ARTICLE 1174: FORTUITOUS EVENT
Hence, a petition for review on
1. JUNTILLA VS. FONTANAR
FACTS:
Herein plaintiff was a passenger of the public utility
jeepney on course from Danao City to Cebu City. The
jeepney was driven by driven by defendant Berfol
Camoro and registered under the franchise of Clemente
Fontanar. When the jeepney reached Mandaue City, the
right rear tire exploded causing the vehicle to turn turtle.
In the process, the plaintiff who was sitting at the front
seat was thrown out of the vehicle. Plaintiff suffered a
lacerated wound on his right palm aside from the injuries
he suffered on his left arm, right thigh, and on his back.
Plaintiff filed a case for breach of contract with damages
before the City Court of Cebu City. Defendants, in their
answer, alleged that the tire blow out was beyond their
control, taking into account that the tire that exploded was
newly bought and was only slightly used at the time it
blew up.
ISSUE:
Whether or not the tire blow-out is a fortuitous event?
HELD:
No. In the case at bar, the cause of the unforeseen and
unexpected occurrence was not independent of the human
will. The accident was caused either through the
negligence of the driver or because of mechanical defects
in the tire. Common carriers should teach drivers not to
overload their vehicles, not to exceed safe and legal speed
limits, and to know the correct measures to take when a
tire blows up thus insuring the safety of passengers at all
times.
2. NPC VS. CA
FACTS:
In the early morning hours of October 27, 1978, at the
height of typhoon "Kading", a massive flood covered the
towns near Angat Dam, particularly the town of
Norzagaray, causing several deaths and the loss and
destruction of houses, farms, plants, working animals and
other properties of the people residing near the Angat
River. Private respondents blamed the sudden rush of
water to the reckless and imprudent opening of all the
three (3) floodgates of the Angat Dam spillway, without
prior warning to the people living near or within the
vicinity of the dam. In view of these, an action for
damages was filed by respondents. The trial court ruled in
favor of the latter. Likewise the Court of Appeals affirmed
with said decision.
certiorari was instituted by the National Power
Corporation (NPC) and Benjamin Chavez, Plant
Superintendent of NPC.
Petitioners denied private respondents' allegations and, by
way of defense, contended that they have maintained the
water in the Angat Dam at a safe level and that the
opening of the spillways was done gradually and after all
precautionary measures had been taken. Petitioner NPC
further contended that it had always exercised the
diligence of a good father in the selection of its officials
and employees and in their supervision. It also claimed
that written warnings were earlier sent to the towns
concerned, and that there was no direct causal relationship
between the alleged damages suffered by the respondents
and the acts and omissions attributed to the former. That
it was the respondents who assumed the risk of residing
near the Angat River, and even assuming that respondents
suffered damages, the cause was due to a fortuitous event
and such damages are of the nature and character of
damnum absque injuria, hence, respondents have no
cause of action against them.
ISSUE:
Whether petitioners can escape civil liability by invoking
force majeure as the proximate cause of the loss and
damage.
HELD:
No. Petitioners cannot escape liability because their
negligence is the proximate cause of the loss and damage.
Act of God or force majeure, by definition, are
extraordinary events not foreseeable or avoidable, events
that could not be foreseen, or which, though foreseen, are
inevitable. It is therefore not enough that the event should
not have been foreseen or anticipated, as is commonly
believed, but it must be one impossible to foresee or to
avoid. 7 As a general rule, no person shall be responsible
for those events which could not be foreseen or which
though foreseen, were inevitable.
However, the principle embodied in the act of God
doctrine strictly requires that the act must be occasioned
solely by the violence of nature. Human intervention is to
be excluded from creating or entering into the cause of the
mischief. When the effect is found to be in part the result
of the participation of man, whether due to his active
intervention or neglect or failure to act, the whole
occurrence is then humanized and removed from the rules
applicable to the acts of God.
Generally it cannot be said that damage, injury or loss is
due to an act of God where it was caused merely by
excessive or heavy rainfall, storms and to weather
conditions which are not unusual in character, those
which could have been reasonably anticipated or where
the injury complained of is due rather to the negligence or
mismanagement of man than to the disturbance of the
elements or where such damage, injury or loss might have
been mitigated or prevented by diligence exercised after
the occurrence.
In the case at bar, although the typhoon "Kading" was an
act of God, petitioners can not escape liability because
their negligence was the proximate cause of the loss and
damage. The Court of Appeals found that the defendants
failed to take the necessary safeguards to prevent the
danger that the Angat Dam posed in a situation of such
nature as that of typhoon "Kading". The representative of
the "PAG-ASA" who testified in these proceedings, Justo
Iglesias, Jr., stated that based on their records the rainfall
on October 26 and 27, 1978 is classified only as moderate,
and could not have caused flash floods. He testified that
flash floods exceeds 50 millimeters per hour and lasts for
at least two (2) hours. He stated that typhoon "Yaning"
which occurred on October 7 to 14, 1978 gave a much
heavier rainfall than "Kading", and so did other previous
typhoons.
Also, despite of the announcements of the newspaper of
the expected occurrence of a powerful typhoon code-
named "Kading", the water level in the dam was
maintained at its maximum from October 21, until
midnight of October 26, 1978.
It has been held in several cases that when the negligence
of a person concurs with an act of God producing a loss,
such person is not exempt from liability by showing that
the immediate cause of the damage was the act of God.
To be exempt he must be free from any previous
negligence or misconduct by which the loss or damage
may have been occasioned.
WHEREFORE, finding no reversible error in the
Decision appealed from, the same is hereby affirmed in
toto, with cost against petitioner.
3. MINDEX RESOURCES VS. MORILLO
FACTS
Private respondent Ephraim Morillo and petitioner
Mindex Resources Corporation entered into a verbal
agreement for the lease of the former's 6 x 6 ten-wheeler
cargo truck for use in Mindex's mining operations in
Binaybay, Bigaan, San Teodoro, Oriental Mindoro.
Unfortunately, the truck was burned by unidentified
persons while it was parked unattended at Sitio Aras,
Bigaan, San Teodoro, Oriental Mindoro, due to
mechanical trouble.
The incident resulted in a lawsuit where the trial court
found petitioner responsible for the destruction or loss of
the leased 6 x 6 truck and ordered it to pay respondent
a. the balance of the unpaid rental for the 6 x 6 truck with
interest at 12 percent from June 22, 1994 (the rendition of
the judgment) up to the payment of the amount
b. costs of repair and overhaul of the said truck, with
interest rate of 12 percent until fully paid; and
c. P20,000 as attorney's fees for compelling respondent to
secure the services of counsel in filing his complaint.
On appeal, the Court of Appeals sustained the trial court's
ruling that petitioner was not without fault for the loss and
destruction of the truck and, thus, liable therefor.
Hence, the present petition. Petitioner contended that the
burning of the truck was a fortuitous event, for which it
should not be held liable pursuant to Article 1174 of the
Civil Code.
ISSUE
1.WON the burning of the truck was a fortuitous event?
RULING
1. No, it does not.
Rationalization
1. The Supreme Court denied the petition. According to
the Court, in order for a fortuitous event to exempt one
from liability, it is necessary that one has committed no
negligence or misconduct that may have occasioned the
loss. When the effect, is found to be partly the result of a
person's participation whether by active intervention,
neglect or failure to act, the whole occurrence is
humanized and removed from the rules applicable to acts
of God.
2. The records clearly showed that petitioner failed to
exercise reasonable care and caution that an ordinarily
prudent person would have used in the same situation.
Petitioner fell short of ordinary diligence in safeguarding
the leased truck against the accident, which could have
been avoided in the first place
 4. METRO CONCAST STEEL
CORPORATION VS. ALLIED BANK
ARTICLE 1175: INTERESTS TO BE IMPOSED ON
OBLIGATIONS
1. SUNLIFE OF CANADA VS. TAN KIT
FACTS:
1. Respondent Tan Kit is the widow and designated
beneficiary of Norberto Tan Kit (Norberto), whose
application for a life insurance policy, with face value of
P300,000.00, was granted by petitioner on October 28,
1999.
2. On February 19, 2001, or within the two-year
contestability period, Norberto died of disseminated
gastric carcinoma. Consequently, respondent Tan Kit
filed a claim under the subject policy.
3. In a letter Petitioner Sun Life denied the claim of
Respondent Tan Kit on account of Norberto‘s failure to
fully and faithfully disclose in his insurance application
certain material and relevant information about his health
and smoking history
4. According to petitioner, its underwriters would not
have approved Norberto‘s application for life insurance
had they been given the correct information. Believing
that the policy is null and void, petitioner opined that its
liability is limited to the refund of all the premiums paid
5. Sun Life enclosed in the said letter a check for
P13,080.93 representing the premium refund. Tan Kit
refused the check and insist on the payment of the
insurance proceeds
6. Petitioner then filed a Complaint for Rescission of
Insurance Contract before the RTC
7. The RTC held in favor of Tan Kit. The RTC concluded
that petitioner, through the above-mentioned
circumstances, had already cleared Norberto of any
misrepresentation that he may have committed.
8. On appeal, the CA reversed the decision of the RTC. It
held that Norberto is guilty of concealment which misled
petitioner in forming its estimates of the risks of the
insurance policy. This gave petitioner the right to rescind
the insurance contract which it properly exercised in this
case.
9. Hence, this appeal
ISSUE:
WON petitioner is liable to pay interest on the premium
to be refunded to the respondents
RULING:
1. Petitioner avers that Tio Khe Chio, albeit pertaining to
marine insurance, is instructive on the issue of payment
of interest.
2. There, the Court pointed to Sections 243 and 244 of the
Insurance Code which explicitly provide for payment of
interest when there is unjustified refusal or withholding of
payment of the claim by the insurer, and to Article 220924
of the New Civil Code which likewise provides for
payment of interest when the debtor is in delay.
3. The Court finds, however, that Tio Khe Chio is not
applicable here as it deals with payment of interest on the
insurance proceeds in which the claim therefor was either
unreasonably denied or withheld or the insurer incurred
delay in the payment thereof.
4. In this case, what is involved is an order for petitioner
to refund to respondents the insurance premium paid by
Norberto as a consequence of the rescission Of the
insurance contract on account of the latter‘s concealment
of material information in his insurance application.
Moreover, petitioner did not unreasonably deny or
withhold the insurance proceeds as it was satisfactorily
established that Norberto was guilty of concealment.
5. It is undisputed that simultaneous to its giving of notice
to respondents that it was rescinding the policy due to
concealment, petitioner tendered the refund of premium
by attaching to the said notice a check representing the
amount of refund.
6. However, respondents refused to accept the same since
they were seeking for the release of the proceeds of the
policy. Because of this discord, petitioner filed for judicial
rescission of the contract. Petitioner, after receiving an
adverse judgment from the RTC, appealed to the CA.
7. And as may be recalled, the appellate court found
Norberto guilty of concealment and thus upheld the
rescission of the insurance contract and consequently
decreed the obligation of petitioner to return to
respondents the premium paid by Norberto. Moreover, we
find that petitioner did not incur delay or unjustifiably
deny the claim.
8. Based on the foregoing, we find that petitioner properly
complied with its obligation under the law and contract.
Hence, it should not be made liable to pay compensatory
interest.
9. Considering the prevailing circumstances of the case,
we hereby direct petitioner to reimburse the premium paid
within 15 days from date of finality of this Decision. If
petitioner fails to pay within the said period, then the
amount shall be deemed equivalent to a forbearance of
credit. In such a case, the rate ofinterest shall be 6% per
annum.
10. Wherefore, Sun Life is ordered to pay the interest
on the premium
2. MACALINAO VS. BPI
FACTS:
Petitioner Ileana Macalinao defaulted on the payment of
her BPI credit card dues. There was a stipulation in a
contract that the charges and/or balance shall earn 3% per
month and additional penalty fee of another 3% per
month. The Regional Trial Court reduced the 3% monthly
interest to 2%. On appeal of the case, the Court of Appeals
reversed the decision of the RTC holding that petitioner
Macalinao freely availed herself of the credit card facility
offered by respondent Bank of the Philippine Islands to
general public; contracts of adhesion are not invalid per
se. Petitioner assailed the appellate court’s decision
alleging that the interest rate and penalty charges are
unconscionable and iniquitous at 36% per annum.
ISSUE:
Whether or not the interest rate and penalty charges are
unconscionable and iniquitous at 36% per annum.
HELD:
The interest rate and penalty charges are unconscionable
and iniquitous at 36% per annum. The Supreme Court
held that the interest rate and penalty charge of 3% per
month or the 36% per annum should be reduced to 2% per
month or 24% per annum. In a long line of cased decided
by the Supreme Court, it considered the 36% per annum
to be excessive and unconscionable. Citing Article1229,
in exercising this power to determine what is iniquitous
and unconscionable; courts must consider the
circumstances of each case since what may be iniquitous
and unconscionable in one maybe totally just and
equitable in another. In the instant case, Macalinao made
partial payments to BPI. Therefore, the interest rate and
penalty charge of 3% per month or 36% per annum should
be reduced to 2% per month or 24% per annum.
3. SPOUSES SOLANGON VS. SALAZAR
FACTS:
On 1986, 1987, and 1990 the Solangons’ executed 3 real
estate mortgages in which they mortgaged a parcel of land
situated in Sta. Maria, Bulacan, in favor of the Salazar to
secure payment of a loan of P60, 000.00 payable within a
period of four (4) months, with interest thereon at the rate
of 6% per month, to secure payment of a loan of P136,
512.00, payable within a period of one (1) year, with
interest thereon at the legal rate, and to secure payment of
a loan in the amount of P230, 000.00 payable within a
period of four (4) months, with interest thereon at the legal
rate.
This action was initiated by the Solangons to prevent the
foreclosure of the mortgaged property. They alleged that
they obtained only one loan form the defendant-appellee,
and that was for the amount of P60, 000.00, the payment
of which was secured by the first of the above-mentioned
mortgages. The subsequent mortgages were merely
continuations of the first one, which is null and void
because it provided for unconscionable rate of interest.
They have already paid the defendant-appellee P78,
000.00 and tendered P47, 000.00 more, but the latter has
initiated foreclosure proceedings for their alleged failure
to pay the loan P230, 000.00 plus interest.
ISSUES:
Is a loan obligation that is secured by a real estate
mortgage with an interest of 72% p.a. or 6% a month
unconscionable?
- Yes, although the C.B. Circular No 905 lifted the ceiling
on interest rates there is nothing in the said circular that
grants lenders carte blanche authority to raise interest
rates to levels which will either enslave their borrowers or
lead to hemorrhaging of their assets.
- In the case of Medel vs. C.A. the S.C. has held that 5.5%
per month was reduced for being iniquitous,
unconscionable and exorbitant hence it is contrary to
morals (contra bonos mores)
- In this case the Solangons’ are in a worse situation than
the Medel case (6% per month interest rate) the said
interest rate should be reduced equitably.
HELD:
WHEREFORE, the appealed decision of the Court of
Appeals is AFFIRMED subject to the MODIFICATION
that the interest rate of 72% per annum is ordered reduced
to 12 % per annum.
Obligations and Contracts Terms:
Legal Interest- the legal rate of interest for the loan or
forbearance of any money, goods or credits, where such
loan or renewal or forbearance is secured in whole or in
part by a mortgage upon real estate the title to which is
duly registered, in the absence of express contract as to
such rate of interest, shall be 12% per annum, unless it is
unconscionable or contrary to laws, morals, public policy.
4. COMMONWEALTH INSURANCE CORP
VS. CA
5. FEDERAL BUILDERS VS. FOUNDATION
SPECIALIST
ARTICLE: FIXING TERM
1. TIGLAO VS. MANILA RAILROAD
FACTS
Petitioners are 35 retired employees of defendant
company who sought to recover salary diff due to them
under MOA with defendant
Under the MOA, employed affected by the
standardized plan will receive standardized salaries
provided that any salary diff from date of exhaustion will
be paid when funds for the purpose are available
ISSUE
W/N a company may be excused for payment of salary
diff of its retired employees when the agreement is subject
to condition that “salary differentials from date of
exhaustion will be paid when funds for the purpose are
available”, if the company is losing its business?
HELD
Art. 1180. When the debtor binds himself to pay when
his means permit him to do so, the obligation shall be
deemed to be one with a period, subject to the provisions
of Article 1197.
MOA does not stipulate that salary diff shall be paid
only from surplus profits
It is not appearing that defendant was bankcrupt – the
obligation to pay said salary diff may be considered as one
with term whose duration has been left to the will of the
debtor, so that pursuant to art. 1197, the duration of the
term may be fixed by courts
ARTICLE 1191: RECESSION OF RECIPROCAL
OBLIGATIONS
2. AYSON-SIMON VS. ADAMOS
FACTS:
On December 13, 1943, Nicolas Adamos and Vicente
Feria defendants-appellants herein purchased two lots
from Juan Porciuncula. Porciuncula’s successor in
interest sought for the annulment and cancellation of the
sale which the court a quo favorably ruled.
In the meantime, during the pendency of the above-
mentioned case, defendants-appellants sold to Generosa
Ayson Simon the lots in question. Due to the failure of
defendants appellants to comply with their commitment
to have the subdivision plan of the lots approved and to
deliver to deliver the titles and possession to Generosa,
the latter filed suit for specific performance. As a result of
the sale of the lot to said defendants sppellants being null
and void, there is impossibity that they can comply with
their commitment to Generosa, the latter then seek the
rescission of the contract plus damages.
The defendants-appellants contend that Generosa’s action
had prescribed, considering that she had only four years
from May 29, 1946 to rescind the transaction.
ISSUE:
Whether or not the action to rescind the obligation has
prescribed.
HELD:
Article 1191 of the Civil Code provides that an injured
party may also seek rescission if the fulfillment should
have become impossible. The cause of action to claim
rescission arises when the fulfillment of the obligation
became impossible when the court declared that the sale
was null and void. The Generosa cannot be assailed on the
ground that she slept on her rights.
3. MAGLASANG VS. NORTHWESTERN
UNIVERSITY
FACTS:
In compliance with the CHED’s requirement before a
school could offer maritime transportation programs, on
June 10, 2004, Northwestern University (Northwestern),
respondent, engaged the services of GL enterprises,
petitioner, to install a new Integrated Bridge System or
IBS. The parties executed two contracts. Two months
after the execution of the contracts, GL Enterprises started
delivering materials. However, when they were installing
the components, Northwestern halted the operations. GL
enterprises requested for an explanation. Northwestern
explained that the stoppage was because the materials and
equipment were substandard. It explained that the
components (1) were old; (2) did not have manual and
warranty certificates; (3) contained indications of being
reconditioned machines; (4) did not meet with CHED and
IMO standards.GL enterprises file a complaint for breach
of contract. The RTC rendered a decision that both parties
are at fault. However, the CA, found that GL enterprises
was the only at fault, for delivering defective equipment
that materially and substantially breached the contracts.
Applying Article 1191 of the Civil Code, the CA declared
the rescission of the contracts.
ISSUE:
Whether the CA gravely erred in (1) finding substantial
breach on the part of GL enterprises.
HELD:
The Supreme Court said that, the CA correctly applied
Article 1191, which provides thus: The power to rescind
obligations is implied in reciprocal ones, in case 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
rescission becomes impossible. The court shall decree the
rescission, unless there be just cause authorizing the
fixing of a period. The Supreme Court said that the two
contracts require substantial breach. Then, it went also to
cite the definition, in the case of Cannu v. Galang, that
substantial breach are fundamental breaches that defeat
the object of the parties entering into an agreement, since
the law is not concerned with trifles. In the case at hand,
it was incumbent upon GL enterprises to supply
components that would create an IBS that would
effectively facilitate the learning of the students.
However, it miserably failed it meetings its responsibility.
It supplied substandard equipment when it delivered
components (1) were old; (2) did not have manual and
warranty certificates; (3) contained indications of being
reconditioned machines; (4) did not meet with CHED and
IMO standards. Also, GL enterprises did not also refute
that it delivered defective equipment. Evidently, the
materials were not likely to pass the CHED and IMO
standards.
4. MILA A. REYES VS. VICTORIA T.
TUPARAN
FACTS:
Mila A. Reyes (petitioner) filed a complaint for
Rescission of Contract with Damages against Victoria T.
Tuparan (respondent) before the RTC.In her Complaint,
petitioner alleged, among others, that she was the
registered owner of a 1,274 square meter residential and
commercial lot located in Karuhatan, Valenzuela City,
and covered by TCT No. V-4130.
Petitioner mortgaged the subject real properties to the
Farmers Savings Bank and Loan Bank, Inc. (FSL Bank)
to secure a loan. Petitioner then decided to sell her real
properties so she could liquidate her bank loan and
finance her businesses. As a gesture of friendship,
respondent verbally offered to conditionally buy
petitioner's real properties.
The parties and FSL Bank executed the corresponding
Deed of Conditional Sale of Real Properties with
Assumption of Mortgage. Due to their close personal
friendship and business relationship, both parties chose
not to reduce into writing the other terms of their
agreement mentioned in paragraph 11 of the complaint.
Respondent, however, defaulted in the payment of her
obligations on their due dates. Instead of paying the
amounts due in lump sum on their respective maturity
dates, respondent paid petitioner in small amounts from
time to time.
Respondent countered, among others, that the tripartite
agreement erroneously designated by the petitioner as a
Deed of Conditional Sale of Real Property with
Assumption of Mortgage was actually a pure and absolute
contract of sale with a term period. It could not be
considered a conditional sale because the acquisition of
contractual rights and the performance of the obligation
therein did not depend upon a future and uncertain event.
Respondent further averred that she successfully rescued
the properties from a definite foreclosure by paying the
assumed mortgage plus interest and other finance charges.
The RTC handed down its decision finding that
respondent failed to pay in full the total purchase price of
the subject real properties. It stated that the checks and
receipts presented by respondent refer to her payments of
the mortgage obligation with FSL Bank. The RTC also
considered the Deed of Conditional Sale of Real Property
with Assumption of Mortgage executed by and among the
two parties and FSL Bank a contract to sell, and not a
contract of sale.
The CA rendered its decision affirming with modification
the RTC Decision.The CA agreed with the RTC that the
contract entered into by the parties is a contract to sell but
ruled that the remedy of rescission could not apply
because the respondent's failure to pay the petitioner the
balance of the purchase was not a breach of contract, but
merely an event that prevented the seller (petitioner) from
conveying title to the purchaser (respondent).
ISSUE:
Whether the agreement is a contract to sell and not a
contract of sale.
HELD:
YES.
CIVIL LAW: Contract to sell versus contract of sale
The Court agrees with the ruling of the courts below that
the subject Deed of Conditional Sale with Assumption of
Mortgage entered into by and among the two parties and
FSL Bank on November 26, 1990 is a contract to sell and
not a contract of sale.
The title and ownership of the subject properties remains
with the petitioner until the respondent fully pays the
balance of the purchase price and the assumed mortgage
obligation. Thereafter, FSL Bank shall then issue the
corresponding deed of cancellation of mortgage and the
petitioner shall execute the corresponding deed of
absolute sale in favor of the respondent.
Accordingly, the petitioner's obligation to sell the subject
properties becomes demandable only upon the happening
of the positive suspensive condition, which is the
respondent's full payment of the purchase price. Without
respondent's full payment, there can be no breach of
contract to speak of because petitioner has no obligation
yet to turn over the title. Respondent's failure to pay in full
the purchase price is not the breach of contract
contemplated under Article 1191 of the New Civil Code
but rather just an event that prevents the petitioner from
being bound to convey title to the respondent.
Thus, the Court fully agrees with the CA when it resolved:
"Considering, however, that the Deed of Conditional Sale
was not cancelled by Vendor Reyes (petitioner) and that
out of the total purchase price of the subject property in
the amount of ?4,200,000.00, the remaining unpaid
balance of Tuparan (respondent) is only ?805,000.00, a
substantial amount of the purchase price has already been
paid.It is only right and just to allow Tuparan to pay the
said unpaid balance of the purchase price to Reyes."
Granting that a rescission can be permitted under Article
1191, the Court still cannot allow it for the reason that,
considering the circumstances, there was only a slight or
casual breach in the fulfillment of the obligation.
Out of the P1,200,000.00 remaining balance, respondent
paid on several dates the first and second installments of
P200,000.00 each. She, however, failed to pay the third
and last installment of P800,000.00 due on December 31,
1991. Nevertheless, on August 31, 1992, respondent,
through counsel, offered to pay the amount of
P751,000.00, which was rejected by petitioner for the
reason that the actual balance was P805,000.00 excluding
the interest charges.
Considering that out of the total purchase price of
P4,200,000.00, respondent has already paid the
substantial amount of P3,400,000.00, more or less,
leaving an unpaid balance of only P805,000.00, it is right
and just to allow her to settle, within a reasonable period
of time, the balance of the unpaid purchase price. The
Court agrees with the courts below that the respondent
showed her sincerity and willingness to comply with her
obligation when she offered to pay the petitioner the
amount of P751,000.00.
5. PAGTALUNAN VS. DELA CRUZ VDA. DE
MANZANO
6. FABRIGAS VS. SAN FRANCISCO DEL
MONTE, INC.
FACTS:
Spouses Fabrigas (petitioner) and respondent San
Francisco Del Monte, Inc.(Del Monte) entered into an
agreement, denominated as Contract to Sell No. 2482-V,
whereby the latter agreed to sell to Spouses Fabrigas a
parcel of residential land. The said lot was worth
P109,200.00 and it was registered in the name of
respondent Del Monte. The agreement stipulated that
Spouses Fabrigas shall pay P30,000.00 as down payment
and the balance within ten years in monthly successive
installments of P1,285.69.
After paying P30,000.00, Spouses Fabrigas took
possession of the property but failed to make any
installment payments on the balance of the purchase price.
Despite the demand letter made by Del Monte and the
grace period given still the said Spouses did not comply
with their obligations.
On January 21, 1985, petitioner Marcelina and Del Monte
entered into another agreement denominated as Contract
to Sell No. 2941-V, covering the same property but under
restricted terms of payment. Under the second contract,
the parties agreed on a new purchase price of
P131,642.58, the amount of P26,328.52 as down payment
and the balance to be paid in monthly installments of
P2,984.60 each.
After the said deal, the petitioner made some delinquent
installments paying less than the stated amount, to which
Del Monte made a demand letter to the petitioners. And
this time they ordered the cancellation of the Contract to
Sell No. 2941-V
ISSUE:
Whether or not the Contract to Sell No. 2941-V was valid.
HELD:
The Court quotes with approval the following factual
observations of the trial court, which cannot be disturbed
in this case, to wit:
The Court notes that defendant, Marcelina Fabrigas,
although she had to sign contract No. 2491-V, to avoid
forfeiture of her down payment, and her other monthly
amortizations, was entirely free to refuse to accept the
new contract. There was no clear case of intimidation or
threat on the part of plaintiff in offering the new contract
to her. At most, since she was of sufficient intelligence to
discern the agreement she is entering into, her signing of
Contract No. 2491-V is taken to be valid and binding. The
fact that she has paid monthly amortizations subsequent
to the execution of Contract to Sell No. 2491-V, is an
indication that she had recognized the validity of such
contract.
In sum, Contract to Sell No. 2491-V is valid and binding.
There is nothing to prevent respondent Del Monte from
enforcing its contractual stipulations and pursuing the
proper court action to hold petitioners liable for their
breach thereof.
7. COMMUNITIES CAGAYAN, INC VS.
NANOL
FACTS:
Sometime in 1994, respondent-spouses Arsenio
and Angeles Nanol entered into a Contract to Sell with
petitioner Communities Cagayan, Inc., (CCI) whereby the
latter agreed to sell to respondent-spouses a house and
Lots 17 and 19 located at Block 16, Camella Homes
Subdivision, Cagayan de Oro City, for the price of
P368,000.00 (P368T). They obtained a loan from Capitol
Development Bank (CDB), using the property as
collateral. To facilitate the loan, a simulated sale over the
property was executed by petitioner in favor of
respondent-spouses. Accordingly, titles (TCT Nos.
105202 and 105203) were transferred in the names of
respondent-spouses and submitted to CDB for loan
processing. The bank collapsed and closed before it could
release the loan.
On November 30, 1997, respondent-spouses
entered into another Contract to Sell with petitioner over
the same property for the same price. This time, they
availed of petitioner’s in-house financing thus,
undertaking to pay the loan over four years, from 1997 to
2001.
Respondent Arsenio demolished the original house
and constructed a three-story house allegedly valued at
P3.5 million, more or less. (Respondent Arsenio died,
leaving his wife, herein respondent Angeles, to pay for the
monthly amortizations.)
On September 10, 2003, petitioner sent respondent-
spouses a notarized Notice of Delinquency and
Cancellation of Contract to Sell due to the latter’s failure
to pay the monthly amortizations. Petitioner filed before
the Municipal Trial Court in Cities, an action for unlawful
detainer against respondent-spouses.
In her Answer, respondent Angeles averred that the
Deed of Absolute Sale is valid.
ISSUES
1) Whether petitioner is obliged to refund to respondent-
spouses all the monthly installments paid; and
2) Whether petitioner is obliged to reimburse respondent-
spouses the value of the new house minus the cost of the
original house.
RULING
The petition is partly meritorious.
Respondent-spouses are entitled to the cash
surrender value of the payments
on the property equivalent to 50% of the total payments
made under the Maceda Law.
Respondent-spouses are entitled to reimbursement
of the improvements
made on the property.
In view of the special circumstances obtaining in
this case, we are constrained to rely on the presumption
of good faith on the part of the respondent-spouses which
the petitioner failed to rebut. Thus, respondent-spouses
being presumed builders in good faith, we now rule on the
applicability of Article 448 of the Civil Code. Article 448
on builders in good faith does not apply where there is a
contractual relation between the parties, such as in the
instant case. We went over the records of this case and we
note that the parties failed to attach a copy of the Contract
to Sell. As such, we are constrained to apply Article 448
of the Civil Code, which provides viz:
ART. 448. The owner of the land on which anything has
been built, sown or planted in good faith, shall have the
right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in
Articles 546 and 548, or to oblige the one who built or
planted to pay the price of the land, and the one who
sowed, the proper rent. However, the builder or planter
cannot be obliged to buy the land if its value is
considerably more than that of the building or trees. In
such case, he shall pay reasonable rent, if the owner of the
land does not choose to appropriate the building or trees
after proper indemnity. The parties shall agree upon the
terms of the lease and in case of disagreement, the court
shall fix the terms thereof.
The rule that the choice under Article 448 of the
Civil Code belongs to the owner of the land is in accord
with the principle of accession, i.e., that the accessory
follows the principal and not the other way around. Even
as the option lies with the landowner, the grant to him,
nevertheless, is preclusive. The landowner cannot refuse
to exercise either option and compel instead the owner of
the building to remove it from the land. The raison d’etre
for this provision has been enunciated thus: Where the
builder, planter or sower has acted in good faith, a conflict
of rights arises between the owners, and it becomes
necessary to protect the owner of the improvements
without causing injustice to the owner of the land. In view
of the impracticability of creating a state of forced co-
ownership, the law has provided a just solution by giving
the owner of the land the option to acquire the
improvements after payment of the proper indemnity, or
to oblige the builder or planter to pay for the land and the
sower the proper rent. He cannot refuse to exercise either
option. It is the owner of the land who is authorized to
exercise the option, because his right is older, and
because, by the principle of accession, he is entitled to the
ownership of the accessory thing.
In conformity with the foregoing pronouncement,
we hold that petitioner, as landowner, has two options. It
may appropriate the new house by reimbursing
respondent Angeles the current market value thereof
minus the cost of the old house. Under this option,
respondent Angeles would have "a right of retention
which negates the obligation to pay rent." In the
alternative, petitioner may sell the lots to respondent
Angeles at a price equivalent to the current fair value
thereof. However, if the value of the lots is considerably
more than the value of the improvement, respondent
Angeles cannot be compelled to purchase the lots. She can
only be obliged to pay petitioner reasonable rent.
ARTICLE 1192: BOTH PARTIES GUILTY OF
VIOLATING THE OBLIGATION
1. CENTRAL BANK VS. CA
The bank’s asking for advance interest for the loan is
improper considering that the total loan hasn’t been
released. A person can’t 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 Tolentino’s 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 Tolentino’s 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 bank’s 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 bank’s asking for advance interest for the loan is
improper considering that the total loan hasn’t been
released. A person can’t 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 can’t 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. Tolentino’s
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.
ARTICLE 1207: JOINT AND SOLIDARY
OBLIGATIONS
1. IMIDC VS. NLRC
FACTS
Private respondents were employees of petitioner who
seek for separation pay and unpaid wages Labor Arbiter
decided the case in their favor. In the decision, IMIDC
and Filipinas Carbon were ordered to pay private
respondent their claims, no word “solidary" was used in
the dispositive portion of the decision Labor Arbiter
issued an alias writ execution in which it was stated that
the sheriff was vested the power to proceed the premises
of IMIDC “and/or” Filipinas Carbon, thus holding them
solidarily liable
ISSUE:
W/N petitioner IMIDC can be held solidarily liable with
Filipinas Carbon when it was not provided in the
judgment that the defendants are liable to pay jointly and
severally liable a certain sum of money
RULING: or solidary?
No. It is already a well settled doctrine that when it is not RULING:
provided in a judgment that the defendants are liable to
SOLIDARY.
pay jointly and severally a certain sum of money, none of
them may be compelled to satisfy in full said judgment In this regard, Article 1207 and 1208 of the Civil
Well entrench is the rule that solidary obligation cannot
lightly inferred. There is solidary liability only when the Code provides -
obligation EXPRESSLY so states, when the law so "Art. 1207. The concurrence of two or more debtors in
provide or when the nature of the obligation so requires one and the same obligation does not imply that each one
Petitioner’s liability is only joint not solidary of the former has a right to demand, or that each one of
2. ERNESTO RONQUILLO VS. CA the latter is bound to render, entire compliance with the
prestation. There is a solidary liability only when the
FACTS: obligation expressly so states, or when the law or the
nature of the obligation requires solidarity.
Petitioner Ernesto V. Ronquillo was one of four (4)
defendants for the collection of the sum of P117,498.98 Art. 1208. If from the law, or the nature or the wording of
plus attorney's fees and costs. The other defendants were the obligation to which the preceding article refers the
Offshore Catertrade, Inc., Johnny Tan and Pilar Tan. contrary does not appear, the credit or debt shall be
presumed to be divided into as many equal shares as there
On December 13, 1979, the lower court rendered its
are creditors and debtors, the credits or debts being
Decision based on the compromise agreement, which
considered distinct from one another, subject to the Rules
stipulates, among others, that the Plaintiff agrees to
of Court governing the multiplicity of suits."
reduce its total claim of P117,498.95 to only P110,000.00
and defendants agree to acknowledge the validity of such Clearly then, by the express term of the compromise
claim and further bind themselves to initially pay out of agreement, the defendants obligated themselves to pay
the total indebtedness of P110,000.00 the amount of their obligation "individually and jointly."
P55,000.00 on or before December 24, 1979, the balance
of P55,000.00, defendants individually and jointly agree The term "individually" has the same meaning as
to pay within a period of six months from January 1980, "collectively", "separately", "distinctively", respectively
or before June 30, 1980. or "severally". An agreement to be "individually liable"
undoubtedly creates a several obligation, and a "several
Upon the defendant’s default, herein private respondent obligation" is one by which one individual binds himself
(then plaintiff) filed a Motion for Execution. to perform the whole obligation.
Ronquillo and another defendant Pilar Tan offered to pay The obligation in the case at bar being described as
their shares of the 55,000 already due. But on January 22, "individually and jointly", the same is therefore
1980, private respondent Antonio So moved for the enforceable against one of the numerous obligors.
reconsideration and/or modification of the aforesaid
Order of execution and prayed instead for the "execution 3. MANLAR RICEMILL VS. DEYTO
of the decision in its entirety against all defendants, jointly
and severally.
Petitioner opposed the said motion arguing that under the
decision of the lower court being executed which has
already become final, the liability of the four (4)
defendants was not expressly declared to be solidary,
consequently each defendant is obliged to pay only his
own pro-rata or 1/4 of the amount due and payable.
ISSUE:
What is the nature of the liability of the defendants
(including petitioner), was it merely joint, or was it
several