Villaroel v. Estrada, 71 Phil.
140 (1940) defendants purpose of his trip, became interested in the
Petitioner: JUAN F. VILLARROEL
Respondent: BERNARDINO ESTRADA,
DOCTRINE:
(Natural Obligation)
Not being based on positive law but on equity and natural law,
do not grant a right of action to enforce their performance, but
after voluntary fulfillment by the obligor, they authorize
theretention of what has been delivered or rendered by reason
thereof.
FACTS:
1. On May 9, 1912, Alexander F. Callao, mother of Juan F.
Villaroel, obtained from the spouses Mariano Estrada and
Severina debt of P1,000, payable after seven years
2. Alejandra, passed away, leaving Villaroel as sole heir. The
spouses Mariano Estrada and Severina also passed away,
leaving Bernardino Estrada as sole heir.
3. On August 9, 1930, Villaroel gave a document to Estrada, in
which he declared in owing the amount of P1,000, with an
interest of 12 percent per year. This action turns on the collection
of this amount.
4. The Court of First Instance of Lagoon, in as interposed this
action, and decided for Villaroel to pay the amount demanded of
P1,000 with its legal interests of 12 percent from August 9, 1930
to its complete payment. Villaroel appealed.
ISSUES:
WON Villaroel should pay the amount despite the prescription of
the original debt
RULING + RATIO:
The present action is not based on the original obligation
contracted by the mother Villaroel, which has prescribed, but on
that which he contracted on August9, 1930 when assuming the
fulfillment of that obligation. Being the sole heir of the indebted
one, with right her inheritance, that debt which was contracted by
his mother legally, although no longer effective by prescription,
now is, nevertheless, a moral obligation. That consideration is
sufficient to create and to make his obligation voluntarily
contracted, effective August of 1930. The rule in which a new
promise to pay a prescribed debt must be done only by the same
person or another who is legally authorized by her, is not
applicable to the present case, because Villaroel voluntarily
wanted to assume this obligation.
Disposition
The appealed sentence is confirmed, with costs to the apellant.
Fisher vs. Robb 69 Phil 101
FACTS:
Defendant John C. Robb was told by the board of directors of the
Philippine Greyhound Club, Inc. to make a business trip to
Shanghai to study the operation of a dog racing course. In
Shanghai, defendant met plaintiff A.O. Fisher who was a
manager of a dog racing course. Plaintiff upon knowing
sued for civil liability. Hence, Barredo claims that he cannot be
Philippine Greyhound Club and asked defendant if he could be
one of the stockholders. Defendant answered in affirmative
which thereupon filed a blank subscription and sent Greyhound
Club Php3,000 in payment of the first installment of his
subscription. Upon receiving a call from the said club, he paid
the second installment amounting to Php2,000. Due to
manipulations of those who control the said club and during
defendants absence, the company was changed to Philippine
Racing Club. Defendant endeavored the investments of those
who subscribed, particularly of that of plaintiff.
Defendant,.through sending a letter, assured plaintiff for any loss
which he might suffer in connection with Philippine Greyhound
Club in the same that he could not expect anyone to reimburse
him for his own losses which were more than that of plaintiff.
ISSUE:
Whether a moral obligation will sustain an express executory
promise
HELD:
NO. Defendant, although morally responsible because of the
failure of the enterprise, is not a consideration under Article 1261
of the Civil Code as an essential element for the legal existence
for an onerous contract which could bind the promisor to comply
with his promise.
Article 1261 states, there is no contract unless the following
requisites exists: consent of the contracting parties; definite
object; consideration. In the present case, it does not appear
that plaintiff consented to the said form of reimbursement. The
first requisite of 1261 is lacking.
With regards of the third requisite, it is now a well-established
rule that a mere moral obligation arising from wholly ethical
motives not connected with any legal obligation will not furnish a
consideration from an executory promise.
Barredo vs Garcia
Facts:
On May 3, 1936, there was a head-on collision between a taxi of
the Malate taxicab driven by Fontanilla and a carretela guided by
Dimapilis. The carretela was over-turned, and a passenger, a 16-
year old boy, Garcia, suffered injuries from which he died. A
criminal action was filed against Fontanilla, and he was
convicted. The court in the criminal case granted the petition to
reserve the civil action. Garcia and Almario, parents of the
deceased, on March 7, 1939, filed a civil action against Barredo,
the proprietor of the Malate Taxicab and employer of Fontanilla,
making him primarily and directly responsible under culpa
acquiliana of Article 2180 of the Civil Code of the Philippines. It is
undisputed that Fontanillas negligence was the cause of the
accident, as he was driving on the wrong side of the road at high
speed, and there was no showing that Barredo exercised the
diligence of a good father of a family, a defense to Article 2180 of
the said Code. Barredos theory of defense is that Fontanillas
negligence being punished by the Revised Penal Code, his
liability as employer is only subsidiary, but Fontanilla, was not
between Salazar's jeep and petitioner's car was the result of the
held liable.
Issue: Whether or not Barredo, as employer is civilly liable for the
acts of Fontanilla, his employee.
Held: Quasi-delict or culpa acquiliana is a separate legal
institution under the Civil Code of the Philippines is entirely
distinct and independent from a delict or crime under the
Revised Penal Code. In this jurisdiction, the same negligent act
causing damage may produce civil liability (subsidiary) arising
from a crime under Article 103 of the Revised Penal Code of the
Philippines; or create an action for quasi-delicto or culpa
aquiliana under Articles 2179 and 2180 of the Civil Code and the
parties are free to choose which course to take. And in the
instant case, the negligent act of Fontanilla produces two (2)
liabilities of Barredo: First, a subsidiary one because of the civil
liability of Fontanilla arising from the latters criminal negligence
under Article 103 of the Revised Penal Code, and second,
Barredos primary and direct responsibility arising from his
presumed negligence as an employer under Article 2180 of the
Civil Code. Since the plaintiffs are free to choose what remedy to
take, they preferred the second, which is within their rights. This
is the more expedious and effective method of relief because
Fontanilla was either in prison or just been released or had no
property. Barredo was held liable for damages.
Mendoza vs Arrieta
Facts:
On October 22, 1969, at around 4pm, a 3-way vehicular accident
occurred along Mac-Arthur Highway Bulacan, involving a
Mercedez Benz owned and driven by petitioner, a private jeep
owned and driven by respondent Salazar and a gravel and sand
truck owned by respondent Timbol and driven by Montoya. As a
consequence, separate informations were filed against Salazar
and Montoya.
At the trial, petitioner testified that Salazar overtook the truck,
swerved to the left and hit his car. He further testified that before
impact, Salazar jumped from the jeep not knowing that Salazar
was hit by the truck of Montoya. Montoya affirmed this. On the
other hand, Salazar tried to show that after overtaking the truck,
he flashed a signal showing his intention to turn left but was
stopped at by a policeman directing traffic at the intersection
which he contends to be the time he was hit by the truck causing
his jeep to hit petitioners car.
Issues:
(1) Whether or not the damages ensued to the vehicle of
petitioner shall be the liability of the driver of the jeep or of the
truck.
(2) Whether or not the trucks owner may be held liable for
damages caused by him employee.
Held:
Thus, the trial Court absolved jeep-owner-driver Salazar of any
liability, civil and criminal, in view of its findings that the collision
former having been bumped from behind by the truck driven by
Montoya. Neither was petitioner awarded damages as he was
not a complainant against truck-driver Montoya but only against
jeep-owner-driver Salazar.
That petitioner's cause of action against Timbol in the civil case
is based on quasi-delict is evident from the recitals in the
complaint to wit: that while petitioner was driving his car along
MacArthur Highway at Marilao, Bulacan, a jeep owned and
driven by Salazar suddenly swerved to his (petitioner's) lane and
collided with his car That the sudden swerving of Salazar's jeep
was caused either by the negligence and lack of skill of Freddie
Montoya, Timbol's employee, who was then driving a gravel and
sand truck iii the same direction as Salazar's jeep; and that as a
consequence of the collision, petitioner's car suffered extensive
damages. Clearly, therefore, the two factors that a cause of
action must consist of, namely: (1) plaintiff's primary right, i.e.,
that he is the owner of a Mercedes Benz, and (2) defendant's
delict or wrongful act or omission which violated plaintiff's
primary right, i.e., the negligence or lack of skill either of jeep-
owner Salazar or of Timbol's employee, Montoya, in driving the
truck, causing Salazar's jeep to swerve and collide with
petitioner's car, were alleged in the Complaint.
Consequently, petitioner's cause of action being based on quasi-
delict, respondent Judge committed reversible error when he
dismissed the civil suit against the truck-owner, as said case may
proceed independently of the criminal proceedings and
regardless of the result of the latter.
In view of what has been proven and established during the trial,
accused Freddie Montoya would be held able for having bumped
and hit the rear portion of the jeep driven by the accused Rodolfo
Salazar. Considering that the collision between the jeep driven
by Rodolfo Salazar and the car owned and driven by Edgardo
Mendoza was the result of the hitting on the rear of the jeep by
the truck driven by Freddie Montoya, this Court behaves that
accused Rodolfo Salazar cannot be held able for the damages
sustained by Edgardo Mendoza's car.
Song Fo and Co., vs. Hawaiian-Philippine Co. [47 SCRA 821
G.R. No. 23769. September 16, 1925]
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.
The judgment of the trial court condemned Hawaiian-Philippine
Co. to pay Song Fo& Co. a total of P35,317.93, with legal
interest from the date of the presentation of the complaint, and
with costs.
Issue:
(1) Did Hawaiian-Philippine Co. agree to sell 400,000 gallons of
molasses or 300,000 gallons of molasses?
(2) Had Hawaiian-Philippine Co. the right to rescind the contract
of sale made with Song Fo& 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?
Held:
(1) Only 300,000 gallons of molasses was agreed to by
Hawaiian-Philippine Co. as seen in the documents presented in
court. The language used with reference to the additional
100,000 gallons 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 contract. It should be noted that the
time of payment stipulated for in the contract should be treated
as of the presence of the contract. There was only a slight
breach of contract when the payment was delayed for 20 days
after which Hawaiian-Philippine Co. accepted the payment of the
overdue accounts and continued with the contract, waiving its
right to rescind the contract. 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 greater expense to which it was
put in being compelled to secure molasses from other sources to
which Supreme Court ruled that P3,000 should be paid by
Hawaiian-Philippine Co. with legal interest from October 2, 1923
until payment.
The second cause of action was based on the lost profits on
account of the breach of contract. Supreme Court said that Song
Fo& Co. is not entitled to recover anything under the second
cause of action because the testimony of Mr. Song Heng will
follow the same line of thought as that of the trial court which in
unsustainable and there was no means for the court to find out
what items make up the P14,000 of alleged lost profits.
Velarde, et.al. vs. CA [361 SCRA 56 GR No. 108346. July 11,
2001]
Facts: David Raymundo (private respondent) is the absolute
and registered owner of a parcel of 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 encumbrances not later than Jan.
21, 1987.
The RTC of Makati dismissed the complaint of the petitioners
against Mr. Raymundo for specific 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.
Upon the appeal of the private respondent to the CA, the court
upheld the earlier decision of the RTC regarding the validity of
the rescission made by private respondents.
Issue: Whether the rescission of contract made by the private
respondent is valid.
Held: There is a breach of contract because the petitioners did
not merely stopped paying the mortgage obligations but they
also failed to pay the balance purchase price.
Their conditional offer to Mr. Raymundo cannot take the place of
actual payment as would discharge the obligation of the buyer
under contract of sale.
Mr. Raymundos source of right to rescind the contract is Art.
1191 of the Civil Code predicated on a breach of faith by the
other party who violates the reciprocity between them. Moreover,
the new obligations as preconditions to the performance of the
petitioners own obligation were repudiation of an existing
obligation, which was legally due and demandable under the
contract of sale.
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
Lot buyer (P) vs. Seller (D)
GR L-42283 [T]
Summary: A buyer of a property paid monthly installments for
nine years, but was five months late on the installment payment
due. The seller rescinded the contract and applied the
installments made as rentals.
Rule of Law: The act of a party in treating a contract as canceled
or resolved on account of infractions by the other is always
provisional, being ever subject to scrutiny and review by the
proper court.
Facts:
Ursula and Tomas Calasanz (D) sold a piece of land to
Buenaventura Angeles (P) and TeofilaJuani covered by a
contract to sell.
Angeles (P) paid a downpayment upon the execution of the
contract and started paying the balance in monthly installments.
Angeles (P) paid monthly installments for nine years with only a
few remaining installments left to pay. Although Calasanz (D)
accepted late payments before, Angeles (P) was now five
months late.
Calasanz (D) demanded payment of past due accounts, but did
not receive any. Eventually, Calansanz (D) canceled the said
contract because Angeles (P) failed to pay the subsequent
payments. Angeles (P) asked for reconsideration, but was
denied.
Angeles (P) filed a case to compel the Calasanz (D) to execute
in their favor the final deed of sale alleging that they have
already fully paid the total price of the property. Calasanz (D)
alleged in their answer that Angeles (P) violated the contract to
sell when they failed to pay a monthly installment.
A provision in the contract to sell gave Calasanz (D) the right to
cancel the contract and consider the amounts paid as rent for
the property. However, the lower court ruled that the contract
was not validly canceled and ordered Calasanz (D) to execute a
final Deed of Sale in favor of Angeles (P)
Issues: Was the contract to sell validly canceled?
Ruling:
No. The rule that it is not always necessary for the injured party
to resort to court for rescission of the contract when the contract
itself provides was qualified by this Court in University of the
Philippines v. De los Angeles, (35 SCRA 102) where we
explained (paraphrased) that:
Of course, the act of a party in treating a contract as canceled or
resolved on account of infractions by the other must be made
known to the other and is always provisional, being ever subject
to scrutiny and review by the proper court. If the other party
denies that rescission is justified, it is free to bring the matter to
court. Then, should the court decide that the resolution of the
contract was not warranted, the responsible party will be
sentenced to damages; in the contrary case, the resolution will
be affirmed and indemnity awarded to the party prejudiced.
In short, the party who deems the contract violated many
consider it resolved or rescinded without previous court action,
but it proceeds at its own risk. For it is only the final judgment of
the court that will conclusively and finally settle whether the
action taken was or was not correct in law.
The right to rescind the contract for non-performance of one of
its stipulations, therefore, is not absolute. In Universal Food
Corporation vs. Court of Appeals (33 SCRA 1) the Court stated
that:
The general rule is that rescission of a contract will not be
permitted for a slight or casual breach, but only for such
substantial and fundamental breach as would defeat the very
object of the parties in making the agreement. (Song Fo& Co. vs.
Hawaiian-Philippine Co., 47 Phil. 821) The question of whether a
breach of a contract is substantial depends upon the attendant
circumstances. (Corpus vs. Alikpala, GR L-23707 & L-23720,
January 17, 1968)
The breach of the contract alleged by Calasanz (D) is so slight
considering that Angeles (P) had already paid monthly
installments for almost nine years. In only a short time, the entire
obligation would have been paid. To sanction the rescission
made by Calasanz (D) will work injustice to Angeles (P) and
unjustly enrich Calasanz (D).
Article 1234 of the Civil Code which provides that:
If the obligation has been substantially performed in good faith,
the obligor may recover as though there had been a strict and
complete fulfillment, less damages suffered by the obligee.
also militates against the unilateral act of the Calasanz (P) in
cancelling the contract.
G.R. No. L-55665 February 8, 1989
DELTA MOTOR CORPORATION, petitioner, vs. EDUARDA
SAMSON GENUINO, JACINTO S. GENUINO, Jr., VICTOR S.
GENUINO, HECTOR S. GENUINO, EVELYN S. GENUINO, and
The COURT OF APPEALS, respondents.
CORTES, J.:
Petitioner, through this petition for review by certiorari, appeals
from the decision of respondent appellate court in CA-G.R. No.
59848-R entitled "Eduarda Samson Genuino, et al. v. Delta
Motor Corporation" promulgated on October 27, 1980.
The facts are as follows:
Petitioner Delta Motor Corporation (hereinafter referred to as
Delta) is a corporation duly organized and existing under
Philippine laws.
On the other hand, private respondents are the owners of an
iceplant and cold storage located at 1879 E. Rodriguez Sr.
Avenue, Quezon City doing business under the name "Espaa
Extension Iceplant and Cold Storage."
In July 1972, two letter-quotations were submitted by Delta to
Hector Genuino offering to sell black iron pipes. T
The letter dated July 3, 1972 quoted Delta's selling price for
1,200 length of black iron pipes schedule 40, 2" x 20' including
delivery at P66,000.00 with the following terms of payment:
a. 20% of the net contract price or P13,200.00 will be
due and payable upon signing of the contract papers.
b. 20% of the net contract price or P13,200.00 will be
due and payable before commencement of delivery.
c. The balance of 60% of the net contract price or
P39,600.00 with 8% financing charge per annum will be
covered by a Promissory Note bearing interest at the
rate of 14% per annum and payable in TWELVE (12)
equal monthly installment (sic), the first of which will
become due thirty (30) days after the completion of
delivery. Additional 14% will be charged for all delayed
payments. [Exh. "A"; Exh. 1.]
The second letter-quotation dated July 18, 1972 provides for the
selling price of 150 lengths of black iron pipes schedule 40, 1
1/4" x 20' including delivery at P5,400.00 with the following terms
of payment:
a. 50% of the net contract price or P 2,700.00 will be due
and payable upon signing of the contract papers.
b. 50% of the net contract price or P 2,700.00 will be due
and payable before commencement of delivery. [Exh.
"C"; Exh. "2".]
Both letter-quotations also contain the following stipulations as to
delivery and price offer:
DELIVERY
Ex-stock subject to prior sales.
xxx xxx xxx
Our price offer indicated herein shall remain firm within a
period of thirty (30) days from the date hereof. Any order
placed after said period will be subject to our review and
confirmation. [Exh. "A" and "C"; Exhs. "l" and "2".]
Hector Genuino was agreeable to the offers of Delta hence, he
manifested his conformity thereto by signing his name in the
space provided on July 17, 1972 and July 24, 1972 for the first
and second letter-quotations, respectively.
It is undisputed that private respondents made initial payments
on both contracts for the first contract, P13,200.00 and, for
the second, P2,700.00 for a total sum of P15,900.00 on July
28, 1972 (Exhs. "B" and "D"].
Likewise unquestionable are the following. the non-delivery of
the iron pipes by Delta; the non-payment of the subsequent
installments by the Genuinos; and the non-execution by the
Genuinos of the promissory note called for by the first contract.
The evidence presented in the trial court also showed that
sometime in July 1972 Delta offered to deliver the iron pipes but
the 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.
Almost 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. At the same time private respondents
manifested their preparedness to pay the second installment on
both contracts upon notice of Delta's readiness to deliver.
Delta countered that the black iron pipes cannot be delivered on
the prices quoted as of July 1972. The company called the
attention of the Genuinos to the stipulation in their two (2)
contracts that the quoted prices were good only within thirty (30)
days from date of offer. Whereupon Delta sent new price
quotations to the Genuinos based on its current price of black
iron pipes, as follows:
P241,800.00 for 1,200 lengths of black iron pjpes
schedule 40, 2" x 20' [Exh. "G-1".]
P17,550.00 for 150 lengths of black iron pipes schedule
40, 1 1/4" x 20' [Exh. "G-2".]
The Genuinos rejected the new quoted prices and instead filed a
complaint for specific performance with damages seeking to
compel Delta to deliver the pipes. Delta, in its answer prayed for
rescission of the contracts pursuant to Art. 1191 of the New Civil
Code. The case was docketed as Civil Case No. Q-20120 of the
then Court of First Instance of Rizal, Branch XVIII, Quezon City.
After trial the Court of First Instance ruled in favor of Delta,the
dispositive portion of its decision reading as follows:
WHEREFORE, premises considered, judgment is
rendered:
1. Declaring the contracts, Annexes "A" and "C" of the
complaint rescinded;
 2. Ordering defendant to refund to plaintiffs the sum of
P15,900.00 delivered by the latter as downpayments on
the aforesaid contracts;
3. Ordering plaintiffs to pay defendant the sum of
P10,000.00 as attorney's fees; and,
4. To pay the costs of suit. [CFI Decision, pp. 13-14;
Rollo, pp. 53-54.]
On appeal, the Court of Appeals reversed and ordered private
respondents to make the payments specified in "Terms of
Payment (b)" of the contracts and to execute the promissory
note required in the first contract and thereafter, Delta should
immediately commence delivery of the black iron pipes.* [CA
Decision, p. 20; Rollo, p. 75.]
The Court of Appeals cited two main reasons why it reversed the
trial court, namely:
1. As Delta was the one who prepared the contracts and
admittedly, it had knowledge of the fact that the black
iron pipes would be used by the Genuinos in their cold
storage plant which was then undergoing construction
and therefore, would require sometime before the
Genuinos would require delivery, Delta should have
included in said contracts a deadline for delivery but it
did not. As a matter of fact neither did it insist on delivery
when the Genuinos refused to accept its offer of delivery.
[CA Decision, pp. 16-17; Rollo, pp. 71-72.]
2. Delta's refusal to make delivery in 1975 unless the
Genuinos pay a price very much higher than the prices it
previously quoted would mean an amendment of the
contracts. It would be too unfair for the plaintiffs if they
will be made to bear the increase in prices of the black
iron pipes when they had already paid quite an amount
for said items and defendant had made use of the
advance payments. That would be unjust enrichment on
the part of the defendant at the expense of the plaintiffs
and is considered an abominable business practice. [CA
Decision, pp. 18-19; Rollo, pp. 73-74.]
Respondent court denied Delta's motion for reconsideration
hence this petition for review praying for the reversal of the Court
of Appeals decision and affirmance of that of the trial court.
Petitioner argues that its obligation to deliver the goods under
both contracts is subject to conditions required of private
respondents as vendees. These conditions are: payment of 20%
of the net contract price or P13,200.00 and execution of a
promissory note called for by the first contract; and payment of
50% of the net contract price or P2,700.00 under the second
contract. These, Delta posits, are suspensive conditions and only
upon their performance or compliance would its obligation to
deliver the pipes arise [Petition, pp. 9-12; Rollo, pp. 1720.] Thus,
when private respondents did not perform their obligations; when
they refused to accept petitioner's offer to deliver the goods; and,
when it took them three (3) long years before they demanded
delivery of the iron pipes that in the meantime, great and sudden
fluctuation in market prices have occurred; Delta is entitled to
rescind the two (2) contracts.
Delta relies on the following provision of law on rescission:
Art. 1191. The power to rescind obligations is implied in
reciprocal ones, in case one of the obligors should not
comply with what is incumbent upon him.
The injured party may choose between the fulfillment
and the rescission of the obligation, with the payment of
damages in either case. He may also seek rescission,
even after he has chosen fulfillment, if the latter should
become impossible.
The court shall decree the rescission claimed, unless
there be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of
third persons who have acquired the thing, in
accordance with articles 1385 and 1388 and the
Mortgage Law.
In construing Art. 1191, the Supreme Court has stated that,
"[r]escission will be ordered only where the breach complained of
is substantial as to defeat the object of the parties in entering
into the agreement. It will not be granted where the breach is
slight or casual." [Phil. Amusement Enterprises, Inc. v. Natividad,
G.R. No. L-21876, September 29, 1967, 21 SCRA 284, 290.]
Further, "[t]he question of whether a breach of a contract is
substantial depends upon the attendant circumstances."
[Universal Food Corporation v. Court of Appeals, G. R. No. L-
29155, May 13,1970,33 SCRA 1, 18].
In the case at bar, the conduct of Delta indicates that the
Genuinos' non-performance of its obligations was not a
substantial breach, let alone a breach of contract, as would
warrant rescission.
Firstly, it is undisputed that a month after the execution of the two
(2) contracts, Delta's offer to deliver the black iron pipes was
rejected by the Genuinos who were "not ready to accept delivery
because the cold storage rooms have not been constructed yet.
Plaintiffs (private respondents herein) were short-funded, and did
not have the space to accommodate the pipes they ordered"
[CFI Decision, p. 9; Rollo, p. 49].
Given this answer to its offer, Delta did not do anything. As
testified by Crispin Villanueva, manager of the Technical Service
department of petitioner:
Q You stated that you sent a certain Evangelista to the
Espaa Extension and Cold Storage to offer the delivery
subject matter of the contract and then you said that Mr.
Evangelista reported (sic) to you that plaintiff would not
accept delivery, is that correct, as a summary of your
statement?
A A Yes, sir.
Q Now, what did you do in the premises (sic)?
A Yes, well, we take the word of Mr. Evangelista. We
could not deliver the said black iron pipes, because as
per information the Ice Plant is not yet finished.
Q Did you not report that fact to ... any other defendant-
officials of the Delta Motor Corporation?
A No.
Q And you did not do anything after that?
A Because taking the word of my Engineer we did not do
anything. [TSN, December 8, 1975, pp. 18-19.]
xxx xxx xxx
And secondly, three (3) years later when the Genuinos offered to
make payment Delta did not raise any argument but merely
demanded that the quoted prices be increased. Thus, in its
answer to private respondents' request for delivery of the pipes,
Delta countered:
Thank you for your letter dated April 15, 1975, requesting
for delivery of Black Iron pipes;.
We regret to say, however, that we cannot base our price
on our proposals dated July 3 and July 18, 1972 as per
the following paragraph quoted on said proposal:
Our price offer indicated herein shall remain firm within
a period of thirty (30) days from the date hereof. Any
order placed after said period will be subject to our
review and confirmation.

We are, therefore, enclosing our re-quoted proposal
based on our current price. [Exh. "G".]
Moreover, the power to rescind under Art. 1191 is not
absolute. "[T]he act of a party in treating a contract as cancelled
or resolved on account of infractions by the other contracting
party must be made known to the otherand is always provisional,
being ever subject to scrutiny and review by the proper court."
[University of the Phils. v. De los Angeles, G. R. No. L-28602,
September 29, 1970, 35 SCRA 102, 107; Emphasis supplied.]
In the instant case, Delta made no manifestation whatsoever that
it had opted to rescind its contracts with f-he Genuinos. It only
raised rescission as a defense when it was sued for specific
performance by private respondents.
Further, 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 P15,900.00 down payments private
respondents have paid. And if petitioner Delta claims the right to
rescission, at the very least, it should have offered to return the
P15,900.00 down payments [See Art. 1385, Civil Code and
Hodges v. Granada, 59 Phil. 429 (1934)].
It is for these same reasons that 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. . . . [Emphasis supplied.]
Finally, 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. Said stipulation makes reference to Delta's price offer
as remaining firm for thirty (30) days and thereafter, will be
subject to its review and confirmation. The offers of Delta,
however, were accepted by the private respondents within the
thirty (30)-day period. And as stipulated in the two (2) letter-
quotations, acceptance of the offer gives rise to a contract
between the parties:
In the event that this proposal is acceptable to you,
please indicate your conformity by signing the space
provided herein below which also serves as a contract of
this proposal. [Exhs. "A" and "C"; Exhs. "1" and "2".]
And as further provided by the Civil Code:
Art. 1319. Consent is manifested by the meeting of the
offer and the acceptance upon the thing and the cause
which are to constitute the contract.
Art. 1475. The contract of sale is perfected at the
moment there is a meeting of minds upon thing which is
the object of the contract and upon the price.
Thus, 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. As testified to
by petitioner's Vice-President of Marketing for the Electronics,
Airconditioning and Refrigeration division, Marcelino Caja, the
stipulation in the two (2) contracts as to delivery, ex-stock
subject to prior sales,means that "the goods have not been
delivered and that there are no prior commitments other than the
sale covered by the contracts.. . once the offer is accepted, the
company has no more option to change the price." [CFI
Decision, p. 5; Rollo, p. 45; Emphasis supplied.] Thus, petitioner
cannot claim for higher prices for the black iron pipes due to the
increase in the cost of goods. Based on the foregoing, petitioner
Delta and private respondents Genuinos should comply with the
original terms of their contracts.
WHEREFORE, the decision of the Court of Appeals is hereby
AFFIRMED.
SO ORDERED.
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
ofP276,000.00) to Seneca Hardware; upon completion of
Vermen Pines Condominiums Phase II, Seneca Hardware shall
be given option to transfer to similar units therein.
As found by the appellate court and admitted by both parties,
Seneca Hardware had paid Vermen Realty the amount of
P110,151.75, and at the same time delivered construction
materials worth P219,727.00. Pending completion of Phase II of
the Vermen Pines Condominiums, Vermen Realty delivered to
Seneca Hardware units 601 and 602 at Phase I of the
VermenPines Condominiums (Rollo, p. 28). In 1982, the Vermen
Realty repossessed unit 602. As a consequence of the
repossession, the officers of the Seneca Hardware corporation
had to rent another unit for their use when they went to Baguio
on April 8, 1982.
In its reply the Vermen Realty corporation averred that Room
602 was leased to another tenant because Seneca Hardware
corporation had not paid anything for purchase of the
condominium unit. Vermen Realty corporation demanded
payment of P27,848.25 representing the balance of the
purchase price of Room 601.
On June 21, 1985, Seneca Hardware filed a complaint with the
Regional Trial Court of Quezon City (Branch 92) for rescission of
the Offsetting Agreement with damages. In said complaint,
Seneca Hardware alleged that Vermen Realty Vermen Realty
Corporation had stopped issuing purchase orders of construction
materials after April, 1982, without valid reason, thus resulting in
the stoppage of deliveries of construction materials on its
(Seneca Hardware) part, in violation of the Offsetting Agreement.
After conducting hearings, the trial court rendered a decision
dismissing the complaint and ordering the plaintiff (Seneca
Hardware in this petition) to pay defendant (Vermen Realty in
this petition) on its counterclaim in the amount of P27,848.25
representing the balance due on the purchase price of
condominium unit 601.
On appeal, respondent court reversed the trial court's decision
as adverted to above.
ISSUE:
Do the circumstances of the case warrant rescission of the
Offsetting Agreement as prayed for bySeneca Hardware?
RULING:
Yes. The Court ruled in favor of Seneca Hardware. There is no
controversy that the provisions of the Offsetting Agreement are
reciprocal in nature. Reciprocal obligations are those created or
established at the same time, out of the same cause, and which
results in a mutual relationship of creditor and debtor between
parties. In reciprocal obligations, the performance of one is
conditioned on the simultaneous fulfillment of the other obligation
Under the agreement, Seneca Hardware shall deliver to Vermen
Realty construction materials. Vermen Realty's obligation under
the agreement is three-fold: 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.
Article 1191 of the Civil Code provides the remedy of rescission
in (more appropriately, the term is "resolution") in case of
reciprocal obligations, where one of the obligors fails to comply
with what is incumbent upon him.
In the case at bar, Vermen Realty argues that it was Seneca
Hardware who failed to perform its obligation in the Offsetting
Agreement. Seneca Hardware, on the other hand, points out that
the subject of the Offsetting Agreement is Phase II of the Vermen
Pines Condominiums. It alleges that since construction of Phase
II of the Vermen Pines Condominiums has failed to begin it has
reason to move for rescission of the Offsetting Agreement, as it
cannot forever wait for the delivery of the condominium units to
it.
It is evident from the facts of the case that Senec Hardware did
not fail to fulfill its obligation in the Offsetting Agreement. The
discontinuance of delivery of construction materials to Vermen
Realty stemmed from the failure of Vermen Realty to send
purchase orders to Seneca Hardware.
The impossibility of fulfillment of the obligation on the part of
Vermen Realty necessitates resolution of the contract for indeed,
the non-fulfillment of the obligation aforementioned constitutes
substantial breach of the Offsetting Agreement.
CETUS DEV.vs CA
Article 1169 of the Civil Code
FACTS:
Private respondents were the lessees of the premises
originally owned by Susana Realty. The payments of the rentals
were paid by them to a collector of the Susana Realty who went
the premises monthly. Susana Realty, however, sold the
property to petitioner Cetus Development, Inc. The private
respondents then continued to pay their monthly rentals to a
collector sent by the petitioner. In succeeding months, for three
months, the private respondents failed to pay their rentals
because no collector came. They then contacted the petitioner
over the telephone as to where they should pay their rentals. The
petitioner then told them that they would send a collector to
collect the rentals. Private respondents waited but no collector
came. Petitioner then sent a letter to each of the private
respondents demanding that they vacate the subject premises
and to pay their arrearages within 15 days from the receipt
thereof. With this, private respondents immediately upon the
receipt of such demand, tendered their payments which were
accepted by the petitioner with the condition that the acceptance
was without prejudice to the filing of ejectment suit. For failure of
the private respondents to vacate the premises as demanded,
petitioner filed an ejectment suit against them.
ISSUE:
Whether or not there was a delay of payment by the
private respondents to the petitioner considering that upon
receipt of the demand letter, they immediately tendered their
payments.
HELD:
No. There was no failure yet on the part of the private
respondents to pay rents for three consecutive months. It has
been duly established that it has been customary for private
respondents to pay their rentals through a collector sent by the
lessor.
Article 1169 of the Civil Code provides that those
obliged to deliver or to do something incur in delay from the time
the oblige judicially or extrajudicially demands from them the
fulfillment of their obligation.
The moment the petitioner extrajudicially demand the payment
of the rentals, private respondents immediately answered their
obligation by paying their arrearages of rentals to the petitioner.
AEROSPACE CHEMICAL Vs CA Case Digest
g.r.no. 108129 September 23, 1999
FACTS:
On June 27, 1986, petitioner Aerospace Industries, Inc.
(Aerospace) purchased five hundred (500) metric tons of sulfuric
acid from private respondent Philippine Phosphate Fertilizer
Corporation (Philphos). Initially set beginning July 1986, the
agreement provided that the buyer shall pay its purchases in
equivalent Philippine currency value, five days prior to the
shipment date. Petitioner as buyer committed to secure the
means of transport to pick-up the purchases from private
respondent's loadports. Per agreement, one hundred metric tons
(100 MT) of sulfuric acid should be taken from Basay, Negros
Oriental storage tank, while the remaining four hundred metric
tons (400 MT) should be retrieved from Sangi, Cebu. On
December 18, 1986, M/T Sultan Kayumanggi docked at Sangi,
Cebu, but withdrew only 157.51 MT of sulfuric acid. Again, the
vessel tilted. Further loading was aborted. Two survey reports
conducted by the SocieteGenerale de Surveillance (SGS) Far
East Limited, dated December 17, 1986 and January 2, 1987,
attested to these occurrences. Later, on a date not specified in
the record, M/T Sultan Kayumanggi sank with a total of 227.51
MT of sulfuric acid on board. Petitioner chartered another vessel,
M/T Don Victor, with a capacity of approximately 500 MT.6 [TSN,
September 1, 1989, pp. 28-29.] On January 26 and March 20,
1987, Melecio Hernandez, acting for the petitioner, addressed
letters to private respondent, concerning additional orders of
sulfuric acid to replace its sunken purchases.
ISSUE:
Should expenses for the storage and preservation of the
purchased fungible goods, namely sulfuric acid, be on seller's
account pursuant to Article 1504 of the Civil Code?
RULING:
Petitioner tries to exempt itself from paying rental expenses and
other damages by arguing that expenses for the preservation of
fungible goods must be assumed by the seller. Rental expenses
of storing sulfuric acid should be at private respondent's account
until ownership is transferred, according to petitioner. However,
the general rule that before delivery, the risk of loss is borne by
the seller who is still the owner, is not applicable in this case
because petitioner had incurred delay in the performance of its
obligation. Article 1504 of the Civil Code clearly states: "Unless
otherwise agreed, the goods remain at the seller's risk until the
ownership therein is transferred to the buyer, but when the
ownership therein is transferred to the buyer the goods are at the
buyer's risk whether actual delivery has been made or not,
except that: (2) Where actual delivery has been delayed through
the fault of either the buyer or seller the goods are at the risk of
the party at fault."
On this score, we quote with approval the findings of the
appellate court, thus: The defendant [herein private respondent]
was not remiss in reminding the plaintiff that it would have to
bear the said expenses for failure to lift the commodity for an
unreasonable length of time.But even assuming that the plaintiff
did not consent to be so bound, the provisions of Civil Code
come in to make it liable for the damages sought by the
defendant.
Santos Ventura Hocorma Foundation, Inc. vs Ernesto
Santos &Riverland, Inc.
G.R. No. 1530004 November 5, 2004
Facts:
Subject of the present petition for review on certiorari is the
Decision, dated January 30, 2002, as well as the April 12, 2002,
Resolution of the Court of Appeals, The appellate court reversed
the Decision, dated October 4, 1996, of the Regional Trial Court
of Makati City, and likewise denied petitioner's Motion for
Reconsideration.
On October 26, 1990, the parties executed a Compromise
Agreement which amicably ended all their pending litigations.
The pertinent portions of the Agreement, include the following:
(1) Defendant Foundation shall pay Plaintiff Santos P14.5 Million
on (a) P1.5 Million immediately upon the execution of this
agreement and (b) The balance of P13 Million shall be paid,
whether in one lump sum or in installments, at the discretion of
the Foundation, within a period of not more than two years from
the execution of this agreement; (2) Immediately upon the
execution of this agreement (and [the] receipt of the P1.5
Million), plaintiff Santos shall cause the dismissal with prejudice
of Civil Cases; (3) Failure of compliance of any of the foregoing
terms and conditions by either or both parties to this agreement
shall ipso facto and ipso jure automatically entitle the aggrieved
party to a writ of execution for the enforcement of this
agreement.
In compliance with the Compromise Agreement, respondent
Santos moved for the dismissal of the aforesaid civil cases. He
also caused the lifting of the notices of lispendens on the real
properties involved. For its part, petitioner SVHFI, paid P1.5
million to respondent Santos, leaving a balance of P13 million.
On October 28, 1992, respondent Santos sent another letter to
petitioner inquiring when it would pay the balance of P13 million.
There was no response from petitioner. Consequently,
respondent Santos applied with the Regional Trial Court of
Makati City, for the issuance of a writ of execution of its
compromise judgment dated September 30, 1991. The RTC
granted the writ.
Petitioner, however, filed numerous motions to block the
enforcement of the said writ. The challenge of the execution of
the aforesaid compromise judgment even reached the Supreme
Court. All these efforts, however, were futile.
On November 22, 1994, petitioner's real properties located in
Mabalacat, Pampanga were auctioned. In the said auction,
Riverland, Inc. was the highest bidder for P12 million and it was
issued a Certificate of Sale covering the real properties subject
of the auction sale. Subsequently, another auction sale was held
on February 8, 1995, for the sale of real properties of petitioner
in Bacolod City. Again, Riverland, Inc. was the highest bidder.
The Certificates of Sale issued for both properties provided for
the right of redemption within one year from the date of
registration of the said properties.
On June 2, 1995, Santos and Riverland Inc. filed a Complaint for
Declaratory Relief and Damages alleging that there was delay on
the part of petitioner in paying the balance of P13 million.
Issues:
a)W/N the CA committed reversible error when it awarded legal
interest in favor of the respondents notwithstanding the fact that
neither in the compromise agreement nor in the compromise of
judgment by the judge provides for payment of interest to the
respondent?
b)W/N the CA erred in awarding legal interest to the respondents
although the obligation of the petitioner to the respondent is to
pay a sum of money that had been converted into an obligation
to pay in kind?
c)W/N respondents are barred from demanding payment of
interest by reason of the waiver provision in the compromise
agreement, which became the law among the parties.
Held:
On October 4, 1996, the trial court rendered a Decision
dismissing the respondents' complaint and ordering them to pay
attorney's fees and exemplary damages to petitioner.
Respondents then appealed to the Court of Appeals.
The only issue to be resolved is whether the respondents are
entitled to legal interest.
The appellate court reversed the ruling of the trial court:
WHEREFORE, finding merit in the appeal, the appealed
Decision is hereby REVERSED and judgment is hereby
rendered ordering appellee SVHFI to pay appellants Santos and
Riverland, Inc.: (1) legal interest on the principal amount of P13
million at the rate of 12% per annum from the date of demand on
October 28, 1992 up to the date of actual payment of the whole
obligation; and (2) P20,000 as attorney's fees and costs of suit.
SO ORDERED.
Delay
Delay as used in this article is synonymous to default or mora
which means delay in the fulfillment of obligations. It is the non-
fulfillment of the obligation with respect to time. In the case at
bar, the obligation was already due and demandable after the
lapse of the two-year period from the execution of the contract.
The two-year period ended on October 26, 1992. When the
respondents gave a demand letter on October 28, 1992, to the
petitioner, the obligation was already due and demandable.
Furthermore, the obligation is liquidated because the debtor
knows precisely how much he is to pay and when he is to pay it.
The petition lacks merit
In the case at bar, the Compromise Agreement was entered into
by the parties on October 26, 1990. It was judicially approved on
September 30, 1991. Applying existing jurisprudence, the
compromise agreement as a consensual contract became
binding between the parties upon its execution and not upon its
court approval. From the time a compromise is validly entered
into, it becomes the source of the rights and obligations of the
parties thereto. The purpose of the compromise is precisely to
replace and terminate controverted claims.
As to the remaining P13 million, the terms and conditions of the
compromise agreement are clear and unambiguous. It provides
that the balance of P13 Million shall be paid, whether in one
lump sum or in installments, at the discretion of the Foundation,
within a period of not more than two (2) years from the execution
of this agreement.
WHEREFORE, the petition is DENIED for lack of merit. The
Decision dated January 30, 2002 of the Court of Appeals and its
April 12, 2002 Resolution in CA-G.R. CV No. 55122 are
AFFIRMED. Costs against petitioner. SO ORDERED
Vasquez vs Ayala Corp
443 SCRA 239 Civil Law Law on Sales Warranty Option
Contract
Daniel Vasquez owns Conduit Development, Inc. In 1981,
Vasquez enters into a Memorandum of Agreement (MOA) with
Ayala Corporation wherein Ayala bought Conduit from Vasquez.
Ayala committed to develop Conduits lands including 4 parcels
of land adjacent to Vasquez retained land. Be it noted that these
parcels of land were in the 3rd phase of Ayalas development
plan. Paragraph 5.15 of the MOA provides:
5.15. The BUYER (AYALA) agrees to give the SELLERS
(Vasquez) a first option to purchase four developed lots next to
the Retained Area at the prevailing market price at the time of
the purchase.
In 1990, Ayala was able to develop the said lots. (This was after
some slump, and some litigation between Conduits former
contractor (GP construction) and GPs subcontractor (Lancer
Builders).) Ayala then offered to sell the 4 parcels of land to
Vasquez at P6.5k/sq. m. which was the market price in 1990.
Vasquez refused the offer. Vasquez contended that the purchase
price should be P460/sq. m. which was the market price in 1981
(time of purchase). Ayala then lowered the purchase price to
P5k/sq. m. but Vasquez refused again. Instead he made a
counter offer to buy the lots at P2k/sq. m. This time, Ayala
refused.
ISSUE:
Whether or not Paragraph 5.15 of the MOA is an option contract
or right of first refusal.
HELD:
No. The said paragraph is a mere right of first refusal. Although
the paragraph has a definite object, i.e., the sale of the 4 lots, the
period within which they will be offered for sale to Vasquez and,
necessarily, the price for which the subject lots will be sold are
not specified. The phrase at the prevailing market price at the
time of the purchase connotes that there is no definite period
within which Ayala is bound to reserve the subject lots for
Vasquez to exercise his privilege to purchase. Neither is there a
fixed or determinable price at which the subject lots will be
offered for sale. The price is considered certain if it may be
determined with reference to another thing certain or if the
determination thereof is left to the judgment of a specified person
or persons.
Further, paragraph 5.15 was inserted into the MOA to give
Vasquez the first crack to buy the subject lots at the price which
Ayala would be willing to accept when it offers the subject lots for
sale. It is not supported by an independent consideration.
G.R. No. L-32336 December 20, 1930
JULIO C. ABELLA, plaintiff-appellant, vs. GUILLERMO B.
FRANCISCO,
AVANCEA, C.J.:
Defendant Guillermo B. Francisco purchased from the
Government on installments, lots 937 to 945 of the Tala Estate in
Novaliches, Caloocan, Rizal. He was in arrears for some of
these installments. On the 31st of October, 1928, he signed the
following document:
MANILA, October 31, 1928
Received from Mr. Julio C. Abella the amount of five hundred
pesos (P500), payment on account of lots Nos. 937, 938, 939,
940, 941, 942, 943, 924, and 945 of the Tala Estate, barrio of
Novaliches, Caloocan, Rizal, containing an area of about 221
hectares, at the rate of one hundred pesos (P100) per hectare,
the balance being due on or before the fifteenth day of
December, 1928, extendible fifteen days thereafter.
(Sgd.) G. B.
FRANCISCO P500 Phone 67125.
After having made this agreement, the plaintiff proposed the sale
of these lots at a higher price to George C. Sellner, collecting
P10,000 on account thereof on December 29, 1928.
Besides the P500 which, according to the instrument quoted
above, the plaintiff paid, he made another payment of P415.31
on November 13, 1928, upon demand made by the defendant.
On December 27th of the same year, the defendant, being in the
Province of Cebu, wrote to Roman Mabanta of this City of
Manila, attaching a power of attorney authorizing him to sign in
behalf of the defendant all the documents required by the
Bureau of Lands for the transfer of the lots to the plaintiff. In that
letter the defendant instructed Roman Mabanta, in the event that
the plaintiff failed to pay the remainder of the selling price, to
inform him that the option would be considered cancelled, and to
return to him the amount of P915.31 already delivered. On
January 3, 1929, Mabanta notified the plaintiff that he had
received the power of attorney to sign the deed of conveyance of
the lots to him, and that he was willing to execute the proper
deed of sale upon payment of the balance due. The plaintiff
asked for a few days' time, but Mabanta, following the
instructions he had received from the defendant, only gave him
until the 5th of that month. The plaintiff did not pay the rest of the
price on the 5th of January, but on the 9th of the month
attempted to do so; Mabanta,however, refused to accept it, and
gave him to understand that he regarded the contract as
rescinded. On the same day, Mabanta returned by check the
sum of P915.31 which the plaintiff had paid.
The plaintiff brought this action to compel the defendant to
execute the deed of sale of the lots in question, upon receipt of
thebalance of the price, and asks that he be judicially declared
the owner of said lots and that the defendant be ordered to
deliver them to him.
The court below absolved the defendant from the complaint, and
the plaintiff appealed.
In rendering that judgment, the court relied on the fact that the
plaintiff had failed to pay the price of the lots within the stipulated
time; and that since the contract between plaintiff and defendant
was an option for the purchase of the lots, time was an essential
element in it.
It is to be noted that in the document signed by the defendant,
the 15th of December was fixed as the date, extendible for
fifteen days, for the payment by the plaintiff of the balance of the
selling price. It has been admitted that the plaintiff did not offer to
complete the payment until January 9, 1929. He contends that
Mabanta, as attorney-in-fact for the defendant in this transaction,
granted him an extension of time until the 9th of January. But
Mabanta has stated that he only extended the time until the 5th
of that month. Mabanta's testimony on this point is corroborated
by that of Paz Vicente and by the plaintiff's own admission to
Narciso Javier that his option to purchase those lots expired on
January 5, 1929.
In holding that the period was an essential element of the
transaction between plaintiff and defendant, the trial court
considered that the contract in question was an option for the
purchase of the lots, and that in an agreement of this nature the
is deemed essential. The opinion of the court is divided upon the
question of whether the agreement was an option or a
sale, but even supposing it was a sale, the court holds that time
was an essential element in the transaction. The defendant
wantedto sell those lots to the plaintiff in order to pay off certain
obligations which fell due in the month of December, 1928. The
time fixed for the payment of the price was therefore essential for
the defendant, and this view is borne out by his letter to his
representative Mabanta instructing him to consider the contract
rescinded if the price was not completed in time. In accordance
with article 1124 of the Civil Code, the defendant is entitled to
resolve the contract for failure to pay the price within the time
specified.
The judgment appealed from is affirmed, with costs against the
appellant. So ordered.
DELA CRUZ v. LEGASPI AND SAMPEROY
G.R. No. L-8024 November 29, 1955
Doctrine:
Subsequent non-payment of the price at the time agreed upon
did not convert the contract into one without cause or
consideration: a nudumpactum.
Facts:
Plaintiff sued defendant Legaspi to compel delivery of the parcel
of land sold to plaintiff. The complaint alleged the defendants
refusal to accept payment of the purchase price of P450 undue
retention of the realty.
The defendants alleged that before the document of sale was
made, the plaintiff agreed to pay the defendants the price right
after the document is executed that very day but after the
document was signed and ratified by the Notary Public and after
the plaintiff has taken the original of the said document, the sad
plaintiff refused to pay. They asserted that for lack of
consideration and for deceit, the document of said should be
annulled.
Issue:
Whether or not the contract of sale is void on the ground that it
lacks consideration
Held:
No. It cannot be denied that when the document was signed the
cause or consideration existed: P450. The document specifically
said so. Subsequent non-payment of the price at the time agreed
upon did not convert the contract into one without cause or
consideration: a nudumpactum. (Levy vs. Johnson, 4 Phil. 650;
Puato vs. Mendoza, 64 Phil, 457). The situation was rather one
in which there is failure to pay the consideration, with its resultant
consequences. In other words, when after the notarization of the
contract, plaintiff failed to hand the money to defendants as he
previously promised, there was default on his part at most, and
defendants right was to demand interest legal interest .
CLAUDINA VDA. DE VILLARUEL, ET AL. VS. MANILA
MOTOR CO., INC. 104 PHIL. 926
FACTS:
On May 31, 1940, the plaintiffs Villaruel and defendant Manila
Motor Co. Inc. entered into a contract whereby the defendant
agreed to lease plaintiffs building premises. On October 31,
1940, the leased premises were placed in the possession of the
defendant until the invasion of 1941. The Japanese military
occupied and used the property leased as part of their quarters
from June, 1942 to March, 1945, in which no payment of rentals
were made. Upon the liberation of the said city, the American
forces occupied the same buildings that were vacated by the
Japanese. When the United States gave up the occupancy of
the premises, defendant decided to exercise their option to
renew the contract, in which they agreed. However, before
resuming the collection of rentals, Dr. Alfredo Villaruel upon
advice demanded payment of rentals corresponding to the time
the Japanese military occupied the leased premises, but the
defendant refused to pay. As a result plaintiff gave notice seeking
the rescission of the contract and the payment of rentals from
June, 1942 to March, 1945; this was rejected by the defendant.
Despite the fact the defendant under new branch manager paid
to plaintiff the sum of P350 for the rent, the plaintiff still
demanded for rents in arrears and for the rescission of the
contract of lease. The plaintiff commenced an action before the
CFC of Neg. Occidental against defendant company. During the
pendency of the case, the leased building was burned down.
Because of the occurrence, plaintiffs demanded reimbursement
from the defendants, but having been refused, they filed a
supplemental complaint to include a 3rd cause of action, the
recovery of the value of the burned building. The trial court
rendered judgment in favor of the plaintiff. Hence the defendants
appeal.
ISSUE:
Is Manila Motor Co. Inc. liable for the loss of the leased
premises?
RULING:
No. Clearly, the lessors insistence upon collecting the
occupation rentals for 1942-1945 was unwarranted in law.
Hence, their refusal to accept the current rentals without
qualification placed them in default (mora creditoris or accipiendi)
with the result that thereafter, they had to bear all supervening
risks of accidental injury or destruction of the leased premises.
While not expressly declared by the Code of 1889, this result is
clearly inferable from the nature and effects of mora. In other
words, the only effect of the failure to consign the rentals in court
was that the obligation to pay them subsisted and the lessee
remained liable for the amount of the unpaid contract rent,
corresponding to the period from July to November, 1946; it
being undisputed that, from December 1946 up to March 2,
1948, when the commercial buildings were burned, the
defendants appellants have paid the contract rentals at the rate
of P350 per month. But the failure to consign did not eradicate
the default (mora) of the lessors nor the risk of loss that lay upon
them.
Central Bank v Court of Appeals G.R. No. L-45710 October 3,
1985
MARCH 16, 2014 LEAVE A COMMENT
The banks asking for advance interest for the loan is improper
considering that the total loan hasnt been released. A person
cant be charged interest for nonexisting debt. The alleged
discovery by the bank of overvaluation of the loan collateral is
not an issue. Since Island Savings Bank failed to furnish the
P63,000.00 balance of the P80,000.00 loan, the real estate
mortgage of Sulpicio M. Tolentino became unenforceable to such
extent.
Facts:
Island Savings Bank, upon favorable recommendation of its
legal department, approved the loan application for P80,000.00
of Sulpicio M. Tolentino, who, as a security for the loan, executed
on the same day a real estate mortgage over his 100-hectare
land located in Cubo, Las Nieves, Agusan. The loan called for a
lump sum of P80,000, repayable in semi-annual installments for
3 yrs, with 12% annual interest. After the agreement, a mere
P17K partial release of the loan was made by the bank and
Tolentino and his wife signed a promissory note for the P17,000
at 12% annual interest payable w/in 3 yrs. An advance interest
was deducted fr the partial release but this prededucted interest
was refunded to Tolentino after being informed that there was no
fund yet for the release of the P63K balance.
Monetary Board of Central Bank, after finding that bank was
suffering liquidity problems, prohibited the bank fr making new
loans and investments. And after the bank failed to restore its
solvency, the Central Bank prohibited Island Savings Bank from
doing business in the Philippines. Island Savings Bank in view of
the non-payment of the P17K filed an application for foreclosure
of the real estate mortgage. Tolentino filed petition for specific
performance or rescission and damages with preliminary
injunction, alleging that since the bank failed to deliver P63K, he
is entitled to specific performance and if not, to rescind the real
estate mortgage.
Issues:
1) Whether or not Tolentinos can collect from the bank for
damages
2) Whether or not the mortgagor is liable to pay the amount
covered by the promissory note
3) Whether or not the real estate mortgage can be foreclosed
Held:
1) Whether or not Tolentinos can collect from the bank for
damages
The loan agreement implied reciprocal obligations. When one
party is willing and ready to perform, the other party not ready
nor willing incurs in delay. When Tolentino executed real estate
mortgage, he signified willingness to pay. That time, the banks
obligation to furnish the P80K loan accrued. Now, the Central
Bank resolution made it impossible for the bank to furnish the
P63K balance. The prohibition on the bank to make new loans is
irrelevant bec it did not prohibit the bank fr releasing the balance
of loans previously contracted. Insolvency of debtor is not an
excuse for non-fulfillment of obligation but is a breach of
contract.
The banks asking for advance interest for the loan is improper
considering that the total loan hasnt been released. A person
cant be charged interest for nonexisting debt. The alleged
discovery by the bank of overvaluation of the loan collateral is
not an issue. The bank officials should have been more
responsible and the bank bears risk in case the collateral turned
out to be overvalued. Furthermore, this was not raised in the
pleadings so this issue cant be raised. The bank was in default
and Tolentino may choose bet specific performance or rescission
w/ damages in either case. But considering that the bank is now
prohibited fr doing business, specific performance cannot be
granted. Rescission is the only remedy left, but the rescission
shld only be for the P63K balance.
2) Whether or not the mortgagor is liable to pay the amount
covered by the promissory note
The promissory note gave rise to Sulpicio M. Tolentinos
reciprocal obligation to pay the P17,000.00 loan when it falls
due. His failure to pay the overdue amortizations under the
promissory note made him a party in default, hence not entitled
to rescission (Article 1191 of the Civil Code). If there is a right to
rescind the promissory note, it shall belong to the aggrieved
party, that is, Island Savings Bank. If Tolentino had not signed a
promissory note setting the date for payment of P17,000.00
within 3 years, he would be entitled to ask for rescission of the
entire loan because he cannot possibly be in default as there
was no date for him to perform his reciprocal obligation to pay.
Since both parties were in default in the performance of their
respective reciprocal obligations, that is, Island Savings Bank
failed to comply with its obligation to furnish the entire loan and
Sulpicio M. Tolentino failed to comply with his obligation to pay
his P17,000.00 debt within 3 years as stipulated, they are both
liable for damages.
3) Whether or not the real estate mortgage can be foreclosed
Since Island Savings Bank failed to furnish the P63,000.00
balance of the P80,000.00 loan, the real estate mortgage of
Sulpicio M. Tolentino became unenforceable to such extent.
P63,000.00 is 78.75% of P80,000.00, hence the real estate
mortgage covering 100 hectares is unenforceable to the extent
of 78.75 hectares. The mortgage covering the remainder of
21.25 hectares subsists as a security for the P17,000.00 debt.
21.25 hectares is more than sufficient to secure a P17,000.00
debt
CHARLES F. WOODHOUSE, plaintiff-appellant, vs.
FORTUNATO F. HALILI, defendant-appellant.
G.R. No. L-4811 July 31, 1953
FACTS
On November 29, 1947, plaintiff Woodhouse entered into a
written agreement with defendant Halili stating among others
that: 1) that they shall organize a partnership for the bottling and
distribution of Missionsoft drinks, plaintiff to act as industrial
partner or manager, and the defendant as a capitalist, furnishing
the capital necessary therefore; 2) that plaintiff was to secure the
also agreed upon that the franchise was to be transferred to the
Mission Soft Drinks franchise for and in behalf of the proposed
name of the partnership, and that, upon its dissolution or
partnership and 3) that the plaintiff was to receive 30 per cent of
the net profits of the business.
Prior to entering into this agreement, plaintiff had informed the
Mission Dry Corporation of Los Angeles, California, that he had
interested a prominent financier (defendant herein) in the
business, who was willing to invest half a milliondollars in the
bottling and distribution of the said beverages, and requested, in
order that he may close the deal with him, that the right to bottle
and distribute be granted him for a limited time under the
condition that it will finally be transferred to the corporation.
Pursuant to this request, plaintiff was given a thirty days option
on exclusive bottling and distribution rights for the Philippines.
The contract was finally signed by plaintiff on December 3, 1947.
When the bottling plant was already in operation, plaintiff
demanded of defendant that the partnership papers be
executed. Defendant Halili gave excuses and would not execute
said agreement, thus the complaint by the plaintiff.
Plaintiff prays for the : 1.execution of the contract of partnership;
2) accounting of profits and 3)share thereof of 30 percent with 4)
damages in the amount of P200,000. The Defendant on the
other hand claims that: 1) the defendants consent to the
agreement, was secured by the representation of plaintiff that he
was the owner, or was about to become owner of an exclusive
bottling franchise, which representation was false, and that
plaintiff did not secure the franchise but was given to defendant
himself 2) that defendant did not fail to carry out his
undertakings, but that it was plaintiff who failed and 3)that
plaintiff agreed to contribute to the exclusive franchise to the
partnership, but plaintiff failed to do so with a 4) counterclaim for
P200,00 as damages.
The CFI ruling: 1) accounting of profits and to pay plaintiff 15 %
of the profits and that the 2) execution of contract cannot be
enforced upon parties. Lastly, the 3) fraud wasnt proved
ISSUES
1. WON plaintiff falsely represented that he had an exclusive
franchise to bottle Mission beverages
2. WON false representation, if it existed, annuls the agreement
to form the partnership
HELD
1. Yes. Plaintiff did make false representations and this can be
seen through his letters to Mission Dry Corporation asking for the
latter to grant him temporary franchise so that he could settle the
agreement with defendant. The trial court reasoned, and the
plaintiff on this appeal argues, that plaintiff only undertook in the
agreement to secure the Mission Dry franchise for and in behalf
of the proposed partnership. The existence of this provision in
the final agreement does not militate against plaintiff having
represented that he had the exclusive franchise; it rather
strengthens belief that he did actually make the representation.
The defendant believed, or was made to believe, that plaintiff
was the grantee of an exclusive franchise. Thus it is that it was
termination, the same shall be reassigned to the plaintiff.
Again, the immediate reaction of defendant, when in California
he learned that plaintiff did not have the exclusive franchise, was
to reduce, as he himself testified, plaintiffs participation in the
net profits to one half of that agreed upon. He could not have
had such a feeling had not plaintiff actually made him believe
that he(plaintiff) was the exclusive grantee of the franchise.
2. No. In consequence, article 1270 of the Spanish Civil Code
distinguishes two kinds of (civil) fraud, the causal fraud, which
may be ground for the annulment of a contract, and the
incidental deceit, which only renders the party who employs it
liable for damages only. The Supreme Court has held that in
order that fraud may vitiate consent, it must be the causal
(dolocausante), not merely the incidental (doloincidente)
inducement to the making of the contract.
The record abounds with circumstances indicative of the fact that
the principal consideration, the main cause that induced
defendant to enter into the partnership agreement with plaintiff,
was the ability of plaintiff to get the exclusive franchise to bottle
and distribute for the defendant or for the partnership. The
original draft prepared by defendants counsel was to the effect
that plaintiff obligated himself to secure a franchise for the
defendant. But if plaintiff was guilty of a false representation, this
was not the causal consideration, or the principal inducement,
that led plaintiff to enter into the partnership agreement. On the
other hand, this supposed ownership of an exclusive franchise
was actually the consideration or price plaintiff gave in exchange
for the share of 30 per cent granted him in the net profits of the
partnership business. Defendant agreed to give plaintiff 30 per
cent share in the net profits because he was transferring his
exclusive franchise to the partnership.
Having arrived at the conclusion that the contract cannot be
declared null and void, may the agreement be carried out or
executed? The SC finds no merit in the claim of plaintiff that the
partnership was already a fait accompli from the time of the
operation of the plant, as it is evident from the very language of
the agreement that the parties intended that the execution of the
agreement to form a partnership was to be carried out at a later
date. , The defendant may not be compelled against his will to
carry out the agreement nor execute the partnership papers. The
law recognizes the individuals freedom or liberty to do an act he
has promised to do, or not to do it, as he pleases.
DispostivePostion: With modification above indicated, the
judgment appealed from is hereby affirmed.
Geraldez vs. CA, [G.R. No. 108253. February 23, 1994]
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,
Petitioner came to know about private respondent from
numerous advertisements in newspapers of general circulation
regarding tours in Europe. She then contacted private
respondent by 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
first-class, the UGC Leather FACTORY which was specifically
added as a highlight of the tour was not 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 dolocausante or
doloincidente. 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. Doloincidente, 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. Dolocausante
determines or is the essential cause of the consent, while
doloincidente refers only to some particular or accident of the
obligations. The effects of dolocausante are the nullity of the
contract and the indemnification of damages, and doloincidente
also obliges the person employing it to pay damages.
In either case, whether private respondent has committed
dolocausante or doloincidente by 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 reneged on its promise of a European
tour manager and the visit to the leather FACTORY, it is
indubitably liable for damages to petitioner.
GUTIERREZ VS GUTIERREZ G.R. NO. 34840 SEPTEMBER
23, 1931
FACTS:
On February 2, 1930, a passenger truck and an automobile of
private ownership collided while attempting to pass each other
on a bridge. The truck was driven by the chauffeur Abelardo
Velasco, and was owned by saturnine Cortez. The automobile
was being operated by Bonifacio Gutierrez, a lad 18 years of
age, and was owned by Bonifacios father and mother, Mr. and
Mrs. Manuel Gutierrez. At the time of the collision, the father was
not in the car, but the mother, together with several other
members of the Gutierrez family were accommodated therein.
The collision between the bus and the automobile resulted in
Narciso Gutierrez suffering a fractured right leg which required
medical attendance for a considerable period of time.
ISSUE:
Whether or not both the driver of the truck and automobile are
liable for damages and indemnification due to their negligence.
What are the legal obligations of the defendants?
HELD:
Bonifacio Gutierrezs obligation arises from culpa aquiliana. On
the other hand, Saturnino Cortezs and his chauffeur Abelardo
Velascos obligation rise from culpa contractual.
The youth Bonifacio was na incompetent chauffeur, that he was
driving at an excessive rate of speed, and that, on approaching
the bridge and the truck, he lost his head and so contributed by
his negligence to the accident. The guaranty given by the father
at the time the son was granted a license to operate motor
vehicles made the father responsible for the acts of his son.
Based on these facts, pursuant to the provisions of Art. 1903 of
the Civil Code, the father alone and not the minor or the mother
would be liable for the damages caused by the minor.
The liability of Saturnino Cortez, the owner of the truck, and his
chauffeur Abelardo Velasco rests on a different basis, namely,
that of contract.
VASQUEZ vs BORJA
74 Phil 560 Civil Law Torts and Damages Distinction of
Liability of Employers Under Article 2180 and Their Liability for
Breach of Contract
FACTS:
In January 1932, Francisco De Borja entered into a contract of
sale with the NVSD (Natividad-Vasquez Sabani Development
Co., Inc.). The subject of the sale was 4,000 cavans of rice
valued at Php2.10 per cavan. On behalf of the company, the
contract was executed by Antonio Vasquez as the companys
acting president. NVSD.only delivered 2,488 cavans and failed
and refused despite demand to deliver the rest hence De Borja
incurred damages (apparently, NVSD was insolvent). He then
sue Vasquez for payment of damages.
ISSUE: Whether or not Vasquez is liable for damages.
HELD:
No. Vasquez is not party to the contract as it was NVSD which
De Borja contracted with. It is well known that a corporation is an
artificial being invested by law with a personality of its own,
separate and distinct from that of its stockholders 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 the latter personally
liable on a contract duly entered into, or for an act lawfully
performed, by them for an in its behalf.
The fact that the corporation, acting thru Vazquez as its
manager, was guilty of negligence in the fulfillment of the
contract did not make Vazquez principally or even subsidiarily
liable for such negligence. Since it was the corporations
contract, its non fulfillment, whether due to negligence or fault or
to any other cause, made the corporation and not its agent
liable.
JUSTICE PARAS Dissenting :
Vasquez as president of NVSD is liable for damages. Vasquez,
as acting president and manager of NVSD, and with full
knowledge of the then insolvent status of his company, agreed to
sell to De Borja 4,000cavans of palay. Further, NVSD was soon
thereafter dissolved
DE GUIA V. MANILA ELECTRIC,RAILROAD& LIGHT CO
STREET; Jan. 28, 1920
NATURE APPEAL from a judgment of the Court of
FirstInstance of Manila.
FACTS
-The plaintiff is a physician residing in Caloocan City.-Sept 4,
1915, at about 8pm, the defendant boardeda car at the end of
the line with the intention of coming to Caloocan.-At about 30
meters from the starting point the carentered a switch, the
plaintiff remaining on the backplatform holding the handle of the
right-hand door.Upon coming out of the switch, the small wheels
of the rear truck left the track ran for a short distanceand hit a
concrete post.-the post was shattered: at the time the car
struckagainst the concrete post, the plaintiff was
allegedlystanding on the rear platform, grasping the handle of
the right-hand door. The shock of the impact threwhim forward,
and the left part of his chest struckagainst the door causing him
to fall. In the falling, theplaintiff alleged that his head struck one
of the seatsand he became unconscious.-the plaintiff was taken
to his home which was ashort distance away from the site of the
incident. Aphysician of the defendant company visited theplaintiff
and noted that the plaintiff was walkingabout and apparently
suffering somewhat frombruises on his chest. The plaintiff said
nothing abouthis head being injured and refused to go to
ahospital.-The plaintiff consulted other physicians about
hiscondition, and all these physicians testified for theplaintiff in
the trial court.-the plaintiff was awarded with P6,100, with
interestand costs, as damages incurred by him inconsequence
of physical injuries sustained. Theplaintiff and the defendant
company appealed.
ISSUES
1. WON the defendant has disproved the existence of
negligence
2. What is the nature of the relation between theparties?
3. WON the defendant is liable for the damages
4. If liable for damages, WON the defendant couldavail of the
last paragraph of Art 1903 on culpaaquiliana (Art 2180)
5. What is the extent of the defendants liability?
5.1 Did the trial judge err in the awarding of
thedamages for loss of professional
earnings(P900)?
5.2 Did the trial judge err in the awarding of
thedamages for inability to accept a position as
adistrict health officer?
5.3 Did the trial judge err in not awarding
damagesfor the plaintiffs supposed incapacitation
forfuture professional practice (P30,000)?
5.4 Is the plaintiff reasonable in demandingP10,000
for the cost of medical treatment andother expenses
incident to his cure?
6. WON the trial judge erred in treating writtenstatements of the
physicians who testified as primaryevidence?
HELD
1. NO, the existence of negligence in theoperation of the car
must be sustained, as notbeing clearly contrary to the evidence.
Ratio
An experienced and attentive motormanshould have discovered
that something was wrongand would have stopped before he
had driven the carover the entire distance from the point where
thewheels left the track to the place where the post wasstruck.
Reasoning
The motorman alleged that he reducedhis speed to the point that
the car barely entered theswitch under its own momentum, and
this operation as repeated as he passed out. Upon getting
againon the straight track he put the control successivelyat
points one, two, three and lastly at point four. Atthe moment
when the control was placed at pointfour he perceived that the
rear wheels were derailedand applied the brake; but at the same
instant thecar struck the post, some 40 meters distant from
theexit of the switch. However, testimonial evidencealleged that
the rate of a car propelled by electricitywith the control at point
"four" should be about fiveor 6 miles per hour (around 8 kph) and
otherevidence showed that the car was behind scheduletime and
that it was being driven, after leaving theswitch, at a higher rate
than would ordinarily beindicated by the control at point four. The
car waspractically empty (so its possible that it could
runfaster???). The court granted that there is negligenceas
shown by the distance which the car was allowedto run with the
front wheels of the rear truckderailed, aside from the fact that the
car was runningin an excessive speed.
2. The relation between the parties was of acontractual nature.
Ratio
The company was bound to convey and deliverthe plaintiff safely
and securely with reference to thedegree of care which, under
the circumstances, isrequired by law and custom applicable to
the case.
Reasoning
The plaintiff had boarded the car as apassenger for the city of
Manila and the company undertook to convey him for hire.
3. YES, the defendant is liable for the damages
Ratio/ Reasoning
Upon failure to comply with thatobligation arising from the
contract, the companyincurred the liability defined in articles
1103-1107 of the Civil Code.
4. No, the defendant could not avail of the lastparagraph of Art
1903Ratio/
Reasoning
The last paragraph of article 1903of the civil code refers to
liability incurred bynegligence in the absence of contractual
relation,that is, to the culpa aquiliana of the civil law and notto
liability incurred by breach of contract; therefore,it is irrelevant to
prove that the defendant companyhad exercised due care in the
selection andinstruction of the motorman who was in charge of
itscar and that he was in experienced and reliableservant.
5. The defendant is liable for the damagesordinary recoverable
for the breach of contractual obligation, against a person whohas
acted in good faith, which could bereasonably foreseen at the
time the obligationis contracted.
Ratio
The extent of the liability for the breach of acontract must be
determined in the light of thesituation in existence at the time the
contract ismade; and the damages ordinarily recoverable are
inall events limited to such as might be reasonablyforeseen in
the light of the facts then known to thecontracting parties.
Reasoning
The court has the power to moderateliability according to the
circumstances of the case,i.e. when the defendant must answer
for theconsequences of the negligence of its employees.Also, an
employer who has displayed due diligence inchoosing and
instructing his servants is entitled to beconsidered a debtor in
good faith (w/n meaning of article 1107, old CC)
5.1. NO, the trial judge was liberal enough tothe
plaintiff.
Reasoning
As a result of the incident, the plaintiff was unable to
properly attend his professional laborsfor 3 months
and suspend his practice for thatperiod. By
testimonial evidence, his customaryincome, as a
physician, was about P300/month. Sothe trial judge
accordingly allowed P900 as damagesfor loss of
earnings.
5.2 YES. The trial judge erred in awarding
suchdamages.
Ratio
Damage of this character could not, at thetime of the
accident, have been foreseen by thedelinquent party
as a probable consequence of the injury inflicted.
Reasoning
The representative from NegrosOccidental has
supposedly asked Dr. Montinola tonominate the
plaintiff as district health officer of Negros Occidental
for two years, with a salary of P1,600 per annum
and a possible outside practiceworth of P350.
However, even if true, the damageswere too
speculative to be the basis of recovery in acivil
action.
5.3 NO. the trial court was fully justified inrejecting
the exaggerated estimate of damagesallegedly
created.
Ratio/ Reasoning
The plaintiff alleged, evenshowing testimonial
evidences from numerousmedical experts, that he
developed infarct of theliver and traumatic neurosis,
accompanied bynervousness, vertigo, and other
disturbing symptomsof a serious and permanent
character, and thesemanifestations of disorder
rendered him liable to ahost of other dangerous
diseases, and thatrestoration to health could only be
accomplishedafter long years of complete repose.-
The medical experts introduced by the
defendanttestified however that the plaintiffs
injuries,considered in their physical effects, were
trivial andthat the attendant nervous derangement,
with itscomplicated train of ailments, was merely
simulated.-According to the court, the evidence
showed thatimmediately after the incident the
plaintiff, sensingin the situation a possibility of profit,
devoted himself with great assiduity to the promotion
of thislitigation; and with the aid of his own
professionalknowledge, supplemented by
suggestions obtainedfrom his professional friends
and associates, heenveloped himself more or less
unconsciously in anatmosphere of delusion which
rendered himincapable of appreciating at their true
value thesymptoms of disorder which he developed.
5.4 No. He is only justified with P200, or theamount
actually paid to Dr. Montes (the doctorwho treated
the plaintiff) which is theobligation supposedly
incurred with respect totreatment for said injuries.
Ratio
In order to constitute a proper element of recovery in
an action of this character, the medicalservice for
which reimbursement is claimed shouldnot only be
such as to have created a legal obligationupon the
plaintiff but such as was reasonablynecessary in
view of his actual condition.
Reasoning
Dr. Montes, in his testimony, speaks inthe most
general terms with respect to the times andextent of
the services rendered; and it is not clearthat those
services which were rendered manymonths, or year,
after the incident had in fact anynecessary or
legitimate relation to the injuriesreceived by the
plaintiff.-On the obligation supposedly incurred by
theplaintiff to three other physicians: (1) it does
notappear that said physicians have in fact
madecharges for those services with the intention of
imposing obligations on the plaintiff to pay them;
(2)in employing so many physicians the plaintiff
musthave had in view the successful promotion of
theissue of this lawsuit rather than the bona
fidepurpose of effecting the cure of his injuries.
6. YES, certificates or the written statementsof the physicians
which were referred to in thetrial cannot be admitted as primary
evidencesince it is fundamentally of a hearsay nature
Ratio
The only legitimate use of certificates could beput, as evidence
for plaintiff, was to allow thephysician who issued it to refer
thereto, to refresh hismemory upon details which he might have
forgotten
DECISION:
Judgment from the trial court modified by reducingthe amount of
the recovery to P1,100, with legalinterest from Nov. 8, 1916
US v. Barias
Facts:
On November 2, 1911, defendant Segundo Barias, a motorman
for the Manila Electric Railroad and Light Company, was driving
his car along Rizal Avenue and stopped at an intersection to take
on some passengers. He looked backward, presumably to be
sure that all passengers were aboard, and then started the car.
At that moment, Fermina Jose, a 3-year old child, walked or ran
in front of the car. She was knocked down and dragged at some
distance to death. Defendant knew nothing of this until his return,
when he was informed of what happened. He was charged and
found guilty of homicide resulting from reckless negligence.
Issue:
Whether the evidence shows such carelessness or want of
ordinary care on the part of the defendant as to amount to
reckless negligence
Held:
Negligence is want of the care required by the circumstances. It
is a 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.
The evidence shows that the thoroughfare on which the incident
occurred was a public street in a densely populated section of
the city. The hour was six in the morning, or about the time when
the 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. 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 in fatal accidents. He had no right to
assume that the track before his car was clear. It was his duty to
satisfy himself of that fact by keeping a sharp lookout, and to do
everything in his power to avoid the danger which is necessarily
incident to the operation of heavy street cars on public
thoroughfares in populous sections of the city. At times, it might
be highly proper and prudent for him to glance back before again
setting his car in motion, to satisfy himself that he understood
correctly a signal to go forward or that all the passengers had
safely alighted or gotten on board. But we do insist that before
setting his car again in motion, it was his duty to satisfy himself
that the track was clear, and, for that purpose, to look and to 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.
We hold that the reasons of public policy which impose upon
street car companies and their employees the duty of exercising
the utmost degree of diligence in securing the safety of
passengers, apply with equal force to the duty of avoiding the
infliction of injuries upon pedestrians and others on the public
streets and thoroughfares over which these companies are
authorized to run their cars. And while, in a criminal case, the
courts will require proof of the guilt of the company or its
employees beyond a reasonable doubt, nevertheless the care or
diligence required of the company and its employees is the same
in both cases, and the only question to be determined is whether
the proofs shows beyond a reasonable doubt that the failure to
exercise such care or diligence was the cause of the accident,
and that the defendant was guilty thereof.
Standing erect, at the position he would ordinarily assume while
the car is in motion, the eye of the average motorman might just
miss seeing the top of the head of a child, about three years old,
standing or walking close up to the front of the car. But it is also
very evident that by inclining the head and shoulders forward
very slightly, and glancing in front of the car, a person in the
position of a motorman could not fail to see a child on the track
immediately in front of his car; and we hold that it is the manifest
duty of a motorman, who is about to start his car on a 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. Of course, this may not be,
and usually is not necessary when the car is in motion, but we
think that it is required by the dictates of the most ordinary
prudence in starting from a standstill.
[G.R. No. 141258. April 9, 2003]
TOMASA SARMIENTO, petitioner, vs. SPS. LUIS & ROSE
SUN-CABRIDO and MARIA LOURDES SUN, respondents.
FACTS:
Petitioner, Tomasa Sarmiento, states that sometime in April
1994, a friend, Dra. Virginia Lao, requested her to find somebody
to reset a pair of diamond earrings into two gold rings.
Accordingly, petitioner sent a certain TitaPayag with the pair of
earrings to Dingdings Jewelry Shop, owned and managed by
respondent 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, TitaPayag delivered to the
jewelry shop one of Dra. Laos diamond earrings which was
earlier appraised as worth .33 carat and almost perfect in cut and
clarity.Respondent Ma. Lourdes (Marilou) Sun went on to
dismount the diamond from its original setting. Unsuccessful, she
asked their goldsmith, Zenon Santos, to do it. Santos 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.
Petitioner filed a complaint for damages on June 28, 1994.
private respondents vigorously denied any transaction between
Dingdings Jewelry Shop and the petitioner, through TitaPayag.
DECISION OF LOWER COURTS:
1. MTC: declared respondents liable.
2. RTC: absolving the respondents of any responsibility arising
from breach of contract. while ostensibly admitting the existence
of the said agreement, private respondents, nonetheless denied
assuming any obligation to dismount the diamonds from their
original settings.
3. CA: declared the private respondents not liable for damages.
ARGUMENTS OF THE PARTIES:
Respondents
- dismounting of the diamond from its original setting was part of
the obligation assumed by the private respondents under the
contract of service.
Petitioners
- agreement was for crafting two gold rings mounted with
diamonds only and did not include the dismounting of the said
diamonds from their original setting.
ISSUE:
Whether respondents are liable
RULING:
Yes.
it is beyond doubt that Santos acted negligently in dismounting
the diamond from its original setting. It appears to be the practice
of
page4image1152
the trade to use a miniature wire saw in dismounting precious
gems, such as diamonds, from their original settings. However,
Santos employed a pair of pliers in clipping the original setting,
thus resulting in breakage of the diamond. The jewelry shop
failed to perform its obligation with the ordinary diligence
required by the circumstances. It should be pointed out that
Marilou examined the diamond before dismounting it from the
original setting and found the same to be in order. Its subsequent
breakage in the hands of Santos could only have been caused
by his negligence in using the wrong equipment. Res ipsa
loquitur. (the thing speaks for itself)Obligations arising from
contracts have the force of law between the contracting parties.
Corollarily, 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.23[23] 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.
Marilou and Zenon Santos were employed at Dingdings Jewelry
Shop in order to perform activities which were usually necessary
or desirable in its business.
Private respondents Luis Cabrido and Rose Sun-Cabrido are
hereby ordered to pay, jointly and severally, the amount of
P30,000 as actual damages and P10,000 as moral damages in
favor of the petitioner
Crisostomo v. CA, 409 SCRA 528 (2003)
Problem:
Estela L. Crisostomo contracted the services of Caravan Travel
and Tours International, Inc. to arrange and facilitate her
booking, ticketing and accommodation in a tour dubbed "Jewels
of Europe". The package tour cost her P74, 322.70. She was
given a 5% discount on the amount, which included airfare, and
the booking fee was also waived because petitioners niece,
Meriam Menor, was formers companys ticketing manager.
Menor went to her aunts residence on a Wednesday to deliver
petitioners travel documents and plane tickets. Estela, in turn,
gave Menor the full payment for the package tour. Menor then
told her to be at the Ninoy Aquino International Airport (NAIA) on
Saturday, two hours before her flight on board British Airways.
Without checking her travel documents, Estela went to NAIA on
Saturday, to take the flight for the first leg of her journey from
Manila to Hongkong. She discovered that the flight she was
supposed to take had already departed the previous day. She
learned that her plane ticket was for the flight scheduled on June
14, 1991. She thus called up Menor to complain.
Subsequently, Menor prevailed upon Estela to take another tour
the "British Pageant, which cost P20, 881.00. She gave caravan
travel and tours P7, 980.00 as partial payment and commenced
the trip in July 1991.
Upon petitioners return from Europe, she demanded from
respondent the reimbursement of P61, 421.70, representing the
difference between the sum she paid for "Jewels of Europe" and
the amount she owed respondent for the "British Pageant" tour.
Despite several demands, respondent company refused to
reimburse the amount, contending that the same was non-
refundable.
Estela filed a complaint against Caravan travel and Tours for
breach of contract of carriage and damages.
A) Will the action prosper?
B) Will she be entitled to damages?
Answer:
No, for there was no contract of carriage.
By definition, a contract of carriage or transportation is one
whereby a certain person or association of persons obligate
themselves to transport persons, things, or news from one place
to another for a fixed price.
From the above definition, Caravan Travel and Tours is not an
entity engaged in the business of transporting either passengers
or goods and is therefore, neither a private nor a common
carrier. Caravan Travel and Tours did not undertake to transport
Estela from one place to another since its covenant with its
customers is simply to make travel arrangements in their behalf.
Caravan travel and tours services as a travel agency include
procuring tickets and facilitating travel permits or visas as well as
booking customers for tours.
While Estela concededly bought her plane ticket through the
efforts of respondent company, this does not mean that the latter
ipso facto is a common carrier. At most, Caravan Travel and
Tours acted merely as an agent of the airline, with whom the
former ultimately contracted for her carriage to Europe.
B) No.
The negligence of the obligor in the performance of the
obligation renders him liable for damages for the resulting loss
suffered by the obligee. Fault or negligence of the obligor
consists in his failure to exercise due care and prudence in the
performance of the obligation as the nature of the obligation so
demands.
In the case at bar, Caravan Travel and Tours exercised due
diligence in performing its obligations under the contract and
followed standard procedure in rendering its services to Estela.
The plane ticket issued to petitioner clearly reflected the
departure date and time, contrary to Estelas contention. The
travel documents, consisting of the tour itinerary, vouchers and
instructions, were likewise delivered to her two days prior to the
trip. The Caravan Travel and Tours also properly booked Estela
for the tour, prepared the necessary documents and procured
the plane tickets. It arranged Estelas HOTEL
ACCOMMODATION as well as food, land transfers and
sightseeing excursions, in accordance with its avowed
undertaking.
From the foregoing, it is clear that the Caravan Travel and Tours
performed its prestation under the contract as well as everything
else that was essential to book Estela for the tour.
Hence, Estela cannot recover and must bear her own damage.
G.R. No. L-27454 April 30, 1970
Rosendo O. Chavez, plaintiff-appellant vs. Fructuoso
Gonzales, defendant-appellee
Facts:
On July 1963, Rosendo Chavez brought his typewriter to
Fructuoso Gonzales a typewriter repairman for the cleaning and
servicing of the said typewriter but the latter was not able to
finish the job. During October 1963, the plaintiff gave the amount
of P6.00 to the defendant which the latter asked from the plaintiff
for the purchase of spare parts, because of the delay of the
repair the plaintiff decided to recover the typewriter to the
defendant which he wrapped it like a package. When the plaintiff
reached their home he opened it and examined that some parts
and screws was lost. That on October 29, 1963 the plaintiff sent
a letter to the defendant for the return of the missing parts, the
interior cover and the sum of P6.00 (Exhibit D). The following
day, the defendant returned to the plaintiff some of the missing
parts, the interior cover and the P6.00. The plaintiff brought his
typewriter to Freixas Business Machines and the repair cost the
amount of P89.85. He commenced this action on August 23,
1965 in the City Court of Manila, demanding from the defendant
the payment of P90.00 as actual and compensatory damages,
P100.00 for temperate damages, P500.00 for moral damages,
and P500.00 as attorneys fees. The defendant made no denials
of the facts narrated above, except the claim of the plaintiff that
the cost of the repair made by Freixas Business Machines be
fully chargeable against him.
Issue:
Whether or not the defendant is liable for the total cost of the
repair made by Freixas Business Machines with the plaintiff
typewriter?
Ruling:
No, he is not liable for the total cost of the repair made by
Freixas Business Machines instead he is only liable for the cost
of the missing parts and screws. The defendant contravened the
tenor of his obligation in repairing the typewriter of the plaintiff
that he fails to repair it and returned it with the missing parts, he
is liable under ART. 1167. If a person obliged to do something
fails to do it, the same shall be executed at his cost.
This same rule shall be observed if he does it in contravention of
the tenor of the obligation. Furthermore it may be decreed that
what has been poorly done he undone.
Telefast v. Castro
G.R. No. 73867 February 29, 1988
Facts:
The petitioner is a company engaged in transmitting telegrams.
The plaintiffs are the children and spouse of Consolacion Castro
who died in the Philippines. One of the plaintiffs, Sofia sent a
telegram thru Telefast to her father and other siblings in the USA
to inform about the death of their mother. Unfortunately, the
deceased had already been interred but not one from the
relatives abroad was able to pay their last respects. Sofia found
out upon her return in the US that the telegram was never
received. Hence the suit for damages on the ground of breach of
contract. The defendant-petitioner argues that it should only pay
the actual amount paid to it.
The lower court ruled in favor of the plaintiffs and awarded
compensatory, moral, exemplary, damages to each of the
plaintiffs with 6% interest p.a. plus attorneys fees. The Court of
Appeals affirmed this ruling but modified and eliminated the
compensatory damages to Sofia and exemplary damages to
each plaintiff, it also reduced the moral damages for each. The
petitioner appealed contending that, it can only be held liable for
P 31.92, the fee or charges paid by Sofia C. Crouch for the
telegram that was never sent to the addressee, and that the
moral damages should be removed since defendant's negligent
act was not motivated by "fraud, malice or recklessness.
Issue:
Whether or not the award of the moral, compensatory and
exemplary damages is proper.
RULING:
Yes, there was a contract between the petitioner and private
respondent Sofia C. Crouch whereby, for a fee, petitioner
undertook to send said private respondent's message overseas
by telegram. Petitioner failed to do this despite performance by
said private respondent of her obligation by paying the required
charges. Petitioner was therefore guilty of contravening its and is
thus liable for damages. This liability is not limited to actual or
quantified damages. To sustain petitioner's contrary position in
this regard would result in an inequitous situation where
petitioner will only be held liable for the actual cost of a telegram
fixed thirty (30) years ago.
Art. 1170 of the Civil Code provides that "those who in the
performance of their obligations are guilty of fraud, negligence or
delay, and those who in any manner contravene the tenor
thereof, are liable for damages." Art. 2176 also provides that
"whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage
done."
Award of Moral, compensatory and exemplary damages is
proper.
The petitioner's act or omission, which amounted to gross
negligence, was precisely the cause of the suffering private
respondents had to undergo. Art. 2217 of the Civil Code states:
"Moral damages include physical suffering, mental anguish,
fright, serious anxiety, besmirched reputation, wounded feelings,
moral shock, social humiliation, and similar injury. Though
incapable of pecuniary computation, moral damages may be
recovered if they are the proximate results of the defendant's
wrongful act or omission."
Then, the award of P16,000.00 as compensatory damages to
Sofia C. Crouch representing the expenses she incurred when
she came to the Philippines from the United States to testify
before the trial court. Had petitioner not been remiss in
performing its obligation, there would have been no need for this
suit or for Mrs. Crouch's testimony.
The award of exemplary damages by the trial court is likewise
justified for each of the private respondents, as a warning to all
telegram companies to observe due diligence in transmitting the
messages of their customers.
ARRIETA vs NARIC
FACTS:
Paz Arrieta is a rice dealer/importer. In May 1952, she
participated in a public bidding held by the National Rice and
Corn Corporation (NARIC). NARIC was looking for someone to
supply 20,000 metric tons of Burmese Rice. Arrieta was the
lowest bidder at $203.00 per metric ton hence she won the
bidding. So a contract was made whereby Arrieta is to deliver the
rice supply and NARIC is 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 Arrieta and/or supplier in Burma,
immediately. Arrieta then proceeded to contact her supplier in
Burma (ThiriSetkya) and arranged the sale of the 20k metric ton
of Burmese Rice,Arrieta promised Setkya that he will be paid by
NARIC on August 4, 1952. Arrieta also made a 5% deposit
(P200k) as advance payment to Setkya.
Meanwhile, NARIC tried to open a letter of credit ion the amount
of $3,614,000.00 with the Philippine National Bank. PNB agreed
to open the letter of credit but only on the condition that NARIC
deposits 50% of the said amount. NARIC failed to do this and the
letter of credit was not opened when the obligation to pay Setkya
became due. Because of this, Arrieta lost the opportunity to profit
from the sale as the agreement was eventually forfeited. Her 5%
depoit was likewise forfeited pursuant to Burma laws.
ISSUE:
Whether or not Arrieta is entitled to damages.
HELD:
Yes. It is clear upon the records that the sole and principal
reason for the cancellation of the allocation contracted by Arrieta
in Rangoon, Burma, was the failure of the letter of credit to be
opened with the contemplated period. The letter of credit is in US
currency. Normally, parties can stipulate as to which currency
shall be used in paying off an obligation provided that the
exchange rate prevailing at the time of judgment shall prevail
over the rate of exchange at the time of the breach. This rule
however is of no application in the case at bar due to the
passage of Republic Act 529 which expressly declares such
stipulations as contrary to public policy, void and of no effect. If
there is any agreement to pay an obligation in a currency other
than Philippine legal tender, the same is null and void as
contrary to public policy (Republic Act 529), and the most that
could be demanded is to pay said obligation in Philippine
currency to be measured in the prevailing rate of exchange at
the time the obligation was incurred.
NOTE: This is a 1964 case. RA 529 has already been repealed
by Republic Act 8183 which provides that every monetary
obligation must be paid in Philippine currency which is legal
tender in the Philippines. However, the parties may agree that
the obligation or transaction shall be settled in any other
currency at the time of payment. (The Philippine Negotiable
Instruments Law, De Leon and De Leon Jr., p. 29)
G.R. No. L-37120 April 20, 1983
VICTORINO D. MAGAT, petitioner, vs. HON. LEO D.
MEDIALDEA and SANTIAGO A. GUERRERO, respondents.
ESCOLIN, J.:
Put to test in this petition for review on certiorari is the sufficiency
of the averments contained in the complaint for alleged breach of
contract filed by petitioner Victorino D. Magat against respondent
Santiago A. Guerrero in Civil Case No. 17827 of the Court of
First Instance of Rizal, presided by respondent Judge Leo D.
Medialdea, now Deputy Judicial Administrator, which complaint
was dismissed for failure to state a cause of action.
The pertinent allegations in the complaint, subject of inquiry, are
as follows: 1
3. That sometime in September 1972, the defendant
entered into a contract with the U.S. Navy Exchange,
Subic Bay, Philippines, for the operation of a fleet of
taxicabs, each taxicab to be provided with the necessary
taximeter and a radio transceiver for receiving and
sending of messages from mobile taxicab to fixed base
stations within the Naval Base at Subic Bay, Philippines;
4. That Isidro Q. Aligada, acting as agent of the
defendant herein conducted the necessary project
studies on how best the defendant may meet the
requirements of his contract with the U.S. Navy
Exchange, Subic Bay, Philippines, and because of the
experience of the plaintiff in connection with his various,
contracts with the U.S. Navy, Subic Bay, Philippines, and
his goodwill already established with the Naval personnel
of Subic Bay, Philippines, especially in providing the U.S.
Navy with needed materials or goods on time as
specified by the U.S. Navy, be they of local origin or
imported either from the United States or from Japan, the
said Isidro Q. Aligada approached the plaintiff herein in
behalf of the defendant and proposed to import from
Japan thru the plaintiff herein or thru plaintiff's Japanese
business associates, all taximeters and radio
transceivers needed by the defendant in connection with
his contract with the U.S. Navy Exchange, Subic Bay,
Philippines;
5. That the defendant herein and his aforesaid agent
Isidro Q. Aligada 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, Subic Bay, Philippines, the
plaintiff's assistance in this matter having been given to
the defendant gratis et amore;
6. That Isidro Q. Aligada, also acting as agent of the
defendant, made representations with the plaintiff herein
to the effect that defendant desired to procure from
Japan thru the plaintiff herein the needed radio
transceivers and to this end, Isidro Q. Aligada secured a
firm offer in writing dated September 25, 1972, a copy of
which is hereto attached marked as Annex 'A' and made
an integral part of this complaint, wherein the plaintiff
quoted in his offer a total price of $77,620.59 [U.S.
dollars] FOB Yokohama, the goods or articles therein
offered for sale by the plaintiff to the defendant to be
delivered sixty to ninety [60-90] days after receipt of
advice from the defendant of the radio frequency
assigned to the defendant by the proper authorities;
7. That the plaintiff received notice of the fact that the
defendant accepted plaintiff's offer to sell to the
defendant the items specified in Annex 'A', as well as the
terms and conditions of said offer, as shown by the
signed conformity of the defendant appearing on Annex
'A' which was duly delivered by the defendant's agent to
the plaintiff herein, whereupon all that the plaintiff had to
do in the meantime was to await advice from the
defendant as to the radio frequency to be assigned by
the proper authorities to the defendant;
9. That in his letter dated October 6, 1972, a copy of
which is hereto attached marked as Annex 'C', the
defendant advised his aforementioned agent to the effect
that the U.S. Navy provided him with the radio frequency
of 34.2 MHZ [Megahertz] and defendant requested his
said agent to proceed with his order placed with the
plaintiff herein, which fact was duly communicated to the
plaintiff by the defendant's aforementioned agent;
10. That by his letter dated October 7, 1972, addressed
to the plaintiff by the defendant's agent, a copy of which
is hereto attached and marked as Annex 'D', defendant's
agent qualified defendant's instructions contained in his
letter of October 6, 1972 [Annex 'C'] in the sense that
plaintiff herein should proceed to fulfill defendant's order
only upon receipt by the plaintiff of the defendant's letter
of credit;
11. That it being normal business practice in case of
foreign importation that the buyer opens a letter of credit
in favor of the foreign supplier before delivery of the
goods sold, the plaintiff herein awaited the opening of
such a letter of credit by the defendant;
12. That the defendant and his agent have repeatedly
assured plaintiff herein of the defendant's financial
capabilities to pay for the goods ordered by him and in
fact he accomplished the necessary application for a
letter of credit with his banker, but he subsequently
instructed his banker not to give due course to his
application for a letter of credit and that for reasons only
known to the defendant, he fails and refuses to open the
necessary letter of credit to cover payment of the goods
ordered by him;
ascertain from the defendant as to whether it is his
intention to fulfill his part of the agreement with the
plaintiff herein or whether he desired to have the contract
between them definitely cancelled, but defendant did not
even have the courtesy to answer plaintiff's demand;
15. That the defendant herein entered into a contract
with the plaintiff herein as set forth in Annex 'A' without
the least intention of faithfully complying with his
obligation is thereunder, but he did so only in order to
obtain the concession from the U.S. Navy Exchange,
Subic Bay, Philippines, of operating a fleet of taxicabs
inside the U.S. Naval Base to his financial benefit and at
the expense and prejudice of third parties such as the
plaintiff herein;
16. That in view of the defendant's failure to fulfill his
contractual obligations with the plaintiff herein, the
plaintiff will suffer the following damages:
[a] As the radio transceivers ordered by the defendant
are now in the hands of the plaintiff's Japanese
representative, the plaintiff will have to pay for them,
thus he will have to suffer as total loss to him the
amount of P523,938.98 (converting the amount of
$77,620.59 to pesos at the rate of P6.75 to the dollar)
as said radio transceivers were purposely made or
manufactured solely for the use of the defendant
herein and cannot possibly be marketed by the plaintiff
herein to the general public;
[d] That in view of the defendant's bad faith in inducing
plaintiff to enter into the contract with him as set forth
hereinabove, defendant should be assessed by his
Honorable Court in favor of the plaintiff the sum of
P200,000.00 as moral and exemplary damages;
[e] That in view of the defendant's fault and to protect
his interests, plaintiff herein is constrained to retain the
services of counsel with whom he agreed to pay by
way of attorney's fees the sum of P50,000.00".
Respondent Guerrero filed a motion to dismiss said complaint for
lack of cause of action, which ground is propounded by
respondent's counsel thus: 2
... it is clear 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. Hence, 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.

8. That believing that the defendant would faithfully fulfill
his contract with the plaintiff herein, considering his
signed conformity appearing in Annex 'A' hereof as well
as the letter dated October 4, 1972, of his agent
aforementioned which is attached hereto and marked as
Annex 'B' and made an integral part of this complaint,
and in order that plaintiff's promised delivery would not
be delayed, the plaintiff herein took steps to advise the
Japanese entity entrusted with the manufacture of the
items listed in Annex 'A' to the effect that the contract
between the defendant herein and the plaintiff has been
perfected and that advice with regards to radio frequency
would follow as soon as same is received by the plaintiff
from the defendant;
13. That it has come to the knowledge of the plaintiff
herein that the defendant has been operating his
taxicabs without the required radio transceivers and
when the U.S. Navy Authorities of Subic Bay, Philippines,
were pressing defendant for compliance with his
commitments with respect to the installations of radio
transceivers on his taxicabs, he impliedly laid the blame
for the delay upon the plaintiff herein, thus destroying the
reputation of the plaintiff herein with the said Naval
Authorities of Subic Bay, Philippines, with whom plaintiff
herein transacts business;
14. That on March 27, 1973, plaintiff wrote a letter thru
his counsel, copy attached marked as Annex 'E', to
Inasmuch as there is no other allegation in the present
Complaint wherein the same could be maintained
[b] The amount of P 52,393.89 or 10% of the purchase
price by way of loss of expected profits from the against defendant, the present Complaint should be
dismissed for its failure to state a cause of action against
transaction or contract between plaintiff and the
defendant; defendant.
The respondent judge, over petitioner's opposition, issued a
[c] Loss of confidence in him and goodwill of the
plaintiff which will result in the impairment of his minute order dismissing the complaint as follows: 3
business dealings with Japanese firms, thereby
resulting also in loss of possible profits in the future
which plaintiff assess at no less than P200,000.00;
 Acting upon the 'Motion to Dismiss' filed by the
defendant, through counsel, dated June 7, 1973, as well
as the opposition thereto filed by the plaintiff, through
counsel, dated June 14, 1973, for the reasons therein
alleged, this Court hereby grants said motion and, as
prayed for, the complaint in the above-entitled case is
dismissed.
SO ORDERED.
Both parties are in accord with the view that when a motion to
dismiss is based on the ground of lack of cause of action, the
sufficiency of the case of action can only be determined on the
basis of the facts alleged in the complaint 4 ; that the facts
alleged are deemed hypothetically admitted, including those
which are fairly deducible therefrom 5 ; and that, admitting the
facts as alleged, whether or not the Court can render a valid
judgment against the defendant upon said facts in accordance
with the prayer in the complaint 6.
After a thorough examination of the complaint at bar, We find the
test of legal sufficiency of the cause of action adequately
satisfied. In a methodical and logical sequence, the complaints
recites the circumstances that led to the perfection of the
contract entered into by the parties. It further avers that while
petitioner had fulfilled his part of the bargain [paragraph 8 of the
Complaint], private respondent failed to comply with his
correlative obligation by refusing to open a letter of credit to
cover payment of the goods ordered by him [paragraphs 11 & 12
of the Complaint], and that consequently, petitioner suffered not
only loss of his expected profits, but moral and exemplary
damages as well. From these allegations, the essential elements
of a cause of action are present, to wit: [1] the existence of a
legal right to the plaintiff; [2] a correlative duty of the defendant
and [3] an act or omission of the defendant in violation of the
plaintiff's right, with consequent injury or damage to the latter for
which he may maintain an action for recovery of damages or
other appropriate relief. 7
Indisputably, the parties, both businessmen, entered into the
aforesaid contract with the evident intention of deriving some
profits therefrom. Upon breach of the contract by either of them,
the other would necessarily suffer loss of his expected profits.
Since the loss comes into being at the very moment of breach,
such loss is real, "fixed and vested" and, therefore, recoverable
under the law.
Article 1170 of the Civil Code provides:
Those who in the performance of their obligation are
guilty of fraud, negligence, or delay, and those who in
any manner contravene the tenor thereof are liable for
damages.
The phrase "in any manner contravene the tenor" of the
obligation includes any ilicit act or omission which impairs the
strict and faithful fulfillment of the obligation and every kind of
defective performance. 8
The damages which the obligor is liable for includes not only the
value of the loss suffered by the obligee [dao emergente] but
also the profits which the latter failed to obtain [lucro cesante] 9. If
the obligor acted in good faith, he shall be liable for those
damages that are the natural and probable consequences of the
breach of the obligation and which the parties have foreseen or
could have reasonably foreseen at the time the obligation was
constituted; and in case of fraud, bad faith, malice or wanton
attitude, he shall be liable for all damages which may be
reasonably attributed to the non-performance of the obligation 10.
The same is true with respect to moral and exemplary damages.
The applicable legal provisions on the matter, Articles 2220 and
2232 of the Civil Code, allow the award of such damages in
breaches of contract where the defendant acted in bad faith. To
Our mind, the complaint sufficiently alleges bad faith on the part
of the defendant.
In fine, We hold that on the basis of the facts alleged in the
complaint, the court could render a valid judgment in accordance
with the prayer thereof.
ACCORDINGLY, the questioned order of dismissal is hereby set
aside and the case ordered remanded to the court of origin for
further proceedings. No costs.
SO ORDERED.