21.

) VAZQUEZ V DE BORJA
OZAETA; FEBRUARY 23, 1944
NATURE: PETITION to review on certiorari a decision of te Court of Appeals
FACTS:
De Borja entered into a contract with Natividad-Vazquez Sabani Development to purchased 4,000 sack of palay at P2.10 per sack for a total
consideration of P 8,400 which was paid by de Borja. Vazquez and Busuego represented the Company in the transaction as acting manager
and treasurer, respectively. In addition, de Borja delivered to the defendants a total of 4,000 empty sacks which presumealy were to be used
in the delivery of the palay.
Defendants only deliverd to de Borja a total of 2,488 cavans of palay with a value of P5,224.80 and have since refused to deliver the balance.
Action was commenced by Francisco de Borja in the Court of First Instance of Manila against Antonio Vazquez and Fernando Busuego to
recover from them jointly and severally the total amount of P4,702.70 arising out of the non delivery of 1,512 cavans of rice and 1,510 empty
sacks.
Vazquez denied entering into the contract in his individual and personal capacity. The contract was between plaintiff and Natividad-Vazquez
Sabani Development Co., Inc., a corporation which the defendant Vazquez represented as its acting manager. Vazquez filed a counterclaim
for P1,000 as damages.
Trial court found in favor of the plaintiff and ordered Vazquez to pay the total sum of P3,552.70. It also absolved Busuego from the complaint.
Vazquez appealed to the CA and it modified the judgement by reducing the amount to P 3,314.78 plus interest and costs. On motion for
reconsideration, the CA set aside its judgment and ordered the case remanded to the court of origin for further proceedings.
Hence the two petitions from both plaintiff and defendant to the Supreme court for certiorari.
ISSUES:
1. WON de Borja entered into the contract with Vazquez in his personal capacity or as manager of the Natividad-Vazquez Sabani Development
2. WON Vazquez is entitled to counter damages arising out of the erroneous suit
HELD:
Ratio

The Action being on a contract, and it appearing from the preponderance of the evidence that the party liable is Natividad-Vazquez, which is
not a party to the suit, the complaint should have been dismissed.
No award is given to Vazquez as the SC believes that he was morally responsible to the party with whom he contracted to see to it that the
corporation represented by him fulfilled the contract by delivering that palay it had sold particularly since the same had already been made.

Reasoning
Corporations are artificial beings invested by law with a personality of is own, separate and distinct from that of the shareholders and from that
of its officers who manage and run its affairs. The mere fact that its personality is owing to a legal fiction and that it necessarily has to act thru
its agents does not make such agents personally liable on a contract duly entered into by them for and in behalf of said corporation. This legal
fiction may however be disregarded only when an attempt is made to use its as a cloak to hide an unlawful or fraudulent purpose. As there
seems to be no showing that Vazquez personally benefited from the transaction, he is within his rights to invoke the legal fiction to avoid
personal liability.
The trial court in finding Vazquez guilty of negligence in the performance of the contract and in holding him personally liable manifestly failed
to distinguish a contractual from an extra-contractual obligation, or an obligation arising from contract from an obligation arising from culpa
aquiliana. In the contractual obligation, it is the obligor to fulfill said contract and not its agents. Hence, the obligor is the party guilty of
negligence in the fulfillment of said contract. On the other hand, if independently from the contract, Vazquez by his fault or negligence cased
damage to the plaintiff, then he would be personally liable for such damage. But since the suit is based on the contract, then the court has no
jurisdiction over the issue and could not adjudicate upon it.
DISPOSITION: The judgment of the CA is reversed and the complaint is dismissed, without finding as to cost.
SEPARATE OPINION
PARAS, Dissenting:
From the facts, it appears that

prior to entering into contract with de Borja knew that his company was already insolvent. Knowing full well that the contract could not be
fulfilled, he nonetheless consummated the transaction and received the full payment. Hence the CFI and Ca are both correct in holding the
failure to deliver was the result of Vazquezs fault or negligence.
While it is true that the contract is between de Borja and the company, it was proven during the trial that it was Vazquez who prevented the
performance of the contract and also of negligence bordering on fraud which caused damage to de Borja. Hence the technicality of a
procedural error should not be hindrance to the rendition.

The suit be considered as based on fault and negligence of Vazquez and to sentence defendant accordingly.

22.) DE GUIA V. MANILA ELECTRIC RAILROAD AND LIGHT COMPANY

PARTIES: MANUEL DE GUIA, plaintiff and appellant, vs. THE MANILA ELECTRIC RAILROAD AND LIGHT COMPANY, defendant and appellant
FACTS:
Manuel de Guia rode a train owned by MERALCO. 30 meters from the point of origin, the small wheels of the rear truck left the track. The train was
derailed and struck a concrete post. De Guia was thrown against the door with some violence receiving injuries.
CFIs Ruling: Motorman of the derailed car was negligent having maintained too rapid a speed. De Guia awarded P6,100 with interests and costs
for damages and injuries.
Both De Guia and MERALCO appealed.
ISSUE:
WON MERALCO is liable for the damages incurred by De Guia and to hat extent.
HOLDING AND RATIONALE:
MERALCO is liable.
o There was negligence on the part of the motorman and MERALCO is liable for the consequence of that negligence.
o There existed a contractual relationship between De Guia and MERALCO. The duty of MERALCO was to convey and deliver De Guia
safely and securely with reference to the degree of care which, under the circumstances, is required by law and custom applicable to the
case (Art. 1258 CC). Upon failure to comply with that obligation, MERALCO incurred liability defined in Art 1108-1107 CC.
o MERALCO cannot avail itself of the diligent father defense under Art 1903 CC, because article does not include contractual relationships.
However, an employer who exercised due diligence in choosing and instructing his employees is entitled to be considered a debtor in
good faith under Art 1107 CC.
MERALCOs liability is therefore limited to such damages as might, at the time of the accident, have been reasonably foreseen as a probable
consequence of the physical injuries inflicted upon De Guia and which was a necessary result of those injuries.
o CFI awarded De Guia P900 for his loss of professional earnings due to his injuries and P3,900 for his loss due to his inability to accept a
position as district health officer. The P3,900 awarded by the CFI is not a proper grounds for recovery of damages because damage of
this character could not, at the time of the accident, have been foreseen by MERALCO as a probable consequence of the injury inflicted.
o In addition, De Guia presented amounts incurred by him through hiring three physicians who supposedly treated his injuries. The SC
however believes that these medical expenses were sufficiently proven and that De Guias injuries were as extensive as he made them
out to be.
JUDGMENT: Judgment is modified reducing the amount of recovery to P1,100.
Giselle Muoz
23.) UNITED STATES V. BARIAS
CARSON, J.; NOVEMBER 12, 1912
FACTS:
Segundo Barias was a motorman for the Manila Electric Railroad and Light Company. On the morning of November 2, 1911, he was driving
his car along Rizal Avenue and stopped it near the intersection to take on some passengers.
When the car stopped, Barias looked backward to note whether all the passengers were aboard then started the car.
It was at that moment that Fermina Jose, a 3-year old child ran in front of the car. As a result, she was knocked down and dragged some
distance underneath the car and was left dead upon the track.
Barias knew nothing of the incident until his return to the place, when he was informed of what happened.
ISSUE:
Whether or not Barias showed carelessness or want of ordinary care so as to amount to reckless negligence
HELD:

RATIO:

Barias is liable for reckless negligence.

Evidence shows that the road on which the incident occurred was a public street in a densely populated section of the city and the hour was 6
in the morning or about the time when residents of such streets begin to move about.
Under such conditions, a motorman of an electric street car was clearly charged with a high degree of diligence in the performance of his
duties for he was bound to know and to recognize that any negligence on his part in observing the track over which he was running his car
might result to fatal accidents.
Barias, before setting his car again in motion, had the duty to satisfy himself that the track was clear, and for that purpose, he should have
looked and see the track just in front of his car. This the defendant did not do, and the result of his negligence was the death of the child.
Had the motorman seen the child, he could have avoided the accident; the accident was not therefore, unavoidable, and it appearing that the
motorman, by the exercise of ordinary diligence, might have seen the child before he set the car in motion, his failure to satisfy himself that the
track was clear before doing so was reckless negligence.
Barias was negligent in that he failed to exercise the degree of diligence required of him he failed in taking precautions or advance
measures as common prudence would suggest when he put his car in motion without looking at the road in front of his car.

Others:
As to the contention that the accident would still have happened even if utmost care was exercised, (because of photographs showing that
while the motorman was standing in his proper place on the front platform of his car, a child walking immediately in front of the car would not
have come within the line of his vision) the court said that by inclining the head and shoulders forward very slightly, the motorman could not fail
to notice a child on the track immediately in front of his car. And according to the court, it is the manifest duty of a motorman, who is about to
start his car in public thoroughfare in a thickly-settled district, to satisfy himself that the track is clear immediately in front of his car, and to
incline his body slightly forward, if that be necessary, in order to bring the whole track within his line of vision.
Negligence defined (pinili lang):
The failure to observe, for the protection of the interests of another person, that degree of care, precaution and vigilance which the
circumstances justly demand, whereby such other person suffers injury (J. Cooley in his work in Torts)
Reckless negligence consists of the failure to take such precautions or advance measure in the performance of an act as the most common
prudence would suggest whereby injury is caused to persons or to property (U.S. v. Nava)
Negligence is want of the care required by the circumstances. It is relative or comparative, not an absolute, term and its application depends
upon the situation of the parties and the degree of care and vigilance which the circumstances reasonably require. Where the danger is great,
a high degree of care is necessary, and the failure to observe it is a want of ordinary care under the circumstances (Ahern v. Oregon
Telephone Co.)
Joy Montes

24. SARMIENTO V SPS. CABRIDO

CORONA; April 9, 1003
NATURE
Petition for review on certiorari of a decision of the Court of Appeals
FACTS
Tomasa Sarmientos friend, Dra. Virginia Lao, requested her to find someone to reset a pair of diamond earrings into two gold rings. Sarmiento sent Tita
Payag with the earrings to Dingdings Jewelry Shop, owned and managed by spouses Luis and Rose Cabrido, which accepted the job order for P400.
Petitioner provided 12 grams of gold to be used in crafting the pair of ring settings. After 3 days, Payag delivered to the jewelry shop one of the diamond
earrings which was earlier appraised as worth .33 carat and almost perfect in cut and clarity. Respondent Marilou Sun went on to dismount the diamond
from original settings. Unsuccessful, she asked their goldsmith, Zenon Santos, to do it. He removed the diamond by twisting the setting with a pair of pliers,
breaking the gem in the process. Petitioner required the respondents to replace the diamond with the same size and quality. When they refused, the
petitioner was forced to buy a replacement in the amount of P30,000.
Rose Cabrido, manager, denied having any transaction with Payag whom she met only after the latter came to seek compensation for the broken piece of
jewelry. Marilou, on the other hand, admitted knowing Payag to avail their services and recalled that when Santos broke the jewelry, Payag turned to her for
reimbursement thinking she was the owner. Santos also recalled that Payag requested him to dismount what appeared to him as sapphire and that the
stone accidentally broke. He denied being an employee of the Jewelry shop. The MTCC of
Tagbilaran City rendered a decision in favor of the petitioner. On appeal,
Respondents conceded to the existence of an agreement for crafting a pair of gold rings mounted with diamonds but denied they had obligation to dismount
the diamonds from the original setting. Petitioner claims that dismounting the diamonds from the original setting was part of the obligation assumed by
respondents under the contract of service. The RTC ruled in favor of the respondents. CA affirmed the judgment of the RTC.
ISSUES
1. WON dismounting of the diamond from its original setting was part of the obligation
2. WON respondents are liable for damages
3. WON respondents are liable for moral damages
HELD

1. YES
Ratio The contemporaneous and subsequent acts of the parties reveal the scope of obligation assumed by the jewelry shop to reset the pair of earrings.
Reasoning Marilou expressed no reservation regarding the dismounting of the diamonds. She could have instructed Payag to have the diamonds
dismounted first, but instead, she readily accepted the job order and charged P400. After the new settings were completed, she called petitioner to bring the
diamond earrings to be reset. She examined one of them and went on to dismount the diamond from the original setting. After failing to do the same, she
delegated it to the goldsmith.
Having acted the way she did, she cannot deny that the dismounting was part of the shops obligation to reset the pair of earrings.
2. YES
Ratio 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 fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and
corresponds with the circumstances of the persons, of the time and of the place.
Reasoning Santos acted negligently in dismounting the diamond from its original setting. Instead of using a miniature wire, which is the practice of the
trade, he used a pair of pliers. Marilou examined the diamond before dismounting and found the same to be in order. The subsequent breakage could only
have been caused by Santos negligence in using the wrong equipment. Res ipsa loquitur. Facts show that Marilou, who has transacted with Payag on at
least 10 occasions, and Santos, who has been accepting job referrals through respondents for 6 mos. now, are employed at the jewelry shop. The jewelry
shop failed to perform its obligation with the ordinary diligence required by the circumstances.
3. YES
Ratio Moral damages may be awarded in a breach of contract when there is proof that defendant acted in bad faith, or was guilty of gross negligence
amounting to bad faith, or in wanton disregard of his contractual obligation.
Reasoning Santos was a goldsmith for more than 40 years. He should have known that using a pair of pliers would have entailed unnecessary risk of
breakage. The
gross negligence of their employee makes the respondents liable of moral damages.
Disposition Petition was granted and CA decision was reversed. Respondents were ordered to pay P30,000 as actual damages and P10,000 as moral
damages.

25.) CRISOSTOMO V. CA
YNARES-SANTIAGO, J. / AUGUST 25, 2003
NATURE: Petition for review on certiorari of a decision of the Court of Appeals
FACTS:
Atty. Crisostomo contracted the services of Caravan Travel and Tours Intl to arrange and facilitate her booking, ticketing, and accommodation in a
tour dubbed Jewels of Europe at a total cost of P74k; Crisostomo was given discount for her niece, Menor was the companys ticketing manager
Pursuant to the contract, Menor went to her aunts house on June 12, 1991 (Wednesday) to deliver the travel documents and plane tickets.
Crisostomo gave Menor the full payment. Menor told her to be at the airport on Saturday two hours before her flight
Without checking her travel documents, Crisostomo went to NAIA on Saturday. She discovered that the flight she was supposed to take had
already departed the previous day.
Crisostomo called up Menor to complain. Menor prevailed upon her aunt to take another tour the British Pageant. She was asked anew to pay
P21k as partial payment and commenced the trip in July
Upon Crisostomos return, she demanded the difference between the sum she paid for Jewels of Europe and the amount she owed respondent for
British Pageant
Caravan Travel refused to reimburse her saying it was non-refundable
Trial Court held that the Caravan Travel was negligent in erroneously advising Crisostomo of her departure date through it employee, Menor who
was not presented as a witness. However, Crisostomo was guilty of contributory negligence for not verifying the exact date of her departure.
Accordingly, 10% of the amount was deducted from the amount being claimed as refund
Court of Appeals also found both parties at fault but held that Crisostomo is more negligent because as a lawyer and a well-traveled person, she
should have known better. She was ordered to pay the Caravan Travel the balance of British Pageant plus interest
ISSUE: WON a travel agency is bound under the law to observe extraordinary diligence in the performance of its obligation
HELD:
NO. For reasons of public policy, a common carrier in a contract of carriage is bound by law to carry passengers as far as human care and foresight
can provide using the utmost diligence of a very cautious person and with due regard for all circumstances.
However, a travel agency is not a carrier that it is not an entity engaged in the business of transporting either passengers or goods. Respondents
services as a travel agency include procuring tickets and facilitating travel permits or visas and booking customers for tours. It is thus not bound under
the law to observe extraordinary diligence in the performance of its obligation .
Felman Magcalas

26.
CHAVEZ V GONZALES
REYES; April 30, 1970
FACTS
- Chavez brought his typewriter on July of 1963 to Gonzales to have it fixed. There was no agreement as to when the typewriter should be ready for return
to Chavez.
- Gonzales was not able to finish the work after a certain time despite repeated reminders from Chavez.
- Gonzales asked Chavez for P6.00 for the purchase of spare parts which Chavez gave.
- In October 1963 Chavez went to Gonzales house and got the typewriter. It was returned to him with the cover and some essential parts missing.
- Chavez formally demanded that the missing parts be returned along with the cover and the sum of P6.00 which Gonzales did.
- August 1964 the typewriter was fixed by another person which cost Chavez P89.95 for materials and labor.
- The trial court awarded Chavez damages of only P31.10 out of his total claim of
P690.00.
ISSUE
WON Chavez should be entitled to greater damages than what was awarded to him in the trial court
HELD
YES
- Art. 1197 cannot be raised as a defense.
a. Art. 1197 states that the petitioner should have first filed for a petition from the Court, fixing the period.
b. This is not applicable because the time for compliance has already expired, the defendant not having worked on the typewriter and returning it to
the owner unrepaired.
- Gonzales is liable under Art. 1165 because of his non-performance.
c. He is liable for the cost of executing the obligation in the proper manner.
d.
He is also liable for the missing parts.
e. But the moral damages and attorneys fees should not be awarded because they were not alleged in the complaint.

27.) TELEFAST COMMUNICATIONS/PHILIPPINE WIRELESS, INC. V CASTRO, SR.

FACTS:
When Sofia was vacationing in the Philippines, her mother died. She decided to send a telegram to their family residing in the US through the
Telefast Communications to inform them about it. She paid the necessary fees and then left the rest to the company. Later on, the mother was interred
with only Sofia in attendance. She eventually came back to the US and was surprised to find out that her telegram never reached her father and
siblings. She instituted this case against the company. The companys only defense is that they were unable to transmit the wire due to some technical
and atmospheric factors which were beyond the control of the company.
ISSUE: WON Telefast Communications breached its contract with Sofia.
HELD: Yes. Sofia had already paid the necessary fees and has thus performed her end of the obligation. There was a contravention of the tenor when
the company neglected to send the wire without evidence of exerting sufficient effort to overcome the said difficulties.
Damages:
Moral because the shock suffered by the family who only learned of the death of the mother when she was already interred was proximately caused
by the acts, or lack thereof, of the company. They were not given the opportunity to choose to attend her funeral in the Philippines because they were
not informed of its occurrence.
Exemplary as a warning to other telegram companies to perform their jobs better and to observe due diligence in transmitting the messages of their
customers to avoid incurring these unnecessary expenses.
Compensatory (for Sofia) because she had to go to the Philippines to file this suit which would not have been necessary had the company performed
its job.
*guys, I dont know what contravention of tenor means yet so this might not be very helpful to us. But just the same
Anna Basman

28. ARRIETA V NATIONAL RICE AND CORN CORP

REGALA; January 31, 1964
NATURE
Appeal of the defendant-appellant NARIC from the decision of the trial court dated
February 20, 1958, awarding to the plaintiffs-appellees the amount of $ 286,000.00 as damages for breach of contract and dismissing the counterclaim and
third party complaint of the defendant-appellant NARIC.
FACTS
- On May 19, 1952, plaintiff-appellee participated and won in the public bidding called by the NARIC for the supply of 20,000 metric tons of Burmese rice.
Accordingly, on July 1, 1952, plaintiff- appellee Paz P. Arrieta and the appellant corporation entered into a Contract of Sale of Rice, under the terms of which
the former obligated herself to deliver to the latter 20,000 metric tons of Burmese Rice at $203.00 per metric ton, CIF Manila. In turn, the defendant
Corporation committed itself to pay for the imported rice "by means of an irrevocable, confirmed and assignable letter of credit in U.S. currency in favor of
the plaintiff- appellee and/or supplier in Burma, immediately."
- Despite the commitment to pay immediately "by means of an irrevocable, confirmed and assignable Letter of Credit," however, it was only on July 30,
1952, or a full month from the execution of the contract, that the defendant corporation, thru its general manager, took the first step to open a letter of credit
by forwarding to the Philippine National Bank its Application for Commercial Letter of Credit. On the same day, July 30, 1952, Mrs. Paz P. Arrieta, thru
counsel, advised the appellant corporation of the extreme necessity for the immediate opening of the letter of credit since she had by then made a tender to
her supplier in Rangoon, Burma "equivalent to 5% of the F.O.B. price of 20,000 tons at $180.70 and in compliance with the regulations in Rangoon this 5%
will be confiscated if the required letter of credit is not received by them before August 4, 1952."
- It turned out however, the appellant corporation was not in any financial position to meet the condition, which it candidly admitted in a communication with
PNB. Consequently, the credit instrument applied for was opened only on September 8,
1952 "in favor of Thiri Setkya, Rangoon, Burma, and/or assignee for $3,614,000.00,"
(which is more than two months from the execution of the contract) the party named by the appellee as beneficiary of the letter of credit. As a result of the
delay, the allocation of appellee's supplier in Rangoon was cancelled and the 5% deposit, amounting to 524,000 kyats or approximately P200,000.00 was
forfeited. In this connection, it must be made of record that although the Burmese authorities had set August 4, 1952 as the deadline for the remittance of
the required letter of credit, the cancellation of the allocation and the confiscation of the 5% deposit were not effected until August 20. 1952, or, a full half
month after the expiration of the deadline. And yet, even with that 15-day grace, appellant corporation was unable to make good its commitment to open the
disputed letter of credit.
- The appellee endeavored, but failed, to restore the cancelled Burmese rice allocation. When the futility of reinstating the same became apparent, she
offered to substitute Thailand rice instead to the defendant NARIC, communicating at the same time that the offer was "a solution which should be beneficial
to the NARIC and to us at the same time." This offer for substitution, however, was rejected by the appellant in a resolution dated November 15, 1952.
Appellee sent a letter to the appellant, demanding compensation for the damages caused her in the sum of $286,000.00, U.S. currency, representing
unrealized profit. The demand having been rejected, she instituted this case now on appeal.
ISSUE
WON the lower court erred in holding NARIC liable for damages for breach of contract
HELD
- YES. We do not think the appellant corporation can refute the fact that had it been able to put up the 50 c/o marginal cash deposit demanded by the bank,
then the letter of credit would have been approved, opened and released as early as
August 4, 1952. The letter of the Philippine National Bank to the NARIC was plain and explicit that as of the said date, appellant's it "application for a letter
of credit . . . has been approved by the Board of Directors with the condition that 50% marginal cash deposit be paid and that drafts are to be paid upon
presentment."
The liability of the appellant, however, stems not alone from this failure or inability to satisfy the requirements of the bank. Its culpability arises from its willful
and deliberate assumption of contractual obligations even as it was well aware of its financial incapacity to undertake the presentation.
- A number of logical inferences may be drawn from NARICs admission. First, that the appellant knew the bank requirements for opening letters of credit;
second, that appellant also knew it could not meet those requirements. When, therefore, despite this awareness that it was financially incompetent to open
a letter of credit immediately, appellant agreed in paragraph 8 of the contract to pay immediately "by means of an irrevocable, confirmed and assignable
letter of credit," it must be similarly be held to have bound itself too answer for all and every consequences that would result from the representation.
- In relation to the aforequoted observation of the trial court, We would like to make reference also to Article 1170 of the Civil Code which provides:
"Those who in the performance of their obligation are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor
thereof, are liable in damages.
- Under this provision, not only debtors guilty of fraud, negligence or default in the performance of obligations are decreed liable: in general, every debtor
who fails in the performance of his obligations is bound to indemnify for the losses and damages caused thereby. The phrase "in any manner contravene
the tenor" of the obligation includes any illicit act which impairs the strict and faithful fulfillment of the obligation, or every kind of defective performance. (IV
Tolentino, Civil Code of the Philippines, citing authorities, p. 103

The NARIC would also have this Court hold that the subsequent offer to substitute
Thailand rice for the originally contracted Burmese rice amounted to a waiver by the appellee of whatever rights she might have derived from the breach of
the contract. We disagree. Waivers are not presumed, but must be clearly and convincingly shown, either by express stipulation or acts admitting no other
reasonable explanation. (Ramirez vs. Court of Appeals, 98 Phil., 225; 52 Off. Gaz.
779). In the case at bar, no such intent to waive has been established.

In the premises, however, a minor modification must be effected in the disposition portion of the decision appealed from insofar as it expresses the amount of
damages in U.S. currency and not in Philippine Peso. Republic Act 529 specifically requires the discharge of obligations only "in any coin or currency which
at the time of payment is legal tender for public and private debts." In view of that law, therefore, the award should be converted into and expressed in
Philippine Peso.
Disposition UPON ALL THE FOREGOING, the decision appealed from is hereby affirmed, with the sole modification that the award should be converted into
the Philippine peso at the rate of exchange prevailing at the time the obligation was incurred or on July 1, 1952 when the contract was executed. The
appellee insurance company, in the light of this judgment, is relieved of any liability under this suit.
No pronouncement as to costs.

29.) MAGAT V. MEDIALDEA

ESCOLIN, J. ; APRIL 20, 1983
NATURE:
Petition for review on certiorari to determine 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 of the CFI 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.
FACTS:
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 massage from mobile taxicab to fixed base
stations within the Naval Base
Because of the experience of the plaintiff in connection with his various contracts with the U.S. Navy and his goodwill already established with
the Naval personnel, Isidro Q. Aligada, acting as agent of the defendant approached the plaintiff and proposed to import from Japan thru the
plaintiff or thru plaintiff's Japanese business associates, all taximeters and radio transceivers needed by the defendant
Defendant and his agent were able to import from Japan with the assistance of the plaintiff and his Japanese business associates the
necessary taximeters for defendant's taxicabs in partial fulfillment of defendant's commitments with the U.S. Navy Exchange, the plaintiff's
assistance in this matter having been given to the defendant gratis et amore
Isidro Q. Aligada, acting as agent of the defendant, made representations with the plaintiff that defendant desired to procure from Japan thru
the plaintiff the needed radio transceivers and to this end, Isidro Q. Aligada secured a firm offer in writing dated September 25, 1972, wherein
the plaintiff quoted in his offer a total price of $77,620.59 FOB Yokohama, the goods or articles offered for sale by the plaintiff to the defendant
to be delivered sixty to ninety days after receipt of advice from the defendant of the radio frequency assigned to the defendant by the proper
authorities
Plaintiff received notice of the fact that the defendant accepted plaintiff's offer to sell to the defendant the items as well as the terms and
conditions of said offer, as shown by the signed conformity of the defendant which was duly delivered by the defendant's agent to the plaintiff,
whereupon all that the plaintiff had to do was to await advice from the defendant as, to the radio frequency to be assigned by the proper
authorities to the defendant
In his letter dated October 6, 1972, the defendant advised his agent that the U.S. Navy provided him with the radio frequency of 34.2 MHZ
[Megaherzt] and requested his said agent to proceed with his order placed with the plaintiff, which fact was duly communicated to the plaintiff
By his letter dated October 7, 1972 addressed to the plaintiff by the defendant's agent, defendant's agent qualified defendant's instructions that
plaintiff should proceed to fulfill defendant's order only upon receipt by the plaintiff of the defendant's letter of credit
Plaintiff awaited the opening of such a letter of credit by the defendant
Defendant and his agent have repeatedly assured plaintiff of the defendant's financial capabilities to pay for the goods 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
It came to the knowledge of the plaintiff 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 thus destroying the reputation of the
plaintiff with the mid Naval Authorities with whom plaintiff transacts business
On March 27, 1973, plaintiff wrote a letter thru his counsel to ascertain from the defendant as to whether it is his intention to fulfill his pan of the
agreement with the plaintiff 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

Petitioners Claims The defendant entered into a contract with the plaintiff without the least intention of faithfully complying with his obligations, but he
did so only in order to obtain the concession from the U.S. Navy Exchange. 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. That in view of the defendant's failure to fulfill his contractual obligations with
the plaintiff, the plaintiff will suffer several damages
Respondents Arguments Respondent Guerrero filed a motion to dismiss complaint for lack of cause of action. He alleged that plaintiff was merely
anticipating his loss or damage, which might result from the alleged failure of defendant to comply with the terms of the alleged contract. Plaintiff's right of
recovery under his cause of action is premised not on any loss or damage actually suffered by him but on a non-existing loss or damage which he is
expecting to incur in the near future. Plaintiff's right therefore under his cause of action is not yet fixed or vested.
The respondent judge, over petitioner's opposition, issued a minute order dismissing the complaint
ISSUE: WON there is sufficient cause of action
HELD: YES.
Ratio The essential elements of a cause of action are: [1] the existence of a legal right of 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.
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 illicit 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 emergense] but also the profits
which the latter failed to obtain [lucro cesante]. 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 nonperformance of the obligation. 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.

Reasoning The complaint 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, 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, 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.
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. The complaint sufficiently alleges
bad faith on the part of the defendant.
Disposition The questioned order of dismissal was set aside and the case was ordered remanded to the court of origin for further proceedings. No costs.
Noel Baga
30
31 TANGUILIG V COURT OF APPEALS
BELLOSILLO; January 2, 1997
NATURE
Petition for review on certiorari of CA decision
FACTS
-April 1987: petitioner Jacinto M. Tanguilig doing business under the name and style J.M.T. Engineering and General Merchandising proposed to respondent
Vicente
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.
-14 March 1988: due to the refusal and failure of respondent to pay the balance, petitioner filed a complaint to collect the amount.

Respondents' Comments
-Since the deep well formed part of the system, the P15,000 he tendered to San
Pedro General Merchandising Inc. (SPGMI) should be credited to his account by petitioner.
-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.
Petitioners' Counterclaim
-The construction of a deep well was not included in the agreement to build the windmill system. 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. He claims that the collapse was attributable to a typhoon, a force majeure, which relieved him of any liability.
Lower Courts Ruling
-RTC ruled in favor of plaintiff-petitioner: that the construction of the deep well was not part of the windmill project & that there is no clear and convincing
proof that the windmill system fell down due to the defect of the construction.
-CA reversed; 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. But it rejected petitioner's claim of force majeure and ordered the latter to reconstruct the windmill in accordance with the stipulated one-year
guaranty.
MFR was also denied.
ISSUES
1. WON the agreement to construct the windmill system included the installation of a deep well.
2. WON respondent can claim that Pili of SPGMI accepted his payment on behalf of petitioner.
3. WON petitioner is under obligation to reconstruct the windmill after it collapsed.
4. WON private respondent is already in default in the payment of his outstanding balance.
5. Who should bear the costs of the reconstruction?
HELD
1.

2.

3.

4.

Ratio NO. Where the terms of the instruments are clear and leave no doubt as to their meaning, they should not be disturbed. In interpreting contracts, the
intention of the parties shall be accorded primordial consideration and, in case of doubt, their contemporaneous & subsequent acts shall be principally
considered.
Reasoning The words "deep well" preceded by the prepositions "for" and "suitable for" were meant only to convey the idea that the proposed windmill would
be appropriate for a deep well pump with a diameter of 2 to 3 inches.
-The claim of Guillermo Pili of SPGMI that Herce Jr. wrote him a letter asking him to build a deep well pump as part of the price/contract Herce had with
Tanguilig is unsubstantiated. The alleged letter was never presented in court.
-If indeed the deep well were part of the windmill project, the contract for its installation would have been strictly a matter between petitioner and Pili himself
with the former assuming the obligation to pay the price.
-If the price of P60,000.00 included the deep well, the obligation of respondent was to pay the entire amount to petitioner without prejudice to any action that
Guillermo Pili or SPGMI may take, if any, against the latter.
Ratio NO. Civil Code provisions on "payments made by a third person do not apply in the instant case as no creditor-debtor relationship has been
established between the parties.
Reasoning There was no contract between Pili and Tanguilig for the construction of Herces deep well. If SPGMI was really commissioned by petitioner to
construct the deep well, an agreement particularly to this effect should have been entered into.
Ratio YES. He can not claim exemption by reason of force majeure. 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. Four 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. (Nakpil v CA)
Reasoning Petitioner failed to show that the collapse of the windmill was due solely to a fortuitous event. A strong wind in this case cannot be fortuitous
unforeseeable nor unavoidable. On the contrary, a strong wind should be present in places where windmills are constructed, otherwise the windmills will not
turn.
-The presumption that "things have happened according to the ordinary course of nature and the ordinary habits of life" has not been rebutted by petitioner.
Ratio NO. Art. 1169, CC: 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.
Reasoning Tanguilig has not complied with his obligation to repair the windmill system.

5.

Ratio TANGUILIG. Art. 1167, CC: if a person obliged to do something fails to do it, the same shall be executed at his cost.
Reasoning 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.
Disposition Judgment modified. Herce, Jr directed to pay balance of P15,000 with interest. Tanguilig ordered to reconstruct subject defective windmill
system, in accordance with the one-year guaranty, within 3mos. from the finality of decision.

32.) PSBA V. COURT OF APPEALS

PADILLA, J. / FEBRUARY 4, 1992;
FACTS:
Carlitos Bautista, a 3rd year Commerce student from the Philippine School of Business Administration, was stabbed
inside the school premises by outsiders. Hence, his parents filed suit against the schools corporate officers. They
allege negligence, recklessness, and lack of security precautions, means, and methods, before, during, and after the
attack on their son.
During the proceedings, Lt. Soriano (Assistant Chief of Security) resigned from his post.
The defendants prayed for the dismissal of the case claiming that since they were presumably being sued under Art.
2180 of the Civil Code, jurisprudence therefor dictates that academic institutions are outside the ambit of the aforesaid
article.
ISSUE: WON is liable for civil damages through quasi-delict due to negligence.
HELD: No, for the rule of in loco parentis under Art. 2180 to apply, the wrongdoing should have been caused by pupils or
students of the educational institution sought to held liable for having custody over them.
RATIO DECIDENDI:
When an academic institution accepts a student for enrollment, an obligation is created between the two parties. The
school provides the milieu for the education and the development of the skills of the student but at the same time
providing for his security within the premises. On the other hand, the student has to complete his academic
requirements and comply with school rules and regulations.
However, the rules on quasi-delicts do not govern in this case due to the presence of an existing contractual relation
between the deceased and PSBA.
The school cannot be held liable because the assailants were neither students nor employees of PSBA.
There was neither sufficient proof nor finding that the school was negligent in providing proper security measures.
Supposing that there had been a finding of negligence, this could only give rise to a breach of contractual obligation
insofar as providing security within the premises.
The court took into account that a school cannot be an infallible insurer of its students against all risks, i.e., Murphys
Law. Likewise, it would be unreasonable to expect schools to anticipate all types of violent trespass upon their
premises. Should that be the case, it may still avoid liability by proving that the breach of its contractual obligation to
the students was not due to its negligence.
Decision: Petition is denied, but the Court of origin (RTC, Manila, Br. 47) was ordered to continue proceedings due to
the paucity of material facts.
Pat Sadeghi-Tajar

33.) AMADORA V. CA
CRUZ, J. / APRIL 15, 1988
PARTIES: Jose S. Amadora, et. al ,Petitioners Vs.Honorable Court Of Appeals, Colegio De San Jose-Recoletos, Victor Lluch
Sergio P. Dlmaso Jr., Celestino Dicon, Aniano Abellana, Pablito Daffon thru his parents and natural guardians, Mr. And Mrs.
Nicanor Gumban, And Rolando Valencia, thru his guardian, A. Francisco Alonso, Respondents.
FACTS:
Pablito Damon, fired a gun that killed the 17yo Alfredo Amadora while the latter was in the auditorium of their school
Colegio de San Jose-Recoletos to deliver his physics project.
it was already sembreak ; the teacher-in-charge wasnt in school

Daffon was convicted of homicide thru reckless imprudence

alfredos parents filed a civil action for damages under Article 2180 of the Civil Code against the school and its officials
like the rector, the high school principal, the dean of boys, and the physics teacher, together with Daffon.
Art 2180 Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused by their pupils
and students or apprentices so long as they remain in their custody.

The CFI of Cebu held the defendants civilly liable.

On appeal, CA absolved the defendants of the liability because:

o

Article 2180 was not applicable as the Colegio de San Jose-Recoletos was not a school of arts and trades
but an academic institution of learning.

the students were not in the custody of the school at the time of the incident as the semester had already
ended

fatal gun not clearly identified

respondents exercised due diligence

ISSUES:
1. School should not be held liable because it is an academic institution NO DIFF. BETWEEN ACADEMIC SCHOOL
AND SCHOOL OF ARTS AND TRADE
2.

School still responsible even though end of school term? YES

3.

Teacher in charge has been negligent/ no proof of this

4.

ho should be liable for the tort? School? Dean of boys? Principal? Rector? The dean of boys of boys has been
negligent but none of those mentioned above is liable

REASON:
1. no difference between the academic and the non-academic schools. The same vigilance is expected from the teacher
over the students under his control and supervision, whatever the nature of the school where he is teaching.
2.

It doesnt matter whether Alfredo was in the school auditorium to finish his physics experiment or merely to submit his
physics report-what is important is that he was there for a legitimate purpose. even the mere savoring of the company
of his friends in the premises of the school is a legitimate purpose that would have also brought him in the custody of
the school authorities.
the teacher-in-charge must answer for his students' torts

3.

At any rate, assuming that he was the teacher-in-charge, no proof that Dicon was negligent in enforcing discipline upon
Daffon. He was not required to report to school on that day

4.
a.) The rector, the high school principal and the dean of boys= cannot be held liable because:

They are not the teacher-in-charge as previously defined.

Theyre only exercising general authority over the student body, not direct control and influence

b.) dean of boys= since there is no teacher-in-charge, it is probably the dean of boys who should be held liable bec. He
was negligent in not taking disciplinary action over the boy who owns the unlicensed gun which he had earlier
confiscated; he returned it to the boy afterwards. He didnt even report it to the authorities
But it does not link him to the shooting because there is no proof that the confiscated and returned pistol was the gun that
killed Alfredo
c.) the Colegio de San Jose-Recoletos = is not directly liable under the article because the rector, the high school
principal and the dean of boys didnt have custody of the offending student during the shooting or remiss in the
discharge of their duties. school cant be made to answer for them
Decision: the petition is DENIED.

34
35.) TENGCO V. CA
PADILLA, J. / 1989
Review on certiorari
FACTS:
1942, Tengco entered into a verbal lease agreement with Lutgarda Cifra over a house in Navotas which belonged to
the latter. Aside from the amount of rentals, no other condition or term was agreed upon. The rentals were collected
from Tengco by Lutgardas collector from time to time, with no fixed frequency.

ISSUES:
1.
2.
3.
4.

1976, Cifra, Jr., claimed to be the owner the house in Navotas which was leased to Emilia Tengco. He filed an action
to evict Tengco, from the said premises for her alleged failure to comply with the terms and conditions of the lease
contract by failing and refusing to pay the stipulated rentals despite repeated demands. Judgment was rendered
against Tengco. She has appealed, and raises the following issues:
Is Cifra Jr. the real owner of the said property?
Did Cifra Jr. actually delay acceptance of the rentals, therefore being guilty of mora accipiendi?
Does the principle of laches (see Notes) bar Cifra Jr.s action?
Does Cifra Jr. have a cause of action?

HELD and RATIO:

1. YES. Such was the finding of the lower court, and the Supreme Court will not dispute the findings, barring errors of the
lower court regarding facts. Such being the case, Tengco has not given sufficient proof that the lot she has leased is
NOT the lot that Cifra Jr. claims to own. Further, she herself acknowledged his ownership by paying him the rentals for
the month of January.
2. NO. The non-acceptance of the rentals is justified because they were tendered to someone who had no authority to
accept them in the first place due to a change in ownership. Tengco could have released herself from responsibility by
judicial deposit of the rentals, or actually paying them to Cifra Jr.
3. NO. For laches to apply, there should have been a failure on Tengcos part to pay the rent AFTER Cifra Jr. demanded
it, because it would only be at that point that Cifra Jr. would have a cause of action. Cifra Jr. demanded the rent only on
August 23, 1976, then filed the current case 3 weeks later, September 16,1976, after a reasonable amount of time.
4. YES, as we see from the foregoing.

NOTES:
MORA ACCIPIENDI unreasonable and unexplained delaying or defaulting on acceptance of a prestation out of negligence of
the enforcement of ones right/s
LACHES - unreasonable and unexplained delay in bringing a cause of action before the courts.
Judith Cortez

36
EASTERN SHIPPING LINES V CA
VITUG; July 12, 1994
FACTS
- On Dec. 4, 1981, two fiber drums of riboflavin were shipped from Yokohama, Japan for delivery vessel "SS EASTERN COMET"
owned by defendant Eastern Shipping
Lines under Bill of Lading No. YMA-8. The shipment was insured under plaintiff's Marine Insurance Policy No. 81/01177 for
P36,382,466.38. On Dec. 12, 1981, upon arrival of shipment, it was discharged unto the custody of defendant Metro Port Service,
Inc. (The latter excepted to one drum, said to be in bad order, which damage was unknown to plaintiff.) On Jan 7, 1982 defendant
Allied Brokerage
Corporation received the shipment from defendant Metro Port Service, Inc., one drum opened and without seal. On Jan. 8 and 14,
1982 defendant Allied Brokerage Corporation made deliveries of the shipment to the consignee's warehouse. The latter excepted to
one drum which contained spillages, while the rest of the contents was adulterated/fake.
- Plaintiff argues: [a] due to the losses/damage sustained by said drum, the consignee suffered losses totaling P19,032.95, due to
the fault and negligence of defendants. (Claims were presented against defendants who failed and refused to pay the same) [b] As a
consequence of the losses sustained, plaintiff was compelled to pay the consignee P19,032.95 under the aforestated marine
insurance policy, so that it became subrogated to all the rights of action of said consignee against defendants
- Defendant/s argue/s: [a] As for defendant Eastern Shipping (carrier) it alleged that the shipment was discharged in good order from
the vessel unto the custody of
Metro Port Service so that any damage/losses incurred after the shipment was incurred after the shipment was turned over to the
latter, is no longer its liability;
[b] Metroport (arrastre operator) averred that although subject shipment was discharged unto its custody, portion of the same was
already in bad order; [c] Allied
Brokerage (broker)alleged that plaintiff has no cause of action against it, not having negligent or at fault for the shipment was
already in damage and bad order condition when received by it, but nonetheless, it still exercised extra ordinary care and diligence
in the handling/delivery of the cargo to consignee in the same condition shipment was received by it.
- Trial Court ruling: [a] Defendants to pay plaintiff, jointly and severally: 1) The amount of P19,032.95, with the present legal interest
of 12% per annum from October 1, 1982, the date of filing of this complaints, until fully paid (the liability of defendant Eastern
Shipping, Inc. shall not exceed US $500 per case or the CIF value of the loss, whichever is lesser, while the liability of defendant
Metro Port Service,
Inc. shall be to the extent of the actual invoice value of each package, crate box or container in no case to exceed P5,000.00 each,
pursuant to Section 6.01 of the Management Contract); 2) P3,000.00 as attorney's fees, and 3) Costs. [b] Dismissed the
counterclaims and crossclaim of defendant/cross -claimant Allied Brokerage
Corporation.
- CA affirmed the decision of the Trial Court in toto.
ISSUES
1. WON a claim for damage sustained on a shipment of goods can be a solidary, or joint and several, liability of the common carrier,
the arrastre operator and the customs broker
2. WON payment of legal interest on an award for loss or damage is to be computed from the time the complaint is filed or from the
date the decision appealed from is rendered
3. WON the applicable rate of interest, referred to above, is 12% or 6%
HELD
1. The common carrier's duty to observe the requisite diligence in the shipment of goods lasts from the time the articles are
surrendered to or unconditionally placed in the possession of, and received by, the carrier for transportation until delivered to, or until
the lapse of a reasonable time for their acceptance by, the person entitled to receive them (Arts. 1736-1738, Civil Code; Ganzon vs.
Court of Appeals, 161 SCRA 646; Kui Bai vs. Dollar Steamship Lines, 52 Phil. 863).

- When the goods shipped are either lost or arrive in damaged condition, a presumption arises against the carrier of its failure to
observe that diligence, and there need not be an express finding of negligence to hold it liable (Art. 1735, Civil Code; Philippine
National Railways vs. Court of Appeals, 139 SCRA 87; Metro Port Service vs. Court of Appeals, 131 SCRA 365).
- There are, of course, exceptional cases when such presumption of fault is not observed but these cases, enumerated in Article
1734 of the Civil Code, are exclusive, not one of which can be applied to this case.
- The question of charging both the carrier and the arrastre operator with the obligation of properly delivering the goods to the
consignee has, too, been passed upon by the Court. In Fireman's Fund Insurance vs. Metro Port Services (182 SCRA
455)
- Since it is the duty of the ARRASTRE to take good care of the goods that are in its custody and to deliver them in good condition to
the consignee, such responsibility also devolves upon the CARRIER. Both the ARRASTRE and the CARRIER are therefore
charged with the obligation to deliver the goods in good condition to the consignee.
- We do not, of course, imply by the above pronouncement that the arrastre operator and the customs broker are themselves always
and necessarily liable solidarily with the carrier, or vice-versa, nor that attendant facts in a given case may not vary the rule.
- The instant petition has been brought solely by Eastern Shipping Lines, which, being the carrier and not having been able to rebut
the presumption of fault, is, in any event, to be held liable in this particular case. A factual finding of both the court a quo and the
appellate court, we take note, is that "there is sufficient evidence that the shipment sustained damage while in the successive
possession of appellants" (the herein petitioner among them).
- Accordingly, the liability imposed on Eastern Shipping Lines, Inc., sole petitioner in this case, is inevitable regardless of whether
there are others solidarily liable with it.
2, The date of the decision of the court a quo. Notice the Disposition portion of this case which says: The legal interest to be paid is
6% on the amount due computed from the decision, dated 03 February 1988, of the court a quo. A 12% interest, in lieu of 6%, shall
be imposed on such amount upon finality of this decision until the payment thereof.
3. Art. 2209 CC: If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for
damages, there being no stipulation to the contrary, shall be the payment of interest agreed upon, and in the absence of stipulation,
the legal interest which is six percent per annum. (This was upheld in a number of cases. Kindly check original text)
- The ostensible discord is not difficult to explain. The factual circumstances may have called for different applications, guided by the
rule that the courts are vested with discretion, depending on the equities of each case, on the award of interest.
Nonetheless, it may not be unwise, by way of clarification and reconciliation, to suggest the following rules of thumb for future
guidance:
A. When an obligation, regardless of its source, i.e., law, contracts, quasi- contracts, delicts or quasi- delicts 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
B. 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:
i. 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.
ii. 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.
iii. 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.
Disposition Petition is partly GRANTED. The appealed decision is AFFIRMED with the MODIFICATION that the legal interest to be
paid is 6% on the amount due computed from the decision, dated 03 February 1988, of the court a quo. A 12% interest, in lieu of
6%, shall be imposed on such amount upon finality of this decision until the payment thereof.

37 CRISMINA GARMENTS V CA

PANGANIBAN; March 9, 1999

FACTS
-The petitioner, who was engaged in the export of girls' denim pants, contracted the services of the respondent, the sole proprietress
of the D'Wilmar Garments, for the sewing of 20,762 pieces of assorted girls denims. The respondent sewed the materials and
delivered them to the petitioner.
-Petitioner told the respondent that some were defective. The respondent offered to take the defective goods back, but the
petitioners representative already said they were good. She was told just to return for her check of P76,410.
-The petitioner failed to pay. The respondent demanded payment. The petitioners vice president comptroller wrote to the
respondent saying that 6,164 pairs of jeans were defective and as such, she was liable to the petitioner for P49,925.51.
- The respondent filed before the trial court for the collection of P76,410. The trial court ordered the petitioner to pay the said amount
with interest thereon at 12% per annum. The CA affirmed.
- petitioner submits that the interest rate should be six percent (6%), pursuant to Article 2209 of the Civil Code. On the other hand,
private respondent maintains that the interest rate should be twelve percent (12 %) per annum, in accordance with
Central Bank (CB) Circular No. 416. She argues that the circular applies, since "the money sought to be recovered by her is in the
form of forbearance."
ISSUE
WON it is proper to impose interest at the rate of twelve percent (12%) per annum for an obligation that does not involve a loan or
forbearance of money in the absence of stipulation of the parties
HELD
No. The proper interest rate should be 6% per annum.
In Reformina v. Tomol Jr., this Court stressed that the interest rate under CB Circular
No. 416 applies to (1) loans; (2) forbearance of money, goods or credits; or (3) a judgment involving a loan or forbearance of money,
goods or credits. Cases beyond the scope of the said circular are governed by Article 2209 of the Civil Code, which

considers interest a form of indemnity for the delay in the performance of an obligation.
Because the amount due in this case arose from a contract for a piece of work, not from a loan or forbearance of money, the legal
interest of six percent (6%) per annum should be applied. Furthermore, since the amount of the demand could be established with
certainty when the Complaint was filed, the six percent (6%) interest should be computed from the filing of the said Complaint. But
after the judgment becomes final and executory until the obligation is satisfied, the interest should be reckoned at twelve percent
(%12) per year.
Private respondent maintains that the twelve percent (12%) interest should be imposed, because the obligation arose from a
forbearance of money. This is erroneous. In Eastern Shipping , the Court observed that a "forbearance" in the context of the usury
law is a "contractual obligation of lender or creditor to refrain, during a given period of time, from requiring the borrower or debtor to
repay a loan or debt then due and payable." Using this standard, the obligation in this case was obviously not a forbearance of
money, goods or credit.
Disposition Decision modified.The rate of interest shall be six percent (6%) per annum, computed from the time of the filing of the
Complaint in the trial court until the finality of the judgment. If the adjudged principal and the interest (or any part thereof) remain
unpaid thereafter, the interest rate shall be twelve percent (12%) per annum computed from the time the judgment becomes final
and executory until it is fully satisfied. No pronouncement as to costs.

38
39 SECURITY BANK V RTC
HERMOSISIMA; October 23, 1996
NATURE
Petition for review on certiorari of a decision of the RTC of Makati assailing the decision of Judge Fernando Gorospe, which found
private respondent Eusebio liable to petitioner for a sum of money.
FACTS
- April 27, 1983, private respondent Magtanggol Eusebio executed a promissory note in favor of petitioner Security Bank and
Trust Co. (SBTC) in the total
amount of P100,000 payable in 6 monthly installments with 23% per annum interest up to the 5th installment
- July 28, 198, Eusebio again executed another promissory note to SBTC. He bound
himself to pay P100,000 again payable in 6 monthly installments with 23% per annum interest
- Finally, another promissory note was executed in Aug. 31, 1983 in the amount of

P65,000.
- On all promissory notes, Leila Ventura signed as co-maker.
- Upon maturity, the principal balance remaining on the note stood as: PN1 P16, 665 as of Sept. 1983
PN2 P 83,333 as of Aug. 1983
PN3 P65,000 as of Aug. 1983
- SBTC filed a collection case upon Euseios refusal to pa the balance payable - RTC ordered Eusebio to pay the balance
w/ 12% interest
- SBTC filed a motion for partial reconsideration contending that: (1) the interest rate agreed upon was 23% (2) the interests
awarded should be compounded quarterly from due date (3) Leila Ventura should likewise be held liable to pay the balance since
she has signed as co-maker
- The court held Leila Ventura to be jointly and severally liable but denied the motion to grant the rates beyond 12%; hence this
petition

WON the 23% rate of interest per annum agreed upon by petitioner bank and respondents is allowable and not against the Usury
law.
HELD
YES it is allowable
Ratio
- the applicable provision of law is the Central Bank Circular No. 905 w/c took effect on Dec. 22, 1982, part. Sec. 1&2
- Central Bank Circular 905 was issued by Central Bank Monetary Board which empowers them to prescribe the maximum rates of
interest for loans and certain forebearances
- This circular did not repeal or in any way amend the Usury Law but simply suspended the latters effectivity; basic is the rule in
statutory construction that when the law is clear and unambiguous, the court is left with not alternative but to apply the same in its
clear language
- The rate was agreed upon by the parties freely; respondent did not question that rate and it is not for the respondent court to
change stipulation in the contract where it is not illegal
- Furthermore, art. 1306 CC provides that contracting parties may establish such stipulations, clauses, terms and conditions as they
may deem convenient, provided they are not contrary to law, morals, good customs, public order or public policy
- In a loan or forbearance of money, the interest due should be that stipulated in writing and in the absence thereof, the rate shall be
12% per annum; hence only in the absence of a stipulation can a court impose the 12% interest

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