHEREFORE,the decision of the Court of Appeals of 31 January 2002 in CA-G.R. SP No. 47878 is hereby AFFIRMED insofar as the respondents ANG ENG JOO, ANG KEONG LAN, and E.J. ANG INTERNATIONAL, LTD., are entitled to the payment of 12% interest per annum in the form of actual or compensatory damages on the judgment award of US$2,531,632.18 to run from 22 October 1992, when the 11 September 1992 Order of the Regional Trial Court of Manila, Branch 31, became final and executory, until the amount is fully paid. The said decision is, however, MODIFIED as follows: 1. The award of interest at the rate of 6% per annum as actual or compensatory damages from 15 October 1981 until the closure of PaBC is hereby deleted for lack of basis without prejudice, however, to liquidating dividends or interests as may be determined by the Liquidator. 2. The Regional Trial Court of Manila, Branch 31, is hereby directed to make a recomputation of all the total amounts paid by the petitioner Liquidator in favor of the private respondent Singaporeans taking into account the exact amount due them, and to issue the proper orders for payment, if warranted. The amount due shall include the 12% rate of legal interests on the judgment debt of US$2,531,632.18. Vazquez v. Ayala Corp/ Nov 2004/ MMetilla

distinct contract from that whichthe parties may enter into upon its the consummation. Anindependent consideration was also wanting because thecontested paragraphs purpose was to give the Vasquez spousesthe first option to purchase the lots at a price acceptable by Ayalaupon the latters offer. Articles 1324 and 1479 were then notapplicable. Thus, paragraph 5.15 cannot be considered an optioncontract. Relatively, petitioners' right of first refusal was deemedlost when its counter-offer was rejected by respondent. Ledesma v. CA/ 1988/ DMiles

FACTS:
This petition seeks to reverse the decision of the respondent Court of Appeals which afirmed the decision of the Court of First Instance of Iloilo, adjudging the petitioner, who was then the President of the West Visayas College liable for damages under Article 27 of the Civil Code of the Philippines for failure to graduate a student with honors. An organization named Student Leadership Club was formed by some students of the West Visayas College. They elected the late Violets Delmo as the treasurer. In that capacity, Delmo extended loans from the funds of the club to some of the students of the school. "the petitioner claims that the said act of extending loans was against school rules and regulations. Thus, the petitioner, as President of the School, sent a letter to Delmo informing her that she was being dropped from the membership of the club and that she would not be a candidate for any award or citation from the school. Delmo asked for a reconsideration of the decision but the petitioner denied it. Delmo, thus, appealed to the Office of the Director of the Bureau of Public Schools. On April 27, 1966, the petitioner received by mail the decision of the Director and all the records of the case. On the same day, petitioner received a telegram stating the following: "AIRMAIL RECORDS DELMO CASE MISSENT THAT OFFICE" The Director asked for the return only of the records but the petitioner allegedly mistook the telegram as ordering him to also send the decision back. On the same day, he returned by mail all the records plus the decision of the Director to the Bureau of Public Schools. The next day, the petitioner received another telegram from the Director order him to furnish Delmo with a copy of the decision. The petitioner, in turn, sent a night letter to the Director informing the latter that he had sent the decision back and that he had not retained a copy thereof.. On May 3, 1966, the day of the graduation, the petitioner received another telegram from the Director ordering him not to deprive Delmo of any honors due her. As it was impossible by this time to include Delmo's name in the program as one of the honor students, the petitioner let her graduate as a plain student instead of being awarded the Latin honor of Magna Cum Laude. To delay the matter further, the petitioner on May 5, 1966, wrote the Director for a reconsideration of the latters" decision because he believed that Delmo should not be allowed to graduate with honors. The Director denied the petitioner's request.

FACTS:
The Vasquez spouses sold to Ayala Corporation all their shares of stocks in Conduit Development, Inc. Among the terms and conditions stipulated under the Memorandum of Agreement(MOA) was that Ayala Corp. would give the Vasquez spouses a first option to purchase four developed lots next to the Retained Area at the prevailing market price at the time of the purchase as indicated in paragraph 5. 15 of the MOA. When Ayala offered tosell the four lots back to the Vasquez spouses by virtue of the provision of the MOA, the parties were not able to agree what prevailing price should apply. The regional trial court ruled thatsince the option to purchase the 4 lots was with a consideration, paragraph 5.15 is an option contract. The Court of Appeals held otherwise and claimed that it was a right of first refusal there being no separate consideration.

ISSUE:
Whether or not paragraph 5.15 of the MOA constitute anoption contract or a right of first refusal

HELD:
Paragraph 5.15 of the MOA constitutes a mere right of firstrefusal there being no fixed period and a determined price at which the subject lots will be offered for sale as connoted by the phrase at the prevailing market price at the time of thepurchase. More so, paragraph 5.5 is not in any way apreparatory or a separate and

On July 12, 1966, the petitioner finally instructed the Registrar of the school to enter into the scholastic records of Delmo the honor, "Magna Cum Laude." On July 30, 1966, Delmo, then a minor, was joined by her parents in flag action for damages against the petitioner. During the pendency of the action, however, Delmo passed away, and thus, an Amended and Supplemental Complaint was filed by her parents as her sole and only heirs. The trial court after hearing rendered judgment against the petitioner and in favor of the spouses Delmo.

Lee v. De Guzman/ July 1990/ LMonday

FACTS:
On November 8, 1983, a free-lance salesman of respondent Motorcars, Inc., (then Delta Motors Corporation) named Arsenio Tumibay signed in behalf of Domingo Tupaz its Branch Manager in Makati, a price quotation and delivered to petitioner Alex B. Lee for the sale of one (1) unit Toyota Corolla Liftback, 1983 model, with the quoted price of P149,700.00 plus miscellaneous expenses of P10,033.00. On the same date, petitioner Lee as customer, signed the vehicle sales order. The delivery of the subject vehicle was within the month of November, 1983. In view of such order, petitioner Lee deposited the amount of P1,000.00 on November 10, 1983 as required in the aforesaid price quotation, to which Tumibay wrote petitioner the information that the Motorcars Inc., had acknowledged receipt of the delivery receipt for petitioner. Thereupon, on December 15, 1983, petitioner's counsel, Atty. Doroteo A. Dadal, wrote Mr. Nicolas O. Carranceja, Jr., Executive Vice-President of Motorcars, demanding for delivery of the said Toyota car. The respondent car company replied on December 19, 1983, through its counsel Atty. Benjamin S. Benito, that due to the sudden change of prices by the car manufacturer, they had decided to exercise the option contained in the vehicle sales order, (Exhibits "C") which states: Whenever deposits are made by customers for vehicles, parts and services ordered, the sales for such vehicles, parts or services shall be at the option of Motorcars, Inc., and refund of the deposits shall be made upon request and without undue delay should such option be exercised The respondent car company thus offered to refund petitioner's deposit of P1,000.00. Part of the vehicle sales order also reads, viz: This order is not valid unless signed and accepted by the dealer principal, President, Executive Vice President or General Sales Manager of the dealership. The trial court rendered judgment in favor of respondent car company ruling as follows:Exhibit "A" is merely a quotation offered by defendant's sales representative. Exhibit "C", the vehicle sales order, was not signed and accepted by defendant's President, Executive Vice President, nor its General Sales Manager, hence, not valid because it exercised the option in Exh. "1" beforestated due to sudden change of prices by the car manufacturer (Exh. "2"). Exhibit "C" which contains; Exhibits "1" and "1-A", having been signed by plaintiff binds him alone There was no perfected contract in accordance with Article 1318, Civil Code. Expectedly dissatisfied with the aforesaid court's ruling, petitioner appealed to the Court of Appeals which reversed the decision appealed from ruling that there was a perfected contract of sale, and that there was the undisputed signature of one Mr. Domingo Tapas, the branch manager of Motorcars. Thereupon, the Court of Appeals ordered respondent company to deliver to petitioner the subject vehicle upon payment by the latter of the amount of P149,700.00 and the amount of P8,833.00 for Miscellaneous Expenses and/or Incidental Charges. Thus, respondent appealed to this Court, docketed as G.R. No. 77992. In this Court's resolution dated August 31, 1987, through the Third Division, the decision appealed from was affirmed, and the petition was denied. This Court ruled: The issue of whether or not there was a perfected contract of sale appears to have been correctly decided by the respondent court. This Court also finds no reason to disturb the ruling of the respondent court on the factual issue of whether or not the branch manager could bind the petitioner. It appearing that the findings of fact of the respondent court are supported by substantial evidence

ISSUE:
The issues raised in this petition can be reduced to the sole question of whether or not the respondent Court of Appeals erred in affirming the trial court's finding that petitioner is liable for damages under Article 27 of the New Civil Code.

HELD:
We find no reason why the findings of the trial and appellate courts should be reversed. It cannot be disputed that Violeta Delmo went through a painful ordeal which was brought about by the petitioner's neglect of duty and callousness. The Solicitor-General tries to cover-up the petitioner's deliberate omission to inform Miss Delmo by stating that it was not the duty of the petitioner to furnish her a copy of the Director's decision. Granting this to be true, it was nevertheless the petitioner's duty to enforce the said decision. He could have done so considering that he received the decision on April 27, 1966 and even though he sent it back with the records of the case, he undoubtedly read the whole of it which consisted of only three pages. Moreover, the petitioner should have had the decency to meet with Mr. Delmo, the girl's father, and inform the latter, at the very least of the decision. This, the petitioner likewise failed to do, and not without the attendant bad faith which the appellate court correctly pointed out in its decision, to wit: Third, assuming that defendant could not furnish Miss Delmo of a copy of the decision, he could have used his discretion and plain common sense by informing her about it or he could have directed the inclusion of Miss Delmo's honor in the printed commencement program or announced it during the commencement exercises. Fourth, defendant despite receipt of the telegram of Director Benardino hours before the commencement exercises on May 3-4, 1966, disobeyed his superior by refusing to give the honors due Miss Delmo with a lame excuse that he would be embarrassed if he did so, to the prejudice of and in complete disregard of Miss Delmo's rights. Fifth, defendant did not even extend the courtesy of meeting Mr. Pacifico Delmo, father of Miss Delmo, who tried several times to see defendant in his office thus Mr. Delmo suffered extreme disappointment and humiliation. xxx xxx xxx Defendant, being a public officer should have acted with circumspection and due regard to the rights of Miss Delmo. Inasmuch as he exceeded the scope of his authority by defiantly disobeying the lawful directive of his superior, Director Bernardino, defendant is liable for damages in his personal capacity.

and there being no showing that its decision is not in accord with law or jurisprudence, the COURT RESOLVED to DENY the petition. When the case was remanded to the trial Court, petitioner filed a Motion for Writ of Execution. Instead of complying with the Order of the court, respondent company filed a motion to quash writ of execution. Said motion was anchored on the premise that the obligation has become impossible to comply on the ground that the Delta Motors Corporation has closed shop. Petitioner opposed the quashal of the Writ of execution and consequently, the motion to quash was denied. An alias writ of execution was filed by petitioner, but respondent company continued to defy the Order of the Court. Petitioner filed a motion for contempt of court for the stance of the respondent company was contumacious in nature. Respondent company filed an opposition thereto reiterating the grounds relied on in the Motion to quash writ of execution. Respondent trial court issued the questioned Order, dated August 10, 1989, which was adjudged favorably for the respondent company, which order as alleged by the petition, was totally at war with the previous order granting the alias writ of execution. Hence, this petition for certiorari with mandamus.

LOPEZ VS PAN AMERICAN WORLD AIRWAYS/ MARCH 30, 1966/ MMuoz

FACTS:
Reservations for first class accommodations in Flight No. 2 of Pan American World Airways hereinafter otherwise called PAN-AM from Tokyo to San Francisco on May 24, 1960 were made with PANAM on March 29, 1960, by "Your Travel Guide" agency, specifically, by Delfin Faustino, for then Senator Fernando Lopez, his wife Maria J. Lopez, his son-in-law Alfredo Montelibano, Jr., and his daughter, Mrs. Alfredo Montelibano, Jr., (Milagros Lopez Montelibano). PANAM's San Francisco head office confirmed the reservations on March 31, 1960. First class tickets for the abovementioned flight were subsequently issued by PAN-AM on May 21 and 23, 1960, in favor of Senator Lopez and his party. The total fare of P9,444 for all of them was fully paid before the tickets were issued. As scheduled Senator Lopez and party left Manila by Northwest Airlines on May 24, 1960, arriving in Tokyo at 5:30 P.M. of that day. As soon as they arrived Senator Lopez requested Minister Busuego of the Philippine Embassy to contact PAN-AM's Tokyo office regarding their first class accommodations for that evening's flight. For the given reason that the first class seats therein were all booked up, however, PAN-AM's Tokyo office informed Minister Busuego that PAN-AM could not accommodate Senator Lopez and party in that trip as first class passengers. Senator Lopez thereupon gave their first class tickets to Minister Busuego for him to show the same to PAN-AM's Tokyo office, but the latter firmly reiterated that there was no accommodation for them in the first class, stating that they could not go in that flight unless they took the tourist class therein. Due to pressing engagements awaiting Senator Lopez and his wife, in the United States he had to attend a business conference in San Francisco the next day and she had to undergo a medical checkup in Mayo Clinic, Rochester, Minnesota, on May 28, 1960 and needed three days rest before that in San Francisco Senator Lopez and party were constrained to take PAN-AM's flight from Tokyo to San Francisco as tourist passengers. Senator Lopez however made it clear, as indicated in his letter to PAN-AM's Tokyo office on that date (Exh. A), that they did so "under protest" and without prejudice to further action against the airline. Suit for damages was thereafter filed by Senator Lopez and party against PAN-AM on June 2, 1960 in the Court of First Instance of Rizal. Alleging breach of contracts in bad faith by defendant, plaintiffs asked for P500,000 actual and moral damages, P100,000 exemplary damages, P25,000 attorney's fees plus costs. PAN-AM filed its answer on June 22, 1960, asserting that its failure to provide first class accommodations to plaintiffs was due to honest error of its employees. It also interposed a counterclaim for attorney's fees of P25,000. After trial, the Court of First Instance rendered its decision in favor of the plaintiffs, for moral damages, exemplary damages and attorneys fee. Plaintiffs, however, on November 21, 1963, moved for reconsideration of said judgment, asking that moral damages, defendants opposed but judgment is hereby rendered in favor of the plaintiffs. It is from said judgment, as thus reconsidered, that both parties have appealed.

ISSUE:
Should respondent Motorcars be made liable to fulfill a seemingly impossible obligation?

HELD:
It is well-settled that when after a judgment has become final and executory, facts and circumstances transpire which render its execution impossible or unjust, the interested party may ask a competent court to stay its execution or prevent its enforcement. We find that respondent Court did not act with grave abuse of discretion in denying the motion for contempt. Unfortunately it is not possible for Motorcars to comply with the writ of execution since admittedly, the then Delta Motors who manufactured 1983 models of Toyota Liftback had already closed shop, but be this as it may, there is no question that indeed there was a perfected contract of sale between petitioner Lee and private respondent Motorcars pursuant to this Court's (through the Third Division) resolution dated August 31, 1987. The relief left for petitioner Lee is that found under Article 1170 of the Civil Code which provides: "(T)hose who in the performance of their obligations are guilty of fraud, negligence or delay, and those who in any manner contravene the tenor thereof, are liable for damages." The reply letter of private respondent company dated December 19, 1983 which said that "due to the sudden change of prices by the car manufacturer, they have decided to exercise the option . . ." did not relieve Motorcars from the contract had entered into with petitioner Lee. There was therefore delay in the delivery of the subject vehicle which entitles petitioner to be awarded damages. The records show that the subject vehicle should have been delivered within the month of November, 1983. (Annex C, Records).Considering the circumstances attendant to this case, a total amount of damages worth Fifty Thousand Pesos (P50,000.00) would be reasonable, twenty thousand pesos (P20,000.00) of which 2 as temperate damages inclusive of attorney's fees and the remaining thirty thousand pesos (P30,000.00) as exemplary damages. PREMISES CONSIDERED, insofar as the denial of the motion for contempt by the lower court, dated August 10, 1989 is concerned, the petition for certiorari with mandamus is hereby DISMISSED, but the respondent is ordered to give to the petitioner the amount of damages adverted to in the next preceding paragraph.

Defendant, as stated, has from the start admitted that it breached its contracts with plaintiffs to provide them with first class accommodations in its Tokyo-San Francisco flight of May 24, 1960. In its appeal, however, it takes issue with the finding of the court a quo that it acted in bad faith in the branch of said contracts. As to Cenon S. Cervantes it would appear that in Flight No. 6 of PANAM on September 29, 1958 from Bangkok to Hongkong, he and his wife had to take tourist class, although they had first class tickets, which they had previously confirmed, because their seats in first class were given to "passengers from London." Against the foregoing, however, defendant's evidence would seek to establish its theory of honest mistake.

For plaintiffs were travelling with first class tickets issued by defendant and yet they were given only the tourist class. At stopovers, they were expected to be among the first-class passengers by those awaiting to welcome them, only to be found among the tourist passengers. It may not be humiliating to travel as tourist passengers; it is humiliating to be compelled to travel as such, contrary to what is rightfully to be expected from the contractual undertaking. The rationale behind exemplary or corrective damages is, as the name implies, to provide an example or correction for public good. Defendant having breached its contracts in bad faith, the court, as stated earlier, may award exemplary damages in addition to moral damages. In view of its nature, it should be imposed in such an amount as to sufficiently and effectively deter similar breach of contracts in the future by defendant or other airlines. In this light, we find it just to award P75,000.00 as exemplary or corrective damages. Magat vs Medialdea / 121 SCRA 418 / PJNg

ISSUE:
Whether the defendant acted in bad faith for deliberate refusal to comply with its contract to provide first-class accommodation to the plaintiff.

HELD:
From the foregoing evidence of defendant it is in effect admitted that defendant through its agents first cancelled plaintiffs, reservations by mistake and thereafter deliberately and intentionally withheld from plaintiffs or their travel agent the fact of said cancellation, letting them go on believing that their first class reservations stood valid and confirmed. In so misleading plaintiffs into purchasing first class tickets in the conviction that they had confirmed reservations for the same, when in fact they had none, defendant wilfully and knowingly placed itself into the position of having to breach its a foresaid contracts with plaintiffs should there be no last-minute cancellation by other passengers before flight time, as it turned out in this case. Such actuation of defendant may indeed have been prompted by nothing more than the promotion of its self-interest in holding on to Senator Lopez and party as passengers in its flight and foreclosing on their chances to seek the services of other airlines that may have been able to afford them first class accommodations. All the time, in legal contemplation such conduct already amounts to action in bad faith. For bad faith means a breach of a known duty through some motive of interest or ill-will (Spiegel vs. Beacon Participations, 8 NE 2d 895, 907). As stated in Kamm v. Flink, 113 N.J.L. 582, 175 A. 62, 99 A.L.R. 1, 7: "Selfenrichment or fraternal interest, and not personal ill-will, may well have been the motive; but it is malice nevertheless." At the time plaintiffs bought their tickets, defendant, therefore, in breach of its known duty, made plaintiffs believe that their reservation had not been cancelled. Such willful-non-disclosure of the cancellation or pretense that the reservations for plaintiffs stood - and not simply the erroneous cancellation itself - is the factor to which is attributable the breach of the resulting contracts. And, as above-stated, in this respect defendant clearly acted in bad faith. Accordingly, there being a clear admission in defendant's evidence of facts amounting to a bad faith on its part in regard to the breach of its contracts with plaintiffs, it becomes unnecessary to further discuss the evidence adduced by plaintiffs to establish defendant's bad faith. For what is admitted in the course of the trial does not need to be proved (Sec. 2, Rule 129, Rules of Court). As to moral damages. As a proximate result of defendant's breach in bad faith of its contracts with plaintiffs, the latter suffered social humiliation, wounded feelings, serious anxiety and mental anguish.

FACTS:
Put to test in this petition for review on certiorari is the sufficiency of the averments contained in the complaint for alleged breach of contract filed by petitioner Victorino D. Magat against respondent Santiago A. Guerrero in Civil Case No. 17827 of the Court of First Instance of Rizal, presided by respondent Judge Leo D. Medialdea, now Deputy Judicial Administrator, which complaint was dismissed for failure to state a cause of action. The pertinent allegations in the complaint, subject of inquiry, are as follows: - That sometime in September 1972, the defendant entered into a contract with the U.S. Navy Exchange, Subic Bay, Philippines, for the operation of a fleet of taxicabs, each taxicab to be provided with the necessary taximeter and a radio transceiver for receiving and sending of messages from mobile taxicab to fixed base stations within the Naval Base at Subic Bay, Philippines; - That Isidro Q. Aligada, also acting as agent of the defendant, made representations with the plaintiff herein to the effect that defendant desired to procure from Japan thru the plaintiff herein the needed radio transceivers and to this end, Isidro Q. Aligada secured a firm offer in writing dated September 25, 1972, a copy of which is hereto attached marked as Annex 'A' and made an integral part of this complaint, wherein the plaintiff quoted in his offer a total price of $77,620.59 [U.S. dollars] FOB Yokohama, the goods or articles therein offered for sale by the plaintiff to the defendant to be delivered sixty to ninety [60-90] days after receipt of advice from the defendant of the radio frequency assigned to the defendant by the proper authorities; - That the plaintiff received notice of the fact that the defendant accepted plaintiff's offer to sell to the defendant the items specified in Annex 'A', as well as the terms and conditions of said offer, as shown by the signed conformity of the defendant appearing on Annex 'A' which was duly delivered by the defendant's agent to the plaintiff herein, whereupon all that the plaintiff had to do in the meantime was to await advice from the defendant as to the radio frequency to be assigned by the proper authorities to the defendant; - That believing that the defendant would faithfully fulfill his contract with the plaintiff herein, considering his signed conformity appearing in Annex 'A' hereof as well as the letter dated October 4,

1972, of his agent aforementioned which is attached hereto and marked as Annex 'B' and made an integral part of this complaint, and in order that plaintiff's promised delivery would not be delayed, the plaintiff herein took steps to advise the Japanese entity entrusted with the manufacture of the items listed in Annex 'A' to the effect that the contract between the defendant herein and the plaintiff has been perfected and that advice with regards to radio frequency would follow as soon as same is received by the plaintiff from the defendant; 11. That it being normal business practice in case of foreign importation that the buyer opens a letter of credit in favor of the foreign supplier before delivery of the goods sold, the plaintiff herein awaited the opening of such a letter of credit by the defendant; 12. That the defendant and his agent have repeatedly assured plaintiff herein of the defendant's financial capabilities to pay for the goods ordered by him and in fact he accomplished the necessary application for a letter of credit with his banker, but he subsequently instructed his banker not to give due course to his application for a letter of credit and that for reasons only known to the defendant, he fails and refuses to open the necessary letter of credit to cover payment of the goods ordered by him; 13. That it has come to the knowledge of the plaintiff herein that the defendant has been operating his taxicabs without the required radio transceivers and when the U.S. Navy Authorities of Subic Bay, Philippines, were pressing defendant for compliance with his commitments with respect to the installations of radio transceivers on his taxicabs, he impliedly laid the blame for the delay upon the plaintiff herein, thus destroying the reputation of the plaintiff herein with the said Naval Authorities of Subic Bay, Philippines, with whom plaintiff herein transacts business; 14. That on March 27, 1973, plaintiff wrote a letter thru his counsel, copy attached marked as Annex 'E', to ascertain from the defendant as to whether it is his intention to fulfill his part of the agreement with the plaintiff herein or whether he desired to have the contract between them definitely cancelled, but defendant did not even have the courtesy to answer plaintiff's demand; 15. That the defendant herein entered into a contract with the plaintiff herein as set forth in Annex 'A' without the least intention of faithfully complying with his obligation is thereunder, but he did so only in order to obtain the concession from the U.S. Navy Exchange, Subic Bay, Philippines, of operating a fleet of taxicabs inside the U.S. Naval Base to his financial benefit and at the expense and prejudice of third parties such as the plaintiff herein; 16. That in view of the defendant's failure to fulfill his contractual obligations with the plaintiff herein, the plaintiff will suffer the following damages: [a] As the radio transceivers ordered by the defendant are now in the hands of the plaintiff's Japanese representative, the plaintiff will have to pay for them, thus he will have to suffer as total loss to him the amount of P523,938.98 (converting the amount of $77,620.59 to pesos at the rate of P6.75 to the dollar) as said radio transceivers were purposely made or manufactured solely for the use of the defendant herein and cannot possibly be marketed by the plaintiff herein to the general public;

[b] The amount of P 52,393.89 or 10% of the purchase price by way of loss of expected profits from the transaction or contract between plaintiff and the defendant; [c] Loss of confidence in him and goodwill of the plaintiff which will result in the impairment of his business dealings with Japanese firms, thereby resulting also in loss of possible profits in the future which plaintiff assess at no less than P200,000.00; [d] That in view of the defendant's bad faith in inducing plaintiff to enter into the contract with him as set forth hereinabove, defendant should be assessed by his Honorable Court in favor of the plaintiff the sum of P200,000.00 as moral and exemplary damages; [e] That in view of the defendant's fault and to protect his interests, plaintiff herein is constrained to retain the services of counsel with whom he agreed to pay by way of attorney's fees the sum of P50,000.00".

ISSUE:
WON the obligor is also liable not only for the value of the obligation but also for subsequent consequence of loss of profits based on the actions of the obligor which is not in strict and faithful fulfillment of the obligation?

HELD:
After a thorough examination of the complaint at bar, We find the test of legal sufficiency of the cause of action adequately satisfied. In a methodical and logical sequence, the complaints recites the circumstances that led to the perfection of the contract entered into by the parties. It further avers that while petitioner had fulfilled his part of the bargain [paragraph 8 of the Complaint], private respondent failed to comply with his correlative obligation by refusing to open a letter of credit to cover payment of the goods ordered by him [paragraphs 11 & 12 of the Complaint], and that consequently, petitioner suffered not only loss of his expected profits, but moral and exemplary damages as well. From these allegations, the essential elements of a cause of action are present, to wit: [1] the existence of a legal right to the plaintiff; [2] a correlative duty of the defendant and [3] an act or omission of the defendant in violation of the plaintiff's right, with consequent injury or damage to the latter for which he may maintain an action for recovery of damages or other appropriate relief. 7 Indisputably, the parties, both businessmen, entered into the aforesaid contract with the evident intention of deriving some profits therefrom. Upon breach of the contract by either of them, the other would necessarily suffer loss of his expected profits. Since the loss comes into being at the very moment of breach, such loss is real, "fixed and vested" and, therefore, recoverable under the law. Article 1170 of the Civil Code provides: Those who in the performance of their obligation are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof are liable for damages. The phrase "in any manner contravene the tenor" of the obligation includes any ilicit act or omission which impairs the strict and faithful fulfillment of the obligation and every kind of defective performance. The damages which the obligor is liable for includes not only the value of the loss suffered by the obligee [dao emergente] but also

the profits which the latter failed to obtain [lucro cesante] 9. If the obligor acted in good faith, he shall be liable for those damages that are the natural and probable consequences of the breach of the obligation and which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted; and in case of fraud, bad faith, malice or wanton attitude, he shall be liable for all damages which may be reasonably attributed to the non-performance of the obligation 10. The same is true with respect to moral and exemplary damages. The applicable legal provisions on the matter, Articles 2220 and 2232 of the Civil Code, allow the award of such damages in breaches of contract where the defendant acted in bad faith. To Our mind, the complaint sufficiently alleges bad faith on the part of the defendant. In fine, We hold that on the basis of the facts alleged in the complaint, the court could render a valid judgment in accordance with the prayer thereof. ACCORDINGLY, the questioned order of dismissal is hereby set aside and the case ordered remanded to the court of origin for further proceedings. No costs. SO ORDERED. Meralco v. CA/ January 1988/ ROmega

fees. The failure to give a notice of disconnection to private respondents might have been a breach of duty or breach of contract, but by itself does not constitute bad faith or fraud; it must be shown that such a failure was motivated by in or done with fraudulent intent.Petitioners also maintain that ' private respondents were in arrears in the payment of their electricity bills when their electric service was connected, no moral damages may be recovered by them under the 'clean hands' doctrine enunciated in Mabutas vs. Calapan Electric Company, CA-G.R. No. L-9683-R, May 26, 1964. In its decision, the respondent Court of Appeals held that MERALCO's right to disconnect the electric service of a delinquent customer "is an absolute one, subject only to the requirement that defendant MERALCO should give the customer a written notice of disconnection 48 hours in advance." This requirement is embodied in Section 97 of the Revised Order No. 1 of the Public Service Commission which provides as follows: Section 97. Payment of bills. A public service, may require that bills for service be paid within a specified time after rendition. When the billing period covers a month or more, the minimum time allowed will be ten days and upon expiration of the specified time, service may be discontinued for the nonpayment of bills, provided that a 48 hours' written notice of such disconnection has been given the customer: Provided, however, that disconnections of service shall not be made on Sundays and official holidays and never after 2 p.m. of any working day: Provided, further, that if at the moment the disconnection is to be made the customer tenders payment of the unpaid bill to the agent or employee of the operator who is to effect the disconnection, the said agent or employee shall be obliged to accept tender of payment and issue a temporary receipt for the amount and shall desist from disconnecting the service. The respondent court stressed the importance and necessity of the 48-hour advance written notification before a disconnection of service may be effected. Said the court: ... It sets in motion the disconnection of an electrical service of the customer by giving the notice, determining the expiration date thereof, and executing the disconnection. It, therefore, behooves the defendant MERALCO that before it disconnects a customer's electrical service, there should be sufficient evidence that the requirements for the disconnection had been duly complied with, otherwise, the poor consumer can be subjected to the whims and caprices of the defendant, by the mere pretension that the written notice had been duly served upon the customer.

FACTS:
In an action for recovery of damages for embarassment, humiliation, wounded feelings and hurt pride, caused to herein private respondents, by reason of the disconnection of their electrical service by the petitioners, the then Court of First Instance of Manila, Sixth Judicial District, Branch XXIV, rendered a decision dated December 13,1967, ordering herein petitioners jointly and severally to pay private respondents the sum of Ten Thousand (P10,000.00) Pesos as moral damages, Two Thousand (P2,000.00) Pesos as exemplary damages and, One Thousand (P1,000.00) Pesos as attorney's fees, and dismissing petitioners' counterclaim. On appeal, the Court of Appeals and in toto the trial court's decision. Their Motion for Reconsideration having been denied, petitioners filed the instant petition for certiorari. Petitioner Manila Electric Company (MERALCO) is a public utility corporation providing electric power for the consumption of the general public in Metro Manila. Petitioner Pedro Yambao is a bill collector of MERALCO. Private respondents Isaac Chaves and Juana O. Chaves, husband and wife, filed the complaint for damages, together with their children, Isaac O. Chaves, Jr. and Rosendo O. Chaves. Isaac Sr. and Isaac Jr. and Rosendo were members of the Philippine Bar; Isaac, Sr. and Isaac, Jr. were practicing lawyers and Rosendo was a Legal Officer at the Agricultural Productivity Commission. Juana O. Chaves was a public school teacher. Petitioners dispute the finding that there was no notice given to herein respondent. However, since only questions of law may be raised in a petition for certiorari under Rule 45 of the Revised Rules of Court, petitioners, 'for the sake of argument and for the purpose of giving focus on the legal issues', do not take issue with such finding. Petitioners contend that in the absence of bad faith, they could not be held liable for moral and exemplary damages as well as attorney's

ISSUE:
Whether or not Court of Appeals committed grave abuse of discretion in affirming the Trial Court's decision.

HELD:
SC find no reversible error in the decision appealed from. One can not deny the vital role which a public utility such as MERALCO, having a monopoly of the supply of electrical power in Metro Manila and some nearby municipalities, plays in the life of people living in such areas. Electricity has become a necessity to most people in these areas justifying the exercise by the State of its regulatory power over the business of supplying electrical service to the public, in which petitioner MERALCO is engaged. Thus, the state may regulate, as it has done through Section 97 of the Revised Order No.

1 of the Public Service Commission, the conditions under which and the manner by which a public utility such as MERALCO may effect a disconnection of service to a delinquent customer. Among others, a prior written notice to the customer is required before disconnection of the service. Failure to give such prior notice 4 amounts to a tort, as held by us in a similar case, where we said: ... petitioner's act in 'disconnecting respondent Ongsip's gas service without prior notice constitutes breach of contract amounting to an independent tort. The prematurity of the action is indicative of an intent to cause additional mental and moral suffering to private respondent. This is a clear violation of Article 21 of the Civil Code which provides that any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for damages. This is reiterated by paragraph 10 of Article 2219 of the Code. Moreover, the award of moral damages is sanctioned by Article 2220 which provides that wilfull injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith.** Likewise, we find no merit in petitioners' contention that being in arrears in the payment of their bills, the private respondents are not entitled to moral damages under the doctrine that "he who comes to court in demand of equity, must come with clean hands." We rejected this argument in the Manila Gas Corporation case, supra, wherein we held that respondents' default in the payment of his bills "cannot be utilized by petitioner to defeat or null the claim for damages. At most, this circumstance can be considered as a mitigating factor in ascertaining the amount of damages to which respondent ... is entitled." Accordingly, we find no grave abuse of discretion committed by respondent court in affirming the trial court's decision. The petition is hereby DISMISSED for lack of merit. **The right to disconnect the electric service of a delinquent customer shall be accompanied by a given notice 48 hours in advances as provided for in Section 97 of the Revised Order No. 1 of the Public Service Commission. In accordance with the previous rulings, failure to give such prior notice amounts to a tort. And since, petitioner MERALCO in this particular case disregarded the rule on 48-hour notice prior to disconnection which is protected by law, petitioner is liable for damages according to Article 1170 of the civil code, therefore, the respondents are entitled to claim damages. Article 1170 states that, Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages. Maersk Line vs. CA/17 May 1993/BCPandita

in 6 drums of 100,000 capsules each, were already shipped on board MV Anders Maerskline under Voyage 7703 for shipment to the Philippines via Oakland, California. In said Memorandum, shipper Eli Lilly, Inc. specified the date of arrival to be 3 April 1977. For reasons unknown, said cargo of capsules were misshipped and diverted to Richmond, Virginia, USA and then transported back to Oakland, California. The goods finally arrived in the Philippines on 10 June 1977 or after 2 months from the date specified in the memorandum. As a consequence, Castillo as consignee refused to take delivery of the goods on account of its failure to arrive on time. Castillo, alleging gross negligence and undue delay in the delivery of the goods, filed an action before the trial court for rescission of contract with damages against Maersk Line and Eli Lilly, Inc. as defendants. Later, Castillo moved for the dismissal of the complaint against Eli Lilly on the ground that the evidence on record shows that the delay in the delivery of the shipment was attributable solely to Maersk Line. Acting on said motion, the trial court dismissed the complaint against Eli Lilly; and correspondingly, the latter withdrew its cross-claim against Maersk Line in a joint motion dated 3 December 1979.

ISSUE:
Whether or not respondent Castillo is entitled to damages resulting from delay in the delivery of the shipment in the absence in the bill of lading of a stipulation on the period of delivery.

HELD:
YES. IN VIEW OF THE FOREGOING, this Court believe (sic) and so hold (sic) that there was a breach in the performance of their obligation by the defendant Maersk Line consisting of their negligence to ship the 6 drums of empty Gelatin Capsules which under their own memorandum shipment would arrive in the Philippines on April 3, 1977 which under Art. 1170 of the New Civil Code, they stood liable for damages. We have carefully reviewed the decisions of respondent court and the trial court and both of them show that, in finding petitioner liable for damages for the delay in the delivery of goods, reliance was made on the rule that contracts of adhesion are void. Added to this, the lower court stated that the exemption against liability for delay is against public policy and is thus, void. Besides, private respondents action is anchored on Article 1170 of the New Civil Code and not under the law on Admiralty (AC-GR CV No. 10340, Rollo, p. 14). In Magellan, (supra), we ruled: It is a long standing jurisprudential rule that a bill of lading operates both as a receipt and as contract to transport and deliver the same a therein stipulated. As a contract, it names the parties, which includes the consignee, fixes the route, destination, and freight rates or charges, and stipulates the rights and obligations assumed by the parties. Being a contract, it is the law between the parties who are bound by its terms and conditions provided that these are not contrary to law, morals, good customs, public order and public policy. A bill of lading usually becomes effective upon its delivery to and acceptance by the shipper. It is presumed that the stipulations of the bill were, in the absence of fraud, concealment or improper conduct, known to the shipper, and he is generally bound by his acceptance whether he reads the bill or not. (Emphasis supplied) However, the aforequoted ruling applies only if such contracts will not create an absurd situation as in the case at bar. The questioned provision in the subject bill of lading has the effect of practically

FACTS:
Petitioner Maersk Line is engaged in the transportation of goods by sea, doing business in the Philippines through its general agent Compania General de Tabacos de Filipinas. Private respondent Efren Castillo, on the other hand, is the proprietor of Ethegal Laboratories, a firm engaged in the manutacture of pharmaceutical products. On 12 November 1976, Castillo ordered from Eli Lilly, Inc. of Puerto Rico through the latters agent in the Philippines, Elanco Products, 600,000 empty gelatin capsules for the manufacture of his pharmaceutical products. The capsules were placed in 6 drums of 100,000 capsules each valued at US $1,668.71. Through a Memorandum of Shipment, the shipper Eli Lilly, Inc. of Puerto Rico advised Castillo as consignee that the600,000 empty gelatin capsules

leaving the date of arrival of the subject shipment on the sole determination and will of the carrier. While it is true that common carriers are not obligated by law to carry and to deliver merchandise, and persons are not vested with the right to prompt delivery, unless such common carriers previously assume the obligation to deliver at a given date or time (Mendoza v. Philippine Air Lines, Inc., 90 Phil. 836 [1952]), delivery of shipment or cargo should at least be made within a reasonable time. In the case before us, we find that a delay in the delivery of the goods spanning a period of two (2) months and seven (7) days falls was beyond the realm of reasonableness. Described as gelatin capsules for use in pharmaceutical products, subject shipment was delivered to, and left in, the possession and custody of petitionercarrier for transport to Manila via Oakland, California. But through petitioners negligence was mishipped to Richmond, Virginia. Petitioners 21ishonour21 that it cannot be held liable for the delay finds no merit. In the case before us, we that the only evidence presented by petitioner was the testimony of Mr. Rolando Ramirez, a claims manager of its agent Compania General de Tabacos de Filipinas, who merely testified on Exhs. 1 to 5 (AC-GR CV No. 10340, p. 2) and nothing else. Petitioner never even bothered to explain the course for the delay, i.e. more than two (2) months, in the delivery of subject shipment. Under the circumstances of the case, we hold that petitioner is liable for breach of contract of carriage through gross negligence amounting to bad faith. Thus, the award of moral damages if therefore proper in this case. In line with this pronouncement, we hold that exemplary damages may be awarded to the private respondent. In contracts, exemplary damages may be awarded if the defendant acted in a wanton, fraudulent, reckless, 21ishonour21 or malevolent manner. There was gross negligence on the part of the petitioner in mishiping the subject goods destined for Manila but was inexplicably shipped to Richmond, Virginia, U.S.A. Gross carelessness or negligence 21ishonour2121 wanton misconduct, hence, exemplary damages may be awarded to the aggrieved party (Radio Communication of the Phils., Inc. v. Court of Appeals, 195 SCRA 147 [1991]).

demand on April 24, 1984 until full payment thereof; the reasonable attorneys fees in the amount equivalent to five (5) percent of the amount of the claim and the costs of the suit. It appears that on 16 January 1984, plaintiff (Valenzuela Hardwood and Industrial Supply, Inc.) entered into an agreement with the defendant Seven Brothers (Shipping Corporation) whereby the latter undertook to load on board its vessel M/V Seven Ambassador the formers lauan round logs numbering 940 at the port of Maconacon, Isabela for shipment to Manila. On 20 January 1984, plaintiff insured the logs against loss and/or damage with defendant South Sea Surety and Insurance Co., Inc. for P2,000,000.00 and the latter issued its Marine Cargo Insurance Policy No. 84/24229 for P2,000,000.00 on said date. On 24 January 1984, the plaintiff gave the check in payment of the premium on the insurance policy to Mr. Victorio Chua. In the meantime, the said vessel M/V Seven Ambassador sank on 25 January 1984 resulting in the loss of the plaintiffs insured logs. On 30 January 1984, a check for P5,625.00 (Exh. E) to cover payment of the premium and documentary stamps due on the policy was tendered due to the insurer but was not accepted. Instead, the South Sea Surety and Insurance Co., Inc. cancelled the insurance policy it issued as of the date of the inception for nonpayment of the premium due in accordance with Section 77 of the Insurance Code. On 2 February 1984, plaintiff demanded from defendant South Sea Surety and Insurance Co., Inc. the payment of the proceeds of the policy but the latter denied liability under the policy. Plaintiff likewise filed a formal claim with defendant Seven Brothers Shipping Corporation for the value of the lost logs but the latter denied the claim. After due hearing and trial, the court a quo rendered judgment in favor of plaintiff and against defendants. Both defendants shipping corporation and the surety company appealed.

ISSUE:
Valenzuela Hardwood and Industrial Supply Inc. v. CA and Seven Brothers Shipping Corp/ 1997/ Jpinili Whether or not respondent Court of Appeals committed a reversible error in upholding the validity of the stipulation in the charter party executed between the petitioner and the private respondent exempting the latter from liability for the loss of petitioners logs arising from the negligence of its (Seven Brothers) captain. Whether or not Art 1170 of the New Civil Code is applicable in the case at bar.

FACTS:
Is a stipulation in a charter party that the owners shall not be responsible for loss, split, short-landing, breakages and any kind of damages to the cargo 1 valid? This is the main question raised in this petition for review assailing the Decision of Respondent Court of Appeals 2 in CA-G.R. No. CV-20156 promulgated on October 15, 1991. The Court of Appeals modified the judgment of the Regional Trial Court of Valenzuela, Metro Manila, Branch 171, the dispositive portion of which reads: WHEREFORE, Judgment is hereby rendered ordering South Sea Surety and Insurance Co., Inc. to pay plaintiff the sum of TWO MILLION PESOS (P2,000,000.00) representing the value of the policy of the lost logs with legal interest thereon from the date of demand on February 2, 1984 until the amount is fully paid or in the alternative, defendant Seven Brothers Shipping Corporation to pay plaintiff the amount of TWO MILLION PESOS (2,000,000.00) representing the value of lost logs plus legal interest from the date of

HELD:
The petition is not meritorious. Validity of Stipulation is Lis Mota The charter party between the petitioner and private respondent stipulated that the (o)wners shall not be responsible for loss, split, short-landing, breakages and any kind of damages to the cargo. 10 The validity of this stipulation is the lis mota of this case. The provisions of our Civil Code on common carriers were taken from Anglo-American law. Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier. As a private carrier,

a stipulation exempting the owner from liability for the negligence of its agent is not against public policy, and is deemed valid. Indeed, where the reason for the rule ceases, the rule itself does not apply. The general public enters into a contract of transportation with common carriers without a hand or a voice in the preparation thereof. The riding public merely adheres to the contract; even if the public wants to, it cannot submit its own stipulations for the approval of the common carrier. Thus, the law on common carriers extends its protective mantle against one-sided stipulations inserted in tickets, invoices or other documents over which the riding public has no understanding or, worse, no choice. Compared to the general public, a charterer in a contract of private carriage is not similarly situated. It can and in fact it usually does enter into a free and voluntary agreement. In practice, the parties in a contract of private carriage can stipulate the carriers obligations and liabilities over the shipment which, in turn, determine the price or consideration of the charter. Thus, a charterer, in exchange for convenience and economy, may opt to set aside the protection of the law on common carriers. When the charterer decides to exercise this option, he takes a normal business risk. In fine, the respondent appellate court aptly stated that *in the case of] a private carrier, a stipulation exempting the owner from liability even for the negligence of its agents is valid. 24 Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages The Court notes that the foregoing articles are applicable only to the obligor or the one with an obligation to perform. In the instant case, Private Respondent Seven Brothers is not an obligor in respect of the cargo, for this obligation to bear the loss was shifted to petitioner by virtue of the charter party. This shifting of responsibility, as earlier observed, is not void. The provisions cited by petitioner are, therefore, inapplicable to the present case. In its memorandum, Seven Brothers argues that petitioner has no cause of action against it because this Court has earlier affirmed the liability of South Sea for the loss suffered by petitioner. Private respondent submits that petitioner is not legally entitled to collect twice for a single loss. 41 In view of the above disquisition upholding the validity of the questioned charter party stipulation and holding that petitioner may not recover from private respondent, the present issue is moot and academic. It suffices to state that the Resolution of this Court dated June 2, 1995 42 affirming the liability of South Sea does not, by itself, necessarily preclude the petitioner from proceeding against private respondent. An aggrieved party may still recover the deficiency for the person causing the loss in the event the amount paid by the insurance company does not fully cover the loss. Article 2207 of the Civil Code provides: Art. 2207. If the plaintiffs property has been insured, and he has received indemnity for the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency form the person causing the loss or injury. WHEREFORE, premises considered, the petition is hereby DENIED for its utter failure to show any reversible error on the part of Respondent Court. The assailed Decision is AFFIRMED.

YHT Realty Corp v. CA/ Feb 2005/ Cremoroza

FACTS:
McLoughlin, an Australian businessman-philanthropist who used to stay at Sheraton Hotel during his trips to the Philippines prior to 1984 when he met Tan. Tan befriended McLoughlin by showing him around, introducing him to important people, accompanying him in visitingstreet children and assisting him in buying gifts for charity works. Tan convinced McLoughlin to transfer from Sheraton Hotel to Tropicana where Lainez, Payam and Danilo Lopez were employed. Lopez served as manager of the hotel while Lainez and Payam had custody of the keys for the safety deposit boxes of Tropicana. Tan took care of McLoughlins booking at the Tropicana where he started staying during his trips to the Philippines from December 1984 to September 1987.On 30 October 1987, McLoughlin arrived from Australia and registered with Tropicana. He rented a safety deposit box as it was his practice to rent one every time he stays here. On 12 December 1987, before leaving for a brief trip to Hongkong, McLoughlin opened his safety deposit box with his key and with the key of the management and took therefrom the envelope containing Five Thousand US Dollars, the envelope containing Ten Thousand Australian Dollars and his passports and his credit cards.When he arrived in Hongkong, he opened the envelope which contained Five Thousand US Dollars (US$5,000.00) and discovered upon counting that only Three Thousand US Dollars were left. After returning to Manila, he checked out of Tropicana on 18 December 1987 and left for Australia. When he arrived in Australia, he discovered that the envelope with Ten Thousand US Dollars was short of Five Thousand US Dollars. He also noticed that the jewelry which he bought in Hongkong and stored in the safety deposit box upon his return to Tropicana was likewise missing, except for a diamond bracelet. When he came back to the Philippines on 4 April 1988, he asked Lainez if some money and/or jewelry which he had lost were found and returned to her or to the management. However, Lainez told him that no one in the hotel found such things and none were turned over to the management. He again registered at Tropicana and rented a safety deposit box. The same incident happened, when McLoughlin discovered the loss, he immediately confronted Lainez and Payam who admitted that Tan opened the safety deposit box with the key assigned to him. Tan admitted that she had stolen McLoughlins key and was able to open the safety deposit box with the assistance of Lopez, Payam and Lainez. Lopez also told McLoughlin that Tan stole the key assigned to McLoughlin while the latter was asleep.

ISSUE:
Whether or not YHT corporation is liable for the malfeasance which caused injury to McLoughlin. Whether or not a hotel may evade liability for the loss of items left with it for safekeeping by its guests, by having these guests execute written waivers holding the establishment or its employees free from blame for such loss

HELD:
(1) YES, Payam and Lainez, who were employees of Tropicana, had custody of the master key of the management when the loss took place. In fact, they even admitted that they assisted Tan on three separate occasions in opening McLoughlins safety deposit box. Tropicana had prior knowledge that a person aside from the registered guest had access to the safety deposit box. Yet the management failed to notify McLoughlin of the incident and waited for him to discover the taking before it disclosed the incident to him. Therefore, Tropicana should be held responsible for the damage

suffered by Mcloughlin by reason of the negligence of its employees. The management should have done enough efforts to guard the respondents things. Under Article 1170 of the Civil Code, those who in the performance of their obligations are guilty of fraud, negligence or delay and those in any manner contravene the tenor thereof, are liable for damages. If an employee is found negligent, it is presumed that the employer was negligent in selecting and/or supervising him for it is hard for the victim to prove the negligence of such employer. (2) The waiver executed by McLoughlin is null and void. Under Art. 2003, the hotel keeper cannot free himself from responsibility by posting notices to the effect that he is not liable for the articles brought by the guest. Any stipulation between the hotel-keeper and the guest whereby the responsibility of the formeras set forth in Articles 1998 to 2001 is suppressed or diminished shall be void. Nancy and Alex Go v. CA/ May 1997/ Mrequillo

This contention is primarily premised on Article 1883 of the Civil Code which states thus: Art. 1883. If an agent acts in his own name, the principal has no right of action against the persons with whom the agent has contracted; neither have such persons against the principal. In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal.

ISSUE: HELD:
In the instant case, the contract entered into is one of service, that is, for the video coverage of the wedding. Consequently, it can hardly be said that the object of the contract was the video equipment used. The use by petitioners of the video equipment of another person is of no consequence. As regards the award of damages, petitioners would impress upon this Court their lack of malice or fraudulent intent in the erasure of the tape. They insist that since private respondents did not claim the tape after the lapse of thirty days, as agreed upon in their contract, the erasure was done in consonance with consistent business practice to minimize losses. We are not persuaded. The fact that private respondents filed a case against petitioners belies such assertion. Clearly, petitioners are guilty of actionable delay for having failed to process the video tape. Thus, the erasure of the tape after the lapse of thirty days was unjustified. In this regard, Article 1170 of the Civil Code provides that those who in the performance of their obligations are guilty of fraud, negligence or delay, and those who is any manner contravene the tenor thereof, are liable for damages. Clearly, petitioners are guilty of contravening their obligation to said private respondents and are thus liable for damages. Generally, moral damages cannot be recovered in an action for breach of contract because this case is not among those enumerated in Article 2219 of the Civil Code. However, it is also accepted in this jurisdiction that liability for a quasi-delict may still exist despite the presence of contractual relations, that is, the act which violates the contract may also constitute a quasi-delict. Consequently, moral damages are recoverable for the breach of contract which was palpably wanton, reckless, malicious or in bad faith, oppressive or abusive. Petitioners act or omission in recklessly erasing the video coverage of private respondents wedding was precisely the cause of the suffering private respondents had. The trial court was correct in awarding the appellees moral damages, which was a great reduction from plaintiffs demand in the complaint in compensation for the mental anguish, tortured feelings, sleepless nights and humiliation that the appellees suffered and which under the circumstances could be awarded as allowed under Articles 2217 and 2218 of the Civil Code. The award of attorney s fees and litigation expenses are likewise proper, consistent with Article 2208 of the Civil Code.

FACTS:
Private respondents spouses Hermogenes and Jane Ong were married on June 7, 1981.The video coverage of the wedding was provided by petitioners at a contract price of P1,650.00. Three times thereafter, the newlyweds tried to claim the video tape of their wedding, which they planned to show to their relatives in the United States where they were to spend their honeymoon, and thrice they failed because the tape was apparently not yet processed. The parties then agreed that the tape would be ready upon private respondents return. When private respondents came home from their honeymoon, however, they found out that the tape had been erased by petitioners and therefore, could no longer be delivered. Furious at the loss of the tape which was supposed to be the only record of their wedding, private respondents filed on September 23, 1981 a complaint for specific performance and damages against petitioners before the Regional Trial Court. After a protracted trial, the court a quo rendered a decision, to wit: WHEREFORE, judgment is hereby granted: 2. Ordering the rescission of the agreement entered into between plaintiff Hermogenes Ong and defendant Nancy Go;

2. Declaring defendants Alex Go and Nancy Go jointly and severally liable to plaintiffs Hermogenes Ong and Jane C. Ong for the following sums: a) P450.00 , the down payment made at contract time; b) P75,000.00, as moral damages; c) P20,000.00, as exemplary damages; d) P5,000.00, as attorneys fees; and e) P2,000.00, as litigation expenses; Defendants are also ordered to pay the costs. Dissatisfied with the decision, petitioners elevated the case to the Court of Appeals which, dismissed the appeal and affirmed the trial courts decision. Hence, this petition. Petitioners contend that they acted only as agents of a certain Pablo Lim and, as such, should not have been held liable. In addition, they aver that there is no evidence to show that the erasure of the tape was done in bad faith so as to justify the award of damages.

Finally, petitioner Alex Go questions the finding of the trial and appellate courts holding him jointly and severally liable with his wife Nancy regarding the pecuniary liabilities imposed. He argues that when his wife entered into the contract with private respondent, she was acting alone for her sole interest. We find merit in this contention. Under Article 117 of the Civil Code (now Article 73 of the Family Code), the wife may exercise any profession, occupation or engage in business without the consent of the husband. In the instant case, we are convinced that it was only petitioner Nancy Go who entered into the contract with private respondent. Consequently, we rule that she is solely liable to private respondents for the damages awarded below, pursuant to the principle that contracts produce effect only as between the parties who execute them. WHEREFORE, the assailed decision dated September 14, 1993 is hereby AFFIRMED with the MODIFICATION that petitioner Alex Go is absolved from any liability to private respondents and that petitioner Nancy Go is solely liable to said private respondents for the judgment award. Costs against petitioners. SO ORDERED. Savellano et al v. Northwest Airlines/ July 2003/ Sandico

flight. The selection of who was to take which flight was handled via the computer reservation system, which took into account only the passengers final destination. The records show that respondent was impelled by sincere motives to get petitioners to their final destination by whatever was the most expeditious course in its judgment, if not in theirs. Though they claim that they were not accommodated on Flight 27 from Seattle to Tokyo because respondent had taken on Japanese passengers, petitioners failed to present convincing evidence to back this allegation. In the absence of convincing evidence, respondent could not be found guilty of bad faith. Petitioners have failed to show convincingly that they were rerouted by respondent to Los Angeles and Seoul because of malice, profit motive or self interest. Good faith is presumed, while bad faith is a matter of fact that needs to be proved by the party alleging it. In the absence of bad faith, ill will, malice or wanton conduct, respondent cannot be held liable for moral damages. Article 2219 of the Civil Code enumerates the instances in which moral damages may be awarded. In a breach of contract, such damages are not awarded if the defendant is not shown to have acted fraudulently or with malice or bad faith. Insufficient to warrant the award of moral damages is the fact that complainants suffered economic hardship or that they worried and experienced mental anxiety. Legaspi Oil Co. Inc. v. CA and Bernard Oseraos/ July 1993/ Jtan

FACTS:
Petitioners Victorino, Virginia and Deogracias, all surnamed Savellano, were on board Northwest Airlines Flight 27 bound for Manila when the pilot made an emergency landing in Seattle because of a fire which has started in one of planes engine. As a result, they were billeted at a hotel nearby and instructed that they can use the same boarding passes the next day. The family received a call, that midnight, advising them to be at the airport by 7:00 a.m. for their departure, thus making them skip breakfast. When petitioners reached the airport, they were belatedly advised that instead of flying to Manila they would have to board NW Flight bound to Los Angeles for a connecting flight to Manila. In Los Angeles, they found out that no flight was posted bound for Manila, thus it was only after complaining that the flight was changed to include Manila. On arrival at the Manila airport, Col. Delfin teased the petitioners for taking the longer and tiresome route to the Philippines. Thus, they filed a complaint for damages because they suffered inconvenience, embarrassment, and humiliation for taking a longer route. The RTC ruled in favor of and granted moral damages to petitioners because they were excluded from the Seattle-TokyoManila flight to accommodate several Japanese passengers for Japan. On appeal, the CA reversed the ruling of the lower court and held that there was no basis for the award of moral damages finding no bad faith, negligence or malice in transporting petitioners via the Seattle-Los Angeles-Seoul Manila route.

FACTS:
The petition for review on certiorari before us seeks to set aside the decision dated March 23, 1990 of the Court of Appeals in CA-G.R. CV No. 05828, penned by the Honorable Justice Abelardo Dayrit with whom Justices Javellana and Kalalo concurred, which dismissed petitioners complaint for damages. From the evidence presented by the plaintiff-appellee [now petitioner Legaspi Oil Company, Inc.], it appears that defendantappellant [now private respondent Bernard Oseraos] acting through his authorized agents, had several transactions with appellee Legaspi Oil Co. for the sale of copra to the latter. The price at which appellant sells the copra varies from time to time, depending on the prevailing market price when the contract is entered into. One of his authorized agents, Jose Llover, had previous transactions with appellee for the sale and delivery of copra. The records show that he concluded a sale for 70 tons of copra at P95.00 per 100 kilos on May 27, 1975 (Exhibit G-5) and another sale for 30 tons of P102.00 per 100 kilos on September 23, 1975 (Exhibit G-3). Subsequently, on November 6, 1975, another designated agent signed a contract in behalf of appellant for the sale of 100 tons of copra at P79.00 per 100 kilos with the delivery terms of 25 days effective December 15, 1975 (Exhibit G-2). At this point, it must be noted that the price of copra had been fluctuating (going up and down), indicating its unsteady position in the market. On February 16, 1976, appellants agent Jose Llover signed contract No. 3804 for the sale of 100 tons of copra at P82.00 per 100 kilos with delivery terms of 20 days effective March 8, 1976 (Exhibit G, for the plaintiff). As compared to appellants transaction on November 6, 1975, the current price agreed upon is slightly higher than the last contract. In all these contracts though, the selling price had always been stated as total price rather than per 100 kilos. However, the parties had understood the same to be per 100 kilos in their previous transactions.

ISSUE:
Whether or not petitioners are entitled to moral damages as a consequence of the breach by respondent airline of its air-carriage contract?

HELD:
The Supreme Court was not convinced when petitioners imputed impute oppression, discrimination, recklessness and malevolence to respondent. There is no persuasive evidence that they were maliciously singled out to fly the Seattle-Los Angeles-Seoul-Manila route. It appears that the passengers of the distressed flight were randomly divided into two groups. One group was made to take the Tokyo-Manila flight; and the other, the Los Angeles-Seoul-Manila

After the period to deliver had lapsed, appellant sold only 46,334 kilos of copra thus leaving a balance of 53,666 kilos as per running account card (Exhibit F). Accordingly, demands were made upon appellant to deliver the balance with a final warning embodied in a letter dated October 6, 1976, that failure to deliver will mean cancellation of the contract, the balance to be purchased at open market and the price differential to be charged against appellant. On October 22, 1976, since there was still no compliance, appellee exercised its option under the contract and purchased the undelivered balance from the open market at the prevailing price of P168.00 per 100 kilos, or a price differential of P86.00 per 100 kilos, a net loss of P46,152.76 chargeable against appellant. On November 3, 1976, petitioner filed a complaint against private respondent for breach of a contract and for damages. After trial, the then Court of First Instance (now Regional Trial Court) of Albay in Civil Case No. 5529 rendered a decision holding herein private respondent (then defendant) Oseraos liable for damages in the amount of P48,152.76, attorneys fees (P2,000), and litigation costs. Oseraos appealed to respondent Court which thereafter rendered a reversal decision on March 23, 1990, ordering the dismissal of the complaint.

negligence by the presence of deliberate intent, which is lacking in the latter. The next point of inquiry, therefore, is the amount of damages which private respondent is liable to pay petitioner. As aforementioned, on account of private respondents deliberate breach of his contractual obligation, petitioner was compelled to buy the balance of 53,666 kilos of copra in the open market at the then prevailing price of P168 per 100 kilograms thereby paying P46,152.76 more than he would have paid had private respondent completed delivery of the copra as agreed upon. Thus, private respondent is liable to pay respondent the amount of P46,152.76 as damages. In case of fraud, bad faith, malice, or wanton attitude, the guilty party is liable for all damages which may be reasonably attributed to the non performance of the obligation (Magat vs. Medialdea, 121 SCRA 418 [1983]). Inasmuch as the plaintiff company had failed to comply with a part of its booking contract, and as the defendant company had suffered damages as a result thereof, the former is liable to indemnify the damages caused to the latter, in accordance with the provisions of Article 1101 of the Civil Code (Article 1170 of our present Civil Code). WHEREFORE, the instant petition is hereby GRANTED. The decision of the respondent Court of Appeals in CA-G.R. CV No. 05828 is ANNULLED and SET ASIDE and the decision of the trial court in Civil Case No. 5529 REINSTATED, with costs against private respondent. Magat, Jr. v CA/ 4 Aug 2000/ Smier

ISSUE:
Whether or not private respondent Oseraos is liable for damages arising from fraud or bad faith in deliberately breaching the contract of sale entered into by the parties.

FACTS:
Private respondent Santiago A. Guerrero was President and Chairman of Guerrero Transport Services, a single proprietorship. Sometime in 1972, Guerrero Transport Services won a bid for the operation of a fleet of taxicabs within the Subic Naval Base, in Olongapo. As highest bidder, Guerrero was to provide radio controlled taxi service within the U. S. Naval Base, Subic Bay, utilizing as demand requires 160 operational taxis consisting of four wheel, four-door, four passenger, radio controlled, meter controlled, sedans, not more than one year On September 22, 1972, with the advent of martial law, President Ferdinand E. Marcos issued Letter of Instruction No. 1 (which ordered the seizure and control of all privately owned newspapers, magazines, radio and television facilities and all other media communication. In relation to this LOI, the Radio Control Office issued Administrative Circular No. 4 (which suspended the acceptance and processing of applications for radio station construction permits and for permits to own and/or possess radio transmitters and tranreceivers). On September 25, 1972, Guerrero and Victorino D. Magat Jr. , as General Manager of Spectrum Electronic Laboratories, a single proprietorship, executed a letter-contract for the purchase of transceivers at a quoted price of US$77,620.59, FOB Yokohoma. Victorino was to deliver the transceivers within 60 to 90 days after receiving notice from Guerrero of the assigned radio frequency, taking note of Government Regulations. On January 10, 1973, Guerrero applied for a letter of credit with the Metropolitan Bank and Trust Company. This application was not pursued. On March 27, 1973, Victorino, represented by his lawyer, Atty. Sinesio S. Vergara, informed Guererro that the order with the

HELD:
After a review of the case, we believe and thus hold, that private respondent is guilty of fraud in the performance of his obligation under the sales contract whereunder he bound himself to deliver to petitioner 100 metric tons of copra within twenty (20) days from March 8, 1976. However within the delivery period, Oseraos delivered only 46,334 kilograms of copra to petitioner, leaving an undelivered balance of 53,666 kilograms. Petitioner made repeated demands upon private respondent to comply with his contractual undertaking to deliver the balance of 53,666 kilograms but private respondent elected to ignore the same. In a letter dated October 6, 1976, petitioner made a final demand with a warning that, should private respondent fail to complete delivery of the balance of 53,666 kilograms of copra, petitioner would purchase the balance at the open market and charge the price differential to private respondent. Still private respondent failed to 25ishon his contractual obligation to deliver the remaining 53,666 kilograms of copra. On October 22, 1976, since there was still no compliance by private respondent, petitioner exercised its right under the contract and purchased 53,666 kilograms of copra, the undelivered balance, at the open market at the then prevailing price of P168.00 per 100 kilograms, a price differential of P86.00 per 100 kilograms or a total price differential of P46,152.76. The actuality of private respondents fraud cannot be gainsaid. In general, fraud may be defined as the voluntary execution of a wrongful act, or a wilfull omission, knowing and intending the effects which naturally and necessarily arise from such act or omission; the fraud referred to in Article 1170 of the Civil Code of the Philippines is the deliberate and intentional evasion of the normal 25ishonour25 of obligation; it is distinguished from

Japanese supplier has not been canceled. Should the contract be canceled, the Japanese firm would forfeit 30% of the deposit and charge a cancellation fee in an amount not yet known, Guerrero to bear the loss. Further, should the contract be canceled, Victorino would demand an additional amount equivalent to 10% of the contract price. Unable to get a letter of credit from the Central Bank due to the refusal of the Philippine government to issue a permit to import the transceivers, Guerrero commenced operation of the taxi cabs within Subic Naval Base, using radio units borrowed from the U.S. government (through the Subic Naval Base authorities). Victorino thus canceled his order with his Japanese supplier.

representations of the Radio Control Office and the Office of the President. True, Guerrero borrowed equipment from the Subic Naval Base authorities at zero cost. This does not automatically translate to bad faith. Guerrero was faced with the danger of the cancellation of his contract with Subic Naval Base. He borrowed equipment as a prudent and swift alternative. There was no proof that he resorted to this option with a deliberate and malicious intent to 26ishonour his contract with Victorino. An award of damages surely cannot be based on mere hypotheses, conjectures and surmises. Good faith is presumed, the burden of proving bad faith rests on the one alleging it. Petitioners did not effectively discharge the burden in this case. To recover moral damages in an action for breach of contract, the breach must be palpably wanton, reckless, malicious, in bad faith, oppressive or abusive. This is not the case here. Exemplary damages also cannot be awarded. Guerrero did not act in a wanton, fraudulent, reckless, oppressive or malevolent manner. Neither can actual damages be awarded. True, indemnification for damages contemplates not only actual loss suffered (damnum emergens) but unrealized profits (lucrum cessans) as well. However, to be entitled to adequate compensation for pecuniary loss, the loss must be actually suffered and duly proved. To recover actual damages, the amount of loss must not only be capable of proof, but must be proven with a reasonable degree of certainty. The claim must be premised upon competent proof or upon the best evidence obtainable, such as receipts or other documentary proof. Samar II Electric Cooperative, Inc. vs. Estrella Quijano/ April 2007/ Jylanan

ISSUE:
Whether the contract between Victorino and Guerrero for the purchase of radio transceivers was void In affirming the validity of the contract, whether the contract was breached.

HELD:
1. NO. The contract was valid; the radio transceivers were not contraband. Contraband generally refers to any property which is unlawful to produce or possess. It refers to goods which are exported and imported into a country against its laws. The Court of Appeals declared that the proposed importation of such goods was contrary to law, hence, the nullity of the contract. We do not agree. The contract was not void ab initio. Nowhere in the LOI and Admin. Circular is there an express ban on the importation of transceivers. The LOI and Administrative Circular did not render radios and transceivers illegal per se. The Administrative Circular merely ordered the Radio Control Office to suspend the acceptance and processing . of applications for permits to possess, own, transfer, purchase and sell radio transmitters and transceivers Therefore, possession and importation of the radio transmitters and transceivers was legal provided one had the necessary license for it. Transceivers were not prohibited but merely regulated goods. The LOI and Administrative Circular did not render the transceivers outside the commerce of man. They were valid objects of the contract. 2. NO. The law provides that *w+hen the service (required by the contract) has become so manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part. Here, Guerreros inability to secure a letter of credit and to comply with his obligation was a direct consequence of the denial of the permit to import. For this, he cannot be faulted. Even if we assume that there was a breach of contract, damages cannot be awarded. Damnum absque injuria. There was no bad faith. Bad faith does not simply connote bad judgment or negligence. It imports a dishonest purpose or some moral obliquity and conscious doing of wrong. It means a breach of a known duty through some motive or interest or ill will that partakes of the nature of fraud. Guerrero honestly relied on the

FACTS:
Spouses Norberto and Estrella Quijano were customers of Samar II Electric Cooperaive, Inc. SAMELCO (for Brevity) noticed a reduction by more or less 50% in the electric consumption of the spouses from April 1983 to March 1984, hence, they sent an inspection team headed by Baltazar Dacula. The team discovered that the electric meter of the spouses has no seals which were previously attached to it and that the rotating disc was adjusted upward causing it to stop intermittently. The team removed the device and cut-off the services. The removal was made without the knowledge of the spouses and was only made known by the spouses 17 year old daughter. The following day, the spouses sought for the reconnection of their services but it was denied rather SAMELCO required them to pay penalty charges for allegedly tampering with the electric meter. The spouses filed a complaint for damages with the RTC against SAMELCO and Dacula. The RTC held SAMELCO AND Dacula solidarily liable for damages. On appeal, the Court of Appeals reversed the decision of the RTC.

ISSUE:
Whether SAMELCO and Daculo should be solidarily liable for damages

HELD:
No. Under Presidential Decree No. 401 (P.D. No. 401), the remedies available to it were merely the conduct of inspections of electric meters and the criminal prosecution of those erring consumers who

were found to have tampered with their electric meters. Recourse to the remedy of differential billing with disconnection was subject to strict regulation, specifically under Sections 96 and 97 of Revised General Order No. 1, which provide: Sec. 96. Refusal or discontinuance of service. A public service shall not refuse or discontinue service to an applicant, or customer, who is not in arrears to the public service, even though there are unpaid charges due from the premises occupied by applicant, or customer, on account of unpaid bill of a prior tenant, unless there is evidence of conspiracy between them to defraud public service. Sec. 97. Payment of bills. A public service may require that bills for service be paid within a specified time after rendition. When the billing period covers a month or more, the minimum time allowed will be ten days and upon expiration of the specified time, service may be discontinued for the non-payment of bills, provided that a 48-hours written notice of such disconnection has been given the customer; Provided, however, That disconnections of service shall not be made on Sundays and official holidays and never after 2 p.m., or any working day; Provided, further, that if at the moment the disconnection is to be made the customer tenders payment of the unpaid bill to the agent or employee of the operator who is to effect the disconnection, the said agent or employee shall be obliged to accept tendered payment and issue a temporary receipt for the amount and shall desist from disconnecting the service. Significantly, electric cooperatives were not permitted to resort to outright disconnection without prior recourse to differential billing with notice. The law in force at the time of the disconnection complained of in this case is P.D. No. 401. Hence, the requirements under said law are applicable to this case, specifically that disconnection be resorted to only after notice of differential billing as provided under Sections 96 and 97 above. There is no question that herein petitioners resorted to disconnection without prior recourse to charging respondents differential billing and affording the latter opportunity to settle the same. This arbitrary action of petitioners rendered them in bad faith. Spouses Quisumbing v. MERALCO/ April 2002/ Yap

defendant-appellant temporarily disconnect electrical services that will only be restored unless the couple will pay P178, 875 representing the differential bill. However, at around 2pm, the electric service was reconnected as instructed by defendantappellants officer. Plaintiff-appellees filed a complaint for damages with a prayer for the issuance of a writ of preliminary injunction despite the immediate reconnection.

ISSUE:
Whether or not the act of the defendant-appellants inspectors in immediately disconnecting the electrical service of MERALCO constituted a violation of rights of the plaintiffs-appellees, making the respondent liable to pay damages to petitioner.

HELD:
Yes. Respondent had no legal right to immediately disconnect petitioners electrical supply without observing the requisites of law which, in turn, are akin to due process. Public utilities have a clear duty to see to it that they do not violate nor transgress the rights of the consumers. Any act on their part that militates against the ordinary norms of justice and fair play is considered an infraction that gives rise to an action for damages. Such is the case at bar. Hence, the Supreme Court partly granted the petition and ordered plaintiff to pay respondent the billing differential of P193,332.96 while latter is ordered to pay petitioners moral and exemplary damages including attorneys fees. Moral damages may be recovered when rights of individuals including right against the deprivation of property without due process of law are violated. Exemplary damages on the other hand are imposed by way of example or correction for public. SC recognized the effort of MERALCO in preventing illegal use of electricity. However, any action must be done in strict observance of the rights of the people. Under the law, the Manila Electric Company (Meralco) may immediately disconnect electric service on the ground of alleged meter tampering, but only if the discovery of the cause is personally witnessed and attested to by an officer of the law or by a duly authorized representative of the Energy Regulatory Board. During the inspection, no government official or ERB representative was present. Petitioners claim for actual damages was not granted for failure to supply proof and was premised only upon Lornas testimony. These are compensation for an injury that will put the injure position where it was before it was injured.

FACTS:
This is a petition for review filed by petitioners regarding the February 1, 2000 Decision and the April 10, 2000 Resolution of the Court of Appeals where the decision of the trial court is set aside, the complaint against MERALCO is dismissed, and plaintiffsappellees are ordered to pay defendant-appellant the differential billing of P193,332.00 representing the value of used but unregistered electrical consumption. Spouses Antonio and Lorna Quisumbing, plaintiffs-appellees in this case, are the owners of a house and lot located at No. 94 Greenmeadows Avenue, Quezon City which they bought from Ms. Carmina Serapio Santos. On March 3, 1995, around 9am, defendantappellants inspectors headed by Emmanuel C. Orlina were assigned to conduct a routine on the spot inspection of all single phase meters at the house owned by the spouses. The inspectors performed their standard operating procedure by first asking permission from the secretary of the couple before they proceed to the inspection of the house. Later, the inspectors found out that there were few illegal markings on the meter which made