Stronghold Insurance v Republic Asahi

protecting the interest of consumers. Moreover, Section 201 of the National Building Code gives the

Facts: Republic Asahi Glass contracts with JDS for the construction of roadways and drainage
systems in RAG's compound. JDS does so and files the required compliance bond with Stronghold
Insurance acting as surety. The contract is 5.3M the bond is 795k. JDS falls woefully behind
schedule, prompting RAG to rescind the contract and demand the compliance bond. The owner of
JDS dies and JDS disappears. SHI refuses to pay the bond claiming that the death of JDS owner
extinguishes the obligation. Is SHI right?
Held: As a general rule, the death of either the creditor or the debtor does not extinguish the
obligation.[8]Obligations are transmissible to the heirs, except when the transmission is prevented

responsibility for the administration and enforcement of the provisions of the Code, including the
imposition of penalties for administrative violations thereof to the Secretary of Public Works. This
is not being strictly followed as the LGUs are tasked to discharge the regulatory powers of DPWH
instead of DPWH instead.

As such, Senate Committee recommended that: 1) Office of Solicitor General should institute the

by the law, the stipulations of the parties, or the nature of the obligation.[9]Only obligations that

action to enjoin the collction of parking fees and enforce the sanctions for violation of National

are personal[10] or are identified with the persons themselves are extinguished by death.

Building Code; 2) DTI pursuant to RA 7394 should enforce the provisions of Code relative to

[11] Furthermore, The liability of petitioner is contractual in nature, because it executed a

performance bond, As a surety, petitioner is solidarily liable with Santos in accordance with the
Civil Code

parking; and 3) Congress should amend and update the National Building Code to prohibit the
collection of parking fees and its waiver of liability.

G.R. No. 177056 September 18, 2009

THE OFFICE OF THE SOLICITOR GENERAL, Petitioner,

Respondent SM Prime assailed the recommendation of the Committee and filed a Petition for
Declaratory Relief under Rule 63 of the Revised Rules of Court against DPWH and local building

vs.

officials, contending that: 1) Rule XIX of Implementing Rules and Regulations of National Building

AYALA LAND INCORPORATED, ROBINSONS LAND CORPORATION, SHANGRI-LA PLAZA

Code is unconstitutional and void; 2) respondent has the legal right to lease parking spaces; and 3)

CORPORATION and SM PRIME HOLDINGS, INC., Respondents.

National Building Code IRR is ineffective as it was not published for 3 consecutive weeks in
newspaper of general circulation as mandated by Section 211 of PD 1096.

Facts:
OSG then filed a Petition for Declaratory Relief and Injunction (with Prayer for Temporary
This is a Petition for Review on Certiorari, under Rule 45 of the Revised Rules of Court, filed by

Restraining Order and Writ of Preliminary Injunction) to the RTC against respondents, prohibiting

petitioner seeking the reversal and setting aside of the decision of CA which affirmed the decision

them from collecting parking fees and contending that their practice of charging parking fees is

of RTC, which denied the Motion for Reconsideration of OSG. The RTC adjudged that respondents

violative of National Building Code.

Ayala Land Incorporated (Ayala Land), Robinsons Land Corporation (Robinsons), Shangri-la Plaza
Corporation (Shangri-la), and SM Prime Holdings, Inc. (SM Prime) could not be obliged to provide

The RTC held that: 1) OSG has the capacity to institute the proceeding it being a controversy of

free parking spaces in their malls to their patrons and the general public.

public welfare; 2) a petition for declaratory relief is proper since all the requisites are present; 3)
the Building Code with its IRR does not necessarily impose that parking spaces shall be free of

The Senate Committee on Trade and Commerce found that the collection of parking fees by

charge and providing parking spaces for free can be considered as unlawful taking of property

shopping malls is contrary to National Building Code and figuratively speaking, the Code has

right without just compensation; and 4) there was no sufficient evidence to justify any award for

expropriated the land for parking. Also, Committee stated that the collection of parking fees

damages. They deemed that the respondents are not obligated to provide parking spaces free of

would be against Article II of RA 9734 (Consumer Act of the Philippines) as to the States policy of

charge.

OSG appealed the decision to CA, saying that RTC erred in holding that the National Building

1. No. The CA was correct in affirming the ruling of RTC, and the respondents are not obliged to

Code did not intend the parking spaces to be free of charge. On the otherhand, respondent SM

provide free parking spaces. SC found no merit in the OSGs petition:

filed a separate appeal to the CA, contending that: 1) RTC erred in failing to declare Rule XIX of

Sec 803 of National Building Code.

IRR as unconstitutional; 2) RTC erred in failing to declare IRR ineffective for not having been
published as required by law; 3) RTC erred in dismissing the OSGs petition for failure to exhaust
administrative remedies; and 4) RTC erred in failing to declare that OSG has no legal standing as it
is not a real party-in-interest.

Percentage of Site Occupancy states that maximum site occupancy shall be governed by the use, type
of construction, and height of the building and the use, area, nature, and location of the site; and
subject to the provisions of the local zoning requirements and in accordance with the rules and
regulations promulgated by the Secretary.
RULE XIX PARKING AND LOADING SPACE REQUIREMENTS

CA denied the appeals of both petitioners and respondents on the following grounds: 1) OSG did
not fail to exhaust administrative remedies and that an administrative review is not a condition
precedent to judicial relief where the question in dispute is purely a legal one and nothing of an

Pursuant to Section 803 of the National Building Code (PD 1096) providing for maximum site
occupancy, the following provisions on parking and loading space requirements shall be observed:

administrative nature is to be or can be done; 2) the validity of National Building Code IRR cannot

1. The parking space ratings listed below are minimum off-street requirements for specific

be proceeded as it was not discussed in RTC and the controversy could be settled on other

1.1 The size of an average automobile parking slot shall be computed as 2.4 meters by 5.00 meters

grounds without touching the issue of validity since the courts should refrain from passing upon
the constitutionality of a law; and 3) Section 803 of National Building Code and Rule XIX of IRR
are clear that they are only intended to control the occupancy of areas and structures, and in the
absence of provision of law, respondents could not be obliged to provide parking spaces free of
charge.

As such, OSG presented itself to SC for the instant Petition for Review.

Issues:

uses/occupancies for buildings/structures:

for perpendicular or diagonal parking, 2.00 meters by 6.00 meters for parallel parking. A truck or bus
parking/loading slot shall be computed at a minimum of 3.60 meters by 12.00 meters. The parking
slot shall be drawn to scale and the total number of which shall be indicated on the plans and
specified whether or not parking accommodations, are attendant-managed. (See Section 2 for
computation of parking requirements).
xxxx
1.7 Neighborhood shopping center 1 slot/100 sq. m. of shopping floor area
SECTION 102. Declaration of Policy
It is hereby declared to be the policy of the State to safeguard life, health, property, and public
welfare, consistent with the principles of sound environmental management and control; and to this
end, make it the purpose of this Code to provide for all buildings and structures, a framework of

1. Whether the CA erred in affirming the ruling of RTC that respondents are not obliged to provide
free parking spaces to their customers or the public.

minimum standards and requirements to regulate and control their location, site, design, quality of
materials, construction, use, occupancy, and maintenance.
The requirement of free-of-charge parking, the OSG argues, greatly contributes to the aim of
safeguarding life, health, property, and public welfare, consistent with the principles of sound

2. Whether the petition of OSG for prohibiting the collection of parking fees is a valid exercise of
the police power of State.

Held:

environmental management and control. Adequate parking spaces would contribute greatly to
alleviating traffic congestion when complemented by quick and easy access thereto because of freecharge parking. Moreover, the power to regulate and control the use, occupancy, and maintenance of
buildings and structures carries with it the power to impose fees and, conversely, to control
partially or, as in this case, absolutely the imposition of such fees.

The explicit directive of the above is that respondents, as operators/lessors of neighborhood

into effect the law as it has been enacted, and it cannot be extended to amend or expand the

shopping centers, should provide parking and loading spaces with the minimum ratio of one slot

statutory requirements or to embrace matters not covered by the statute. Administrative

per 100 square meters of shopping floor area. There is nothing therein pertaining to the collection

regulations must always be in harmony with the provisions of the law because any resulting

(or non-collection) of parking fees by respondents. In fact, the term parking fees cannot even be

discrepancy between the two will always be resolved in favor of the basic law.

found at all in the entire National Building Code and its IRR. One rule of statutory construction is
that if a statute is clear and unequivocal, it must be given its literal meaning and applied without

2. No. The petition of OSG to prohibit collection of parking fees is not a valid exercise of the police

any attempt at interpretation. Since Section 803 of the National Building Code and Rule XIX of its

power of State.

IRR do not mention parking fees, then simply, said provisions do not regulate the collection of the
same

It is not sufficient for the OSG to claim that the power to regulate and control the use, occupancy,
and maintenance of buildings and structures carries with it the power to impose fees and,

The OSG cannot rely on Section 102 of the National Building Code to expand the coverage of

conversely, to control, partially or, as in this case, absolutely, the imposition of such fees. Firstly,

Section 803 of the same Code and Rule XIX of the IRR, so as to include the regulation of parking

the fees within the power of regulatory agencies to impose are regulatory fees. It has been settled

fees. The OSG limits its citation to the first part of Section 102 of the National Building Code

law in this jurisdiction that this broad and all-compassing governmental competence to restrict

declaring the policy of the State to safeguard life, health, property, and public welfare, consistent

rights of liberty and property carries with it the undeniable power to collect a regulatory fee. It

with the principles of sound environmental management and control; but totally ignores the

looks to the enactment of specific measures that govern the relations not only as between

second part of said provision, which reads, and to this end, make it the purpose of this Code to

individuals but also as between private parties and the political society. True, if the regulatory

provide for all buildings and structures, a framework of minimum standards and requirements to

agencies have the power to impose regulatory fees, then conversely, they also have the power to

regulate and control their location, site, design, quality of materials, construction, use, occupancy,

remove the same. Even so, it is worthy to note that the present case does not involve the

and maintenance. While the first part of Section 102 of the National Building Code lays down the

imposition by the DPWH Secretary and local building officials of regulatory fees upon respondents;

State policy, it is the second part thereof that explains how said policy shall be carried out in the

but the collection by respondents of parking fees from persons who use the mall parking facilities.

Code. Section 102 of the National Building Code is not an all-encompassing grant of regulatory

Secondly, assuming arguendo that the DPWH Secretary and local building officials do have

power to the DPWH Secretary and local building officials in the name of life, health, property, and

regulatory powers over the collection of parking fees for the use of privately owned parking

public welfare. On the contrary, it limits the regulatory power of said officials to ensuring that the

facilities, they cannot allow or prohibit such collection arbitrarily or whimsically. Whether allowing

minimum standards and requirements for all buildings and structures, as set forth in the National

or prohibiting the collection of such parking fees, the action of the DPWH Secretary and local

Building Code, are complied with.

building officials must pass the test of classic reasonableness and propriety of the measures or
means in the promotion of the ends sought to be accomplished.

Consequently, the OSG cannot claim that in addition to fixing the minimum requirements for
parking spaces for buildings, Rule XIX of the IRR also mandates that such parking spaces be

Without using the term outright, the OSG is actually invoking police power to justify the regulation

provided by building owners free of charge. If Rule XIX is not covered by the enabling law, then it

by the State, through the DPWH Secretary and local building officials, of privately owned parking

cannot be added to or included in the implementing rules. The rule-making power of

facilities, including the collection by the owners/operators of such facilities of parking fees from

administrative agencies must be confined to details for regulating the mode or proceedings to carry

the public for the use thereof. The Court finds, however, that in totally prohibiting respondents

said facilities, is already tantamount to a taking or confiscation of their properties. The State is not

from collecting parking fees, the State would be acting beyond the bounds of police power.

only requiring that respondents devote a portion of the latters properties for use as parking
spaces, but is also mandating that they give the public access to said parking spaces for free. Such

Police power is the power of promoting the public welfare by restraining and regulating the use of

is already an excessive intrusion into the property rights of respondents. Not only are they being

liberty and property. It is usually exerted in order to merely regulate the use and enjoyment of the

deprived of the right to use a portion of their properties as they wish, they are further prohibited

property of the owner. The power to regulate, however, does not include the power to prohibit. A

from profiting from its use or even just recovering therefrom the expenses for the maintenance and

fortiori, the power to regulate does not include the power to confiscate. Police power does not

operation of the required parking facilities.

involve the taking or confiscation of property, with the exception of a few cases where there is a
necessity to confiscate private property in order to destroy it for the purpose of protecting peace

In conclusion, the total prohibition against the collection by respondents of parking fees from

and order and of promoting the general welfare; for instance, the confiscation of an illegally

persons who use the mall parking facilities has no basis in the National Building Code or its IRR.

possessed article, such as opium and firearms.

The State also cannot impose the same prohibition by generally invoking police power, since said
prohibition amounts to a taking of respondents property without payment of just compensation.

When there is a taking or confiscation of private property for public use, the State is no longer
exercising police power, but another of its inherent powers, namely, eminent domain. Eminent

WHEREFORE, the instant Petition for Review on Certiorari is hereby DENIED. The Decision dated 25

domain enables the State to forcibly acquire private lands intended for public use upon payment of

January 2007 and Resolution dated 14 March 2007 of the Court of Appeals in CA-G.R. CV No.

just compensation to the owner.

76298, affirming in toto the Joint Decision dated 29 May 2002 of the Regional Trial Court of Makati
City, Branch 138, in Civil Cases No. 00-1208 and No. 00-1210 are hereby AFFIRMED. No costs.

Normally, of course, the power of eminent domain results in the taking or appropriation of title to,

may not be availed of only to impose a burden upon the owner of condemned property, without

PNB vs. CA and BP Mata and Co.

This is a case wherein a well-known financial institution had an internal problem and they only
realized and took action to regularize it, seven years too late

loss of title and possession. It is a settled rule that neither acquisition of title nor total destruction

I. CASE FACTS

and possession of, the expropriated property; but no cogent reason appears why the said power

of value is essential to taking. It is usually in cases where title remains with the private owner that
inquiry should be made to determine whether the impairment of a property is merely regulated or
amounts to a compensable taking. A regulation that deprives any person of the profitable use of
his property constitutes a taking and entitles him to compensation, unless the invasion of rights is
so slight as to permit the regulation to be justified under the police power. Similarly, a police
regulation that unreasonably restricts the right to use business property for business purposes
amounts to a taking of private property, and the owner may recover therefor.

Although in the present case, title to and/or possession of the parking facilities remain/s with
respondents, the prohibition against their collection of parking fees from the public, for the use of

A US company, Star Kist Foods, Inc. USA (Star Kist) engaged local B.P. Mata Co. Inc (Mata) in
providing manning and crewing services for their company located in the United States. Payment is
settled through telegraphic transfer involving several banks namely Security Pacific National Bank
(SEPAC) of Los Angeles as the bank of Star Kist, Philippine National Bank (PNB) as the bank with
the agency arrangement with Star Kist, and Insular Bank of Asia and America (IBAA) as the bank
of Mata.
February 24, 1975: PNB issued a Cashiers Check amounting to $1,400 for the account of Mata
representing payment for services rendered by Mata to Star Kist.
March 11, 1975: PNB effected another payment amounting to $14,000, which was said to be
another payment made by Star Kist. Prior February 24, the PNB International Department
received notice for payment for $14,000 to Mata but they returned the missive to SEPAC Bank
noting an error. It was cleared by SEPAC Bank that the notice should only be for $1,400 and NOT
$14,000.
May 31, 1981: PNB requested Mata for refund of $14,000, which was mistakenly paid to them.
February 4, 1982: PNB filed a civil case for collection and refund of $14,000 against Mata using
Article 14561 as basis for their argument.

III. ANALYSIS
II. DECISION OF THE COURTS

Regional Trial Court

The RTC dismissed the complaint stating that the case falls under Article 21542 instead of Article
1456. They ruled that the trust code does not apply in this case by using the technical definition of
trust that is a right of property, real or personal, held by one party for the benefit of another, that
there is a fiduciary relation between a trustee and a cestui que trust as regards certain property,
real, personal, money or chooses in action.
Court of Appeals
PNB elevated the case to the Court of Appeals wherein said court affirmed the decision of the lower
court. The appellate court also added that the case would not prosper due to the prescription
provided in Article 1145 that states:
Art. 1145. The following actions must be commenced within six years:
(1) Upon an oral contract;
(2) Upon a quasi-contract. (n)

It is becoming clear to me that the law does not tolerate negligence. It maybe argued that it is not
just nor equitable for PNB not be able to claim the money that they mistakenly paid Mata, but they
have to suffer the cost of their own negligence.
Working for a bank for the past 4 years, we have been taught to be meticulous and careful in every
transaction that we undertake. Audit, spot checks and counter checkings have been established to
prevent erroneous entries and mitigate possible mistakes. Fear motivates us actually. Fear that
well lose our jobs or that well find ourselves defendants in a civil case.
Thats why I find it really unbelievable that a big bank, such as PNB, should only spot its error 7
years after the transaction.
There also is a thing, not only for banks, but also for companies, called a fiscal year. At the end of
a fiscal year, everything and I mean EVERYTHING should be balanced. $14,000 is a big amount,
which should have been easily traced.

Supreme Court

Footnotes:
1 Art. 1456: If property is acquired through mistake or fraud, the person obtaining it is, by force of
law, considered a trustee of an implied trust for the benefit of the person from whom the property
comes.

The Supreme Court applied both Art. 1456 which is on constructive trust and Art. 2154 which is
on solutio indebiti to the case.

2Art. 2154: If something is received when there is no right to demand it, and it was unduly
delivered through mistake, the obligation to return it arises.

They determined that there is constructive trust involved enforcing Art. 1456. A constructive trust
is a form of implied trust. Implied trusts are those which, without being expressed, are deducible
from the nature of the transaction as matters of the intent or which are superinduced on the
transaction by operation of the law as matters of equity, independently of the particular intention
of the parties. Constructive trusts occur when there is neither a promise nor any fiduciary
relation to speak of and the so-called trustee neither accepts any trust nor intends holding the
property for the beneficiary. Following the aforementioned definitions, there is trust involved.
There was no expression or contract stipulating that Mata and PNB have a fiduciary relationship,
however, the point that there was a transaction that would infer such an arrangement (payment),
constructive trust has been established.
The Supreme Court also adapted Art. 2154 for the case clearly falls in this article. Mata received
money, which had not right to demand it, and there was also a mistake of delivery.
. However, due to the prescription of Art. 2154, quasi-contract can no longer be an alternative
leaving constructive trust as the applicable option.
As for the issue whether or not PNB can still claim the $14,000, the Supreme Court ruled that it
couldnt be possible. Even though the case is still within the prescription period, the petitioner
cannot do so because they were proved to be negligent in exercising their legal right. It took them
seven years to realize their error and for a big bank such as PNB, that is very remarkable. Banks
are subject to audits and an error such as that should have been spotted within the year. The
bank should, therefore, bear the cost of their own negligence.

Padcom Condominium Corporation vs. Ortigas Center Association, Inc.

G.R. No. 146807. May 9, 2002.
Facts:
Petitioner Padcom Condominium Corporation (PADCOM) owns and manages the Padilla
Office Condominium Building (PADCOM BUILDING). The land on which the building stands was
originally acquired from the Ortigas & Company, Limited Partnership, by Tierra Development
Corporation (TDC) under a Deed of Sale with a condition that the transferee and its successor-ininterest must become members of an association for realty owners and long-term lessees in the
area later known as the Ortigas Center. Subsequently, the said lot, together with the improvements
thereon, was conveyed by TDC in favor of PADCOM in a Deed of Transfer.

Thereafter, respondent Ortigas Center Association, Inc. (ASSOCIATION) was organized to

advance the interests and promote the general welfare of the real estate owners and long-term
lessees of the lots in the Ortigas Center and sought the collection of membership dues from
PADCOM. In view of PADCOM'S failure and refusal to pay its arrears in monthly dues, the

Association filed a complaint for collection of sum of money before the trial court, but the same

Facts: The parties entered into a contract for a piece of work when they executed the supplemental

was dismissed. On appeal, the Court of Appeals reversed and set aside the trial court's dismissal.

agreement. Respondent Primetown Property Group, Inc. awarded the contract for the structural

Hence, this petition.

works of its 32-storey Makati Prime Tower (MPT) to petitioner Titan-Ikeda Construction and
Development Corporation. Titan-Ikeda as contractor bound itself to execute the project for

Issue:

Whether or not PADCOM is unjustly enriched by the improvements made by the

Association, thus requiring the former to pay dues to the latter.

respondent, the owner/developer, in consideration of a price certain P130M. (The supplemental

agreement was reciprocal in nature because the obligation of respondent to pay the entire contract

Held:

Yes. The Supreme Court held that as resident and lot owner in the Ortigas area, PADCOM
was definitely benefited by the Association's acts and activities to promote the interests and welfare
of those who acquire property therein or benefit from the acts or activities of the Association.

price depended on the obligation of petitioner to complete the project.)

ITI estimated that petitioner should have accomplished 48.71% of the project as of the October 12,
Generally, it may be said that a quasi-contract is based on the presumed will or intent of
the obligor dictated by equity and by the principles of absolute justice. Examples of these
principles are: (1) it is presumed that a person agrees to that which will benefit him; (2) nobody
wants to enrich himself unjustly at the expense of another; or (3) one must do unto others what he
would want others to do unto him under the same circumstances.

1995 takeover date. Petitioner repudiated this figure but qualifiedly admitted that it did not finish
the project. Records showed that respondent did not merely take over the supervision of the
project but took full control thereof.

Because the parties agreed to extinguish the supplemental agreement, they were no longer
required to fully perform their respective obligations. Petitioner was relieved of its obligation to
complete the project while respondent was freed of its obligation to pay the entire contract price.

Finally, PADCOM's argument that the collection of monthly dues has no basis since
there was no board resolution defining how much fees are to be imposed deserves scant
consideration. Suffice it is to say that PADCOM never protested upon receipt of the earlier
demands for payment of membership dues. In fact, by proposing a scheme to pay its obligation,
PADCOM cannot belatedly question the Association's authority to assess and collect the fees in
accordance with the total land area owned or occupied by the members, which finds support in a
resolution dated 6 November 1982 of the Association's incorporating directors and Section 2 of its

Issue:
WON there was delay on the part of petitioner Titan-Ikeda? NO

Held:
Mora or delay is the failure to perform the obligation in due time because of dolo (malice) or culpa
(negligence). A debtor is deemed to have violated his obligation to the creditor from the time the
latter makes a demand. Once the creditor makes a demand, the debtor incurs mora or delay.

By-laws.
Construction Contact:
TITAN-IKEDA CONST. vs. PRIMETOWN
544 SCRA 466 (Art. 1169)

If at any time during the effectivity of this contract, [PETITIONER] shall incur unreasonable delay
or slippages of more (15%) of the scheduled work program, [RESPONDENT] should notify in writing

to accelerate the work and reduce, if not erase, slippage. If after the lapse of sixty (60) days from
receipt of such notice, [PETITIONER] fails to rectify the delay or slippage, [RESPONDENT] shall
have the right to terminate this contract except in cases where the same was caused by force

Subsequently, both parties agreed that Primetown will take over the project.
Petitioner then demanded for the payment due him in relation to its partial performance of its
obligation. For failure of Primetown to pay despite repeated demands, petitioner filed a case for
specific performance against Primetown. Meanwhile, Primetown demanded reimbursement for the
amount it spent in having the project completed.

majeure.
ISSUE:
Respondent never sent petitioner a written demand asking it to accelerate work on the project and
reduce, if not eliminate, slippage. If delay had truly been the reason why respondent took over the
Whether or not Titzn-Ikeda is responsible for the projects delay.

project, it would have sent a written demand as required by the construction contract. Moreover,
according to the October 12, 1995 letter-agreement, respondent took over the project for the sole
reason that such move was part of its (respondents) long-term plan.

RULING:

Because petitioner did not consent to the change of the designated construction manager, ITIs
September 7, 1995 report could not bind it.

It was found that because respondent modified the MPT's architectural

design, petitioner had to adjust the scope of work. Moreover, respondent belatedly informed

Petitioner did not incur delay in the performance of its obligation.

TITAN-IKEDA CONSTRUCTION vs. PRIMETOWN
G.R. No. 158768
FEBRUARY 12, 2008

petitioner of those modifications. It also failed to deliver the concrete mix and rebars according to
schedule. For this reason, petitioner was not responsible for the project's delay. Mora or delay is
the failure to perform the obligation in due time because of dolo (malice) or culpa (negligence). A
debtor is deemed to have violated his obligation to the creditor from the time the latter makes a
demand. Once the creditor makes a demand, the debtor incurs mora or delay. Respondent never
sent petitioner a written demand asking it to accelerate work on the project and reduce, if not
eliminate, slippage. In view of the foregoing, we hold that petitioner did not incur delay in the
performance of its obligation.

FACTS:
Metropolitan Bank vs. Absolute Management Corp. | G.R. No. 170498 | January 9, 2013
In 1992, respondent Primetown Property Group, Inc. awarded the contract for
the structural works of its 32-storey Makati Prime Tower (MPT) to petitioner Titan-Ikeda
Construction and Development Corporation. In September 1995, respondent engaged the services
of Integratech, Inc. (ITI), an engineering consultancy firm, to evaluate the progress of the project.
In its report, ITI informed respondent that petitioner, at that point, had only accomplished 31.89%
of the project (or was 11 months and six days behind schedule). Meanwhile, petitioner and
respondent were discussing the possibility of the latters take over of the projects supervision.
Despite ongoing negotiations, respondent did not obtain petitioners consent in hiring ITI as the
projects construction manager. Neither did it inform petitioner of ITIs September 7, 1995 report.

Facts: Metrobank deposited the AMC checks to Ayala Lumber and Hardwares account; because of
Chuas control over AMCs operations, Metrobank assumed that the checks payable to AMC could
be deposited to Ayala Lumber and Hardwares account.
Ayala Lumber and Hardware had no right to demand and receive the checks that were deposited to
its account; despite Chuas control over AMC and Ayala Lumber and Hardware, the two entities are
distinct, and checks exclusively and expressly payable to one cannot be deposited in the account of
the other.
In its fourth-party complaint, Metrobank claims that Chuas estate should reimburse it if it
becomes liable on the checks that it deposited to Ayala Lumber and Hardwares account.

Issue: Whether or not Ayala Lumber must return the amount of said checks to Metrobank.
Held: Metrobank acted in a manner akin to a mistake when it deposited the AMC checks to Ayala
Lumber and Hardwares account because it assumed that the checks payable to AMC could be
deposited to Ayala Lumber and Hardwares account. This disjunct created an obligation on the
part of Ayala Lumber and Hardware, through its sole proprietor, Chua, to return the amount of
these checks to Metrobank.
This fulfills the requisites of solutio indebiti. Metrobanks fourth-party complaint falls under the
quasi-contracts enunciated in Article 2154 of the Civil Code. Article 2154 embodies the concept
"solutio indebiti" which arises when something is delivered through mistake to a person who has
no right to demand it. It obligates the latter to return what has been received through mistake.
Solutio indebiti, as defined in Article 2154 of the Civil Code, has two indispensable requisites: first,
that something has been unduly delivered through mistake; and second, that something was
received when there was no right to demand it.

" In conformity with said doctrine as established in paragraph 2 of article 609 of said code, that
"the ownership and other property rights are acquired and transmitted by law, by gift, by testate
or intestate succession, and, in consequence of certain contracts, by tradition." And as the logical
application of this disposition article 1095 prescribes the following: "A creditor has the rights to
the fruits of a thing from the time the obligation to deliver it arises. However, he shall not acquire
areal right." (and the ownership is surely such) "until the property has been delivered to him. "In
accordance with such disposition and provisions the delivery of a thing constitutes a necessary
and indispensable requisite for the purpose of acquiring the ownership of the same by virtue for a
contract. With this, it can therefore be concluded that: "The transfer of the ownership in the
contract of such transfer, does not produce the effect by the fact of the mere consent, but is
acquired by tradition and in the due observance of general precepts." Therefore, by reason of the
non-delivery Terrell did not acquire the ownership of the property transferred to him by Wilson.
The court therefore finds that neither of the two creditors should enjoy preference with regard to
the other. Preference is determined by the nature of the credit in some cases and by the priority
of date in others. The first, when it deals with privileged credits, which different kinds of privileged

G.R. No. 2684 March 15, 1907 THE FIDELITY AND DEPOSIT COMPANY OF MARYLAND,
plaintiff-appellant,vs.
WILLIAM A. WILSON, ET AL.,
Facts: Wilson, is a disbursing officer in the Philippines, he took money, sureties, and funds, then
fled to Canada. When he was caught, several lawsuits were filed against him intercorrelating each
complaint. The American Company of New York became sureties on the official bond of Wilson for
the sum of USD 15,000. Wilson defaulted USD 8,931.80, so the surety companies paid half from
each of them to the Government. His funds were placed in a depositary named by the court to take
care of the money. A little earlier before the complaint was filled, Wilson transferred the funds to
Terrell, in payment of his debt for the professional services already rendered. Since the funds were
under the possession of the Treasurer entrusted with the depository, the transfer could not have
been made since, it would have been necessary that the delivery of the funds had been made
directly Terrell, which fact has not been proved at any time. But Terrell never claimed that
the delivery was ever made, he only claims that the ownership thereof should be derived to him,
not thru the fact of delivery but thru the very fact of the transfer and of his subsequent
notification to Treasurer Baranagan, although, it is
very clear that such notification does not constitute, in any manner, the fact of delivery as
established by articles 1462, 1463, and 1464of the Civil Code, all of which cover, in full this
subject-matter.
Issue: Should Terrell and The Fidelity and Deposit Company of Maryland, claim ownership of the
funds in accordance to Art 609 of the Civil Code?
Decision:

credits are enumerated in articles 1922, 1923, and 1924 of the Civil Code; and the second, when
such credits are without special privilege, but are set forth in a public document or a
final judgment. (Par. 3, article 1924.) In neither of these two classes do we find the credit of the
appellant or that of the appellee. The credit of the appellee is only shown in a private document,
and the right, or credit, of the appellant is that derived by reason of the payment made by
appellant to the Government as a surety on the bond of Wilson, and nothing more than this
appears in the allegations and admissions of the parties during the trial of the case. It does not
appear by the bill of exceptions in this case that any document was ever presented in justification
of such payment. Neither does the decision refer to any document as showing, as proven, said
payment. These two credits not coming under any of the articles herein cited, the same pertain to
a general class, and therefore do not enjoy any preference, in accordance with provisions of article
1925 of the Civil Code. This being so, the two creditors should be paid of pro rata from the funds
in question and without consideration of the dates. (Rule 3, of article 1929.)
THE ROMAN CATHOLIC BISHOP OF JARO
vs.
GREGORIO DE LA PEA
FACTS : The plaintiff is the trustee of a charitable bequest made for the construction of a leper
hospital and that father Agustin de la Pea was the duly authorized representative of the plaintiff
to receive the legacy. The defendant is the administrator of the estate of Father Dela Pea.
In the year 1898 the books Father De la Pea, as trustee, showed that he had on hand as such
trustee the sum of P6,641, collected by him for the charitable purposes aforesaid. In the same year
he deposited in his personal account P19,000 in the Hongkong and Shanghai Bank at Iloilo.
Shortly thereafter and during the war of the revolution, Father De la Pea was arrested by the
military authorities as a political prisoner, and while thus detained made an order on said bank in
favor of the United States Army officer under whose charge he then was for the sum thus
deposited in said bank. The arrest of Father De la Pea and the confiscation of the funds
inthe bank were the result of the claim of the militaryauthorities that he was an insurgent and

that the funds thus deposited had been collected by him for revolutionary purposes. The money

Since Cruzado was friends with Bustos, a rich woman in their place. He begged the

was taken from the bank by the military authorities by virtue of such order, was confiscated and

latter to simulate a mortgage deed of a certain property and have it executed in court in

turned over to the Government. While there is considerable dispute in the case over the question

his favor only to pose that he has real property to enable him to qualify to such position

whether the P6,641 of trust funds was included in the P19,000 deposited as aforesaid,

of procurador. In truth, the said mortagage was a front and fraudulent but was effected

nevertheless, a careful examination of the case leads us to the conclusion that said trust funds
were a part of the funds deposited and which were removed and confiscated by the military

by making a pretended contract which bore the appearance of truth.

It is unquestionable that the contract of sale was perfect and binding upon both
contracting parties since their names both appear in that instrument to have agreed

authorities of the United States.

upon the thing sold. But it is also undeniable that the said contract was not
consummated. 1.) Cruzado did not pay the purchase price of P2,200 2.) he never took

ISSUE : Whether or not Father de la Pea is liable for the loss of the money under his trust?

possession of the land apparently sold in the said deed. All that the vendee did was to
RULINGS : The court, therefore, finds and declares that the money which is the subject matter of
this action was deposited by Father De la Pea in the Hongkong and Shanghai Banking

pledge the land as a security for the faithful discharge of the duties of his office.
Santiago Cruzado, the son, brought an action for recovery of possession, founded on the

Corporation of Iloilo; that said money was forcibly taken from the bank by the armed forces of the

right transmitted to him by his father at his death a right arising from the said

United States during the war of the insurrection; and that said Father De la Pea was not

simulated deed of sale of the land in question.

responsible for itsloss.Father De la Pea's liability is determined by thoseportions of the

Civil Code which relate to obligations.(Book 4, Title 1.)Although the Civil Code states that "a person
obliged to give something is also bound to preserve it with the diligence pertaining to a good father
of a family" (art.1094), it also provides, following the principle of the Roman law,
major casus est, cui humana infirmitasresistere non potest

Issue:

W/N the said deed of sale was simulated, not with the intent to defraud 3 rd persons, but

for the sole purpose of making it appear that Agapito Cruzado has real property?
W/N rights of transmission acquired by Santiago Cruzado from the death of his father,
pertaining to the said land in contest is valid and without defect?

, that "no one shall be liable for events which could not be foreseen, or which having been foreseen
were inevitable, with the exception of the cases expressly mentioned in the law or those in which
the obligation so declares." (Art. 1105.)By placing the money in the bank and mixing it with his
personal funds De la Pea did not thereby assume an obligation different from that under which
he would have lain if such deposit had not been made, nor did he thereby make himself liable to

Ruling:

and the other. Full ownership of the thing sold being conveyed to the vendee, from which

or from his house by the military forces of one of the combatants during a state of war, it is clear

moment the right of action derived from this right may be exercised. the record

that under the provisions of the Civil Code he would have been exempt from responsibility. The fact

discloses that there was no payment made by Cruzado to Bustos, thus, rendering the

that he placed the trust fund in the bank in his personal account does not add to his
responsibility. Such deposit did not make him a debtor who must respond at all hazards

delivered to him.
Besides the failure to pay the purchase price, neither the vendee nor his heirs, had at
any time taken possession of the land. Seven witnesses attest to the fact, Bustos and

An appeal from the judgment of CFI Pampanga allowing declaring defendant Bustos as

the rightful owner of the property in question.

Bustos and Escaler who has said to be detaining such land, refused to deliver the
possession thereof to plaintiff and refused to recognize his ownership of the same.

her husband while still living, continued to possess the said land supposedly sold to
Agapito Cruzado and cultivated it, as she had done long before the sale of September

1875 to September 1891, the date of complaint by Santiago Cruzado.

Consequently, at the death of Agapito, he could not have transmitted to the Santiago as
his successor any greater right than a personal right to exact fulfillment of a contract,
as plaintiff was not the owner of the said land, he could not validly register it. This

Facts:

contract not to be consummated.

Art 1164 states that, a creditor has a right to the fruits of the time the obligation to
deliver it arise. However, he shall not acquire a property right thereto until it has been

Cruzado v. Bustos
Case:

Under the law, the contract of purchase and sale, as consensual, is perfected by consent
as to the price and the thing and is consummated by the reciprocal delivery of the one

repay the money at all hazards. If the had been forcibly taken from his pocket

fulfillment of a right has already prescribed since, under the law, prescription towards
real property shall be 30 years. In the case at bar, the action to recover took 34 years to

Agapito Cruzado was a poor man living in Pampanga, he had a job in court but was still
not enough to support his family. He aspired to hold the office of procurador in the CFI
of Pampanga but he was unable to give the required bond, an indispensable condition
for his appointment.

bring it to court, thus has already prescribed.

Petition is denied.

Caleon v. Agus Development Corp. (G.R. No. 77365. April 7, 1992)

18AUG
FACTS:
Agus Development Corporation leased to Rita Caleon its lot for P180.00/month. Caleon built a 4door apartment and sub-leased it at P350.00/door/month without Agus consent. Agus filed an
ejectment suit under Batas Pambansa (B.P.) Blg. 25 after Caleon refused to vacate the lot. Caleon

Facts: Hawaiian-Philippine Co. got into a contract with Song Fo & Co. where it would deliver
molasses to the latter.
Hawaiian-Philippine Co. was able to deliver 55,006 gallons of molasses before the breach of
contract.
SFC filed a complaint for breach of contract against Hawaiian-Philippine Co. and asked
P70,369.50. Hawaiian-Philippine Co. answered that there was a delay in the payment from Song
Fo & Co. and that Hawaiian-Philippine Co. has the right to rescind the contract due to that and
claims it as a special defense.

argued that B.P. Blg. 25 cannot be applied because there is a perfected contract of lease without

The judgment of the trial court condemned Hawaiian-Philippine Co. to pay Song Fo & Co. a total of

any express prohibition on subleasing. The MTC ruled in favor of Agus. It was appealed to the RTC

P35,317.93, with legal interest from the date of the presentation of the complaint, and with costs.

but was dismissed outright. Hence this petition for review.

ISSUE:

Issue:

Whether or not B.P. Blg. 25 is unconstitutional for being violative of non-impairment clause on

(1) Did Hawaiian-Philippine Co. agree to sell 400,000 gallons of molasses or 300,000 gallons of

the ground that it impaired the lease contract.

molasses?
(2) Had Hawaiian-Philippine Co. the right to rescind the contract of sale made with Song Fo &

HELD:
No. B.P. Blg. 25 is valid and constitutional. The lease contract is subordinate to the police power of
the state. Petition is denied.

Co.?
(3) On the basis first, of a contract for 300,000 gallons of molasses, and second, of a contract
imprudently breached by Hawaiian-Philippine Co., what is the measure of damages?

RATIO:
B.P. Blg. 25 is derived from P.D. No. 20 which has been declared by the Supreme Court as police

Held:

power legislation so that the applicability thereof to existing contracts cannot be denied. The

(1) Only 300,000 gallons of molasses was agreed to by Hawaiian-Philippine Co. as seen in the

constitutional guaranty of non-impairment of obligations of contract is limited by and subject to

documents presented in court. The language used with reference to the additional 100,000 gallons

the exercise of police power of the state in the interest of public health, safety, morals and general
welfare. In spite of the constitutional prohibition, the State continues to possess authority to
safeguard the vital interests of its people. Legislation appropriate to safeguarding said interest may
modify or abrogate contracts already in effect.

was not a definite promise.

(2) With reference to the second question, doubt has risen as to when Song Fo & Co. was supposed
to make the payments for the delivery of molasses as shown in the documents presented by the
parties.
The Supreme Court said that Hawaiian-Philippine Co. does not have the right to rescind the

Song Fo and Co., vs. Hawaiian-Philippine Co. [47 SCRA 821 G.R. No. 23769. September 16,

contract. It should be noted that the time of payment stipulated for in the contract should be

1925]

treated as of the presence of the contract. There was only a slight breach of contract when the

Post under case digests, Civil Law at Tuesday, March 20, 2012 Posted by Schizophrenic Mind

overdue accounts and continued with the contract, waiving its right to rescind the contract. The

payment was delayed for 20 days after which Hawaiian-Philippine Co. accepted the payment of the
delay in the payment of Song Fo & Co. was not such a violation for the contract.

(3) With regard to the third question, the first cause of action of Song Fo & Co. is based on the

Upon the appeal of the private respondent to the CA, the court upheld the earlier decision of the

greater expense to which it was put in being compelled to secure molasses from other sources to

RTC regarding the validity of the rescission made by private respondents.

which Supreme Court ruled that P3,000 should be paid by Hawaiian-Philippine Co. with legal
interest from October 2, 1923 until payment.

Issue: Whether the rescission of contract made by the private respondent is valid.

The second cause of action was based on the lost profits on account of the breach of contract.

Held: There is a breach of contract because the petitioners did not merely stopped paying the

Supreme Court said that Song Fo & Co. is not entitled to recover anything under the second cause

mortgage obligations but they also failed to pay the balance purchase price. Their conditional offer

of action because the testimony of Mr. Song Heng will follow the same line of thought as that of the

to Mr. Raymundo cannot take the place of actual payment as would discharge the obligation of the

trial court which in unsustainable and there was no means for the court to find out what items

buyer under contract of sale.

make up the P14,000 of alleged lost profits.

Mr. Raymundos source of right to rescind the contract is Art. 1191 of the Civil Code predicated on

Velarde, et.al. vs. CA [361 SCRA 56 GR No. 108346. July 11, 2001]

a breach of faith by the other party who violates the reciprocity between them. Moreover, the new

Facts: David Raymundo (private respondent) is the absolute and registered owner of a parcel of

of an existing obligation, which was legally due and demandable under the contract of sale.

land, located at 1918 Kamias St., Dasmarias Village Makati, together with the house and other
improvements, which was under lease. It was negotiated by Davids father with plaintiffs Avelina
and Mariano Velarde (petitioners). A Deed of Sale with Assumption of Mortgage was executed in
favor of the plaintiffs. Part of the consideration of the sale was the vendees assumption to pay the
mortgage obligations of the property sold in the amount of P 1,800,000.00 in favor of the Bank of
the Philippine Islands. And while their application for the assumption of the mortgage obligations
is not yet approved by the mortgagee bank, they have agreed to pay the mortgage obligations on
the property with the bank in the name of Mr. David Raymundo. It was further stated that in the
event Velardes violate any of the terms and conditions of the said Deed of Real Estate Mortgage,
they agree that the downpayment P800,000.00, plus all the payments made with the BPI on the
mortgage loan, shall be forfeited in Favor of Mr. Raymundo, as and by way of liquidated damages,
w/out necessity of notice or any judicial declaration to that effect, and Mr. Raymundo shall resume
total and complete ownership and possession of the property, and the same shall be deemed
automatically cancelled, signed by the Velardes.
Pursuant to said agreements, plaintiffs paid BPI the monthly interest loan for three months but
stopped in paying the mortgage when informed that their application for the assumption of
mortgage was not approved. The defendants through a counsel, wrote plaintiffs informing the latter
that their non-payment to the mortgagee bank constituted non-performance of their obligation and
the cancellation and rescission of the intended sale. And after two days, the plaintiffs responded
and advised the vendor that he is willing to pay provided that Mr. Raymundo: (1) delivers actual
possession of the property to them not later than January 15, 1987 for their occupancy (2) causes
the release of title and mortgage from the BPI and make the title available and free from any liens
and encumbrances (3) executes an absolute deed of sale in their favor free from any liens and

obligations as preconditions to the performance of the petitioners own obligation were repudiation

The breach committed by the petitioners was the non-performance of a reciprocal obligation. The
mutual restitution is required to bring back the parties to their original situation prior to the
inception of the contract. The initial payment and the mortgage payments advanced by petitioners
should be returned by private respondents, lest the latter unjustly enriched at the expense of the
other. Rescission creates the obligation to return the obligation of contract. To rescind, is to declare
a contract void at its inception and to put an end to it as though it never was.
The decision of the CA is affirmed with modification that private respondents are ordered to return
to petitioners, the amount they have received in advanced payment.
ANGELES VS. CALASANZ
135 SCRA 323
FACTS:
On December 19, 1957, defendants-appellants Ursula Torres Calasanz and plaintiffs-appellees
Buenaventura Angeles and Teofila Juani entered into a contract to sell a piece of land located in
Cainta, Rizal for the amount of P3,920.00 plus 7% interest per annum. The plaintiffs-appellees
made a downpayment of P392.00 upon the execution of the contract. They promised to pay the
balance in monthly installments of P41.20 until fully paid, the installment being due and payable
on the 19th day of each month. The plaintiffs-appellees paid the monthly
installments until July 1966, when their aggregate payment already amounted to P4,533.38.
On December 7, 1966, the defendants-appellants wrote the plantiffs-appellees a letter requesting

encumbrances not later than Jan. 21, 1987.

the remittance of past due accounts. On January 28, 1967, the defendants-appellants cancelled

The RTC of Makati dismissed the complaint of the petitioners against Mr. Raymundo for specific

plaintiffs letter with their plea for reconsideration of the said cancellation was denied by the

performance, nullity of cancellation, writ of possession and damages. However, their Motion for
Reconsideration was granted and the Court instructed petitioners to pay the balance of P 1.8
million to private respondent who, in turn were ordered to execute a deed of absolute sale and to
surrender possession of the disputed property to petitioners.

the said contract because the plaintiffs failed to meet subsequent payments. The
defendants.
The plaintiffs-appellees filed a case before the Court of First Instance to compel the defendant to
execute in their favor the final deed of sale alleging inter alia that
after computing all subsequent payments for the land in question, they found out that they have

already paid the total amount including interests, realty taxes and
incidental expenses. The defendants alleged in their answer that the plaintiffs violated par. 6 of the
contract to sell when they failed and refused to pay and/or offer to pay
monthly installments corresponding to the month of August, 1966 for more than 5 months,
thereby constraining the defendants to cancel the said contract.
The Court of First Instance rendered judgment in favor of the plaintiffs, hence this appeal.
ISSUE:
Has the Contract to Sell been automatically and validly cancelled by the defendants-appellants?

Genuinos did not accept the offer because the construction of the ice plant building where the
pipes were to be installed was not yet finished. Three years later, on April 15, 1975, Hector
Genuino, in behalf of Espaa Extension Ice Plant and Cold Storage, asked Delta to deliver the iron
pipes within thirty (30) days from its receipt of the request. But petitioner Delta is unwilling to
deliver said iron pipes unless the Genuinos agree to a new quotation price set by the former.
Private Respondents rejected the new quoted prices and instead filed a complaint for specific
performance with damages seeking to compel Delta to deliver the pipes. Meanwhile, Delta, in its
answer prayed for rescission of the contracts pursuant to Art. 1191 of the New Civil Code.
Issue: Whether or not Delta is entitled for rescission of contract as the latter is subject to
suspensive conditions and only upon their performance or compliance would its obligation to
deliver the pipes arise?

RULING:
No. While it is true that par.2 of the contract obligated the plaintiffs-appellees to pay the
defendants the sum of P3,920 plus 7% interest per annum, it is likewise
true that under par 12 the seller is obligated to transfer the title to the buyer upon payment of the
said price.
The contract to sell, being a contract of adhesion, must be construed against the party causing it.
The Supreme Court agree with the observation of the plaintiffs appellees to the effect that the
terms of a contract must be interpreted against the party who drafted the same,
especially where such interpretation will help effect justice to buyers who, after having invested a
big amount of money, are now sought to be deprived of the same thru the prayed application of a
contract clever in its phraseology, condemnable in its lopsidedness and injurious in its effect
which, in essence, and its entirety is most unfair to the buyers.
Thus, since the principal obligation under the contract is only P3,920.00 and the plaintiffsappellees have already paid an aggregate amount of P4,533.38, the courts should only order the
payment of the few remaining installments but not uphold the cancellation of the
contract. Upon payment of the balance of P671.67 without any interest thereon, the defendant
must immediately execute the final deed of sale in favor of the plaintiffs and execute the necessary
transfer of documents, as provided in par.12 of the contract.
Delta Motors vs. Genuino
G.R. No. 55665, February 8, 1989
Cortes, J.
Facts:
Private Respondents are owners of an iceplant and cold storage who ordered black iron pipes to
Delta Motors (herein petitioner) for which the latter provided two letter quotations indicating the
selling price and delivery of said pipes. The terms of payment are also included in the letter
quotations which must be complied with by the respondents. Private respondents made initial
payments on both contracts but delivery of the pipes was not made by Delta Motors so that the
Genuinos are not willing to give subsequent payments notwithstanding the agreed terms of
payment requiring them of such. In July 1972 Delta offered to deliver the iron pipes but the

Held: No. While there is merit in Delta's claim that the sale is subject to suspensive conditions,
the Court finds that it has, nevertheless, waived performance of these conditions and opted to go
on with the contracts although at a much higher price. Art. 1545 of the Civil Code provides:
Art. 1545. Where the obligation of either party to a contract of sale is subject to any condition
which is not performed, such party may refuse to proceed with the contract or he may waived
performance of the condition. . .
it would be highly inequitable for petitioner Delta to rescind the two (2) contracts considering the
fact that not only does it have in its possession and ownership the black iron pipes, but also the
down payments private respondents have paid. Delta cannot ask for increased prices based on the
price offer stipulation in the contracts and in the increase in the cost of goods. Reliance by Delta
on the price offer stipulation is misplaced. The moment private respondents accepted the offer of
Delta, the contract of sale between them was perfected and neither party could change the terms
thereof. Neither could petitioner Delta rely on the fluctuation in the market price of goods to
support its claim for rescission.
VERMEN REALTY DEVELOPMENT
CORPORATION VS. COURT OF APPEALS G.R. No.
101762
FACTS:
Under the conditions of the so-called Offsetting
Agreement, Vermen Realty (the first party in the contract)
and Seneca Hardware (the second party) were under a
reciprocal obligation. Seneca Hardware shall deliver to
Vermen Realty construction materials worth P552,000.00.
Vermen Realty's obligation under the agreement is threefold:
he shall pay Seneca Hardware P276,000.00 in cash;
he shall deliver possession of units 601 and 602, Phase I,
Vermen Pines Condominiums (with total value of
P276,000.00) to Seneca Hardware; upon completion of
Vermen Pines Condominiums Phase II, Seneca Hardware

shall be given option to transfer to similar units therein.

Seneca Hardware?

As found by the appellate court and admitted by

both parties, Seneca Hardware had paid Vermen Realty

RULING:

the amount of P110,151.75, and at the same time delivered

Yes. The Court ruled in favor of Seneca Hardware.

construction materials worth P219,727.00. Pending

There is no controversy that the provisions of the

completion of Phase II of the Vermen Pines

Offsetting Agreement are reciprocal in nature. Reciprocal

Condominiums, Vermen Realty delivered to Seneca

obligations are those created or established at the same

Hardware units 601 and 602 at Phase I of the Vermen

time, out of the same cause, and which results in a mutual

Pines Condominiums (Rollo, p. 28). In 1982, the Vermen

relationship of creditor and debtor between parties. In

Realty repossessed unit 602. As a consequence of the

reciprocal obligations, the performance of one is

repossession, the officers of the Seneca Hardware

conditioned on the simultaneous fulfillment of the other

corporation had to rent another unit for their use when

obligation Under the agreement, Seneca Hardware shall

they went to Baguio on April 8, 1982.

deliver to Vermen Realty construction materials. Vermen

Realty's obligation under the agreement is three-fold: he

In its reply the Vermen Realty corporation averred

shall pay Seneca Hardware P276,000.00 in cash; he shall

that Room 602 was leased to another tenant because

deliver possession of units 601 and 602, Phase I, Vermen

Seneca Hardware corporation had not paid anything for

Pines Condominiums (with total value of P276,000.00) to

purchase of the condominium unit. Vermen Realty

Seneca Hardware; upon completion of Vermen Pines

corporation demanded payment of P27,848.25

Condominiums Phase II, Seneca Hardware shall be given

representing the balance of the purchase price of Room

option to transfer to similar units therein.

601.

Article 1191 of the Civil Code provides the remedy

of rescission in (more appropriately, the term is

On June 21, 1985, Seneca Hardware filed a

"resolution") in case of reciprocal obligations, where one of

complaint with the Regional Trial Court of Quezon City

the obligors fails to comply with what is incumbent upon

(Branch 92) for rescission of the Offsetting

him.

Agreement with damages. In said complaint, Seneca

Hardware alleged that Vermen Realty Vermen Realty

In the case at bar, Vermen Realty argues that it

Corporation had stopped issuing purchase orders of

was Seneca Hardware who failed to perform its obligation

construction materials after April, 1982, without valid

in the Offsetting Agreement.

reason, thus resulting in the stoppage of deliveries of

Seneca Hardware, on the other hand, points out

construction materials on its (Seneca Hardware) part, in

that the subject of the Offsetting Agreement is Phase II of

violation of the Offsetting Agreement.

the Vermen Pines Condominiums. It alleges that since

After conducting hearings, the trial court rendered

construction of Phase II of the Vermen Pines

a decision dismissing the complaint and ordering the

Condominiums has failed to begin it has reason to move

plaintiff (Seneca Hardware in this petition) to pay

for rescission of the Offsetting Agreement, as it cannot

defendant (Vermen Realty in this petition) on its

forever wait for the delivery of the condominium units to

counterclaim in the amount of P27,848.25 representing

it.

the balance due on the purchase price of condominium

unit 601.

It is evident from the facts of the case that Seneca

Hardware did not fail to fulfill its obligation in the

On appeal, respondent court reversed the trial

Offsetting Agreement. The discontinuance of delivery of

court's decision as adverted to above.

construction materials to Vermen Realty stemmed from

the failure of Vermen Realty to send purchase orders to

ISSUE:

Seneca Hardware.

Do the circumstances of the case warrant

rescission of the Offsetting Agreement as prayed for by

The impossibility of fulfillment of the obligation on

the part of Vermen Realty necessitates resolution of the

Held: The Decision of the Court of First Instance is affirmed with modification.

contract for indeed, the non-fulfillment of the obligation

aforementioned constitutes substantial breach of the

Fraud was undoubtedly employed by the plaintiff to secure the consent of the defendant to enter

Offsetting Agreement.

into the contract with him by representing himself as holder of exclusive franchise rights when in
fact he only holds a temporary franchise right good for 30 days. The fraud employed was not such

Woodhouse vs. Halili [93 PHIL 527 # L-4811. July 31, 1953]

as to render the contract null and void but only such as to hold the plaintiff liable for damages.
Such fraud is merely incidental (dolo incidental) and not the causal fraud (dolo causante) that is

Post under case digests, Civil Law at Tuesday, March 20, 2012 Posted by Schizophrenic Mind
Facts: The Plaintiff entered into an agreement with the defendant for the establishment of a

detrimental to a contract. It does not invalidate the contract since fraud was only employed to
secure the 30% stipulated share from the partnership.

partnership for bottling and distribution ofMission soft drinks. Before the partnership was actually

The parties cannot be compelled to enter into a contract of partnership. The law recognizes the

established the defendant required the plaintiff to secure an exclusive franchise for the said

liberty of an individual to do or not to do an act. The action falls within Acto Personalisimo (a very

venture. In behalf of the said partnership and upon obtaining the said exclusive franchise the

personal act) which courts may not compel compliance.

defendant stipulated to pay the plaintiff 30% of the profits. The plaintiff sought to obtain the said
exclusive franchise but was only given a temporary one, subject only to 30 days. The parties then

The 15% that the Trial court ordered the defendant to pay the plaintiff is deemed to be the

proceeded with the signing of the agreement. The partnership was still not initiated, only the

appropriate and reasonable. Such amount was the spontaneous reaction of the defendant upon

agreement to work with each other, with the plaintiff as manager and the defendant as financer,

knowledge of the misrepresentation of the plaintiff and amounts to the virtual modification of their

was established.

contract.

Together the two parties went to the US to formally sign the contract of franchise with Mission Dry

Geraldez vs. CA, [G.R. No. 108253. February 23, 1994]

Corporation. The defendant then found out about the temporary franchise right given to the
plaintiff, different from the exclusive franchise rights they stipulated in their contract.

Facts: An action for damages by reason of contractual breach was filed by petitioner Lydia L.
Geraldez against private respondent Kenstar Travel Corporation. Sometime in October 1989,

When the operations of the business began he was paid P 2,000 and was allowed the use of a car.

Petitioner came to know about private respondent from numerous advertisements in newspapers

But in the next month, the pay was decreased to P 1,000 and the car was withdrawn from him.

of general circulation regarding toursin Europe. She then contacted private respondent by

The plaintiff demanded the execution of the partnership, but the defendant excused himself,
saying that there was no hurry to do so. The Court of First Instance ordered the defendant to
render an accounting of the profits and to pay the plaintiff 15% of such amount. It also held that
execution of the contract of partnership cannot be enforced upon the defendant and that fraud as
alleged by the defendant was also not proved. Hence the present action.

phone and the latter sent its representative, who gave her the brochure for the tour and later
discussed its highlights. The European tours offered were classified into four, and petitioner chose
the classification denominated as "VOLARE 3" covering a 22-day tour of Europe for S2,990.00. She
paid the total equivalent amount of P190,000.00 charged by private respondent for her and her
sister, Dolores. Petitioner claimed that, during the tour, she was very uneasy and disappointed
when it turned out that, contrary to what was stated in the brochure, there was no European tour
manager for their group of tourists, the hotels in which she and the group stayed were not firstclass, the UGC Leather Factory which was specifically added as a highlight of the tour was not

Issues:
(1) Whether the representation of the plaintiff in saying that he had exclusive franchise rights
rather than the actual temporary right he possessed invalidated the contract
(2) Whether the court may compel the defendant to execute the contract of partnership between
the parties
(3) What will be the amount of damages to be paid to the plaintiff?

visited, and the Filipino lady tour guide by private respondent was a first timer, that is, she was
performing her duties and responsibilities as such for the first time.
Issue: Whether or not the respondent company committed fraud in order for the petitioner to enter
into the contract.
Held: This fraud or dolo, which is present or employed at the time of birth or perfection of a
contract, may either be dolo causante or dolo incidente. The first, or causal fraud referred to
in Article 1338, are those deceptions or misrepresentations of a serious character employed by one
party and without which the other party would not have entered into the contract. Dolo incidente,
or incidental fraud which is referred to in Article 1344, are those, which are not serious in
character and without which the other party would still have entered into the contract. Dolo
causante determines or is the essential cause of the consent, while dolo incidente refers only to

some particular or accident of the obligations. The effects of dolo causante are the nullity of the

LEGASPI OIL CO., INC. vs. THE COURT OF APPEALS

contract and the indemnification of damages, and dolo incidente also obliges the person employing
it to pay damages.

G.R. No. 96505

In either case, whether private respondent has committed dolo causante or dolo incidente by

JULY 1, 1993

making misrepresentations in its contracts with petitioner and other members of the tour group,
which deceptions became patent in the light of after-events when, contrary to its representations, it
employed an inexperienced tour guide, housed the tourist group in substandard hotels, and

FACTS:

reneged on its promise of a European tour manager and the visit to the leather factory, it is
indubitably liable for damages to petitioner.
Bernard Oseraos had several transactions with Legaspi Oil Co. for the sale of copra to
CATHAY PACIFIC AIRWAYS LTD., petitioner,

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. On February 16, 1976, appellant's agent

vs. SPOUSES DANIEL VASQUEZ and MARIA LUISA MADRIGAL VASQUEZ, respondents.
[G.R. No. 150843. March 14, 2003]
FACTS:
In respondents return flight to Manila from Hongkong, they were deprived of their original seats in
Business Class with their companions because of overbooking. Since respondents were privileged
members, their seats were upgraded to First Class. Respondents refused but eventually persuaded
to accept it. Upon return to Manila, they demanded that they be indemnified in the amount

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. After the period to deliver had lapsed, appellant
sold only 46,334 kilos of copra thus leaving a balance of 53,666 kilos. Accordingly, demands were
made upon appellant to deliver the balance with a final warning 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.

of P1million for the humiliation and embarrassment caused by its employees. Petitioners
Country Manager failed to respond. Respondents instituted action for damages. The RTC ruled in
favor of respondents. The Court of Appeals affirmed the RTC decision with modification in the

ISSUE:

award of damages.
Whether or not private respondent is guilty of breach of contact.
ISSUE:
Whether or not the petitioners (1) breached the contract of carriage, (2) acted with fraud and (3)
were liable for damages.

RULING:

RULING:
(1) YES. Although respondents have the priority of upgrading their seats, such priority may be
waived, as what respondents did. It should have not been imposed on them over their vehement

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. However

objection.

within the delivery period, Oseraos delivered only 46,334 kilograms of copra to petitioner.

(2) NO. There was no evident bad faith or fraud in upgrade of seat neither on overbooking of flight

kilograms but private respondent ignored the same. Petitioner made a final demand with a

as it is within 10% tolerance.

warning that, should private respondent fail to complete delivery of the balance of 53,666

Petitioner made repeated demands upon private respondent to deliver the balance of 53,666

kilograms of copra, petitioner would purchase the balance at the open market and charge the price
(3) YES. Nominal damages (Art. 2221, NCC) were awarded in the amount of P5,000.00. Moral

differential to private respondent. Still private respondent failed to fulfill his contractual obligation

damages (Art.2220, NCC) and attorneys fees were set aside and deleted from the Court of Appeals

to deliver the remaining 53,666 kilograms of copra and since there was still no compliance by

ruling.

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 P46,152.76.

appeared that the check has not been encashed. The delivery of the managers check did not
constitute payment. The original obligation to pay still exists. Indeed, the circumstances that
caused the non-presentment of the check should be considered to determine who should

The conduct of private respondent clearly manifests his deliberate fraudulent intent to
evade his contractual obligation for the price of copra had in the meantime more than doubled
from P82.00 to P168 per 100 kilograms. Under Article 1170 of the Civil Code of the Philippines,

bear the loss. In this case, ICB held on the check and refused to encash the same because of the
controversy surrounding the signing of the joint motion to dismiss. There is no bad faith
or negligence on the part of ICB.

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. Pursuant to said article,
private respondent is liable for damages.

A stale check is one which has not been presented for payment within a reasonable time
after its issue. It is valueless and, therefore, should not be paid. A check should be presented
for payment within a reasonable time after its issue. Here, what is involved is a

THE INTERNATIONAL CORPORATE BANK V. SPOUSES GUECO

managers check, which is

essentially a banks own check and may be treated as a PN with the bank as a maker. Even
assuming that presentment is needed, failure to present for payment within a reasonable time

351 SCRA 516

will result to the discharge of the drawer only to the extent of the loss caused by the delaybut
here there is
no loss sustained. Still, such failure to present on time does not wipe out liability.
FACTS:
Gueco spouses obtained a loan from ICB (now Union Bank) to purchase a car. In consideration
thereof, the debtors executed PNs, and a chattel mortgage was made over the car.

As

the usual story goes, the spouses defaulted in payment of their obligations and despite
the lowering of the amount to be paid, they still failed to pay.
a managers check in favor of the bank.

Thereafter, they tendered

Nonetheless, the car was still detained for the

spouses refused to sign the joint motion to dismiss. The bank averred that the joint motion to
dismiss is part of standard office procedure to preclude the filing of other claims.
Because of this, the spouses filed an action for damages against the bank. And by the time the
case was instituted, the check had become stale in the hands of the bank.

HELD:
The main issue though unrelated to Negotiable Instruments Law in this case was whether or not
the signing of the joint motion to dismiss a part of the compromise agreement between the spouses
and the bank. The answer is no, it is not a part of the compromise agreement entered by the
parties. And thus, the signing is dispensible in releasing the car to the spouses. And on the
ancillary issue of the case, which is the relevant issue for the subject, whether or not the spouses
should replace the check they paid to the bank after it became stale, the answer is yes. It