Professional Documents
Culture Documents
have the force of law between the contracting parties. 3 Exhibit I; TSN, February 7, 1995, p. 4.
Corollarily, those who in the performance of their 4 Exhibit 1; TSN, November 8, 1994, pp. 3-4.
those who in any manner contravene the tenor thereof, 6 TSN, December 14, 1995, p. 9.
are liable for damages. The fault or negligence of the 7 TSN, November 8, 1994, pp. 6-7.
The facts show that Santos had been working at 31 Calalas vs. Court of Appeals, 302 SCRA 356 [2000].
Dingdings Jewelry Shop as goldsmith for about 6 months 32 Magat, Jr. vs. Court of Appeals, 337 SCRA 298, 308
accepting job orders through referrals from private [2000]; Integrated Packaging Corporation vs. Court of
respondents.27 On the other hand, Payag stated that she Appeals, 333 SCRA 170 [2000].
had transacted with Dingdings Jewelry Shop on at least 33 TSN, June 8, 1995, p. 4.
10 previews occasions, always through Marilou.28 The 34 Bernardo vs. Court of Appeals, 275 SCRA 413, 432
The date and time of departure The Revised Rules of Court in the Philippines, Vol.
16
consists in the omission of that diligence which is required Phil. 1009, 1018; 321 SCRA 393 (1999), citing Belen v.
by the nature of the obligation and corresponds with the Belen, 13 Phil. 202, 206 (1909), cited in Martin v. Court of
circumstances of the persons, of the time and of the place. Appeals, G.R. No. 82248, 205 SCRA 591 (1992).
When negligence shows bad faith, the provisions of 537
Articles 1171 and 2201, paragraph 2, shall apply. VOL. 409, AUGUST 25, 2003 53
If the law or contract does not state the diligence
which is to be observed in the performance, that which is Crisostomo vs. Court of Appeals
expected of a good father of a family shall be required. Contrary to petitioners claim, the evidence on record
13 Jarco Marketing Corporation v. Court of shows that respondent exercised due diligence in
Appeals, 378 Phil. 991, 1003; 321 SCRA 375 (1999), performing its obligations under the contract and followed
citing Picart v. Smith, 37 Phil. 809 (1918). standard procedure in rendering its services to petitioner.
14 This rule states: As correctly observed by the lower court, the plane
SEC. 3. Disputable presumptions.The following ticket19 issued to petitioner clearly reflected the departure
presumptions are satisfactory if uncontradicted, but may date and time, contrary to s petitioners contention. The
be contradicted and overcome by other evidence: travel documents, consisting of the tour itinerary,
xxx xxx xxx vouchers and instructions, were likewise delivered to
(e) That evidence willfully suppressed would be petitioner two days prior to the trip. Respondent also
adverse if produced; properly booked petitioner for the tour, prepared the
xxx xxx xxx necessary documents and procured the plane tickets. It
536 arranged petitioners hotel accommodation as well as
food, land transfers and sightseeing excursions, in
536 SUPREME COURT REPORTS ANNOTATED accordance with its avowed undertaking.
Crisostomo vs. Court of Appeals Therefore, it is clear that respondent performed its
was legibly written on the plane ticket and the travel prestation under the contract as well as everything else
papers were delivered two days in advance precisely so that was essential to book petitioner for the tour. Had
that petitioner could prepare for the trip. It performed all petitioner exercised due diligence in the conduct of her
its obligations to enable petitioner to join the tour and affairs, there would have been no reason for her to miss
exercised due diligence in its dealings with the latter. the flight. Needless to say, after the travel papers were
We agree with respondent. delivered to petitioner, it became incumbent upon her to
Respondents failure to present Menor as witness to take ordinary care of her concerns. This undoubtedly
rebut petitioners testimony could not give rise to an would require that she at least read the documents in
inference unfavorable to the former. Menor was already order to assure herself of the important details regarding
working in France at the time of the filing of the the trip.
complaint,15 thereby making it physically impossible for The negligence of the obligor in the performance of the
respondent to present her as a witness. Then too, even if obligation renders him liable for damages for the
it were possible for respondent to secure Menors resulting loss suffered by the obligee. Fault or negligence
testimony, the presumption under Rule 131, Section 3(e) of the obligor consists in his failure to exercise due care
would still not apply. The opportunity and possibility for and prudence in the performance of the obligation as the
obtaining Menors testimony belonged to both parties, nature of the obligation so demands.20 There is no fixed
considering that Menor was not just respondents standard of diligence applicable to each and every
employee, but also petitioners niece. It was thus error for contractual obligation and each case must be determined
the lower court to invoke the presumption that upon its particular facts. The degree of diligence required
respondent willfully suppressed evidence under Rule 131, depends on the circumstances of the specific obligation
Section 3(e). Said presumption would logically be and whether one has been negligent is a question of fact
inoperative if the evidence is not intentionally omitted but that is to be determined after taking into account the
is simply unavailable, or when the same could have been particulars of each case.21
obtained by both parties.16 _______________
In sum, we do not agree with the finding of the lower
court that Menors negligence concurred with the Supra, note 2 at 60 & 94.
19
negligence of petitioner and resultantly caused damage to Bayne Adjusters and Surveyors, Inc. v. Court of
20
the latter. Menors negligence was not sufficiently proved, Appeals, G.R. No. 116332, 323 SCRA 231 (2000), citing
considering that the only evidence presented on this score Articles 1170, 1172-73, Civil Code; Southeastern College,
was petitioners uncorroborated narration of the events. Inc. v. Court of Appeals, 354 Phil 434; 292 SCRA
It is well-settled that the party alleging a fact has the 422 (1998).
burden of proving it and a mere allegation cannot take the 21 Commentaries and Jurisprudence on the Civil Code
place of evidence.17 If the plaintiff, upon whom rests the of the Philippines, Vol. IV (1999 Edition), Arturo M.
burden of proving his cause of action, fails to show in a Tolentino, p. 124.
satisfactory manner facts upon which he bases his claim, 538
the defendant is under no obligation to prove his exception 538 SUPREME COURT REPORTS ANNOTATED
or defense.18
_______________ Crisostomo vs. Court of Appeals
The lower court declared that respondents employee was
negligent. This factual finding, however, is not supported
by the evidence on record. While factual findings below
are generally conclusive upon this court, the rule is
subject to certain exceptions, as when the trial court
overlooked, misunderstood, or misapplied some facts or
circumstances of weight and substance which will affect
the result of the case.22
In the case at bar, the evidence on record shows that
respondent company performed its duty diligently and did
not commit any contractual breach. Hence, petitioner
cannot recover and must bear her own damage.
WHEREFORE, the instant petition is DENIED for
lack of merit. The decision of the Court of Appeals in CA-
G.R. CV No. 51932 is AFFIRMED. Accordingly, petitioner
is ordered to pay respondent the amount of P12,901.00
representing the balance of the price of the British
Pageant Package Tour, with legal interest thereon at the
rate of 6% per annum, to be computed from the time the
counterclaim was filed until the finality of this Decision.
After this Decision becomes final and executory, the rate
of 12% per annum shall be imposed until the obligation is
fully settled, this interim period being deemed to be by
then an equivalent to a forbearance of credit.23
SO ORDERED.
Davide, Jr. (C.J.,
Chairman), Vitug, Carpio and Azcuna, JJ., concur.
Petition denied, assailed judgment affirmed.
Note.A common carrier is a person or corporation
whose regular business is to carry passengers or property
for all persons who may choose to employ and to
remunerate him. (Caltex [Philippines], Inc. vs. Sulpicio
Lines, Inc., 315 SCRA 709 [1999])
o0o
_______________
returning the typewriter that he was obliged to repair in v. Belizear, L-22399. 31 March 1967, 19 SCRA 214.
a nonworking condition, with essential parts missing. The 553
fixing of a period would thus be a mere formality and VOL. 32, APRIL 30, 1970 55
would serve no purpose than to delay (cf. Tiglao, et al. v.
Manila Railroad Co., 98 Phil. 181). Vda. De Macabenta vs. Davao Stevedore Terminal Company
It is clear that the defendant-appellee contravened the (b) Damages and attorneys fees must be alleged.See the
tenor of his obligation because he not only did not repair notes under De la Cruz vs. Cruz, L-27759, Aug. 17, 1970,
the typewriter but returned it in shambles, according to this volume.
the appealed decision. For such contravention, as
_______________
SO ORDERED.
Yap (Chairman), Paras and Sarmiento,
JJ., concur.
Melencio-Herrera, J., I concur. In addition to
compensatory and exemplary damages, moral damages
are recoverable in actions for breach of contract, as in this
case, where the breach has been wanton and reckless,
tantamount to bad faith.
Petition denied. Decision modified.
Notes.Telegraph corporation, as employer is liable
directly for the acts of its employees. Action for damages
must be based on Articles 19 and 20 of the Civil Code, not
on subsidiary liability of corporation under Article 1161,
New Civil Code. (Radio Com munications of the Phil. vs.
Court of Appeals, 143 SCRA 657.)
Since negligence may be hard to substantiate in some
cases, the application of the doctrine of res ipsa loquitur is
proper. (Radio Communications of the Phil. vs. Court of
Appeals, 143 SCRA 657.)
o0o
451
Copyright 2017 Central Book Supply, Inc. All rights
reserved.
VOL. 10, JANUARY 31, 1964 In 79
accordance with Section 13 of Republic Act No.
3452, "the National Rice and Corn Administration
Arrieta vs. National Rice and Corn Corporation (NARIC) is hereby abolished and all its assets, liabilities,
No. L-15645. January 31, 1964. functions, powers which are not inconsistent with the
PAZ P. ARRIETA and VITALIADO ARRIETA, plaintiffs- provisions of this Act, and all personnel are transferred"
appellees, vs. NATIONAL RICE AND CORN to the Rice and Corn Administration (RCA).
CORPORATION, defendant-appellant, MANILA All references, therefore, to the NARIC in this
UNDERWRITERS INSURANCE CO., INC., defendant- decision must accordingly be adjusted and read as RCA
appellee. pursuant to the aforementioned law.
Obligations and contracts; Liability for non- On May 19, 1952, plaintiff-appellee participated in
performance; Failure to put up letter of credit within the public bidding called by the NARIC for the supply of
agreed period.One who assumes a contractual 20,000 metric tons of Burmese rice. As her bid of $203.00
obligation and fails to perform the same on account of his per metric ton was the lowest, she was awarded the
inability to meet certain bank requirements which contract for the same. Accordingly, on July 1, 1952,
inability he knew and was aware of when he entered into plaintiffappellee Paz P. Arrieta and the appellant
the contract, should be held liable in damages for breach corporation entered into a Contract of Sale of Rice, under
of contract. the terms of which the former obligated herself to deliver
Under Article 1170 of the Civil Code, not only debtors to the latter 20,000 metric tons of Burmess Rice at
guilty of fraud, negligence or default but also every debtor, $203.00 per metric ton, CIF Manila. In turn, the
in general, who fails in the performance of his obligations defendant corporation committed itself to pay for the
is bound to indemnify for the losses and damages caused imported rice "by means of an irrevocable, confirmed and
thereby. assignable letter of credit in U.S. currency in favor of the
Same; Same; Meaning of phrase "in any manner plaintiff-appellee and/or supplier in Burma,
contravene the tenor" of the obligation in Art. 1170, Civil immediately."
Code.The phrase "in any manner contravene the tenor" Despite the commitment to pay immediately "by
of the obligation in Art. 1170, Civil Code, includes any means of an irrevocable, confirmed and assignable Letter
illicit task which impairs the strict and faithful of Credit," however, it was only on July 30, 1952, or a full
fulfillment of the obligation, or every kind of defective month
performance. 81
Same; Same; Waiver of breach of contract not VOL. 10, JANUARY 31, 1964 8
presumed.Waivers are not presumed, but must be
Arrieta vs. National Rice and Corn Corporation
clearly and convincingly shown, either by express
stipulation or acts admitting no other reasonable from the execution of the contract, that the defendant
explanation. corporation, thru its general manager, took the first step
Same; Payment of award; Philippine currency.In to open a letter of credit by forwarding to the Philippine
view of Republic Act 527 which specifically requires the National Bank its Application for Commercial Letter of
discharge of obligations only "in any coin or currency Credit. The application was accompanied by a transmittal
which at the time of payment is legal tender for public and letter, the relevant paragraphs of which read:
private debt", the award of "damages in U S. dollars made "In view of the fact that we do not have sufficient deposit
by the lower court in the case at bar is modified by with your institution with which to cover the amount
converting it into Philippine pesos at the rate of exchange required to be deposited as a condition for the opening of
prevailing at the time the obligation was incurred, or letters of credit, we will appreciate it if this application
when the contract in question was executed. could be considered a special case.
80 "We understand that our supplier, Mrs. Paz P.
Arrieta, has a deadline to meet which is August 4, 1952,
80 SUPREME COURT REPORTS ANNOTATED and in order to comply therewith, it is imperative that the
Arrieta vs. National Rice and Corn Corporation L/C be opened prior to that date. We would therefore
request your full cooperation on this matter."
APPEAL from a decision of the Court of First Instance of On the same day, July 30, 1952, Mrs. Paz P. Arrieta, thru
Manila. Macadaeg, J. counsel, advised the appellant corporation of the extreme
necessity for the immediate opening of the letter of credit
The facts are stated in the opinion of the Court. since she had by then made a tender to her supplier in
Teehankee & Carreon for plaintiffs-appellees. Rangoon, Burma, "equivalent to 5% of the F.O.B. price of
The Government Corporate Counsel for 20,000 tons at $180.70 and in compliance with the
defendantappellant. regulations in Rangoon this 5% will be confiscated if the
Isidro A. Vera for defendant-appellee. required letter of credit is not received by them before
August st 4, 1952."
On August 4 1952, the Philippine National Bank
REGALA, J.:
informed the appellant corporation that its application,
"for a letter of credit for $3,614,000.00 in favor of Thiri
This is an appeal of the defendant-appellant NARIC from
Setkya has been approved by the Board of Directors with
the decision of the trial court dated February 20, 1958,
the condition that 56% marginal cash deposit be paid and
awarding to the plaintiffs-appellees the -amount of
that drafts are to be paid upon presentment." (Exh. J-pl.;
$286,000.00 as damages for breach of contract and
Exh. 10-def., p. 19, Folder of Exhibits). Furthermore, the
dismissing the counterclaim and third party complaint of
Bank represented that it "will hold your application in
the defendant-appellant NARIC.
abeyance pending compliance with the above stated period. This failure must, therefore, be taken as the
requirement." immediate cause for the consequent damage which
As it turned out, however, the appellant corporation resulted. As it is then, the disposition of this case depends
was not in any financial position to meet the condition. As on a determination of who was responsible for such
a matter of fact, in a letter dated August 2, 1952, the failure. ailure. Stated differently, the issue is whether
NARIC bluntly confessed essed to the appellee its appellant's failure to open immediately the letter of credit
dilemma: "In this connection, please be advised that our in dispute amounted to a breach of the contract of July 1,
application for the opening of the letter of credit has been 1952 for which it may be held liable in damages.
presented to the bank since July 30th but the latter Appellant corporation disclaims responsibility for the
requires that we first deposit 50% of the value of the letter delay in the opening of the letter of credit. On the
amounting to ap- contrary, it insists that the fault lies with the appellee.
82 Appellant contends that the disputed negotiable
82 SUPREME COURT REPORTS ANNOTATED instrument was not promptly secured because the
appellee failed to seasonably furnish data necessary and
Arrieta vs. National Rice and Corn Corporation required for opening the same, namely, "(1) the amount of
proximately $3,614,000.00 which we are not in a position the letter of credit, (2) the person, company or corporation
to meet." (Italics supplied. Exh. 9-Def.; Exh. 1-Pe., p. 18, in whose favor it is to be opened, and (3) the place and
Folder of Exhibits) bank where it may be negotiated." Appellant would have
Consequently, the credit instrument applied for was this Court believe, therefore, that had these informations
opened only on September 8, 1952 "in favor of Thiri been forthwith furnished it, there would have been no
Setkya, Rangoon, Burma, and/or assignee for delay in securing the instrument.
$3,614,000.00," (which is more than two months from the Appellant's explanation has neither force nor merit.
execution of the contract) the party named by the appellee In the first place, the explanation reaches into an area of
as beneficiary of the letter of credit. the proceedings into which We are not at liberty to
As a result of the delay, the allocation of appellee's encroach. The explanation refers to a question of fact.
supplier in Rangoon was cancelled and the 5% deposit, Nothing in the record suggests any arbitrary or abusive
amounting to 524,000 kyats or approximately conduct on the part of the trial judge in the formulation
P200,000.00 was forfeited. orf eited. In this connection, it ormulation of the ruling. His conclusion on the matter is
must be made of record that although the Burmese sufficiently borne out by the evidence presented. We are
authorities had set August 4, 1952, as the deadline for the denied, therefore, the prerogative to disturb that finding,
remittance of the required letter of credit, the cancellation consonant to the time-honored tradition of this Tribunal
of the allocation and the confiscation of the 5% deposit to hold trial judges better situated to make conclusions on
were not effected until August 20, 1952, or, a full half questions of fact. For the record, We quote hereunder the
month after the expiration of the deadline. And yet, even lower court's ruling on the point:
with the 15-day grace, appellant corporation was unable "The defense that the delay, if any in opening the letter of
to make good its commitment to open the disputed letter credit was due to the failure of plaintiff to name the
of credit. supplier,
The appellee endeavored, but failed, to restore the 84
cancelled Burmese rice allocation. When the futility of
84 SUPREME COURT REPORTS ANNOTATED
reinstating the same became apparent, she offered to
substitute Thailand rice instead to the defendant NARIC, Arrieta vs. National Rice and Corn Corporation
communicating at the same time that the offer was "a the amount and the bank is not tenable. Plaintiff stated
solution which should be beneficial to the NARIC and to in Court that these facts were known to defendant even
us at the same time." (Exh. X-Pe., Exh. 25Def., p. 38, before the contract was executed because these facts were
Folder of Exhibits). This offer for substitution, however, necessarily revealed to the defendant before she could
was rejected by the appellant in a resolution dated qualify as a bidder. She stated too that she had given the
November 15, 1952. necessary data immediately after the execution of Exh.
On the foregoing, the appellee sent a letter to the "A" (the contract of July 1, 1952) to Mr. GABRIEL
appellant, demanding compensation for the damages BELMONTE, General Manager of the NARIC, both orally
caused her in the sum of $286,000.00, U.S. currency, and in writing and that she also pressed for the opening
representing unrealized profit. The demand having been of the letter of credit on these occasions. These statements
rejected, she instituted this case now on appeal. have not been controverted and defendant NARIC,
At the instance of the NARIC, a counterclaim was notwithstanding its previous intention to do so, failed to
filed and the Manila Underwriters Insurance Company present Mr. Belmonte to testify or refute this. x x x."
was brought to the suit as a third party defendant to hold Secondly, from the correspondence and communications
it liable on the performance bond it executed in favor of which form part of the record of this case, it is clear that
the plaintiff-appellee. what singularly delayed the opening of the stipulated
83 letter of credit and which, in turn, caused the cancellation
VOL. 10, JANUARY 31, 1964 of the 83allocation in Burma, was the inability of the
appellant corporation to meet the condition imposed by
Arrieta vs. National Rice and Corn Corporation the Bank for granting the same.
We find for the appellee. We do not think the appellant corporation can refute
It is clear upon the records that the sole and principal the fact that had it been able to put up the 50% marginal
reason for the cancellation of the allocation contracted by cash deposit demanded by the bank, then the letter of
the appellee herein in Rangoon, Burma, was the failure of credit would have been approved, opened and released as
the letter of credit to be opened with the contemplated early as August 4, 1952. The letter of the Philippine
National Bank to the NARIC was plain and explicit that Supply, 63 Phil. 657). The phrase "in any manner
as of the said date, appellant's "application for a letter of contravene the tenor" of the obligation includes
credit x x x has been approved by the Board of Directors 86
with the condition that 50% marginal cash deposit be paid 86 SUPREME COURT REPORTS ANNOTATED
and that drafts are to be paid upon presentment." (Italics
supplied) Arrieta vs. National Rice and Corn Corporation
The liability of the appellant, however, stems not any illicit act which impairs the strict and faithful
alone from this failure or inability to satisfy the fulfillment of the obligation, or every kind or defective
requirements of the bank. Its culpability arises from its performance. (IV Tolentino, Civil Code of the Philippines,
willful and deliberate assumption of contractual citing authorities, p. 103.)
obligations even as it was well aware of its financial The NARIC would also have this Court hold that the
incapacity to undertake the prestation. We base this subsequent offer to substitute Thailand rice for the
judgment upon the letter which accompanied the originally contracted Burmese rice amounted to a waiver
application filed by the appellant with the bank, a part of by the appellee of whatever rights she might have derived
which letter was quoted earlier in this decision. In the from the breach of the contract. We disagree. Waivers are
said accompanying correspondence, appellant admitted not presumed, but must be clearly and convincingly
and owned that it did "not have sufficient deposit with shown, either by express stipulation or acts admitting no
your institution (the PNB) with which to cover the other reasonable explanation. (Ramirez v. Court of
amount required to be deposited as a condition for or the Appeals, 52 O.G. 779.) In the case at bar, no such intent
opening of letters of credit. x x x." to waive has been established.
85 We have carefully ully examined and studied the oral
and documentary evidence presented in this case and
VOL. 10, JANUARY 31, 1964 85
upon which the lower court based its award. Under the
Arrieta vs. National Rice and Corn Corporation contract, the NARIC bound itself to buy 20,000 metric
A number of logical inferences may be drawn from the tons of Burmese rice at "$203.00 U.S. Dollars per metric
aforementioned admission. First, that the appellant knew ton, all net shipped weight, and all in U.S. currency, C.I.F.
the bank requirements for opening letters of credit; Manila. x x x." On the other hand, documentary and other
second, that appellant also knew it could not meet those evidence establish with equal certainty that the plaintiff-
requirements. When, therefore, despite this awareness appellee was able to secure the contracted commodity at
that it was financially incompetent to open a letter of the cost price of $180.70 per metric ton from her supplier
credit immediately, appellant agreed in paragraph 8 of in Burma. Considering freights, insurance and charges
the contract to pay immediately "by means of an incident to its shipment here and the forfeiture of the 5%
irrevocable, confirmed and assignable letter of credit," it deposit, the award granted by the lower court is fair and
must be similarly held to have bound itself to answer for equitable. For a clearer view of the equity of the damages
all and every consequences that would result from the awarded, We reproduce below the testimony of the
representation. As aptly observed by the trial court: appellee, adequately supported by the evidence and
"x x x. Having called for bids for the importation of rice record:
involving millions, $4,260,000.00 to be exact, it should "Q. Will you please tell the court, how much is the damage you suffered ?
have ascertained its ability and capacity to comply with
the inevitable requirements in cash to pay for such "A. Because the selling price of my rice is $203.00 per metric ton, and the cost
importation. Having announced the bid, it must be price of my rice is $180.00 We had to pay also $6.25 for shipping and about
deemed to have impliedly assured suppliers of its capacity $164 for insurance. So adding the cost of the rice. the freight. the insurance,
and facility to finance the importation within the required
period, especially since it had imposed on the supplier the the total would be about $187.99 that would be $15.01 gross profit per metric
90-day period within which the shipment of the rice must ton, multiply by 20,000 equals $300,200. that is my supposed profit if I went
be brought into the Philippines. Having entered into the through the contract."
contract, it should have taken steps immediately to The above testimony of the plaintiff was a general
arrange for the letter of credit for the large amount approximation of the actual figures involved in the
involved and in quired into the possibility of its issuance." transac-
In relation to the aforequoted observation of the trial 87
court, We would like to make reference also to Article
1170 of the Civil Code which provides: VOL. 10, JANUARY 31, 1964 8
"Those who in the performance of their obligation are Arrieta vs. National Rice and Corn Corporation
guilty of fraud, negligence, or delay, and those who in any tion. A precise and more exact demonstration of the equity
manner contravene the tenor thereof, are liable in of the award herein is provided by Exhibit HH of the
damages." plaintiff and Exhibit 34 of the defendant, hereunder
Under this provision, not only debtors guilty of fraud, quoted so far as germane.
negligence or default in the performance of obligations are "It is equally of record now that as shown in her request,
decreed liable; in general, every debtor who fails in the dated July 29, 1959, and other communications
performance of his obligations is bound to indemnify for subsequent thereto for the opening by your corporation of
the losses and damages caused thereby (De la Cruz v. the required letter of credit, Mrs. Arrieta was supposed to
Seminary of Manila, 18 Phil. 330; Municipality of pay her supplier in Burma at the rate of One Hundred
Moncada v. Cajuigan, 21 Phil. 184; De la Cavada v. Eighty Dollars and Seventy Cents ($180.70) in U.S.
Diaz, 37 Phil. 982; Maluenda & Co. v. Enriquez, 46 Phil. Currency, per ton plus Eight Dollars ($8.00) in the same
916; Pasumil v. Chong, 49 Phil. 1003; Pando v. currency per ton for shipping and other handling
Gimenez, 54 Phil. 459; Acme Films v. Theaters expenses, so that she is already assured of a net profit of
Fourteen Dollars and Thirty Cents ($14.30), U.S., of exchange at the time the obligation was incurred (Sec.
Currency, per ton or a total of Two Hundred and Eighty 1, idem)."
Six Thousand Dollars ($286,000.00), U.S. Currency, in the UPON ALL THE FOREGOING, the decision appealed
aforesaid transaction. x x x." from is hereby affirmed, with the sole modification that
Lastly, herein appellant filed a counterclaim asserting the award should be converted into the Philippine peso at
that it has suffered, likewise by way of unrealized profit, the rate of exchange prevailing at the time the obligation
damages in the total sum of $406,000.00 from the failure was incurred or on July 1, 1952 when the contract was
of the projected contract to materialize. This counterclaim executed. The appellee insurance company, in the light of
was supported by a cost study made and submitted by the this judgment, is relieved of any liability under this suit.
appellant itself and wherein it was illustrated how No pronouncement as to costs.
indeed, had the importation pushed thru, NARIC would Bengzon,
have realized in profit the amount asserted in the C.J., Padilla, Concepcion, Paredes, Dizon and Makalinta
counterclaim. And yet, the said amount of P406,000.00 l, JJ., concur.
was realizable by the appellant despite a number of Reyes, J.B.L., J., reserves his vote.
expenses which the appellee, under the contract, did not Barrera, J., took no part.
have to incur. Thus, under the cost study submitted by Decision affirmed with modification,
the appellant, banking and unloading charges were to be 89
shouldered by it, including an Import License Fee Copyright 2017 Central Book Supply, Inc. All rights
of 2% and superintendence fee of $0.25 per metric ton. If reserved.
the NARIC stood to profit over P400,000.00 from the
disputed transaction inspite of the above extra
expenditures from which the herein appellee was exempt,
we are convinced of the fairness of the judgment presently
under appeal.
In the premises, however, a minor modification must
be effected in the dispositive portion of the decision
appealed from insofar as it expresses the amount of
damages in U.S. currency and not in Philippine Peso.
Republic Act 529 specifically requires the discharge of
obligations only "in any coin or currency which at the time
of payment is legal tender for public and private debts."
In view of that law, therefore, the award should be
converted into and ex-
88
88 SUPREME COURT REPORTS ANNOTATED
Arrieta vs. National Rice and Corn Corporation
pressed in Philippine Peso.
This brings us to a consideration of what rate of
exchange should apply in the conversion here decreed.
Should it be at the time of the breach, at the time the
obligation was incurred or at the rate of exchange
prevailing on the promulgation of this decision.
In the case of Engel v. Velasco & Co., 47 Phil. 115, We
ruled that in an action for recovery of damages for breach
of contract, even if the obligation assumed by the
defendant was to pay the plaintiff a sum of money
expressed in American currency, the indemnity to be
allowed should be expressed in Philippine currency at the
rate of exchange at the time of the judgment rather than
at the rate of exchange prevailing on the date of
defendant's breach. This ruling, however, can neither be
applied nor extended to the case at bar for the same was
laid down when there was no law against stipulating
foreign currencies in Philippine contracts. But now we
have Republic Act No. 529 which expressly declares such
stipulations as contrary to public policy, void and of no
effect. And, as We already pronounced in the case
of Eastboard Navigation, Ltd. v. Juan Ysmael & Co.,
Inc., G.R. No. L-9090, September 10, 1957, 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
418 SUPREME COURT REPORTS ANNOTATED PETITION for certiorari to review the order of the Court of First Instance of
Rizal. Medialdea, J.
Magat vs. Medialdea
No. L-37120. April 20, 1983.* The facts are stated in the opinion of the Court.
VICTORINO D. MAGAT, petitioner, vs. HON. LEO D. MEDIALDEA and Sinesio S. Vergara tor petitioner.
SANTIAGO A. GUERRERO, respondents. Eladio B. Samson for respondents.
Action; Contracts; A complaint that alleges that the defendant violated his
prestations under a contract such that by reason thereof the plaintiff will suffer ESCOLIN, J.:
damages, sufficiently states a valid cause of action.After a thorough examination
of the complaint at bar, We find the test of legal sufficiency of the cause of action Put to test in this petition for review on certiorari is the sufficiency of the averments
adequately satisfied. In a methodical and logical sequence, the complaint recites contained in the complaint for alleged breach of contract filed by petitioner
the circumstances that led to the perfection of the contract entered into by the Victorino D. Magat against respondent Santiago A. Guerrero in Civil Case No.
parties. It further avers that while petitioner had fulfilled his part of the bargain 17827 of the Court of First Instance of Rizal, presided by respondent Judge Leo D.
[paragraph 8 of the Complaint], private respondent failed to comply with his Medialdea, now Deputy Judicial Administrator, which complaint was dismissed for
correlative obligation by refusing to open a letter of credit to cover payment of the failure to state a cause of action.
goods ordered by him [paragraphs 11 & 12 of the Complaint], and that The pertinent allegations in the complaint, subject of inquiry, are as follows: 1
consequently, petitioner suffered not only loss of his expected profits, but moral and 3. That sometime in September 1972, the defendant entered into a contract with
exemplary damages as well. From these allegations, the essential elements of a the U.S. Navy Exchange, Subic Bay, Philippines, for the operation of a fleet of
cause of action are present, to wit: [1] the existence of a legal right to the plaintiff; taxicabs, each taxicab to be provided with the necessary taximeter and a radio
[2] a correlative duty of the defendant and [3] an act or omission of the defendant transceiver for receiving and sending of messages from mobile taxicab to fixed base
in violation of the plaintiffs right, with consequent injury or damage to the latter stations within the Naval Base at Subic Bay, Philippines;
for which he may maintain an action for recovery of damages or other appropriate 4. That Isidro Q. Aligada, acting as agent of the defendant herein conducted
relief. the necessary project studies on how best the defendant may meet the requirements
Same; Same; Same.Indisputably, the parties, both businessmen, entered of his contract with the U.S. Navy Exchange, Subic Bay, Philippines, and because
into the aforesaid contract with the evident intention of deriving some profits of the experience of
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, 1Annex A of the petition.
recoverable under the law. 420
Same; Same; Damages; Damages cover not only actual loss (dao emergente),
but also profits that may be lost (lucro cesante). An averment that plaintiff stand, to 420 SUPREME COURT REPORTS ANNOTATED
lose expected profits, goodwill, etc. due to defendants breach of contract sufficiently Magat vs. Medialdea
states a cause of action.The damages which the obligor is liable for includes not the plaintiff in connection with his various, contracts with the U.S. Navy, Subic
only the value of the loss suffered by the obligee [dao emergente] but also 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
*SECOND DIVISION. imported either from the United States or from Japan, the said Isidro Q. Aligada
419 approached the plaintiff herein in behalf of the defendant and proposed to import
VOL. 121, APRIL 20, 1983 419 from Japan thru the plaintiff herein or thru plaintiffs Japanese business
associates, all taximeters and radio transceivers needed by the defendant in
Magat vs. Medialdea connection with his contract with the U.S. Navy Exchange, Subic Bay, Philippines;
the profits which the latter failed to obtain [lucro cesante]. If the obligor acted 5. That the defendant herein and his aforesaid agent Isidro Q. Aligada were
in good faith, he shall be liable for those damages that are the natural and probable able to import from Japan with the assistance of the plaintiff and his Japanese
consequences of the breach of the obligation and which the parties have foreseen or business associates the necessary taximeters for defendants taxicabs in partial
could have reasonably foreseen at the time the obligation was constituted; and in fulfillment of defendants commitments with the U.S. Navy Exchange, Subic Bay,
case of fraud, bad faith, malice or wanton attitude, he shall be liable for all damages Philippines, the plaintiffs assistance in this matter having been given to the
which may be reasonably attributed to the non-performance of the obligation. defendant gratis et amore;
6. That Isidro Q. Aligada, also acting as agent of the defendant, made 12. That the defendant and his agent have repeatedly assured plaintiff herein
representations with the plaintiff herein to the effect that defendant desired to of the defendants financial capabilities to pay for the goods ordered by him and in
procure from Japan thru the plaintiff herein the needed radio transceivers and to fact he accomplished the lecessary application for a letter of credit with his banker,
this end, Isidro Q. Aligada secured a firm offer in writing dated September 25, 1972, but he subsequently instructed his banker not to give due course to his application
a copy of which is hereto attached marked as Annex A and made an integral part for a letter of credit and that for reasons only known to the defendant, he fails and
of this complaint, wherein the plaintiff quoted in his offer a total price of $77,620.59 refuses to open the necessary letter of credit to cover payment of the goods ordered
[U.S. dollars] FOB Yokohama, the goods or articles therein offered for sale by the by him;
plaintiff to the defendant to be delivered sixty to ninety [60-90] days after receipt 13. That it has come to the knowledge of the plaintiff herein that the defendant
of advice from the defendant of the radio frequency assigned to the defendant by has been operating his taxicabs without the required radio transceivers and when
the proper authorities; the U.S. Navy Authorities of Subic Bay, Philippines, were pressing defendant for
7. That the plaintiff received notice of the fact that the defendant accepted compliance with his commitments with respect to the installations of radio
plaintiffs offer to sell to the defendant the items specified in Annex A, as well as transceivers on his taxicabs, he impliedly laid the blame for the delay upon the
the terms and conditions of said offer, as shown by the signed conformity of the plaintiff herein, thus destroying the reputation of the plaintiff herein with the said
defendant appearing on Annex A which was duly delivered by the defendants Naval Authorities of Subic Bay, Philippines, with whom plaintiff herein transacts
agent to the plaintiff herein, whereupon all that the plaintiff had to do in the business;
meantime was to await advice from the defendant as to the radio frequency to be 422
assigned by the proper authorities to the defendant; 422 SUPREME COURT REPORTS ANNOTATED
8. That believing that the defendant would faithfully fulfill his contract with
the plaintiff herein, considering his signed conformity appearing in Annex A Magat vs. Medialdea
hereof as well as the letter dated October 4, 1972, of his agent aforementioned 14. That on March 27, 1973, plaintiff wrote a letter thru his counsel, copy attached
which is attached hereto marked as Annex E, to ascertain from the defendant as to whether it is his
421 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
VOL. 121, APRIL 20, 1983 421
not even have the courtesy to answer plaintiffs demand;
Magat vs. Medialdea 15. That the defendant herein entered into a contract with the plaintiff herein
and marked as Annex B and made an integral part of this complaint, and in order as set forth in Annex A without the least intention of faithfully complying with his
that plaintiffs promised delivery would not be delayed, the plaintiff herein took obligations thereunder, but he did so only in order to obtain the concession from
steps to advise the Japanese entity entrusted with the manufacture of the items the U.S. Navy Exchange, Subic Bay, Philippines, of operating a fleet of taxicabs
listed in Annex A to the effect that the contract between the defendant herein and inside the U.S. Naval Base to his financial benfefit and at the expense and prejudice
the plaintiff has been perfected and that advice with regards to radio frequency of third parties such as the plaintiff herein;
would follow as soon as same is received by the plaintiff from the defendant; 16. That in view of the defendants failure to fulfill his contractual obligations
9. That in his letter dated October 6, 1972, a copy of which is hereto attached with the plaintiff herein, the plaintiff will suffer the following damages:
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] 1. [a]As the radio transceivers ordered by the defendant are now in the hands
and defendant requested his said agent to proceed with his order placed with the of the plaintiffs Japanese representative, the plaintiff will have to pay
plaintiff herein, which fact was duly communicated to the plaintiff by the for them, thus he will have to suffer as total loss to him the amount of
defendants aforementioned agent; P523,938.98 (converting the amount of $77,620.59 to pesos at the rate of
10. That by his letter dated October 7, 1972, addressed to the plaintiff by the P6.75 to the dollar) as said radio transceivers were purposely made or
defendants agent, a copy of which is hereto attached and marked as Annex D, manufactured solely for the use of the defendant herein and cannot
defendants agent qualified defendants instructions contained in his letter of possibly be marketed by the plaintiff herein to the general public;
October 6, 1972 [Annex C] in the sense that plaintiff herein should proceed to fulfill 2. [b]The amount of P52,393.89 or 10% of the purchase price by way of loss
defendants order only upon receipt by the plaintiff of the defendants letter of of expected profits from the transaction or contract between plaintiff and
credit; the defendant;
11. That it being normal business practice in case of foreign importation that 3. [c]Loss of confidence in him and goodwill of the plaintiff which will result
the buyer opens a letter of credit in favor of the foreign supplier before delivery of in the impairment of his business dealings with Japanese firms, thereby
the goods sold, the plaintiff herein awaited the opening of such a letter of credit by resulting also in loss of possible profits in the future which plaintiff
the defendant; assess at no less than P200,000.00;
4. [d]That in view of the defendants bad faith in inducing plaintiff to enter 424 SUPREME COURT REPORTS ANNOTATED
into the contract with him as set forth hereinabove, defendant should be
assessed by this Honorable Court in favor of the plaintiff the sum of Magat vs. Medialdea
P200,000.00 as moral and exemplary damages; After a thorough examination of the complaint at bar, We find the test of legal
5. [e]That in view of the defendants fault and to protect his interests, sufficiency of the cause of action adequately satisfied. In a methodical and logical
plaintiff herein is constrained to retain the services of counsel with whom sequence, the complaint recites the circumstances that led to the perfection of the
he agreed to pay by way of attorneys fees the sum of P50,000.00. 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
423
to cover payment of the goods ordered by him [paragraphs 11 & 12 of the
VOL. 121, APRIL 20, 1983 423 Complaint], and that consequently, petitioner suffered not only loss of his expected
Magat vs. Medialdea profits, but moral and exemplary damages as well. From these allegations, the
Respondent Guerrero filed a motion to dismiss said complaint for lack of cause of essential elements of a cause of action are present, to wit: [1] the existence of a legal
action, which ground is propounded by respondents counsel thus:2 right to the plaintiff; [2] a correlative duty of the defendant and [3] an act or
x x x it is clear that plaintiff was merely anticipating his loss or damage which omission of the defendant in violation of the plaintiffs right, with consequent injury
might result from the alleged failure of defendant to comply with the terms of the or damage to the latter for which he may maintain an action for recovery of
alleged contract. Hence, plaintiffs right of recovery under his cause of action is damages or other appropriate relief.7
premised not on any loss or damage actually suffered by him but on a non-existing Indisputably, the parties, both businessmen, entered into the aforesaid contract
loss or damage which he is expecting to incur in the near future. Plaintiffs right with the evident intention of deriving some profits therefrom. Upon breach of the
therefore under his cause of action is not yet fixed or vested. contract by either of them, the other would necessarily suffer loss of his expected
Inasmuch as there is no other allegation in the present Complaint wherein the profits. Since the loss comes into being at the very moment of breach, such loss is
same could be maintained against defendant, the present Complaint should be real, fixed and vested and, therefore, recoverable under the law.
dismissed for its failure to state a cause of action against defendant. Article 1170 of the Civil Code provides:
The respondent judge, over petitioners opposition, issued a minute order Those who in the performance of their obligation are guilty of fraud, negligence, or
dismissing the complaint as follows:3 delay, and those who in any manner contravene the tenor thereof are liable for
Acting upon the Motion to Dismiss filed by the defendant, through counsel, dated damages.
June 7, 1973, as well as the opposition thereto filed by the plaintiff, through The phrase in any manner contravene the tenor of the obligation includes any
counsel, dated June 14, 1973, for the reasons therein alleged, this Court hereby illicit act or omission which impairs the strict and faithful fulfillment of the
grants said motion and, as prayed for, the complaint in the above-entitled case is obligation and every kind of defective performance.8
dismissed. The damages which the obligor is liable for includes not only the value of the
SO ORDERED. loss suffered by the obligee [dao emergente]
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
7Mathay vs. Consolidated Bank & Trust Co., supra.
alleged are deemed hypothetically admitted, including those which are fairly
8Arrieta vs. National Rice & Corn Corp., 10 SCRA 79.
deducible therefrom5; and that, admitting the facts as alleged, whether or not the 425
Court can render a valid judgment against the defendant upon said facts in VOL. 121, APRIL 20, 1983 425
accordance with the prayer in the complaint6.
Magat vs. Medialdea
_______________
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
2 Annex B of the petition.
probable consequences of the breach of the obligation and which the parties have
3 Annex D of the petition.
4 Mindanao Realty Corp. vs. Kintanar, 6 SCRA 894. foreseen or could have reasonably foreseen at the time the obligation was
5 Mathay vs. Consolidated Bank & Trust Co., 58 SCRA 559. constituted; and in case of fraud, bad faith, malice or wanton attitude, he shall be
6 La Suerte Cigar & Cigarette Factory vs. Central Azucarera de Danao, 23 liable for all damages which may be reasonably attributed to the nonperformance
of the obligation10.
SCRA 686.
424
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.
Makasiar (Chairman), Concepcion, Jr., Guerrero and Abad Santos,
JJ., concur.
Aquino, J., is on leave.
De Castro, J., took no part.
Order set aside and case remanded to the court of origin for further proceedings.
Notes.The remedy to set aside orders or decisions of the PHHC is certiorari
or prohibition, not a review or direct action for specific performance. (Raymundo
vs. Peoples Homesite and Housing Corporation, 114 SCRA 712.)
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o0o