No. 10. Villaroel v.

Estrada
FACTS:
On 1912, Alejandra Callao, mother of Juan F. Villaroel, obtained from the spouses Mariano Estrada and Severina debt
of P1,000, payable after seven years. Alejandra, passed away, leaving Villaroel as sole heir. The spouses Mariano
Estrada and Severina also passed away, leaving Bernardino Estrada as sole heir.

On 1930, Villaroel gave a document to Estrada, in which he declared in owing the amount of P1,000, with an interest
of 12 percent per year. n action for collection of said amount was instituted by Estrada against Villaroel. The Court of
First Instance of Lagoon ruled in favor of Villaroel to pay the amount demanded of P1,000 with its legal interests of
12% from 1930 to its complete payment. Villaroel appealed.

ISSUES:
WON Villaroel should pay the amount despite the prescription of the original debt

DECISION:
The present action is not based on the original obligation contracted by the mother Villaroel, which has prescribed,
but on that which he contracted on 1930 when assuming the fulfillment of that obligation. Being the sole heir of the
indebted one, with right her inheritance, that debt which was contracted by his mother legally, although no longer
effective by prescription, now is a moral obligation. That consideration is sufficient to create and to make his
obligation voluntarily contracted, effective August of 1930.

The rule in which a new promise to pay a prescribed debt must be done only by thesame person or another who is
legally authorized by her, is not applicable to the present case, because Villaroel voluntarily wanted to assume this
obligation.

As a general rule, when a debt has already prescribed, it cannot be imposed by the creditor. However, a new
contract which recognizes and assumes the prescribed debt is an exception, for it would be valid and
enforceable. Hence, a person who acknowledges the correctness of the debt and promises to pay it despite knowing
that the debt has already prescribed, such as the case at bar, waived the benefit of the prescription.

11. Fisher v. Robb

FACTS:
Robb, while studying the operation of a dog racing course, met in Shanghai Fisher, who was a manager of a dog racing
course. Fisher became attracted to Robb’s offer to have him as a stockholder and therefore paid P3,000 as the first
installment of his subscription. He later on paid P2,000 for the second installment.

Later on, some members of the Philippine Greyhound Club, Inc. created another organization without Robb’s
Unfortunately, due to the manipulations of those who controlled the Philippine Greyhound Club, Inc., the enterprise
failed during the absence of the defendant in Manila. Upon his return, tried to save PCGI’S investments by having
PRC to acquire remaining assets. Robb felt morally responsible to the stockholders who had paid their second
installment, including those of Fisher. To answer for Fisher’s wasted money, Robb wrote to the former that he intends
to return the invested money with proceeds from Robb’s new organization. Fisher initiated an action to collect the
promised 2000 of Robb. The CFI decided in favor of Fisher ordering Robb to pay the P2,000 with interest at the legal
rate.

ISSUE:
Was there sufficient consideration to justify the promise of Robb in his letters to answer for Fisher‘s loss?

DECISION:
NO. The moral obligation of Robb to Fisher is not sufficient consideration to make his promise actionable.
The contract between Robb and Fisher was deemed to be an onerous contract by the court.
it supposes the deprivation of the latter of an amount of money which impairs his property, which is a burden, and for
it to be legally valid it is necessary that it should have a consideration consisting in the lending or promise of a thing
or service by such party.

Robb was merely prompted by a feeling of pity which he had for Fisher as a result of the loss which the latter had
suffered because of the failure of the enterprise. It was a purely moral and, as such, is not demandable in law but only
in conscience, over which human judges have no jurisdiction. It is not the consideration required by Art. 1261 of the
Civil Code as an essential element for the legal existence of an onerous contract which would bind the promisor to
comply with his promise.
12. Barredo v. Garcia
FACTS:
Malate Taxicab driven by Fontanilla collided with a carriage that had Faustino Garcia as passenger. The latter died
two days later due to the injuries he sustained. Garcia’s parent sought a criminal action against Fontanilla before the
CFI of Rizal, where he was found guilty. Court a quo likewise granted the petition that reserved the right to bring a
separate civil action.

The civil action was instituted in the CFI of Manila against Fontanilla and his employer Barredo. Barredo‘s
responsibility was assailed on the ground that he failed to abide by the standard set by the Civil Code which is that of
exercising care as a good father of a family in hiring Fontanilla despite the latter’s records and involvement in previous
accidents. Under this, Barredo can primarily liable. The court ruled in favor of the parents, awarding damages worth
2,000 plus legal interest. On appeal, the CA reduced the amount to 1k.

The defendants assert that Barredo is only subsidiarily liable under Art. 100 of the RPC since Fontanilla was found
guilty under that said law.

ISSUES:
Whether the petitioners may institute a separate civil action
Whether Barredo may be held primarily liable as the employer for Fontanilla‘s negligence

DECISION:
1. Petitioners may institute separate civil action to recover damages. They are seeking to recover damages not as
a result of the felony but as a result of a quasi-delict, which is recognized by the civil code as a separate legal
concept.
The court has recognizes how delicts and quasi-delicts overlap, and people resort to bringing actions as quasi-
delict because of the speedier disposition of proceedings.
2. Barredo is primarily/directly/principally liable.

Since the present action is a separate civil suit and not an action to recover damages arising from criminal
liability, Barredo‘s negligence under the Civil Code provision invoked makes him directly liable.
 Article 1093 owners or directors of an establishment or business are equally liable for any damages caused by
their employees while engaged in the branch of the service in which employed, or on occasion of the
performance of their duties.
Article 2180 Employers shall be liable for the damages caused by their employees and household helpers
acting within the scope of their assigned tasks, even though the former are not engaged in any business or
industry.

by invoking Articles 2176 and 2180 of the New Civil Code, it is believed, that since the two civil actions are
subject to its distinctions from each other, it may be filed simultaneously
7. Chavez v. Gonzales
FACTS:
Chaves delivered his portable typewriter to Gonzales for cleaning and service, however, the latter was not able to
finish the job and merely gave repeated assurances that he would finish the task and return the printer. Later on,
Gonzales asked Chavez for P6.00 to purchase missing parts which the latter gave.

Exasperated at the delay, Chaves asked Gonzales for the return of the typewriter in a wrapped package. Upon
examining the contents at home, the object was in shambles, with the interior cover and some parts missing. Upon
demand for the return of the missing parts, interior cover and the P6.00, Gonzales complied and Chavez sent the
typewriter to be a repaired by another at the cost of P89.85

Chaves then filed an action against the defendant claiming for damages and breach of contract. The City Court
awarded the plaintiff P31.10, the total value of the missing parts. Chaves appealed the decision.

ISSUE:
Whether the defendant is liable for the whole cost of labor and materials that went into the repair

DECISION:
The defendant is liable for the whole cost of repair amounting to P89.85, with interest at the legal rate from the filing
of the complaint. Defendant is liable under Art 1167, CC.

Parties had a perfected contract for service and cleaning, which the defendant failed to do. He is thus liable for P58.75
which is the cost of the execution of the obligation. Further, the defendant clearly contravened the tenor of his
obligation because not only did he not repair the typewriter as agreed upon, but returned it in shambles and with
missing parts. Having done so, he is also liable for the missing parts worth P31.10 – the cost of returning it to the
same condition as it was received by the defendant.
8. Pantaleon v. AMEX
FACTS:
Pantaleon and his family joined an escorted tour of Western Europe organized by Trafalgar Tours of Europe, Ltd., On
the last day of the tour, the group arrived at the Coster Diamond House and agreed that the visit should end by 9:30
a.m. to allow enough time to take in a guided city tour of Amsterdam.

While in the diamond house, Mrs. Pantaleon decided to make some purchases all of which totaled U.S. $13,826.00,
to be paid by Pantaleon’s American Express credit card. This occurred at around 9:15 AM. As the clearance took a
long time, at 9:40am, Pantaleon asked the store clerk to cancel the sale to avoid further delaying and inconveniencing
the tour group, however upon persuasion by the staff, the Pantaleons decided to continue with their purchase. At
around 10:00a.m, Coster decided to release the items even without respondent’s approval of the purchase. Due to the
delay, the city tour of Amsterdam was to be canceled due to lack of remaining time. Two instances similar to the
Castor incident happened thereafter.

After coming back to Manila, Pantaleon sent a letter demanding an apology for the "inconvenience, humiliation and
embarrassment he and his family thereby suffered" for respondent’s refusal to provide credit authorization for the
aforementioned purchases.

However, the respondents refused to give an apology, contending that the delay was due to the out of the usual charge
purchase pattern established.

In its decision, the trial court ruled in favor of Pantaleon, holding that the normal approval time for purchases was "a
matter of seconds." Based on that standard, respondent had been in clear delay with respect to the three subject
transactions. On appeal, the CA reversed the award of damages in favor of Pantaleon, holding that respondent had not
breached its obligations to petitioner and the delay was not attended by bad faith, malice, or gross negligence. Instead,
respondent "had exercised diligent efforts to effect the approval" of the purchases, which were "not in accordance
with the charge pattern.

ISSUE:
1. Whether has committed a breach of its obligations.
2. Whether respondent is liable for damages.
Mendoza v. Arrieta

Facts:
A 3-way vehicular accident occurred involving a Mercedez Benz owned and driven by petitioner, a private jeep
owned and driven by respondent Salazar and a gravel and sand truck owned by respondent Timbol and driven
by Montoya. As a consequence, separate informations were filed against Salazar and Montoya.

At the trial, petitioner testified that Salazar overtook the truck, swerved to the left and hit his car. He further testified
that before impact, Salazar jumped from the jeep not knowing that Salazar was hit by the truck of Montoya. Montoya
affirmed this. On the other hand, Salazar tried to show that after overtaking the truck, he flashed a signal showing his
intention to turn left but was stopped at by a policeman directing traffic at the intersection which he contends to be
the time he was hit by the truck causing his jeep to hit petitioner’s car.

The trial Court absolved jeep-owner-driver Salazar of any liability, civil and criminal, in view of its findings
that the collision between Salazar's jeep and petitioner's car was the result of the former having been bumped
from behind by the truck driven by Montoya. Neither was petitioner awarded damages as he was not a complainant
against truck-driver Montoya but only against jeep-owner-driver Salazar

Issues:
WON the damages ensued by the petitioner shall be the liability of the driver of the jeep or of the truck.

Decision:
In view of what has been proven and established during the trial, accused Freddie Montoya would be held able for
having bumped and hit the rear portion of the jeep driven by the accused Rodolfo Salazar. Considering that the
collision between the jeep driven by Rodolfo Salazar and the car owned and driven by Edgardo Mendoza was the
result of the hitting on the rear of the jeep by the truck driven by Freddie Montoya, this Court behaves that accused
Rodolfo Salazar cannot be held able for the damages sustained by Edgardo Mendoza's car.

PAPA VS VALENCIA

FACTS:
Papa, acting as attorney-in-fact of Butte, allegedly sold a parcel of land to Penarroyo. However, prior to the alleged sale, the land
was mortgaged by Butte to Associated Banking Corporation along with other properties and after the alleged sale but prior to
the property’s release by delivery, Butte died. The Bank refused to release the property despite Penarroyo’s claim unless and
until the other mortgaged properties by Butte have been redeemed and because of this Penarroyo settled to having the title of the
property annotated.

It was later discovered that the mortgage rights of the Bank were transferred to one Parpana, administrator of the estate of Ramon
Papa Jr. and his since then been collecting rents. Despite repeated demands of Penarroyo and Valencia, Papa refused to deliver
the property which led to a suit for specific performance. The trial court ruled in favor of Penarroyo and Valencia.

Papa averred that the sale of the property was not consummated since the PCIB check issued by Penarroyo for payment worth
40000 pesos was not encashed by him. However, the CA saw the contrary and that Papa in fact encashed the check by means of
a receipt.

ISSUE: Whether the unencashment of the check can be considered effective as payment

HELD:
YES. Granting that Papa had never encashed the check, his failure to do so for more than ten (10) years undoubtedly resulted in
the impairment of the check through his unreasonable and unexplained delay. While it is true that the delivery of a check produces
the effect of payment only when it is cashed, pursuant to Article 1249 of the Civil Code, the rule is otherwise if the debtor
(Peñarroyo) is prejudiced by the creditor’s (Papa’s) unreasonable delay in presentment. The acceptance of a check implies an
undertaking of due diligence in presenting it for payment, and if he from whom it is received sustains loss by want of such
diligence, it will be held to operate as actual payment of the debt or obligation for which it was given.

PABUGAIS VS SAHIJWANI

FACTS:
Petitioner and respondent entered into an agreement to sell a lot containing 1,290 square meters valued at P 15, 487,500.00 with
an option or reservation fee of P 600,000 which was paid by respondent-Dave Sahijwani leaving a balance of 14, 887,500.00 to
be paid within 60 days from the execution of the contract. In their “Agreement and Undertaking”, both parties obligations are
reciprocal in nature wherein the simultaneous delivery of the object of the obligations are essential unless otherwise stipulated
that subject to specific date of delivery or performance. Petitioner is ask to deliver simultaneously the following documents: (1)
Owner’s Duplicate Transfer Certificate of Title in respondent’s name, the DEED of Absolute Sale, (2) Certificate of Non Tax
Delinquency on real estate taxes and (3) Clearance on Payment of Association Dues with further agreement: “that failure on the
part of the respondent entitles petitioner to forfeit the P 600,000 option/reservation fee while non-delivery by the latter of the
necessary documents that form part as object of the obligation obliges him to return to respondent the said option/reservation fee
with interest at 18% per annum.

Pabugais failed to deliver necessary required documents in compliance to their agreement returned P 600,000 plus interest of P
72,900 in the form of Far East Bank and Trust Company Manager’s Check No. 088498 dated August 3, 1994. Counsel refused
to accept payment the check tendered by plaintiff through his messenger on his first attempt, then tried again on Aug 8, 1994 via
DHL Worldwide Services with Manager’s Check attached to letter dates August 5, 1994; and again, respondent’s side refused
to accept. On August 11, 1994, petitioner wrote a letter to respondent saying that he is consigning the amount tendered with RTC
of Makati City. By August 15, 1994, petitioner filed a complaint of consignation wherein he deposited the said check. Respondent
counsel responded that he received the letter sent by petitioner but no check attached, refused to accept since petitioner according
to defendant’s counsel verbally promised 3% monthly interest and 25% attorney’s fee as penalty for default aside from 18% per
annum for the ^ 600, 000 reservation fee.

ISSUES:
1. Was there a valid consignation?
2. Can petitioner withdraw the amount consigned as a matter of right?

HELD:
1. There was a valid consignation. It was held that the manager’s check in the amount of P672,900.00 (representing the
P600,000.00 option/reservation fee plus 18% interest per annum computed from December 3, 1993 to August 3, 1994)
which was tendered but refused by respondent, and thereafter consigned with the court, was enough to satisfy the
obligation and thus, there being a valid tender of payment in an amount sufficient to extinguish the obligation, the
consignation is valid

2. There being a valid consignation, petitioner cannot withdraw the amount consigned. The amount consigned with the trial
court can no longer be withdrawn by petitioner because respondent’s prayer in his answer that the amount consigned be
awarded to him is equivalent to an acceptance of the consignation, which has the effect of extinguishing petitioner’s
obligation. Moreover, petitioner failed to manifest his intention to comply with the “Agreement And Undertaking” by
delivering the necessary documents and the lot subject of the sale to respondent in exchange for the amount deposited.
Withdrawal of the money consigned would enrich petitioner and unjustly prejudice respondent

Cebu International Finance Corp v. CA

FACTS:

Vicente Alegre invested with Cebu International Finance Corporation (CIFC) P500,000 in cash. CIFC issued promissory note
which covered private respondent’s placement. CIFC issued BPI Check No. 513397 (the Check) in favor of private respondent
as proceeds of his matured investment. Mrs. Alegre deposited the Check with RCBC but BPI dishonoured it, annotating therein
that the “Check is subject of an investigation”. BPI took possession of the Check pending investigation of several counterfeit
checks drawn against CIFC’s checking account. Private respondent demanded from CIFC that he be paid in cash but the latter
refused. Private respondent Alegre filed a case for recovery of a sum of money against CIFC.

CIFC asserts that since BPI accepted the instrument, the bank became primarily liable for the payment of the Check. When BPI
offset the value of the Check against the losses from the forged cheks allegedly committed by private respondent, the Check was
deemed paid.

ISSUE:
Whether or not the check is a legal tender thereby extinguishing the obligation of CIFC to pay Alegre

HELD:
NO. A check is not a legal tender, and therefore cannot constitute valid tender of payment. Since a negotiable instrument is only
substitute for money and not money in the face, the delivery of such an instrument does not by itself, operate as payment. Mere
delivery of checks does not discharge the obligation under a judgment. The obligation is not extinguished and remains suspended
until the payment by commercial document is actually realized as per Art 1249 of the Civil Code.

CF SHARP CO VS NORTHWEST AIRLINES

FACTS:
CF Sharp was authorized to sell tickets of Northwest Airlines Japan by entering an International Passenger Sales Agency
Agreement, however, CF Sharp failed to remit the proceeds of the ticket sales. This prompted Northwest Airlines to file a
collection suit against CF Sharp. Judgment was rendered in its favor, ordering CF Sharp to pay Northwest Airlines including the
damages of the delay. Unable to execute the decision in Japan, the respondent filed a case to enforce the said judgment in RTC.
Thereafter, RTC issues a writ of execution for the foreign court’s decision. Petitioner filed for certiorari and the CA lowered the
amount to be paid and included in its decision that the amount may be paid in local currency at rate prevailing at the time of
payment. Petitioner then again appealed that Art 1250 is applicable in this case and that the payment shall be in rate equivalent
to the establishment of the obligation.

ISSUE: WON the basis for the payment of the amount due is the value of the currency at the time of the establishment of the
obligation or at the time of payment of the obligation

HELD:
It shall be on the rate at the time of payment. The rule that the value of the currency shall be based on the establishment of the
obligation is applicable only when there is an official pronouncement or declaration of the existence of an extraordinary inflation
or deflation. Hence, petitioners contention that Art 1250 of the Civil Code is applicable in this case is untenable. Under RA 529,
stipulations of obligations paid in foreign currency are void. Payments of monetary obligation, subject to certain exceptions,
shall be discharged in the currency which is legal tender in the Philippines. But since the law doesn’t provide for the rate of
exchange for the payment of foreign currency, obligations incurred after enactment shall use the exchange rate prevailing at the
time of the payment.
Menchavez v. Bermudez

FACTS:

Menchavez and Bermudez entered into a loan agreement, covering the amount of PhP500,000, with interest fixed at 5% per
month through a promissory note.

For payment, respondent issued five postdated Prudential Bank checks totaling P565,000.00. Four of the checks were cleared
and fully encashed when presented for payment, covering the sum of P465,000.00. The July 17, 1994 check, while dishonored,
was partially paid by respondent with a replacement check for PhP110,000.00 issued on June 12, 1995.

Petitioner alleged entering into a verbal compromise agreement with respondent regarding the delay in payment and the
accumulated interest. Under the agreement, respondent would deliver 11 postdated Prudential Bank checks as payment. When
presented for payment, eight (8) of these checks were dishonored for the reason, "Drawn against Insufficient Funds." Upon filing
of complaints regarding the payments to the courts, it has been disputed whether the interest shall be imposed or not.

ISSUE: WON the interest rate impose was unconscionable and iniquitous and can be struck down or reduced by the court

HELD:

YES. Art. 1306 of the Civil Code provides, "The contracting parties may establish such stipulations, clauses, terms and conditions
as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy."
While petitioner harps on the voluntariness with which the parties agreed upon the 5% per month interest rate, voluntariness
does not make the stipulation on interest valid. The 5% per month, or 60% per annum, rate of interest is, indeed, iniquitous, and
must be struck down.

MACALINAO VS BPI
FACTS:
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: WON the imposed interest of BPI was iniquitous and unconscionable and should be reduced by the courts

HELD:
YES,The court held that the interest rate and penalty charge of 3% per month should be equitably reduced to 2% per month or
24% per annum. It was formerly held in Chua vs Timan that 36% interest rate is exorbitant. Thus, such stipulation of interest is
void for being contrary to morals, if not against the law. Since the stipulation on the interest rate is void, it is as if there was no
express contract thereon. However, because of this exorbitance and considering that Macalinao made partial payments to BPI,
the court may equitably reduce the said interest rate pursuant to Article 1229 of the Civil Code.

Chua v. Timan
FACTS:
petitioners Slavador and Chua granted respondents the loans evidenced with promissory notes with interest of 7% per month,
reduced later to 5% per month.

Rodrigo and Ma. Lynn issued 5 postdated check to secure the loans, except for P150,000 loan which was issued by Lydia Timan
a postdated check also. The respondents paid loan initially at 7% interest rate per month until September 1999, 5% from October
to December 1999. On March 2000 respondents offered to pay the principal amount of loans through PNB Manager’s Check
worth P764,000 but petitioner’s refused to accept insisting that they are entitled to P864,000.

Petitioners aver that the stipulated interest of 5% monthly and higher cannot be considered unconscionable because these rates
are not usurious by virtue of C.B. Cir No. 905-82 which had expressly removed the interest ceilings prescribed by Usury Law.
Petitioners add that the respondents were in pari delicto since they agreed on stipulated interest rate of 7% and 5% per month.
They further aver they honestly believed that the interest rates they imposed on respondents’ loan were not usurious.

The respondent then filed a consignation, a complaint on the stipulated interest as well as of damages to the court which the RTC
ruled in their favor, the respondents appealed to CA which only reaffirmed the decision of the lower court.

ISSUE: Did the Court of Appeal err in ruling that the original stipulated interest rates of 7% and 5% equivalent to 84% and 60%
per annum, are unconscionable, and in ordering petitioners to refund all payments in excess of 12% per annum?

Rulings:

The stipulated interest agreed by parties must be reduced to 12% per annum or 1% per month. We need not unsettle the principle
we had affirmed in a plethora of cases that stipulated interest rates of 3% per month and higher are excessive, iniquitous,
unconscionable and exorbitant. Although C.B. Cir No. 905-82 removed the ceiling on interest rates for both secured and
unsecured loans, regardless of maturity, nothing in the said circular could possibly be read as granting carte blanche authority to
lenders to raise interest rates to levels which would either enslave their borrowers or lead to hemorrhaging of their assets.

Petitioners cannot also raise the defenses of in pari delicto and good faith. The defense of in pari delicto was not raised in the
RTC, hence, such issue cannot be raised for the first time on appeal because questions raised on appeal are confined only within
the issues framed by the parties. The defense of good faith must also fail because such issue is an issue of fact which may not be
properly raised in a petition for review under Rule 45 of the Rules of Civil Procedure which allows only question of law.
DELA PAZ VS L & J DEVT
FACTS:
Rolando lent P350,000.00 without any security to L&J, a property developer. The loan, with no specified maturity date, carried
a 6% monthly interest, i.e., P21,000.00. From December 2000 to August 2003, L&J paid Rolando a total of P576,000.00
representing interest charges. As L&J failed to pay despite repeated demands, Rolando filed a complaint for Collection of Sum
of Money with Damages against L&J and its President.

Rolando argues that the 6% monthly interest rate should not have been invalidated because Atty. Salonga made him believe that
no document was necessary to reflect the interest rate. L&J contends that the interest rate is subject of negotiation and is agreed
upon by both parties, not by the borrower alone. Furthermore, 3% interest per month and higher were nullified as it is contrary
to morals and public interest.

METC upheld the 6% monthly interest. It ruled that since L&J agreed thereto and voluntarily paid the interest at such rate from
2000 to 2003, it is already estopped from impugning the same. Nonetheless, for reasons of equity, the said court reduced the
interest rate to 12%. RTC affirmed to this. However, CA reversed and set aside the RTC Decision. Thus, the appeal for certiorari.

ISSUE: WON there is a monetary interest due for Rolando

HELD:
NO. It stressed that the parties failed to stipulate in writing the imposition of interest on the loan. Hence, no interest shall be due
thereon pursuant to Article 1956 of the Civil Code. And even if payment of interest has been stipulated in writing, the 6%
monthly interest is still illegal and unconscionable because it is contrary to morals, if not against the law. For these reasons,
Rolando cannot collect any interest even if L&J offered to pay interest.

Song Fo v. Hawaiian Philippine Co.

Facts:
Hawaiian Philippine Co. agreed to deliver a certain amount of molasses to Song Fo. Mr. Song Fo asked if HPC could
supply him with another 100,000 gallons of molasses to which the latter replied that they believe it is possible and that they
will do their best to let Mr. Song Fo have the extra 100,000 gallons during the next year However, Song Fo claimed in
trial court that Hawaiian Phil. Co. breached the contract and claimed damages for greater expense, and lost profits
incurred by the breach. HPC contended Song Fo defaulted in payment and thus HPC was forced to rescind the contract.

CFI ruled in favor of Song Fo, awarding 35 000 pesos in damages.

HPC appealed, saying that the agreed amount was only 300,000 gallons and not 400,000 gallons, and that HPC had a
right to rescind the contract because Song Fo had paid later than agreed upon.

Issues:
1. Whether the agreed amount of molasses was really 400,000.
2. Whether HPC had a right to rescind the contract because of Song Fo‘s late payment.

Ruling:
1. No. It was only 300,000.

The contract was in writing. The exchange of letters constituting the agreement was only for 300,000 gallons
only. The language used in reference to the 300,000 gallons was clear and constituted a definite promise. On
the other hand, the language used for the extra 100,000 was not a definite promise and did not constitute an
obligation.

2. No. HPC did not have a right to rescind the contract.

 From the evidence presented, it is clear that Song Fo & Company was to pay the Hawaiian-Philippine Co.
upon presentation of accounts at the end of each month. Song Fo should have paid on January 1922 based on
the timetable, but instead did so only in Feb. However, this is merely a casual breach, not a substantial one.
―Rescission will not be permitted for a slight or casual breach of the contract, but only for such breaches as
are so substantial and fundamental as to defeat the object of the parties in making the agreement. Not only
this, but the Hawaiian-Philippine Co. waived this condition when it arose by accepting payment of the overdue
accounts and continuing with the contract. Thereafter, Song Fo & Company was not in default in payment so
that the Hawaiian-Philippine co. had in reality no excuse for writing its letter of April 2, 1923, cancelling the
contract. HPC had no legal right to rescind the contract.

Velarde, et al v. CA
FACTS:
David Raymundo, absolute and registered owner of a parcel of land, executed a Deed of Sale with Assumption of Mortgage
in favor of the plaintiffs. Part of the consideration of the sale was the vendee’s assumption to pay the mortgage obligations
of the property sold in the amount of P 1,800,000.00 in favor of the Bank of the Philippine Islands. And while
their application for the assumption of the mortgage obligations is not yet approved by the mortgagee bank, they have
agreed to pay the mortgage obligations on the property with the bank in the name of Mr. David Raymundo. The same
contract provides for that “in the event Velardes violate any of the terms and conditions of the said Deed of Real Estate
Mortgage, they agree that the downpayment P800,000.00, plus all the payments made with the BPI on the mortgage loan,
shall be forfeited in Favor of Mr. Raymundo, as and by way of liquidated damages, w/out necessity of notice or any judicial
declaration to that effect, and Mr. Raymundo shall resume total and complete ownership and possession of the property, and the
same shall be deemed automatically cancelled..

Pursuant to said agreements, plaintiffs paid the bank (BPI) for three (3) months until they were advised that the Application
for Assumption of Mortgage was denied. This prompted the plaintiffs not to make any further payment. Private respondent
wrote the petitioners informing the non-fulfillment of the obligations. Petitioners, thru counsel responded that they are willing
to pay in cash the balance subject to several conditions. Private respondents sent a notarial notice of cancellation/rescission
of the Deed of Sale. Petitioners filed a complaint which was consequently dismissed by an outgoing judge but was reversed by
the assuming judge in their Motion for Reconsideration. The Court of Appeals reinstated the decision to dismiss.

Issue: Whether or not the rescission of contract made by the private respondent is valid.

Held:

1. YES. The breach committed did not merely consist of a slight delay in payment or an irregularity; such breach
would not normally defeat the intention of the parties to the contract. Here, petitioners not only failed to pay the
P1.8 million balance, but they also imposed upon private respondents new obligations as preconditions to the
performance of their own obligation. In effect, the qualified offer to pay was a repudiation of an existing obligation,
which was legally due and demandable under the contract of sale. Hence, private respondents were left with the
legal option of seeking rescission to protect their own interest. The mutual restitution is required to bring back the
parties to status quo. Therefore, initial payment and the mortgage payments advanced by petitioners should be
returned by private respondents, lest the latter unjustly enriched at the expense of the other.