BALANE
2014A
Article 1157
Art. 1157. Obligations arise from:
(1)
Law;
(2)
Contracts;
(3)
Quasi-contracts;
(4)
Acts or omissions punished by law; and
(5)
Quasi-delicts. (1089a)
DOCTRINE
Obligations must arise from any of the four sources of obligations, namely, law, contract or quasi-contract, crime, or negligence.
Allien Property Administration was neither a trustee of Sagrada-appellee, nor a privy to the obligations of the Taiwan Tekkosho, its title being based by legal provision of the seizure of enemy property.
Mini digest:
S owned the property, then the Japanse occupied the Phils and took his land from him (kunwari by Sale but there was threat and duress) and then Americans came and took whatever is owned by the enemy (i.e. Japanese) then the US custodian eventually let its
public corp, C, occupy it. And then, C passed it on to N, another public corp. Then S asks for rentals from N saying it was the true owner. SC says, no obligation to pay. The turn of events is none of the sources of obligation.
Facts:
This is an action to recover the possession of a piece of real property (land and warehouses) made by Sagrada. It owned a land in Pandacan, in whose name the title was registered before the war. During the Japanese military occupation, the land was acquired by a
Japanese corporation (Taiwan Tekkosho) for the sum of P140,00, and thereupon title thereto issued in its name. After liberation, the Alien Property Custodian of the United States of America (APCA) took possession, control, and custody thereof under the Trading with
the Enemy Act for the reason that it belonged to an enemy national. APCA let the Copra Export Management Company occupy it under a custodianship agreement and when it vacated the property, said property was occupied by NaCoCo.
[So its like this: Sagrada Japanese Corp US Custodian Copra Export NaCoCo]
The Philippine Government made representations with the Office Alien Property Custodian for the use of property by the Government. NaCoCo was authorized to repair the warehouse on the land. NaCoCo leased one-third of the warehouse to one Dioscoro Sarile at a
monthly rental of P500, which was later raised to P1,000 a month. Sarile did not pay the rents, so action was brought against him. It is not shown, however, if the judgment was ever executed.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
The present action is to recover the reasonable rentals from the date when the NaCoCo began to occupy the premises, to the date it vacated it. NaCoCo says, Wait, CFI said were released from liability so Imma pay you rentals starting from the date of judgement
only. Now on this issue, trial court said plaintiff has always been the owner since the sale to the Japanese buyer was void. Hence, since NaCoCo has used the property and had subleased portion thereof, it must pay reasonable rentals for its occupation.
Issue/Held:
Does NaCoCo have the obligation to pay rentals to Sagrada from the day it started occupying the premises? No.
Ratio:
Obligations must arise from any of the four sources of obligations, namely, law, contract or quasi-contract, crime, or negligence. There was also no privity (of contract or obligation) between the APCA and the Japanese buyer, which had secured the
possession of the property from the Sagrada by the use of duress, such that the APC or its NaCoCo may be held responsible for the supposed illegality of the occupation of the property by the said Japanese corporation. The APCA had the control and administration of
the property not as successor to the interests of the enemy holder of the title but by express provision of law (Trading with the Enemy Act).
The claim or rentals cannot be made against NaCoCo. There was no agreement between the Alien Property Custodian and the NaCoCo for the latter to pay rentals on the property. The existence of an implied agreement to that effect is contrary to the circumstances.
The copra Export Management Company, which preceded the NaCoCo, in the possession and use of the property, does not appear to have paid rentals therefor, as it occupied it by what the parties denominated a "custodianship agreement," and there is no provision
therein for the payment of rentals or of any compensation for its custody and or occupation and the use. The Trading with the Enemy Act, as originally enacted, was purely a measure of conversation, hence, it is very unlikely that rentals were demanded for the use of
the property. When the National coconut Corporation succeeded the Copra Export Management Company in the possession and use of the property, it must have been also free from payment of rentals, especially as it was Government corporation, and steps where
then being taken by the Philippine Government to secure the property for the National Coconut Corporation. So that the circumstances do not justify the finding that there was an implied agreement that the NaCoCo was to pay for the use and occupation of the
premises at all.
The above considerations show that Sagrada-appellee's claim for rentals before it obtained the judgment annulling the sale of the Taiwan Tekkosho may not be predicated on any negligence or offense of the NaCoCo, or any contract, express or implied, because the
Allien Property Administration was neither a trustee of Sagrada-appellee, nor a privy to the obligations of the Taiwan Tekkosho, its title being based by legal provision of the seizure of enemy property. We have also tried in vain to find a law or provision thereof, or any
principle in quasi contracts or equity, upon which the claim can be supported. On the contrary, as NaCoCo entered into possession without any expectation of liability for such use and occupation, it is only fair and just that it may not be held liable therefor .
And as to the rents it collected from its lessee, the same should accrue to it as a possessor in good faith, as this Court has already expressly held.
Article 1159
Art. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. (1091a)
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
Peoples Car Inc (Peoples) contracted Commonado Security Agency (Commonado) under a Guard Service Contract. A guard under contract, while on duty, took out a customers car [Joseph Luy] for a joyride. While driving along JP Laurel St, Davao City, the guard
lost control of the car and the car fell into a ditch. The car guard was charged with qualified theft and the car and company sustained damages amounting to P8,489.
Peoples Car Inc claims that the security agency is liable under paragraph 5 of their contract 1 as they assumed the sole responsibility for the acts done during their watch hours by the guards. Commondao countered that under the contract their liability shall not
exceed P1,000.00 per guard post (par. 4).
Davao RTC held for Commonado and limited award of damages to P1,000.00 based on the contract. RTC also commented that if the situation was one falling on par. 5, Peoples should have insisted and not paid the damages to Luy, and told him instead to bring a
case where Commonado would be become a party through a third-party complaint or as a co-defendant.
ISSUE/S
NO. Court reversed and awarded the full amount of actual damages.
The limited liability is only applicable is loss or damage was through the negligence of Commondos guards, not when the guards deliberately disregarded his duty to safeguard Peoples property by taking a customers car out on a joyride.
Plaintiff was in law liable to its customer for the damages caused the customer's car, which had been entrusted into its custody. Plaintiff therefore was in law justified in making good such damages and relying in turn on defendant to honor its contract and indemnify it for
such undisputed damages, which had been caused directly by the unlawful and wrongful acts of defendant's security guard in breach of their contract. As ordained in Article 1159, Civil Code, "obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith."
Plaintiff in law could not tell its customer, as per the trial court's view, that "under the Guard Service Contract it was not liable for the damage but the defendant" since the customer could not hold defendant to account for the damages as he had no privity of contract
with defendant. Such an approach of telling the adverse party to go to court, notwithstanding his plainly valid claim, aside from its ethical deficiency among others, could hardly create any goodwill for plaintiff's business, in the same way that defendant's baseless
attempt to evade fully discharging its contractual liability to plaintiff cannot be expected to have brought it more business. Worse, the administration of justice is prejudiced, since the court dockets are unduly burdened with unnecessary litigation.
1 'Par. 4. Party of the Second Part (defendant) through the negligence of its guards, after an investigation has been conducted by the Party of the First Part (plaintiff) wherein the Party of the Second Part has been duly represented shall assume full responsibilities
for any loss or damages that may occur to any property of the Party of the First Part for which it is accountable, during the watch hours of the Party of the Second Part, provided the same is reported to the Party of the Second Part within twenty-four (24) hours of the
occurrence, except where such loss or damage is due to force majeure, provided however that after the proper investigation to be made thereof that the guard on post is found negligent and that the amount of the loss shall not exceed ONE THOUSAND (P1,000.00)
PESOS per guard post.''Par. 5 The party of the Second Part assumes the responsibility for the proper performance by the guards employed, of their duties and (shall) be solely responsible for the acts done during their watch hours, the Party of the First Part being
specifically released from any and all liabilities to the former's employee or to the third parties arising from the acts or omissions done by the guard during their tour of duty.' ...
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
In this case, GPS recognized its contractual obligation + admitted that the cargoes were indeed damaged.
o
The law, recognizing the obligatory force of contracts, will not permit a party to be set free from liability for any kind of misperformance of the contractual undertaking or a contravention of the tenor thereof.
o
A breach upon the contract confers upon the injured party a valid cause for recovering that which may have been lost or suffered. The remedy serves to preserve the interests of the promisee that may include his "expectation interest," which is his interest in
having the benefit of his bargain by being put in as good a position as he would have been in had the contract been performed, or his "reliance interest," which is his interest in being reimbursed for loss caused by reliance on the contract by being put in as
good a position as he would have been in had the contract not been made; or his "restitution interest," which is his interest in having restored to him any benefit that he has conferred on the other party.
o
The effect of every infraction is to create a new duty, that is, to make recompense to the one who has been injured by the failure of another to observe his contractual obligation
EXCEPTION: unless he can show extenuating circumstances, like proof of his exercise of due diligence (normally that of the diligence of a good father of a family or, exceptionally by stipulation or by law such as in the case of common carriers,
that of extraordinary diligence) or of the attendance of fortuitous event, to excuse him from his ensuing liability.
In this case, GPS failed to prove it had exercised due diligence/fortuitous event. It merely filed a demurrer and a motion to dismiss.
FGU vs. DRIVER = Culpa Aquiliana
o
Driver cannot be held liable by virtue of the contract because hes not a party thereto A contract can only bind the parties who have entered into it or their successors who have assumed their personality or their juridical position
o
res inter alios acta aliis neque nocet prodest2
o
There is also no concrete evidence that driver was negligent = at most, it could claim damages based on culpa aquiliana but then the negligence of the driver has to be proven, and not just presumed.
(I dont know if well discuss Res Ipsa Loquitur, but Ill put this here just to be safe)
Res Ipsa Loquitur The thing speaks for itself
o
Inference of negligence arises from the circumstances and nature of the occurrence and not from the nature of the relation of the parties
Thus this may apply regardless if its a contractual obligation or a tort or whatever
o
Its a rule of Evidence(procedural, not substantive. Cant be a source of obligation per se, but merely prove that there was negligence): it holds a defendant liable where the thing which caused the injury complained of is shown to be under the latters
management and the accident is such that, in the ordinary course of things, cannot be expected to happen if those who have its management or control use proper care. It affords reasonable evidence, in the absence of explanation by the defendant, that the
accident arose from want of care.
Wikipedia: If someone has an operation and a scalpel was left inside the persons body.
In this case, the fact that the cargoes were damaged when delivered does not speak for itself. There could have been other causes for the damage which were not proven; nonetheless, the presumption of want of care arose, not because of res ipsa
loquitur but because of the failure to comply with contractual obligation.
o
Resort to the doctrine may be allowed only when
(a) the event is of a kind which does not ordinarily occur in the absence of negligence;
(b) other responsible causes, including the conduct of the plaintiff and third persons, are sufficiently eliminated by the evidence; and
(c) the indicated negligence is within the scope of the defendant's duty to the plaintiff.
its not applicable in this case because the accident that happened may be attributed to one of several causes.
Res ipsa loquitur generally finds relevance whether or not a contractual relationship exists between the plaintiff and the defendant, for the inference of negligence arises from the circumstances and nature of the occurrence and not from the nature of the
relation of the parties. Nevertheless, the requirement that responsible causes other than those due to defendants conduct must first be eliminated, for the doctrine to apply, should be understood as being confined only to cases of pure (non-contractual)
tort since obviously the presumption of negligence in culpa contractual , as previously so pointed out, immediately attaches by a failure of the covenant or its tenor. In the case of the truck driver, whose liability in a civil action is predicated on culpa
acquiliana , while he admittedly can be said to have been in control and management of the vehicle which figured in the accident, it is not equally shown, however, that the accident could have been exclusively due to his negligence, a matter that can allow,
forthwith, res ipsa loquitur to work against him.
2 From a random Filipino lawfirm website: A contract cannot be binding upon and cannot be enforced against one who is not a party to it, even if he is aware of such contract and has acted with knowledge thereof. This is called the principle of relativity of contracts.
in wikipedia, it only said its latin for "a thing done between others"
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
Thenafter, the spouses Vallejera filed a complaint3 for damages against the petitioners as employers of the deceased driver, basically alleging that as such employers, they failed to exercise due diligence in the selection and supervision of their employees.
The defendant petitioners filed a Motion to Dismiss, principally arguing that the complaint is basically a "claim for subsidiary liability against an employer" under the provision of Article 103 5 of the Revised Penal Code. Prescinding therefrom, they contend that there must
first be a judgment of conviction against their driver as a condition sine qua non to hold them liable. Ergo, since the driver died during the pendency of the criminal action, the sine qua non condition for their subsidiary liability was not fulfilled, hence the of lack of cause
of action on the part of the plaintiffs. They further argue that since the plaintiffs did not make a reservation to institute a separate action for damages when the criminal case was filed, the damage suit in question is thereby deemed instituted with the criminal action.
which was already dismissed.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
The trial court denied the motion to dismiss for lack of merit. The petitioner then went to the CA which affirmed the denial of the motion; hence, this recourse to the SC.
ISSUE:
Whether the spouses Vallejeras' cause of action in Civil Case No. 99-10845 is founded on Article 103 of the Revised Penal Code (subsidiary liability in criminal actions), as maintained by the petitioners, or derived from Article 2180 10 of the Civil Code (quasi delict).
Action was based on quasi-delict.
COURTS RULING:
Nothing in the foregoing allegations suggests, even remotely, that the herein petitioners are being made to account for their subsidiary liability under Article 103 of the Revised Penal Code. Admittedly though, the complaint did not explicitly state that plaintiff Vallejeras
were suing the defendant petitioners for damages based on quasi-delict. Clear it is, however, from the allegations of the complaint that quasi-delict was their choice of remedy against the petitioners. To stress, the plaintiff spouses alleged in their complaint gross fault
and negligence on the part of the driver and the failure of the petitioners, as employers, to exercise due diligence in the selection and supervision of their employees. The spouses further alleged that the petitioners are civilly liable for the negligence/imprudence of their
driver since they failed to exercise the necessary diligence required of a good father of the family in the selection and supervision of their employees, which diligence, if exercised, could have prevented the vehicular accident that resulted to the death of their 7-year old
son.
Section 2, Rule 2, of the 1997 Rules of Civil Procedure defines cause of action as the "act or omission by which a party violates the right of another." Such act or omission gives rise to an obligation which may come from law, contracts, quasi contracts, delicts or quasidelicts.
Corollarily, an act or omission causing damage to another may give rise to two separate civil liabilities on the part of the offender, i.e., 1) civil liability ex delicto;12 and 2) independent civil liabilities, such as those (a) not arising from an act or omission complained of as
felony (e.g., culpa contractual or obligations arising from law; 13 the intentional torts;14 and culpa aquiliana15); or (b) where the injured party is granted a right to file an action independent and distinct from the criminal action. 16 Either of these two possible liabilities may be
enforced against the offender. 17
Stated otherwise, victims of negligence or their heirs have a choice between an action to enforce the civil liability arising from culpa criminal under Article 100 of the Revised Penal Code, and an action for quasi-delict (culpa aquiliana) under Articles 2176 to 2194 of the
Civil Code. If, as here, the action chosen is for quasi-delict, the plaintiff may hold the employer liable for the negligent act of its employee, subject to the employer's defense of exercise of the diligence of a good father of the family. On the other hand, if the action chosen
is for culpa criminal, the plaintiff can hold the employer subsidiarily liable only upon proof of prior conviction of its employee. 18
The choice is with the plaintiff who makes known his cause of action in his initiatory pleading or complaint, 21 and not with the defendant who can not ask for the dismissal of the plaintiff's cause of action or lack of it based on the defendant's perception that the plaintiff
should have opted to file a claim under Article 103 of the Revised Penal Code. Under Article 2180 of the Civil Code, the liability of the employer is direct or immediate. It is not conditioned upon prior recourse against the negligent employee and a prior showing of
insolvency of such employee.22
Here, the complaint sufficiently alleged that the death of the couple's minor son was caused by the negligent act of the petitioners' driver; and that the petitioners themselves were civilly liable for the negligence of their driver for failing "to exercise the necessary
diligence required of a good father of the family in the selection and supervision of [their] employee, the driver, which diligence, if exercised, would have prevented said accident."
Besides, it is worthy to note that the petitioners, in their Answer with Compulsory Counter-Claim,24 repeatedly made mention of Article 2180 of the Civil Code and anchored their defense on their allegation that "they had exercised due diligence in the selection and
supervision of [their] employees." The Court views this defense as an admission that indeed the petitioners acknowledged the private respondents' cause of action as one for quasi-delict under Article 2180 of the Civil Code.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
All told, Civil Case No. 99-10845 is a negligence suit brought under Article 2176 - Civil Code to recover damages primarily from the petitioners as employers responsible for their negligent driver pursuant to Article 2180 of the Civil Code. The obligation imposed by
Article 2176 is demandable not only for one's own acts or omissions, but also for those of persons for whom one is responsible. Thus, the employer is liable for damages caused by his employees and household helpers acting within the scope of their assigned tasks,
even though the former is not engaged in any business or industry.
Article 1161
Art. 1161. Civil obligations arising from criminal offenses shall be governed by the penal laws, subject to the provisions of Article 2177, and of the pertinent provisions of Chapter 2, Preliminary Title, on Human Relations, and of Title XVIII of this
Book, regulating damages. (1092a)
Petitioners story
Arnold testifies that his vehicle was at full stop at the intersection when the incident
happened. He showed that his car has not yet invaded that portion of the road beyond the
median line of the island and that the petitioners vehicle came swerving from the outer lane
of the road to the left towards Arnolds vehicle.
Petitioner claims that it is Arnolds fault that the collision happened. He recounts that he was
traversing Ortigas Avenue on second gear and was going at around 25-30 kph. He was
moving slowly because he just passed another stoplight. He testified that it was Arnolds car
who bumped into his.
Arnolds father testified that estimation report show that repair costs would amount to almost
P140K.
The trial court ruled in favor of Arnold and convicted petitioner. It also ordered the petitioner to pay the amount necessary to repair Arnolds vehicle. It found that the testimony of Arnold was more consistent with the physical evidence as well as the sketch and TAIR. CA
affirmed the decision of the trial court but modified the damages awarded to Arnold. The appellate court said that Arnold was reckless as he neglected to look out before entering the lane. His contributory negligence warranted mitigation of the civil penalty.
ISSUE:
Whether or not CA erred in affirming RTC decision finding petitioner guilty for reckless imprudence? NO
HELD:
Petition is DENIED.
RATIONALE:
Evidence showed that petitioner was speeding when the incident occurred. Speeding is indicative of imprudent behavior.
Reckless imprudence generally defined by our penal law consists in voluntarily but without malice, doing or failing to do an act from which material damage results by reason of inexcusable lack of precaution on the part of the person performing or failing to perform
such act, taking into consideration his employment or occupation, degree of intelligence, physical condition and other circumstances regarding persons, time and place. Imprudence connotes a deficiency of action. It implies a failure in precaution or a failure to take the
necessary precaution once the danger or peril becomes foreseen.
In prosecutions for reckless imprudence resulting in damage to property, whether or not one of the drivers of the colliding automobiles is guilty of the offense is a question that lies in the manner and circumstances of the operation of the motor vehicle, and a finding of
guilt beyond reasonable doubt requires the concurrence of the following elements, namely:
(a)
that the offender has done or failed to do an act;
(b)
that the act is voluntary;
(c)
that the same is without malice;
(d)
that material damage results; and
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
that there has been inexcusable lack of precaution on the part of the offender.
Aside from the entry in the TAIR, which noted petitioners speed to be beyond what is lawful, the physical evidence on record likewise seems to negate petitioners contention. The photographs taken of Arnolds car clearly show that the extent of the damage. The fact
that the hood of Arnolds car was violently wrenched as well as the fact that on impact the car even turned around 180 degrees and was hurled several feet away from the junction to the outer lane of Ortigas Avenuewhen in fact Arnold had already established his turn
to the left on the inner lane and into the opposite laneclearly demonstrate that the force of the collision had been created by a speed way beyond what petitioners estimation.
Speeding, is indicative of imprudent behavior because a motorist is bound to exercise such ordinary care and drive at a reasonable rate of speed commensurate with the conditions encountered on the road. Ordinary or reasonable care in the operation of a motor
vehicle at an intersection would naturally require more precaution than is necessary when driving elsewhere in a street or highway. Where the view at an intersection is obstructed and an approaching motorist cannot get a good view to the right or left until he is close to
the intersection, prudence would dictate that he take particular care to observe the traffic before entering the intersection or otherwise use reasonable care to avoid a collision, which means that he is bound is to move with the utmost caution until it is determinable that
he can proceed safely and at the slowest speed possible so that the vehicle could be stopped within the distance the driver can see ahead.
Right of way NOT determined by who first approached the intersection. It is determined by the imminence of collision when distance and speed of vehicles are considered.
In traffic law parlance, the term "right of way" is understood as the right of one vehicle to proceed in a lawful manner in preference to another approaching vehicle under such circumstances of direction, speed and proximity as to give rise to a danger of collision unless
one of the vehicles grants precedence to the other. Although there is authority to the effect that the right of way is merely of statutory creation and exists only according to express statutory provision, it is generally recognized, where no statute or ordinance governs the
matter, that the vehicle first entering an intersection is entitled to the right of way, and it becomes the duty of the other vehicle likewise approaching the intersection to proceed with sufficient care to permit the exercise of such right without danger of collisions.
In our setting, the right of way rule is governed by Section 42 of Republic Act (R.A.) No. 4136, which materially provides:
Section 42. Right of Way.
(a)
When two vehicles approach or enter an intersection at approximately the same time, the driver of the vehicle on the left shall yield the right of way to the vehicle on the right, except as otherwise hereinafter provided. The driver of
any vehicle traveling at an unlawful speed shall forfeit any right which he might otherwise have hereunder.
(b)
The driver of a vehicle approaching but not having entered an intersection shall yield the right of a way to a vehicle within such intersection or turning therein to the left across the line of travel of such first-mentioned vehicle, provided
the driver of the vehicle turning left has given a plainly visible signal of intention to turn as required in this Act. x x x.
The provision governs the situation when two vehicles approach the intersection from the same direction and one of them intends make a turn on either side of the road. Nevertheless, the right of way accorded to vehicles approaching an intersection is not absolute in
terms. It is actually subject to and is affected by the relative distances of the vehicles from the point of intersection. Whether two vehicles are approaching the intersection at the same time does not necessarily depend on which of the vehicles enters the intersection
first. Rather, it is determined by the imminence of collision when the relative distances and speeds of the two vehicles are considered. It is said that two vehicles are approaching the intersection at approximately the same time where it would appear to a reasonable
person of ordinary prudence in the position of the driver approaching from the left of another vehicle that if the two vehicles continued on their courses at their speed, a collision would likely occur, hence, the driver of the vehicle approaching from the left must give the
right of precedence to the driver of the vehicle on his right.
Negligence of the person injured does not constitute a defense.
In a prosecution for reckless or dangerous driving, the negligence of the person who was injured or who was the driver of the motor vehicle with which the accuseds vehicle collided does not constitute a defense. In fact, even where such driver is said to be guilty of a
like offense, proof thereof may never work favors to the case of the accused. In other words, proof that the offended party was also negligent or imprudent in the operation of his automobile bears little weight, if at all, at least for purposes of establishing the accuseds
culpability beyond reasonable doubt. Hence, even if we are to hypothesize that Arnold was likewise negligent in neglecting to keep a proper lookout as he took a left turn at the intersection, such negligence, contrary to petitioners contention, will nevertheless not
support an acquittal. At best, it will only determine the applicability of several other rules governing situations where concurring negligence exists and only for the purpose of arriving at a proper assessment of the award of damages in favor of the private offended party.
It must be needlessly emphasized that the measure of a motorists duty is such care as is, under the facts and circumstances of the particular case, commensurate with the dangers which are to be anticipated and the injuries which are likely to result from the use of the
vehicle, and in proportion to or commensurate with the peculiar risk attendant on the circumstances and conditions in the particular case, the driver being under the duty to know and to take into consideration those circumstances and factors affecting the safe operation
of the vehicle which would be open to ordinary observation.
Petitioner did not present evidence which would disprove the damages sustained by vehicle.
On the issue of damages, inasmuch as petitioner had not extended efforts to present countervailing evidence disproving the extent and cost of the damage sustained by Arnolds car, the award assessed and ordered by the trial court must stand.
Article 1162
Art. 1162. Obligations derived from quasi-delicts shall be governed by the provisions of Chapter 2, Title XVII of this Book, and by special laws. (1093a)
CANGCO V. MRR, 38:768
FACTS:
Jose Cangco (plantiff) was a clerk at the Manila Railroad Company (MRC). Going to work, he uses a pass issued by the company to use the train for free from his house in Rizal to his office in Manila.
On Jan 20, 1915, Cangco arose from his seat & while making his exit through the door, he took his position upon the steps seizing the upright guardrail w/ his right hand for support. As the train slowed down another passenger-employee of the railroad company, got off
the same car, alighting safely at the point where the platform begins to rise from the level of the ground. When the train had proceeded a little farther, Cangco stepped off also, but his feet came in contact w/ a sack of watermelons w/ the result that his feet slipped
from under him & he fell violently on the platform. His body at once rolled from the platform & was drawn under the moving car, where his right arm was badly crushed and lacerated. It appeared that after the plaintiff alighted from the train the car moved forward
possibly 6 meters before it came to a full stop.
The accident occurred between 7-8pm. The railroad station was lighted dimly by a single light located some distance away, objects on the platform where the accident occurred were difficult to discern to a person emerging from a lighted car. / The reason for the
presence of the melons was because it was in season and a large lot had been brought to the station for the shipment to the market.
The injuries received by plaintiff was very serious. The 2nd operation resulted into an amputation of his arm extending higher up near the shoulders.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
Cangco filed a case w/ CFI of Manila to recover damages against MRC founding his action upon the negligence of the servants & employees of the defendant in placing the sacks of melons upon the platform & leaving them so placed as to be a menace to the security
of passenger alighting from the company's trains.
CFI concluded that although negligence was attributable to the defendant by reason of the fact that the sacks of melons were so placed as to obstruct passengers passing to and from the cars, nevertheless, the plaintiff himself had failed to use due caution in alighting
from the coach and was therefore precluded form recovering. Judgment was accordingly entered in favor of the defendant company, and the plaintiff appealed.
ISSUE:
Are the employees of the railroad company guilty of negligence? YES. It can not be doubted that the employees of the railroad company were guilty of negligence in piling these sacks on the platform in the manner above stated; that their presence caused the plaintiff
to fall as he alighted from the train; and that they therefore constituted an effective legal cause of the injuries sustained by the plaintiff. It necessarily follows that the defendant company is liable for the damage thereby occasioned unless recovery is barred by the
plaintiff's own contributory negligence.
RATIO:
It is important to note that the foundation of the legal liability of the defendant is the contract of carriage, and that the obligation to respond for the damage which plaintiff has suffered arises, if at all, from the breach of that contract by reason of the
failure of defendant to exercise due care in its performance. That is to say, its liability is direct and immediate, which can be rebutted by proof of the exercise of due care in their selection and supervision.
The liability, which, under the Spanish law, is, in certain cases imposed upon employers with respect to damages occasioned by the negligence of their employees to persons to whom they are not bound by contract, is not based, as in the English Common Law, upon
the principle of respondeat superior if it were, the master would be liable in every case and unconditionally but upon the principle announced in article 1902 of the Civil Code, which imposes upon all persons who by their fault or negligence, do injury to another,
the obligation of making good the damage caused. One who places a powerful automobile in the hands of a servant whom he knows to be ignorant of the method of managing such a vehicle, is himself guilty of an act of negligence which makes him liable for all the
consequences of his imprudence. The obligation to make good the damage arises at the very instant that the unskillful servant, while acting within the scope of his employment causes the injury. The liability of the master is personal and direct. But, if the master
has not been guilty of any negligence whatever in the selection and direction of the servant, he is not liable for the acts of the latter, whatever done within the scope of his employment or not, if the damage done by the servant does not amount to a
breach of the contract between the master and the person injured.
It is not accurate to say that proof of diligence and care in the selection and control of the servant relieves the master from liability for the latter's acts on the contrary, that proof shows that the responsibility has never existed. As Manresa says, the liability arising from
extra-contractual culpa is always based upon a voluntary act or omission which, without willful intent, but by mere negligence or inattention, has caused damage to another. A master who exercises all possible care in the selection of his servant, taking into
consideration the qualifications they should possess for the discharge of the duties, and directs them with equal diligence, he shall incur no liability whatsoever if, by reason of the negligence of his servants, even within the scope of their employment, such third person
suffer damage. True it is that under article 1903 of the Civil Code the law creates a presumption that he has been negligent in the selection or direction of his servant, but the presumption is rebuttable and yield to proof of due care and diligence in this respect.
In Bahia v. Litonjuan & Leynes, which was an action brought upon the theory of the extra-contractual liability of the defendant to respond for the damage caused by the carelessness of his employee while acting within the scope of his employment. The Court, after
citing the last paragraph of article 1903 of the Civil Code, said:
From this article two things are apparent: (1) That when an injury is caused by the negligence of a servant or employee there instantly arises a presumption of law that there was negligence on the part of the master or employer either in selection of the servant or
employee, or in supervision over him after the selection, or both; and (2) that that presumption may be rebutted. It follows necessarily that if the employer shows to the satisfaction of the court that in selection and supervision he has exercised the care and diligence of a
good father of a family, the presumption is overcome and he is relieved from liability.
In this case, the railroad company's defense involves the assumption that even granting that the negligent conduct of its servants in placing an obstruction upon the platform was a breach of its contractual obligation to maintain safe means of approaching and leaving
its trains, the direct and proximate cause of the injury suffered by plaintiff was his own contributory negligence in failing to wait until the train had come to a complete stop before alighting.
We are of the opinion that this proposition is too badly stated and is at variance with the experience of every-day life. In this particular instance, that the train was barely moving when plaintiff alighted is shown conclusively by the fact that it came to stop within six meters
from the place where he stepped from it. Thousands of person alight from trains under these conditions every day of the year, and sustain no injury where the company has kept its platform free from dangerous obstructions. There is no reason to believe that plaintiff
would have suffered any injury whatever in alighting as he did had it not been for defendant's negligent failure to perform its duty to provide a safe alighting place.
In considering the situation thus presented, it should not be overlooked that the plaintiff was, as we find, ignorant of the fact that the obstruction which was caused by the sacks of melons piled on the platform existed; and as the defendant was bound by reason of its
duty as a public carrier to afford to its passengers facilities for safe egress from its trains, the plaintiff had a right to assume, in the absence of some circumstance to warn him to the contrary, that the platform was clear. The place, as we have already stated, was dark,
or dimly lighted, and this also is proof of a failure upon the part of the defendant in the performance of a duty owing by it to the plaintiff; for if it were by any possibility concede that it had right to pile these sacks in the path of alighting passengers, the placing of them
adequately so that their presence would be revealed.
Our conclusion is that the conduct of the plaintiff in undertaking to alight while the train was yet slightly under way was not characterized by imprudence and that therefore he was not guilty of contributory negligence.
Petitioners version: On Aug. 16, 1992, around 2:30PM, the bus was driven by Wilfredo Villanueva along MacArthur Highway within Gerona, Tarlac coming from the North en route to Manila. It was following the Forward Cargo Truck (driven by Delos Santos)
proceeding from the same direction. The cargo truck swerved to the right shoulder o the road and, while about to be overtaken by the bus, again swerved to the left to occupy its lane. It was at that instance where the collision occurred, the left front side of the
truck collided with the right front side of the bus causing two vehicles substantial damages.
Respondents side: Defendant Delos Santos was the driver of Samidan. On that day, he was driving the truck along the National Highway within the vicinity of Gerona, Tarlac. The Viron bus tried to overtake the truck and he swerved to the right shoulder of
the highway, but soon as he occupied the right lane of the road, the cargo truck which he was driving was hit by the Viron bus on the left front side, as the bus swerved to his lane to avoid an incoming bus on its opposite direction.
RTC dismissed the Petitioners complaint and sustained the private respondents counterclaim for damages. It ordered petitioner to pay the respondents. Petitioner appealed to the CA, which affirmed the RTC decision.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
The second imputed error is w/o merit either. Petitioner contends respondents counterclaim failed to state a cause of action. It is to be noted that petitioner Viron as the registered owner of the bus involved originally brought the action for damages. We find
that the counterclaim of private respondents alleges the ultimate facts constituting their cause of action. It is not necessary to state that petitioner was negligent in the supervision and selection of employees. The liability of the employer was explained in a case:
As employers of the bus driver, the petitioner is, under Art. 2180 of the CC, directly an primarily liable for the resulting damages. The presumption that they are negligent flows from the negligence of their employee. The presumption is only juris tantum, not
juris et de jure. Their only possible defense is that they exercised diligence of a good father of a family to prevent damages.
Art. 2180: The obligation imposed by Art. 2176 is demandable not only for ones own acts or omissions, but also fro the persons for whom one is responsible. xxx Employers shall be liable for damages cause 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. xxx The responsibility treated of this article shall cease when the persons mentioned prove that they
observed all the diligence of a good father of a family to prevent damage. The diligence of a good father means the diligence of selection and supervision of employees.
When the employee causes damage due to his own negligence while performing his duties, there arises the juris tantum presumption that the employee is negligent, rebuttable only by proof of observance of DGFF.
We find merit in the third imputed error. Courts may not simply rely on speculation, conjecture or guesswork. To justify an award for damages, there must be competent proof of the actual amount of loss, credence can only be given only to claims which are
supported by receipts. Actual damages were only based on a job estimate and photo; there is absence of competent proof on the specific amounts of actual damages. Nonetheless, in absence of competent proof on actual damages, a party is entitled to
temperate damages.3. DAMAGES MODIFIED.
3 Temperate or moderate damages, which are more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount can not, from the nature of the case, be proved with certainty.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
10
The mafter, the spouses Vallejera filed a complaint3 for damages against the petitioners as employers of the deceased driver, basically alleging that as such employers, they failed to exercise due diligence in the selection and supervision of their employees.
The defendant petitioners filed a Motion to Dismiss, principally arguing that the complaint is basically a "claim for subsidiary liability against an employer" under the provision of Article 103 5 of the Revised Penal Code. Prescinding therefrom, they contend that there must
first be a judgment of conviction against their driver as a condition sine qua non to hold them liable. Ergo, since the driver died during the pendency of the criminal action, the sine qua non condition for their subsidiary liability was not fulfilled, hence the of lack of cause
of action on the part of the plaintiffs. They further argue that since the plaintiffs did not make a reservation to institute a separate action for damages when the criminal case was filed, the damage suit in question is thereby deemed instituted with the criminal action.
which was already dismissed.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
11
ISSUE:
Whether the spouses Vallejeras' cause of action in Civil Case No. 99-10845 is founded on Article 103 of the Revised Penal Code (subsidiary liability in criminal actions), as maintained by the petitioners, or derived from Article 2180 10 of the Civil Code (quasi delict).
Action was based on quasi-delict.
COURTS RULING:
Nothing in the foregoing allegations suggests, even remotely, that the herein petitioners are being made to account for their subsidiary liability under Article 103 of the Revised Penal Code. Admittedly though, the complaint did not explicitly state that plaintiff Vallejeras
were suing the defendant petitioners for damages based on quasi-delict. Clear it is, however, from the allegations of the complaint that quasi-delict was their choice of remedy against the petitioners. To stress, the plaintiff spouses alleged in their complaint gross fault
and negligence on the part of the driver and the failure of the petitioners, as employers, to exercise due diligence in the selection and supervision of their employees. The spouses further alleged that the petitioners are civilly liable for the negligence/imprudence of their
driver since they failed to exercise the necessary diligence required of a good father of the family in the selection and supervision of their employees, which diligence, if exercised, could have prevented the vehicular accident that resulted to the death of their 7-year old
son.
Section 2, Rule 2, of the 1997 Rules of Civil Procedure defines cause of action as the "act or omission by which a party violates the right of another." Such act or omission gives rise to an obligation which may come from law, contracts, quasi contracts, delicts or quasidelicts.
Corollarily, an act or omission causing damage to another may give rise to two separate civil liabilities on the part of the offender, i.e., 1) civil liability ex delicto;12 and 2) independent civil liabilities, such as those (a) not arising from an act or omission complained of as
felony (e.g., culpa contractual or obligations arising from law; 13 the intentional torts;14 and culpa aquiliana15); or (b) where the injured party is granted a right to file an action independent and distinct from the criminal action. 16 Either of these two possible liabilities may be
enforced against the offender. 17
Stated otherwise, victims of negligence or their heirs have a choice between an action to enforce the civil liability arising from culpa criminal under Article 100 of the Revised Penal Code, and an action for quasi-delict (culpa aquiliana) under Articles 2176 to 2194 of the
Civil Code. If, as here, the action chosen is for quasi-delict, the plaintiff may hold the employer liable for the negligent act of its employee, subject to the employer's defense of exercise of the diligence of a good father of the family. On the other hand, if the action chosen
is for culpa criminal, the plaintiff can hold the employer subsidiarily liable only upon proof of prior conviction of its employee. 18
The choice is with the plaintiff who makes known his cause of action in his initiatory pleading or complaint, 21 and not with the defendant who can not ask for the dismissal of the plaintiff's cause of action or lack of it based on the defendant's perception that the plaintiff
should have opted to file a claim under Article 103 of the Revised Penal Code. Under Article 2180 of the Civil Code, the liability of the employer is direct or immediate. It is not conditioned upon prior recourse against the negligent employee and a prior showing of
insolvency of such employee.22
Here, the complaint sufficiently alleged that the death of the couple's minor son was caused by the negligent act of the petitioners' driver; and that the petitioners themselves were civilly liable for the negligence of their driver for failing "to exercise the necessary
diligence required of a good father of the family in the selection and supervision of [their] employee, the driver, which diligence, if exercised, would have prevented said accident."
Besides, it is worthy to note that the petitioners, in their Answer with Compulsory Counter-Claim,24 repeatedly made mention of Article 2180 of the Civil Code and anchored their defense on their allegation that "they had exercised due diligence in the selection and
supervision of [their] employees." The Court views this defense as an admission that indeed the petitioners acknowledged the private respondents' cause of action as one for quasi-delict under Article 2180 of the Civil Code.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
12
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
13
FACTS:
The Hippocratic Oath mandates physicians to give primordial consideration to the health and welfare of their patients. If a doctor fails to live up to this precept, he is made accountable for his acts. A mistake, through gross negligence or incompetence or plain
human error, may spell the difference between life and death. In this sense, the doctor plays God on his patient's fate.
Erlinda Ramos was a 47-year old. Except for occasional complaints of discomfort due to pains allegedly caused by the presence of a stone in her gall bladder she was as normal as any other woman.
She was advised to undergo an operation for the removal of a stone in her gall bladder. Through the intercession of a mutual friend, she and her husband Rogelio met for the first time Dr. Orlino Hosaka. Dr. Hosaka decided that she should undergo a
"cholecystectomy" operation after examining the documents presented to him. Rogelio E. Ramos, however, asked Dr. Hosaka to look for a good anesthesiologist. Dr. Hosaka, in turn, assured Rogelio that he will get a good anesthesiologist.
A day before the scheduled date of operation, she was admitted at Delos Santos Medical Center. At around 7:30 A.M. of June 17, 1985 and while still in her room, she was prepared for the operation by the hospital staff.
Her sister-in-law, Herminda Cruz, who was the Dean of the College of Nursing at the Capitol Medical Center, was also there for moral support. She reiterated her previous request for Herminda to be with her even during the operation.
At the operating room, Herminda saw about 2-3 nurses and Dra. Gutierrez, the other defendant, who was to administer anesthesia.
At around 9:30 A.M., Dr. Hosaka was not yet in. At about 12:15 P.M., Dr. Hosaka arrived. Herminda then saw people inside the operating room "moving, doing this and that, [and] preparing the patient for the operation."
She then saw Dra. Gutierrez intubating the hapless patient. She thereafter heard Dr. Gutierrez say, "ang hirap ma-intubate nito, mali yata ang pagkakapasok. O lumalaki ang tiyan." Herminda thereafter noticed bluish discoloration of the nailbeds of the
left hand of the hapless Erlinda even as Dr. Hosaka approached her.
She then heard Dr. Hosaka issue an order for someone to call Dr. Calderon, another anesthesiologist. After Dr. Calderon arrived at the operating room, she saw this anesthesiologist trying to intubate the patient. The patient's nailbed became bluish and the
patient was placed in a trendelenburg position a position where the head of the patient is placed in a position lower than her feet which is an indication that there is a decrease of blood supply to the patient's brain. Eventually, Dr. Calderon was then able to
Meanwhile, Rogelio, who was outside the operating room, saw a respiratory machine being rushed towards the door of the operating room. He also saw several doctors rushing towards the operating room.
At almost 3:00 P.M., Erlinda was taken to the ICU. Doctors Gutierrez and Hosaka explained that the patient had bronchospasm.
Erlinda Ramos stayed at the ICU for a month. About 4 months thereafter, the patient was released from the hospital.
Since the operation, she has been in a comatose condition. She cannot do anything. She cannot move any part of her body. She cannot see or hear. She is living on mechanical means. She suffered brain damage as a result of the absence of oxygen in her
brain for four to five minutes. After being discharged from the hospital, she has been staying in their residence, still needing constant medical attention, with her husband Rogelio incurring a monthly expense ranging from P8k to P10k. She was also diagnosed to
be suffering from "diffuse cerebral parenchymal damage".
Petitioners filed a civil case for damages against herein private respondents alleging negligence in the management and care of Erlinda Ramos.
PETITIONERS presented the testimonies of Dean Herminda Cruz and Dr. Mariano Gavino to prove that the injury sustained by Erlinda was due to lack of oxygen in her brain caused by the faulty management of her airway by private respondents
during the anesthesia phase.
Private RESPONDENTS primarily relied on the expert testimony of Dr. Eduardo Jamora, a pulmonologist, to the effect that the cause of brain damage was Erlinda's allergic reaction to the anesthetic agent, Thiopental Sodium (Pentothal).
RTC rendered judgment in favor of petitioners but CA reversed RTC decision and ruled in favor of respondents.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
14
ISSUE:
W/N THE DOCTRINE OF RES IPSA LOQUITUR SHOULD BE APPLIED Yes. Respondents are liable for damages.
HELD:
WHEREFORE, the decision and resolution of the appellate court appealed from are hereby modified so as to award in favor of petitioners, and solidarily against private respondents the following: 1) P1,352,000.00 as actual damages computed as of the date of
promulgation of this decision plus a monthly payment of P8,000.00 up to the time that petitioner Erlinda Ramos expires or miraculously survives; 2) P2,000,000.00 as moral damages, 3) P1,500,000.00 as temperate damages; 4) P100,000.00 each as exemplary
damages and attorney's fees; and, 5) the costs of the suit.
Ratio:
Res ipsa loquitur is a Latin phrase which literally means "the thing or the transaction speaks for itself."
The phrase "res ipsa loquitur'' is a maxim for the rule that the fact of the occurrence of an injury, taken with the surrounding circumstances, may permit an inference or raise a presumption of negligence, or make out a plaintiff's prima facie case, and present a
question of fact for defendant to meet with an explanation.
Where the thing which caused the injury complained of is shown to be under the management of the defendant or his servants and the accident is such as in ordinary course of things does not happen if those who have its management or control use proper
care, it affords reasonable evidence, in the absence of explanation by the defendant, that the accident arose from or was caused by the defendant's want of care.
The doctrine of res ipsa loquitur is simply a recognition of the postulate that, as a matter of common knowledge and experience, the very nature of certain types of occurrences may justify an inference of negligence on the part of the person who controls the
instrumentality causing the injury in the absence of some explanation by the defendant who is charged with negligence.
It is grounded in the superior logic of ordinary human experience and on the basis of such experience or common knowledge, negligence may be deduced from the mere occurrence of the accident itself.
Hence, res ipsa loquitur is applied in conjunction with the doctrine of common knowledge.
However, res ipsa loquitur is not a rule of substantive law and, as such, does not create or constitute an independent or separate ground of liability. It is considered as merely evidentiary or in the nature of a procedural rule. It is regarded as a mode of proof, or a
mere procedural of convenience since it furnishes a substitute for, and relieves a plaintiff of, the burden of producing specific proof of negligence. Before resort to the doctrine may be allowed, the following requisites must be satisfactorily shown:
1.
The accident is of a kind which ordinarily does not occur in the absence of someone's negligence;
2.
It is caused by an instrumentality within the exclusive control of the defendant or defendants; and
3.
The possibility of contributing conduct which would make the plaintiff responsible is eliminated.
The fundamental element is the "control of instrumentality" which caused the damage. Such element of control must be shown to be within the dominion of the defendant. In order to have the benefit of the rule, a plaintiff, in addition to proving injury or
damage, must show a situation where it is applicable, and must establish that the essential elements of the doctrine were present in a particular incident.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
15
Testimony as to the statements and acts of physicians and surgeons, external appearances, and manifest conditions which are observable by any one may be given by non-expert witnesses.
Hence, in cases where the res ipsa loquitur is applicable, the court is permitted to find a physician negligent upon proper proof of injury to the patient, without the aid of expert testimony, where the court from its fund of common knowledge can determine the
proper standard of care.
Where common knowledge and experience teach that a resulting injury would not have occurred to the patient if due care had been exercised, an inference of negligence may be drawn giving rise to an application of the doctrine of res ipsa loquitur without
medical evidence, which is ordinarily required to show not only what occurred but how and why it occurred.
When the doctrine is appropriate, all that the patient must do is prove a nexus between the particular act or omission complained of and the injury sustained while under the custody and management of the defendant without need to produce expert medical
testimony to establish the standard of care.
Resort to res ipsa loquitur is allowed because there is no other way, under usual and ordinary conditions, by which the patient can obtain redress for injury suffered by him.
Doctrine was applied in the following situations: leaving of a foreign object in the body of the patient after an operation, injuries sustained on a healthy part of the body which was not under, or in the area, of treatment, removal of the wrong part of the body when
another part was intended, knocking out a tooth while a patient's jaw was under anesthetic for the removal of his tonsils, and loss of an eye while the patient plaintiff was under the influence of anesthetic, during or following an operation for appendicitis, among
others.
Res ipsa loquitur does not automatically apply to all cases of medical negligence as to mechanically shift the burden of proof to the defendant to show that he is not guilty of the ascribed negligence.
It is generally restricted to situations in malpractice cases where a layman is able to say, as a matter of common knowledge and observation, that the consequences of professional care were not as such as would ordinarily have followed if due care had been
exercised.
The real question, therefore, is whether or not in the process of the operation any extraordinary incident or unusual event outside of the routine performance occurred which is beyond the regular scope of customary professional activity in
such operations, which, if unexplained would themselves reasonably speak to the average man as the negligent cause or causes of the untoward consequence.
If there was such extraneous interventions, the doctrine of res ipsa loquitur may be utilized and the defendant is called upon to explain the matter, by evidence of exculpation, if he could.
Doctrine of res ipsa loquitur is appropriate in the case at bar. The damage sustained by Erlinda in her brain prior to a scheduled gall bladder operation presents a case for the application of res ipsa loquitur.
Erlinda submitted herself for cholecystectomy and expected a routine general surgery to be performed on her gall bladder. She delivered her person over to the care, custody and control of private respondents who exercised complete and exclusive control over
her.
At the time of submission, Erlinda was neurologically sound and, except for a few minor discomforts, was likewise physically fit in mind and body. However, during the administration of anesthesia and prior to the performance of cholecystectomy she
suffered irreparable damage to her brain. Thus, without undergoing surgery, she went out of the operating room already decerebrate and totally incapacitated.
Obviously, brain damage, which Erlinda sustained, is an injury which does not normally occur in the process of a gall bladder operation. In fact, this kind of situation does not in the absence of negligence of someone in the administration of anesthesia and in the
use of endotracheal tube. Normally, a person being put under anesthesia is not rendered decerebrate as a consequence of administering such anesthesia if the proper procedure was followed.
Furthermore, the instruments used in the administration of anesthesia, including the endotracheal tube, were all under the exclusive control of private respondents, who are the physicians-in-charge.
Likewise, Erlinda could not have been guilty of contributory negligence because she was under the influence of anesthetics which rendered her unconscious.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
16
Private respondents were unable to disprove the presumption of negligence on their part in the care of Erlinda and their negligence was the proximate cause of her piteous condition.
She is negligent in the care of Erlinda during the anesthesia phase. As borne by the records, Dra. Gutierrez failed to properly intubate the patient. This fact was attested to by Dean Herminda.
Although witness Herminda is not an anesthesiologist, she can very well testify upon matters on which she is capable of observing such as, the statements and acts of the physician and surgeon, external appearances, and manifest conditions which are
observable by any one. This is precisely allowed under the doctrine of res ipsa loquitur where the testimony of expert witnesses is not required.
We take judicial notice of the fact that anesthesia procedures have become so common, that even an ordinary person can tell if it was administered properly. As such, it would not be too difficult to tell if the tube was properly inserted. This kind of observation, we
believe, does not require a medical degree to be acceptable.
At any rate, without doubt, petitioner's witness, an experienced clinical nurse whose long experience and scholarship led to her appointment as Dean of the Capitol Medical Center School at Nursing, was fully capable of determining whether or not the intubation
was a success.
Most of all, her testimony was affirmed by Dra. Gutierrez who admitted that she experienced difficulty in inserting the tube into Erlinda's trachea and that the first intubation was a failure.
Dra. Gutierrez failed to observe the proper pre-operative protocol which could have prevented this unfortunate incident. An experienced anesthesiologist, adequately alerted by a thorough pre-operative evaluation, would have had little difficulty going
around the short neck and protruding teeth. Having failed to observe common medical standards in pre-operative management and intubation, respondent Dra. Gutierrez' negligence resulted in cerebral anoxia and eventual coma of Erlinda.
Dra. Gutierrez admitted that she saw Erlinda for the first time on the day of the operation itself. Before this date, no prior consultations with, or pre-operative evaluation of Erlinda was done by her. Until the day of the operation, respondent Dra. Gutierrez was
unaware of the physiological make-up and needs of Erlinda.
She was likewise not properly informed of the possible difficulties she would face during the administration of anesthesia to Erlinda.
Dra. Gutierrez' act of seeing her patient for the first time only an hour before the scheduled operative procedure was, therefore, an act of exceptional negligence and professional irresponsibility. The measures cautioning prudence and vigilance in dealing with
human lives lie at the core of the physician's centuries-old Hippocratic Oath. Her failure to follow this medical procedure is, therefore, a clear indicia of her negligence.
Private respondents themselves admit that Thiopental induced, allergic-mediated bronchospasm happens only very rarely. In view of the evidence at hand, we are inclined to believe petitioners' stand that it was the faulty intubation which was the proximate
cause of Erlinda's comatose condition.
Proximate cause has been defined as that which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces injury, and without which the result would not have occurred.
Faulty intubation is undeniably the proximate cause which triggered the chain of events leading to Erlinda's brain damage and, ultimately, her comatosed condition.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
17
As the so-called "captain of the ship," 73 it is the surgeon's responsibility to see to it that those under him perform their task in the proper manner.
Dr. Hosaka's negligence can be found in his failure to exercise the proper authority (as the "captain" of the operative team) in not determining if his anesthesiologist observed proper anesthesia protocols. In fact, no evidence on record exists to show that Dr.
Hosaka verified if respondent Dra. Gutierrez properly intubated the patient.
Furthermore, Dr. Hosaka had scheduled another procedure in a different hospital at the same time as Erlinda's surgery, and was in fact over 3 hours late for the latter's operation. Because of this, he had little or no time to confer with his anesthesiologist
regarding the anesthesia delivery. This indicates that he was remiss in his professional duties towards his patient.
Thus, he shares equal responsibility for the events which resulted in Erlinda's condition.
HOSPITALS RESPONSIBILITY
Hospitals exercise significant control in the hiring and firing of consultants and in the conduct of their work within the hospital premises by setting up requirements for application as consultants & for receiving patients, maintaining clinic in the hospital such proof
of completion of residency, their educational qualifications; conduct rounds etc. all subject to review by review committee of the hospital. A consultant remiss in his duties, or a consultant who regularly falls short of the minimum standards acceptable to the
hospital or its peer review committee, is normally politely terminated.
Thus, private hospitals, hire, fire and exercie real control over their attending and visiting "consultant" staff. While "consultants" are not, technically employees, the control exercised, the hiring, and the right to terminate consultants all fulfill the important
hallmarks of an employer-employee relationship, with the exception of the payment of wages. In assessing whether such a relationship in fact exists, the control test is determining.
For the purpose of allocating responsibility in medical negligence cases, an employer-employee relationship in effect exists between hospitals and their attending and visiting physicians.
The basis for holding an employer solidarily responsible for the negligence of its employee is found in Art 2180 of the Civil Code which considers a person accountable not only for his own acts but also for those of others based on the former's responsibility
under a relationship of patria potestas. Such responsibility ceases when the persons or entity concerned prove that they have observed the diligence of a good father of the family to prevent damage.
While the burden of proving negligence rests on the plaintiffs, once negligence is shown, the burden shifts to the respondents (parent, guardian, teacher or employer) who should prove that they observed the diligence of a good father of a family to prevent
damage.
Respondent hospital, apart from a general denial of its responsibility over respondent physicians, failed to adduce evidence showing that it exercised the diligence of a good father of a family in the hiring and supervision of the latter. It failed to
adduce evidence with regard to the degree of supervision which it exercised over its physicians. In neglecting to offer such proof, or proof of a similar nature, respondent hospital thereby failed to discharge its burden under the last paragraph of Article
2180. Having failed to do this, respondent hospital is consequently solidarily responsible with its physicians for Erlinda's condition.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
18
4 Art. 2180. The obligation imposed by article 2176 is demandable not only for one's own acts or omissions, but also for those of persons for whom one is responsible. x x x x
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.
xxxx
The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage.
Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
19
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
20
1.
2.
3.
Whether the Court of Appeals erred in holding Dr. Ampil liable for negligence and malpractice NO, Dr. Ampil is liable because of his medical negligence in not informing Natividad of the two missing pieces of gauze
Whether the Court of Appeals erred in absolving Dr. Fuentes of any liability NO, Dr. Fuentes is not liable. Under the Captain of the Ship doctrine, Dr. Ampil is liable because he was the head surgeon
Whether PSI may be held solidarily liable for the negligence of Dr. Ampil YES.
Petitioner Dr. Milagros L. Cantre was the attending physician of respondent Nora S. Go.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
21
At 1:30 a.m. of April 20, 1992, Nora gave birth to her fourth child, a baby boy. However, at around 3:30 a.m., Nora suffered profuse bleeding inside her womb due to some parts of the placenta which were not completely expelled from her womb after delivery.
Consequently, Nora suffered hypovolemic shock, resulting in a drop in her blood pressure to "40" over "0."
Petitioner and the assisting resident physician performed various medical procedures to stop the bleeding and to restore Noras blood pressure. Her blood pressure was frequently monitored with the use of a sphygmomanometer.
While petitioner was massaging Noras uterus for it to contract and stop bleeding, she ordered a droplight to warm Nora and her baby. Nora remained unconscious until she recovered.
While in the recovery room, her husband, noticed a fresh gaping wound 2 by 3 inches in the inner portion of her left arm, close to the armpit. The husband filed a request for investigation. In response, the medical director of the hospital, called petitioner and the
assisting resident physician to explain what happened. Petitioner said the blood pressure cuff caused the injury.
On May 7, 1992, the spouses went to the NBI for a physical examination, which was conducted by medico-legal officer Dr. Floresto Arizala, Jr.The medico-legal officer later testified that Noras injury appeared to be a burn and that a droplight when placed near the
skin for about 10 minutes could cause such burn.He dismissed the likelihood that the wound was caused by a blood pressure cuff as the scar was not around the arm, but just on one side of the arm.
On May 22, 1992, Noras injury was referred to a plastic surgeon at the Dr. Jesus Delgado Memorial Hospital for skin grafting, with skin sourced from her abdomen, which consequently bore a scar as well. About a year after, on April 30, 1993, scar revision had to be
performed at the same hospital. The surgical operation left a healed linear scar in Noras left arm about three inches in length, the thickest portion rising about one-fourth (1/4) of an inch from the surface of the skin. The costs of the skin grafting and the scar revision
were shouldered by the hospital.
Unfortunately, Noras arm would never be the same. Aside from the unsightly mark, the pain in her left arm remains. When sleeping, she has to cradle her wounded arm. Her movements now are also restricted. Her children cannot play with the left side of her body as
they might accidentally bump the injured arm, which aches at the slightest touch.
Thus, on June 21, 1993, respondent spouses filed a complaint for damages against petitioner, Dr. Abad, and the hospital.
The TRIAL COURT ruled in favor of respondent spouses,and ordered the petitioners to pay the following: a. P500,000.00 in moral damages; b. P150,000.00 exemplary damages; P80,000.00 nominal damages; d. P50,000.00as attorneys fees; and e. P6,000.00 as
litigation expenses.
Petitioners appealed to the Court of Appeals modified the RTC decision to: P200,000.00 as moral damages and deleting the other awards.
ISSUE:
WON petitioner is liable for the injury suffered by respondent Nora Go. YES! They are liable! The SC affirmed the award given by the CA.
RATIO:
RES IPSA LOQUITOR APPLIES
Courts face a unique restraint in adjudicating medical negligence cases because physicians are not guarantors of care and, they never set out to intentionally cause injury to their patients. However, intent is immaterial in negligence cases because where negligence
exists and is proven, it automatically gives the injured a right to reparation for the damage caused.
In cases involving medical negligence, the doctrine of res ipsa loquitur allows the mere existence of an injury to justify a presumption of negligence on the part of the person who controls the instrument causing the injury, provided that the following requisites concur:
1. The accident is of a kind which ordinarily does not occur in the absence of someones negligence;
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
22
As to the first requirement, the gaping wound on Noras arm is certainly not an ordinary occurrence in the act of delivering a baby
Second, whether the injury was caused by the droplight or by the blood pressure cuff is of no moment. Both instruments are deemed within the exclusive control of the physician in charge under the "captain of the ship" doctrine. This doctrine holds the surgeon in
charge of an operation liable for the negligence of his assistants during the time when those assistants are under the surgeons control. In this particular case, it can be logically inferred that petitioner, the senior consultant in charge during the delivery of Noras baby,
exercised control over the assistants assigned to both the use of the droplight and the taking of Noras blood pressure. Hence, the use of the droplight and the blood pressure cuff is also within petitioners exclusive control.
Third, the gaping wound on Noras left arm, by its very nature and considering her condition, could only be caused by something external to her and outside her control as she was unconscious while in hypovolemic shock. Hence, Nora could not, by any stretch of the
imagination, have contributed to her own injury.
We note, however, that petitioner has served well as Noras obstetrician for her past three successful deliveries. This is the first time petitioner is being held liable for damages due to. The fact that petitioner promptly took care of Noras wound before infection and other
complications set in is also indicative of petitioners good intentions. Also, the fact that Nora was suffering from a critical condition when the injury happened, such that saving her life became petitioners elemental concern. Nonetheless, it should be stressed that all
these could not justify negligence on the part of petitioner.
Hence, considering the specific circumstances in the instant case, the award of P200,000 as moral damages in favor of respondents and against petitioner is just and equitable.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
23
Vivian Lee Tan and her husband Silvino Tan were on board a motorcycle driven by Silvino when a bus owned by Phil. Hawk and driven by Margarito Avila hit their motorcycle.
As a result of the accident, Silvino died on the spot while Vivian suffered physical injuries which necessitated medical attention and hospitalization;
Vivian filed before the RTC of QC a Complaint\against Philippine Hawk Corporation and Margarito Avila for damages based on quasi-delict, arising from the vehicular accident that resulted in the death of Vivians husband and Vivians physical injuries.
She filed an Amended Complaint, in her own behalf and in behalf of her children, in the civil case for damages against petitioner.
She sought the payment of indemnity for the death of Silvino, moral and exemplary damages, funeral and interment expenses, medical and hospitalization expenses, the cost of the motorcycle's repair, attorney's fees, and other just and equitable reliefs.
The accident involved a motorcycle, a passenger jeep, and a bus owned by petitioner Philippine Hawk Corporation, and was then being driven by Margarito Avila.
In its Answer, Phil. Hawk denied liability for the vehicular accident, alleging that the immediate and proximate cause of the accident was the recklessness or lack of caution of Silvino. Phil. Hawk asserted that it exercised the diligence of a good father of the family
in the selection and supervision of its employees, including Margarito Avila.
According to Vivians testimony that she was riding on their motorcycle driven by her husband, at a place after a Caltex gasoline station in Barangay Buensoceso, Gumaca, Quezon on the way to Lopez, Quezon. They came from the Pasumbal Machine Shop..
They were on a stop position at the side of the highway; and when they were about to make a turn, she saw a bus running at fast speed coming toward them, and then the bus hit a jeep parked on the roadside, and their motorcycle as well. She lost
consciousness and was brought to the hospital in Quezon, where she was confined for a week. She was later transferred to St. Luke's Hospital in Quezon City, Manila. She suffered a fracture on her left chest, her left arm became swollen, she felt pain in her
bones, and had high blood pressure. Her husband died due to the vehicular accident. The immediate cause of his death was massive cerebral hemorrhage.
She further testified that her husband was leasing and operating a Caltex gasoline station in Gumaca, Quezon that yielded PhP1M a year in revenue. They also had a copra business, which gave them an income of P3k a month or P36k a year.
The driver of the passenger jeep involved in the accident, testified that his jeep was parked on the left side of the highway near the Pasumbal Machine Shop. He did not notice the motorcycle before the accident. But he saw the bus dragging the motorcycle along
the highway, and then the bus bumped his jeep and sped away.
Bus driver, Margarito testified that he was driving his bus at 60 kph on the Maharlika Highway. When they were at Barangay Buensoceso, Gumaca, Quezon, a motorcycle ran from his left side of the highway, and as the bus came near, the motorcycle crossed the
path of the bus, and so he turned the bus to the right. He heard a loud banging sound. From his side mirror, he saw that the motorcycle turned turtle ("bumaliktad"). He did not stop to help out of fear for his life, but drove on and surrendered to the police. He
denied that he bumped the motorcycle. Avila further testified that he had previously been involved in sideswiping incidents, but he forgot how many times.
Operations officer of Philippine Hawk, testified that, like their other drivers, Avila was subjected to and passed the following requirements:
(1) Submission of NBI clearance;
(2) Certification from his previous employer that he had no bad record;
(3) Physical examination to determine his fitness to drive;
(4) Test of his driving ability, particularly his defensive skill; and
(5) Review of his driving skill every six months. 16cralaw
RTC rendered judgment against petitioner and Avila, finding Avila guilty of simple negligence, and ordering Philippine Hawk and Avila to pay them jointly and solidarily the sum of P745,575 for loss of earnings and actual damages plus P50k as moral
damages.
The trial court held Phil Hawk liable for failing to exercise the diligence of a good father of the family in the selection and supervision of Avila, having failed to sufficiently inculcate in him discipline and correct behavior on the road.
On appeal by Phil. Hawk, CA affirmed the decision of the trial court with modification in the award of damages. Philippine Hawk and Avila were ordered to pay jointly and severally the following amount: (a) P168,019.55 as actual damages; (b) P10k as
temperate damages; (c) P100k as moral damages; (d) P590k as unearned income; and (e) P50k as civil indemnity.22cralaw
Issues:
(1) Whether or not negligence may be attributed to Phil Hawk's driver, and whether negligence on his part was the proximate cause of the accident, resulting in the death of Silvino and causing physical injuries to Vivian; - Yes
(2) whether or not Phil Hawk is liable to respondent for damages; and - Yes
(3) whether or not the damages awarded by CA are proper. Yes but in modified amount
Held:
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated August 17, 2004 in CA-G.R. CV No. 70860 is hereby AFFIRMED with MODIFICATION. Petitioner Philippine Hawk Corporation and Margarito Avila are hereby ordered to pay jointly and
severally respondent Vivian Lee Tan: (a) civil indemnity P50k; (b) actual damages P127,192.85; (c) moral damages P80k; (d) indemnity for loss of earning capacity in the amount of P1M; and (e) temperate damages in the amount of P10k.
Ratio:
The Court agree[s] with the bus driver Margarito that the motorcycle was moving ahead of the bus towards the right side from the left side of the road, but disagrees with him that it crossed the path of the bus while the bus was running on the right side of the highway.
If the bus were on the right side of the highway and Margarito turned his bus to the right in an attempt to avoid hitting it, then the bus would not have hit the passenger jeep vehicle which was then parked on the left side of the road. The fact that the bus hit the
jeep too, shows that the bus must have been running to the left lane of the highway from right to the left, that the collision between it and the parked jeep and the moving rightways cycle became inevitable. Besides, Margarito said he saw the motorcycle before
the collision ahead of the bus; that being so, an extra-cautious public utility driver should have stepped on his brakes and slowed down. Here, the bus never slowed down, it simply maintained its highway speed and veered to the left. This is negligence indeed.\
A review of the records showed that it was petitioner's witness, Efren Delantar Ong, who was about 15m away from the bus when he saw the vehicular accident. Nevertheless, this fact does not affect the finding of the trial court that petitioner's bus driver,
Margarito Avila, was guilty of simple negligence. Foreseeability is the fundamental test of negligence. To be negligent, a defendant must have acted or failed to act in such a way that an ordinary reasonable man would have realized that certain interests of certain
persons were unreasonably subjected to a general but definite class of risks.w
In this case, the bus driver, who was driving on the right side of the road, already saw the motorcycle on the left side of the road before the collision. However, he did not take the necessary precaution to slow down, but drove on and bumped the motorcycle, and
also the passenger jeep parked on the left side of the road, showing that the bus was negligent in veering to the left lane, causing it to hit the motorcycle and the passenger jeep.
Whenever an employee's negligence causes damage or injury to another, there instantly arises a presumption that the employer failed to exercise the due diligence of a good father of the family in the selection or supervision of its employees.
To avoid liability for a quasi-delict committed by his employee, an employer must overcome the presumption by presenting convincing proof that he exercised the care and diligence of a good father of a family in the selection and supervision of his employee.
Petitioner is liable to respondent, since it failed to exercise the diligence of a good father of the family in the selection and supervision of its bus driver, Avila, for having failed to sufficiently inculcate in him discipline and correct behavior on the road. Indeed,
petitioner's tests were concentrated on the ability to drive and physical fitness to do so. It also did not know that Avila had been previously involved in sideswiping incidents.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
24
The indemnity for loss of earning capacity of the deceased is provided for by Article 2206 of the Civil Code. Compensation of this nature is awarded not for loss of earnings, but for loss of capacity to earn money.w
As a rule, documentary evidence should be presented to substantiate the claim for damages for loss of earning capacity. By way of exception, damages for loss of earning capacity may be awarded despite the absence of documentary evidence when:
o
(1) the deceased is self-employed and earning less than the minimum wage under current labor laws, in which case, judicial notice may be taken of the fact that in the deceased's line of work no documentary evidence is available; or
o
(2) the deceased is employed as a daily wage worker earning less than the minimum wage under current labor laws.
Records show that Vivian's husband was leasing and operating a Caltex gasoline station in Gumaca, Quezon. She testified that her husband earned an annual income of Php 1M. She presented in evidence a Certificate of Creditable Income Tax Withheld at
Source for the Year 1990, which showed that respondent's husband earned a gross income of P950,988.43 in 1990. It is reasonable to use the Certificate and Vivian's testimony as bases for fixing the gross annual income of the deceased at one million pesos
before respondent's husband died on March 17, 1999.
However, no documentary evidence was presented regarding the income derived from their copra business; hence, the testimony of respondent as regards such income cannot be considered.
In the computation of loss of earning capacity, only net earnings (total earnings necessary expenses for the creation of such earnings living and other expenses), not gross earnings, are to be considered;
In the absence of documentary evidence, it is reasonable to peg necessary expenses for the lease and operation of the gasoline station at 80 percent of the gross income, and peg living expenses at 50 percent of the net income (gross income less necessary
expenses).
Reasonable
Necessary
(80% of GAI)
Life
Expectancy
[2/3 (80-age at the time of death)]
[2/3 (80-65)]
P1,000,000.00
P800,000.00
2/3 (15)
P200,000.00
P100,000.00(Living Expenses)
30/3
P100,000.00
10
P100,000.00
P1,000,000.00
and
Expenses
CA also awarded actual damages for the expenses incurred in connection with the death, wake, and interment of respondent's husband in the amount of P154,575.30, and the medical expenses of respondent in the amount of P168,019.55. Actual damages
must be substantiated by documentary evidence, such as receipts, in order to prove expenses incurred as a result of the death of the victim or the physical injuries sustained by the victim. A review of the valid receipts submitted in evidence showed that total
actual damages is P127,192.85.
CA correctly sustained the award of moral damages in the amount of P50,000.00 for the death of respondent's husband. Moral damages are awarded to allow the plaintiff to obtain means, diversions or amusements that will serve to alleviate the moral
suffering he/she has undergone due to the defendant's culpable action and must, perforce, be proportional to the suffering inflicted.
CA correctly awarded temperate damages in the amount of P10,000.00 for the damage caused on respondent's motorcycle. Under Art. 2224 of the Civil Code, temperate damages "may be recovered when the court finds that some pecuniary loss has been
suffered but its amount cannot, from the nature of the case, be proved with certainty."
o
The cost of the repair of the motorcycle was prayed for by respondent in her Complaint. However, the evidence presented was merely a job estimate of the cost of the motorcycle's repair amounting to P17, 829.00.
o
CA held that there was no doubt that the damage caused on the motorcycle was due to the negligence of petitioner's driver. In the absence of competent proof of the actual damage caused on the motorcycle or the actual cost of its repair, the award
of temperate damages by the appellate court in the amount of P10,000.00 was reasonable under the circumstances.
CA also correctly awarded respondent moral damages for the physical injuries she sustained due to the vehicular accident. Under Art. 2219 of the Civil Code, moral damages may be recovered in quasi-delicts causing physical injuries. However, the award of
P50,000.00 should be reduced to P30,000.00 in accordance with prevailing jurisprudence.
CA correctly awarded respondent civil indemnity for the death of her husband, which has been fixed by current jurisprudence at 50k. The award is proper under Art. 2206 of the Civil Code.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
25
o
o
o
Spouses Solimans daughter, Angelica Soliman, was found to be suffering from osteosarcoma, osteoblastic type, a high-grade (highly malignant) cancer of the bone which usually affects teenage children.
Following this diagnosis, Angelicas right leg was amputated by Dr. Jaime Tamayo in order to remove the tumor. As adjuvant treatment, chemotherapy was suggested. Angelica was referred to Dr. Li, a medical oncologist.
She was discharged four days after the surgery but was instructed to return after two or three weeks for the chemotherapy.
On August 18, 1993, she was readmitted to St. Lukes Medical Center (SLMC). She died 11 days later.
SLMC refused to release a death certificate without payment of the hospital bill. Hence, the spouses brought their daughters cadaver to the PNP Crime Laboratory for post-mortem examination.
The Medico-Legal Report indicated the cause of death as Hypovolemic shock secondary to multiple organ hemorrhages and Disseminated Intravascular Coagulation.
On the other hand, the Certificate of Death issued by SLMC indicated that the immediate cause of death was osteosarcoma.
The spouses filed a damage suit against Dr. Li, Dr. Marbella and Dr. Ledesma (Dr. Lis assistants in handling Angelicas case), Dr. Arriete, and SLMC.
They were charged with negligence and disregard of Angelicas safety, health, and welfare by their careless administration of the chemotherapy drugs, their failure to observe the essential precautions in detecting early the symptoms of fatal
blood platelet decrease and stopping early on the chemotherapy, which bleeding led to hypovolemic shock that caused Angelicas untimely demise.
Dr. Li assured the spouses that Angelica would recover in view of 95% chance of healing with chemotherapy and enumerated the side effects as: (1) slight vomiting; (2) hair loss; and (3) weakness.
Spouses claim that they would not have given their consent to chemotherapy had Dr. Li not falsely assured them of its side effects.
Dr. Li denied having been negligent in administering the chemotherapy drugs to Angelica and asserted that she had fully explained to the spouses how the chemotherapy will affect not only the cancer cells but also the patients normal body parts,
including the white and red blood cells and platelets.
What happened to Angelica can be attributed to malignant tumor cells possibly left behind after surgery. Few as they may be, these have the capacity to compete for nutrients such that the body becomes so weak structurally (cachexia) and
functionally in the form of lower resistance of the body to combat infection.
This infection becomes uncontrollable and triggers a chain of events (sepsis or septicemia) that may lead to bleeding in the form of Disseminated Intravascular Coagulation (DIC), as what the autopsy report showed in the case of Angelica.
Witnesses presented by spouses:
Dr. Vergara (medico-legal): the DIC can be attributed to the chemical agents in the drugs given to the victim, which caused platelet reduction resulting to bleeding sufficient to cause the victims death. The time lapse for the production of DIC
(from the time of diagnosis of sarcoma) was too short, considering the survival rate of about 3 years. Dr. Vergara admitted that she is not a pathologist but her statements were based on the opinion of an oncologist whom she had
interviewed.
Dr. Balmaceda: it is the physicians duty to inform and explain to the patient or his relatives every known side effect of the procedure or therapeutic agents to be administered, before securing the consent of the patient or his relatives to such
procedure or therapy. He stressed that the patient or relatives must be informed of all known side effects based on studies and observations, even if such will aggravate the patients condition.
Dr. Tamayo (who performed the amputation) testified for Dr. Li : Dr. Li was one of the most proficient in the treatment of cancer and the patient was afflicted with a very aggressive type of cancer necessitating chemotherapy as adjuvant treatment
RTC- Dr. Li is not liable for damages as she observed the best known procedures and employed her highest skill and knowledge in the administration of chemotherapy drugs on Angelica. Citing Picart v Smith, declared that Li has taken the necessary
precaution against the adverse effect of chemotherapy on Angelica. A wrong decision is not by itself negligence.
CA- awarded damages; while there was no negligence on her part, Dr. Li as her attending physician failed to fully explain to the spouses all the known side effects of chemotherapy (doctrine of informed consent)
ISSUE:
WoN Dr. Li can be liable for failure to fully disclose serious side effects of chemotherapy, despite the absence of finding that Dr. Li was negligent in administering said treatment.
HELD:
NO. 1) There was adequate disclosure of material risks and 2) the spouses failed to present expert testimony.
RATIO:
o
The doctrine of informed consent within the context of physician-patient relationships goes far back into English common law.
As early as 1767, doctors were charged with battery (unauthorized physical contact with a patient) if they had not gained the consent of their patients prior to performing a surgery or procedure.
Schoendorff v Society of New York Hospital: Every human being of adult years and sound mind has a right to determine what shall be done with his own body; and a surgeon who performs an operation without his consent, commits and
assault, for which he is liable in damages.
Canterbury v Spence: (as to scope of disclosure) The disclosure rule only requires of the physician a reasonable explanation, which means generally informing the patient in nontechnical terms as to what is at stake, the therapy alternatives
available to him, the goals expectably to be achieved, and the risks that may ensue from particular treatment or no treatment.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
26
There was adequate disclosure of material risks inherent in the chemotherapy procedure performed with the consent of Angelicas parents.
When Dr. Li informed the spouses beforehand of the side effects which include lowered counts of WBC and RBC, decrease in blood platelets, possible kidney or heart damage and skin darkening, there is reasonable expectation on the part
of the doctor that the respondents understood very well that the severity of these side effects will not be the same for all patients undergoing the procedure . By the very nature of the disease, the physician cannot precisely determine each
patients reaction to the chemical agents.
That death can possibly result from complications of the treatment or the underlying cancer itself is a risk that cannot be ruled out, as with most other major medical procedures, but conclusion can be reasonably drawn from the general side
effects of chemotherapy already disclosed.
On failure to present expert testimony
In a medical malpractice action based on lack of informed consent, the plaintiff must prove both the duty and the breach of that duty through expert testimony. Such testimony must show the customary standard of care of physicians in the
same practice as that of the defendant doctor.
The testimony of Dr. Balmaceda, who is not an oncologist, does not qualify as expert testimony to establish the standard of care in obtaining consent for chemotherapy treatment.
o
o
o
Carpio, dissenting.
o
There are two standards by which courts determine what constitutes adequate disclosure of associated risks and side effects of a proposed treatment:
Physician standard- a doctor is obligated to disclose that information which a reasonable doctor in the same field of expertise would have disclosed to his/her patient
Patient standard- a doctor is obligated to disclose that information which a reasonable patient would deem material in deciding whether to proceed with a proposed treatment
o
Historically, courts used the physician standard. However, modern prevailing trend among courts is to use the patient standard of materiality.
o
Any definition of scope in terms of a professional standard is at odds with the patients prerogative to decide on projected therapy himself.
o
In order to determine what risks and side effects of a proposed treatment are material and should be disclosed to the patient, testimony by an expert witness is unnecessary (Canterbury).
o
Dr. Li admitted that she assured the spouses that there was an 80%b chance that Angelicas cancer would be controlled and that she disclosed to them only some of the associated risks and side effects of chemotherapy. Thus, Dr. Li impliedly admits
that she failed to disclose many of the other associated risks and side effects of chemotherapy, including the most materialinfection, sepsis, and death.
o
Clearly, infection, sepsis, and death are material risks and side effects of chemotherapy. To any reasonable person, the risk of death is one of the most important, if not the most important, consideration in deciding whether to undergo a proposed
treatment.
o
Had the spouses fully known the severity of the risks and side effects of chemotherapy, they may have opted not to go through with the treatment of their daughter. In fact, after some of the side effects of chemotherapy manifested, they asked Dr. Li to stop
the treatment.
Brion, concurring and dissenting.
o
Concurs in the result and its conclusion that the respondents failed to prove by preponderance of evidence the essential elements of a cause of action based on the doctrine of informed consent.
o
Disagrees with the ponencias conclusion that there was adequate disclosure of material risks of the chemotherapy administered in view of a complete absence of competent expert testimony establishing a medical disclosure standard in the case.
o
Rather, the conclusion is based on spouses failure to prove by competent expert testimony the first and fourth elements of a prima facie case for lack of informed consent, specifically:
1)
The scope of the duty to disclose and the violation of this duty (i.e., failure to define what should be disclosed and to disclose the required material risks or side effects of chemotherapy that allow the patient and/or her parents to properly decide
whether to undergo chemotherapy
2)
That the chemotherapy administered by Dr. Li proximately caused the death of Angelica Soliman.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
27
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
28
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
29
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
30
RTC ruled in favor of respondents and made the following findings: (1) as of Setting Report No. 107, respondents owed petitioners P102,336.80; (2) petitioners withheld the release of the chicks and by-products covered by Setting Report Nos. 108-113; and (3)
the retention of the chicks and by-products was unjustified and accompanied by threats and intimidations on respondents. Both parties appealed.
In the CA, both appeals were denied for lack of merit. The RTCs decision was affirmed, with the modification of including an award of exemplary damages of P10k in favor of respondents.
Issue:
WON petitioners retention of the chicks and by-products on account of respondents failure to pay the corresponding service fees unjustified?
Held:
Yes, unjustified.
Rationale:
It was respondents who violated the very essence of reciprocity in contracts, consequently giving rise to petitioners right of retention. This case is clearly one among the species of non-performance of a reciprocal obligation.
Reciprocal obligations are those which arise from the same cause, wherein each party is a debtor and a creditor of the other, such that the performance of one is conditioned upon the simultaneous fulfillment of the other. From the moment one of the parties
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
31
Respondents offer to partially satisfy their accounts is not enough to extinguish their obligation. Under Article 1248 of the Civil Code, the creditor cannot be compelled to accept partial payments from the debtor, unless there is an express stipulation to that effect.
Respondents cannot substitute or apply as their payment the value of the chicks and by-products they expect to derive because it is necessary that all the debts be for the same kind, generally of a monetary character. Needless to say, there was no valid
application of payment in this case.
5 5. Default. In the event of a default by the PLEDGOR in respect to the Obligations or upon the failure of the PLEDGOR to comply with any of the provisions of this Agreement, the PLEDGEE may
(a) cause the public sale at any time as the PLEDGEE may elect at its place of business or elsewhere and the PLEDGEE may, in all allowable cases, acquire or purchase the Pledged Seat and hold the same thereafter in its own right free from any claim of the
PLEDGOR;
(b) apply, at its option, the proceeds of any said sale, as well as all sums received or collected by the PLEDGEE from or on account of such Pledged Seat to (i) the payment of expenses incurred or paid by the PLEDGEE in connection with any sale, transfer or delivery
of the Pledged Seat, and (ii) payment of the Obligations and all unpaid interests, penalties, damages, expenses, and charges accruing on the Obligations or pursuant to the By-laws and this Agreement. The balance shall be returned to the PLEDGOR.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
32
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
33
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
34
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
35
Is the petitioner liable for damages due to its failure to transmit the telegram to the USA? YES.
Held:
Art. 1170 of the Civil Code provides that "those who in the performance of their obligations are guilty of fraud, negligence or delay, and those who in any manner contravene the tenor thereof, are liable for damages." Art. 2176 also provides that "whoever by act or
omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done."
In this case, Sofia entered into a contract with petitioner, wherein the latter will undertake to transmit a telegram overseas for a fee. Despite payment by Sofia of the fee to petitioner, the latter failed to fulfill its obligation, breaching the contract and making it
liable for damages.
Regarding damages, the amount of 31.92 is inequitable and prejudicial on the part of respondent since thirty (30) years have passed since she attempted to transmit the telegram, and she incurred expenses for travelling to the Philippines. Moreover,
the gross negligence of petitioner has caused the suffering of all respondents, who were unable to be immediately notified of the death of Consolacion and were unable to pay their last respects as a result, hence the award of moral damages is
proper.
Petition denied; amount of damages modified.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
36
On February 16, 1976, appellant's agent Jose Llover signed a contract for the sale of 100 tons of copra at P82.00 per 100 kilos with delivery terms of 20 days effective March 8, 1976. As compared to appellant's transaction on November 6, 1975, the current price
agreed upon is slightly higher than the last contract. In all these contracts though, the selling price had always been stated as "total price" rather than per 100 kilos. However, the parties had understood the same to be per 100 kilos in their previous transactions.
After the period to deliver had lapsed, appellant sold only 46,334 kilos of copra thus leaving a balance of 53,666 kilos. Accordingly, letter demands were made upon appellant to deliver the balance with a final warning that failure to deliver will mean cancellation of the
contract, the balance to be purchased at open market and the price differential to be charged against appellant. On October 22, 1976, since there was still no compliance, Legaspi Oil exercised its option under the contract and purchased the undelivered balance from
the open market at the prevailing price of P168.00 per 100 kilos, or a price differential of P86.00 per 100 kilos, a net loss of P46,152.76 chargeable against appellant. Legaspi Oil then filed a complaint against Oseraos for breach of a contract and for damages. The CFI
rendered a decision holding Oseraos liable for damages. Oseraos appealed to respondent Court which thereafter rendered a reversal decision, ordering the dismissal of the complaint. Hence, this petition for certiorari.
Issue:
Whether or not private respondent Oseraos is liable for damages arising from fraud or bad faith in deliberately breaching the contract of sale entered into by the parties.
Held:
Yes, Oseraos is liable for breach of contract. Petition is granted.
Rationale:
Oseraos is guilty of fraud in the performance of his obligation under the sales contract whereunder he bound himself to deliver to petitioner 100 metric tons of copra within twenty (20) days. Within the delivery period, Oseraos delivered only 46,334 kilograms of copra to
petitioner, leaving an undelivered balance of 53,666 kilograms. Despite the demands made by Legaspi Oil, Oseraos was unable to comply, forcing petitioner to buy on the open market at a much higher price. Under the foregoing undisputed circumstances, the actuality
of private respondent's fraud cannot be gainsaid.
In general, fraud may be defined as the voluntary execution of a wrongful act, or a wilfull omission, knowing and intending the effects which naturally and necessarily arise from such act or omission; the fraud referred to in Article 1170 of the Civil
Code of the Philippines is the deliberate and intentional evasion of the normal fulfillment of obligation; it is distinguished from negligence by the presence of deliberate intent, which is lacking in the latter. The conduct of private respondent clearly manifests his
deliberate fraudulent intent to evade his contractual obligation for the price of copra had in the meantime more than doubled from P82.00 to P168 per 100 kilograms. Under Article 1170 of the Civil Code of the Philippines, those who in the performance of their obligation
are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages. Pursuant to said article, private respondent is liable for damages.
In case of fraud, bad faith, malice, or wanton attitude, the guilty party is liable for all damages which may be reasonably attributed to the non performance of the obligation . Article 1101 of the old Civil Code, later to be reproduced as Article 1170 of our
present Civil Code, was the basis of our decision in an old case, Acme Films, Inc. vs. Theaters Supply Corporation, wherein we held:
It is not denied that the plaintiff company failed to supply the defendant with the cinematographic films which were the subject matter of the contracts entered into on March 20, 1934, and two films under the contract of March 24, 1934, one of said films
being a serial entitled "Whispering Shadow". Guillermo Garcia Bosque testified that because the plaintiff company had failed to supply said films, the defendants had to resort to the Universal Pictures Corporation and ask for films to replace those which
said plaintiff had failed to supply under the contract, having had to pay therefor five per cent more than for those films contracted with said plaintiff Acme Films, Inc., and that the total cost thereof, including the printing of programs, posters paraded
through the streets with bands of music to announce the showing of the films which the plaintiff company failed to supply, amount to from P400 to P550. The plaintiff company did not submit evidence to rebut the testimony of said witness and the fact
that the estimate of the expenses is approximate does not make said estimate inadmissible. It was incumbent upon the plaintiff company to submit evidence in rebuttal, or at least ascertain the amount of the different items in cross-examination. There
being no evidence to the contrary, it is logical to admit that the defendant company spent at least the sum of P400. Inasmuch as the plaintiff company had failed to comply with a part of its booking contract, and as the defendant company had suffered
damages as a result thereof, the former is liable to indemnify the damages caused to the latter, in accordance with the provisions of Article 1101 of the Civil Code.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
37
6 Art. 1256. If the creditor to whom tender of payment has been made refuses without just cause to accept it, the debtor shall be released from responsibility by the consignation of the thing or sum due.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
38
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
39
FACTS
Jimenez went to the market to buy bagoong at the time when it was flooded with ankle deep rainwater. On his way home, he stepped on an uncovered opening which could not be seen because of the dirty rainwater, causing a dirty and rusty four- inch nail, stuck
inside the uncovered opening, to pierce the left leg of plaintiff-petitioner penetrating to a depth of about one and a half inches. First aid was first administered to him but the swelling did not stop. He was then rushed to the Hospital where he had to be confined for
twenty (20) days due to high fever and severe pain.
Upon his discharge from the hospital, he had to walk around with crutches for fifteen (15) days. His injury prevented him from attending to the school buses he is operating. As a result, he had suffered damages.
Petitioner sued for damages the City of Manila and the Asiatic Integrated Corporation under whose administration the Sta. Ana Public Market had been placed by virtue of a Management and Operating Contract.
City of Manila maintains that it cannot be held liable for the injuries sustained by the petitioner because under the Management and Operating Contract, Asiatic Integrated Corporation assumed all responsibility for damages which may be suffered by third persons
for any cause attributable to it. Manila argued that
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
40
CA: Modified RTC decision. Only Asiatic Integrated Corp is solely liable for damages and attorneys fees. City of Manila is NOT solidarily liable with it.
ISSUE:
WON City of Manila should be solidarily liable with Asiatic Integrated Corp for the injuries petitioner suffered?
HELD
YES, solidarily liable.
SC in City of Manila v. Teotico said that RA 409 only establishes a general rule regulating the liability of the City of Manila for "damages or injury to persons or property arising from the failure of city officers" to enforce the provisions of said Act, "or any other law or
ordinance or from negligence" of the City "Mayor, Municipal Board, or other officers while enforcing or attempting to enforce said provisions."
Upon the other hand, Article 21897 of the Civil Code constitutes a particular prescription making "provinces, cities and municipalities ... liable for damages for the death of, or injury suffered by any person by reason" specifically "of the defective condition of
roads, streets, bridges, public buildings, and other public works under their control or supervision."
the Charter of Manila refers to liability arising from negligence, in general, regardless of the object, thereof, while Article 2189 of the Civil Code governs liability due to "defective streets, public buildings and other public works" in particular and is therefore decisive on
this specific case.
under Article 2189 of the Civil Code, it is not necessary for the liability therein established to attach, that the defective public works belong to the province, city or municipality from which responsibility is exacted. What said article requires is that the province, city or
municipality has either "control or supervision" over the public building in question.
In the case at bar, the Sta. Ana Public Market, despite the Management and Operating Contract between respondent City and Asiatic Integrated Corporation remained under the control of the former.
o It was expressly indicated in the contract that activities for the market (eg. Reconstruction, hiring and discharge of emloyees) shall be subject to prior approval of the City of Manila.
o In the contract, Asia Integrated Corp is also required to report on the activities and operation of the public market.
o This fact of supervision and control of the City over subject public market was also admitted by the Mayor
o In fact, the City of Manila employed a market master for the Sta. Ana Public Market whose primary duty is to take direct supervision and control of that particular market, more specifically, to check the safety of the place for the public.
7 Provinces, cities and municipalities shall be liable for damages for the death of, or injuries suffered by any person by reason of defective conditions of roads, streets, bridges, public buildings and other public works under their control or supervision.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
41
As a defense against liability on the basis of a quasi-delict, one must have exercised the diligence of a good father of a family. (Art. 1173 of CC).
It is the duty of the City to exercise reasonable care to keep the public market reasonably safe for people going to the market.
While it may be conceded that the fulfillment of such duties is extremely difficult during storms and floods, it must however, be admitted that ordinary precautions could have been taken during good weather to minimize the dangers to life and limb under those
difficult circumstances.
Eg: drainage hole could have been placed under the stalls instead of on the passage ways, should have seen to it that openings were covered
Sadly, the evidence indicates that long before petitioner fell into the opening, it was already uncovered, and five (5) months after the incident happened, the opening was still uncovered. Moreover, while there are findings that during floods the vendors remove the
iron grills to hasten the flow of water, there is no showing that such practice has ever been prohibited, much less penalized by the City of Manila. Neither was it shown that any sign had been placed thereabouts to warn passersby of the impending danger.
To recapitulate, it appears evident that the City of Manila is likewise liable for damages under Article 2189 of the Civil Code, respondent City having retained control and supervision over the Sta. Ana Public Market and as tort-feasor under Article 2176 of the Civil
Code on quasi-delicts
Petitioner had the right to assume that there were no openings in the middle of the passageways and if any, that they were adequately covered. Had the opening been covered, petitioner could not have fallen into it. Thus the negligence of the City of Manila is the
proximate cause of the injury suffered, the City is therefore liable for the injury suffered by the peti- 4 petitioner.
Respondent City of Manila and Asiatic Integrated Corporation being joint tort-feasors are solidarily liable under Article 2194 of the Civil Code.
Article 1174
Article 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be
foreseen, or which, though foreseen, were inevitable. (1105a)
NAKPIL & SONS V. CA, 144 SCRA 596; 160 SCRA 334
Facts:
(3 Consolidated Cases of Philippine Bar Association, United Construction and Juan F. Nakpil & Sons).
Philippine Bar Association decided to contract an office building, the construction of which was undertaken by United Construction Inc. the plans and specifications for the building were prepared by Juan F. Nakpil & Sons. The building was completed in 1966.
In 1968, an unusually strong earthquake hit Intramuros, Manila. The building sustained major damage, causing it to tilt forward dangerously and collapse onto its side. As a remedial measure, the building was shored up by United Construction.
Philippine Bar Association filed a complaint for damages against United Construction and Juan F. Nakpil & Sons for the partial collapse of the building, arguing that the defects in the construction, failure of the contractors to follow the specifications and violation of the
contract caused the damage to the building.
The commissioner appointed by the trial court reported that the damages sustained by the building was directly caused by both the earthquake and defects in the plans and specifications of the contractors, architects and owners. The TC decided to make United
Construction and Juan F. Nakpil & Sons liable for the damages. The CA affirmed the decision but lowered the award of damages. All parties appealed the decision to the SC.
(During the case, it was further it by 2 more earthquakes which led to its eventual demolition)
Issue:
Whether or not an act of God hich caused the failure of the building, exempts from liability, parties who are otherwise liable because of their negligence. (It does not exempt the parties)
Rationale:
The general rule is that no person shall be responsible for events which could not be foreseen or which though foreseen, were inevitable.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
42
An act of God has been defined as an accident, due directly and exclusively to natural causes without human intervention, which by no amount of foresight, pains or care, reasonably to have been expected, could have been prevented. There is no dispute that the
earthquake of August 2, 1968 is a fortuitous event or an act of God.
To exempt the obligor from liability under Article 1174 of the Civil Code, for a breach of an obligation due to an "act of God," the following must concur:
(a) the cause of the breach of the obligation must be independent of the will of the debtor;
(b) the event must be either unforseeable or unavoidable;
(c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and
(d) the debtor must be free from any participation in, or aggravation of the injury to the creditor.
Thus, if upon the happening of a fortuitous event or an act of God, there concurs a corresponding fraud, negligence, delay or violation or contravention in any manner of the tenor of the obligation, which results in loss or damage, the obligor cannot escape liability.
The negligence of the United Construction and Juan F. Nakpil & Sons was established beyond dispute both in the lower court and in the Intermediate Appellate Court. Defendant United Construction Co., Inc. was found to have made substantial deviations from the
plans and specifications. and to have failed to observe the requisite workmanship in the construction as well as to exercise the requisite degree of supervision; while the Juan F. Nakpil & Sons were found to have inadequacies or defects in the plans and specifications
prepared by them. As correctly assessed by both courts, the defects in the construction and in the plans and specifications were the proximate causes that rendered the PBA building unable to withstand the earthquake in 1968. For this reason the defendant and thirdparty defendants cannot claim exemption from liability.
It is well settled that the findings of facts of the Court of Appeals are conclusive on the parties and on this court unless it falls upon one of the exemptions. It is evident that the case at bar does not fall under any of the exceptions The records show that the lower court
spared no effort in arriving at the correct appreciation of facts by the referral of technical issues to a Commissioner chosen by the parties whose findings and conclusions remained convincingly unrebutted by the intervenors/ amicus curiae who were allowed to intervene
in the Supreme Court.
One who negligently creates a dangerous condition cannot escape liability for the natural and probable consequences thereof, although the act of a third person, or an act of God for which he is not responsible, intervenes to precipitate the loss.
The destruction was not purely an act of God. Truth to tell hundreds of ancient buildings in the vicinity were hardly affected by the earthquake. Only one thing spells out the fatal difference; gross negligence and evident bad faith, without which the damage would not
have occurred.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
43
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
44
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
45
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
46
HELD
The flood was a fortuitious event but the bank is still liable as it was guilty of negligence.
(1)
A contract for the use of a safe deposit box is a special kind of deposit. The relation between the bank renting out the safe deposit box and the customer is one of bailor and bailee, the bailment being for hire and mutual benefit (Sec. 72, R.A. 337). The primary function
is still found within the parameters of a contract of deposit, i.e., the receiving in custody of funds, documents and other valuable objects for safekeeping.
The depositarys responsibility for the safekeeping of the objects deposited in the case at bar is governed by Title I, Book IV of the Civil Code. Accordingly, the depositary would be liable if, in performing its obligation, it is found guilty of fraud, negligence, delay or
contravention of the tenor of the agreement [Art. 1170, id.]. In the absence of any stipulation prescribing the degree of diligence required, that of a good father of a family is to be observed [Art. 1173, id.]. Hence, any stipulation exempting the depositary from any liability,
arising from the loss of the thing deposited on account of fraud, negligence or delay would be void for being contrary to law and public policy.
(2)
YES. The limitation of liability under the lease agreement is void for being contrary to law and public policy, SBTC from any liability for damage, loss or destruction of the contents of the safety deposit box which may arise from its own or its agents fraud, negligence or
delay.
One may, by special contract, define their respective duties or provide for increasing or limiting the liability of the deposit company, provided such contract is not in violation of law or public policy. It must clearly appear that there actually was such a special contract,
however, in order to vary the ordinary obligations implied by law from the relationship of the parties; liability of the deposit company will not be enlarged or restricted by words of doubtful meaning.
Condition 13 stands on a wrong premise and is contrary to the actual practice of the Bank. It is not correct to assert that the Bank has neither the possession nor control of the contents of the box since in fact, the safety deposit box itself is located in its premises and is
under its absolute control; moreover, the respondent Bank keeps the guard key to the said box. As stated earlier, renters cannot open their respective boxes unless the Bank cooperates by presenting and using this guard key.
(3)
YES. However, the element of not aggravating the damage or injury under fortuitous event (Art. 1170) is absent.
SBTCs negligence aggravated the injury or damage to the petitioner which resulted from the loss or destruction of the stamp collection. SBTC was aware of the floods of 1985 and 1986; it also knew that the floodwaters inundated the room where Safe Deposit Box No.
54 was located. In view thereof, it should have lost no time in notifying the petitioner in order that the box could have been opened to retrieve the stamps, thus saving the same from further deterioration and loss. In this respect, it failed to exercise the reasonable care
and prudence expected of a good father of a family, thereby becoming a party to the aggravation of the injury or loss.
A caso fortuito prevents (sic)18 the following essential characteristics: (1) the cause of the unforeseen and unexpected occurrence, or of the failure of the debtor to comply with his obligation, must be independent of human will; (2) it must be impossible to foresee the
event which constitutes the caso fortuito, or if it can be foreseen, it must be impossible to avoid; (3) the occurrence must be such as to render it impossible for one debtor to fulfill his obligation in a normal manner; and (4) the obligor must be free from any participation in
the aggravation of the injury resulting to the creditor.
Facts:
On October 11, 1989, powerful typhoon Saling hit Metro Manila. Buffeted by very strong winds, the roof of Southeastern Colleges building was partly ripped off and blown away, landing on and destroying portions of the roofing of private respondents Dimaanos
house.
Private respondent alleged that the damage to their house rendered the same uninhabitable, forcing them to stay temporarily in others houses.
An ocular inspection of the destroyed building was conducted by a team of engineers headed by the city building official. The fourth floor of subject school building was declared as a structural hazard.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
47
Issue:
WON the damage of the respondents house resulting from the impact of the falling portions of the school buildings roof ripped off was due to fortuitous event and not the negligence or fault of petitioner? YES
Held:
There is no question that a typhoon or storm is a fortuitous event, a natural occurrence which may be foreseen but is unavoidable despite any amount of foresight, diligence or care. In order to be exempt from liability arising from any adverse consequence engendered
thereby, there should have been no human participation amounting to a negligent act. In other words; the person seeking exoneration from liability must not be guilty of negligence. Negligence, as commonly understood, is conduct which naturally or reasonably creates
undue risk or harm to others. It may be the failure to observe that degree of care, precaution, and vigilance which the circumstances justify demand, or the omission to do something which a prudent and reasonable man, guided by considerations which ordinarily
regulate
the
conduct
of
human
affairs,
would
do. From these premises, we proceed to determine whether petitioner was negligent, such that if it were not, the damage caused to private respondents' house could have been avoided?
At the outset, it bears emphasizing that a person claiming damages for the negligence of another has the burden of proving the existence of fault or negligence causative of his injury or loss. The facts constitutive of negligence must be affirmatively established by
competent evidence, not merely by presumptions and conclusions without basis in fact. Private respondents, in establishing the culpability of petitioner, merely relied on the aforementioned report submitted by a team which made an ocular inspection of petitioners
school building after the typhoon. As the term imparts, an ocular inspection is one by means of actual sight or viewing. What is visual to the eye through is not always reflective of the real cause behind.
Petitioners obtained a permit from the city building official before the construction of its building. Having obtained both building permit and certificate of occupancy is prima facie evidence of the regular and proper construction of subject school building. When part of its
roof needed repairs of the damage inflicted by typhoon Saling, the city engineer gave the go-signal for such repairs without any deviation from the original design. It subsequently authorized the use of the entire fourth floor of the same building. These only prove that
subject building suffers from no structural defect.
Petitioner presented its vice president for finance and administration who testified that an annual maintenance inspection and repair of subject school building were regularly undertaken. Petitioner was even willing to present its maintenance supervisor to attest to the
extent of such regular inspection but private respondents agreed to dispense with his testimony and simply stipulated that it would be corroborative of the vice presidents narration. Besides, no complaint regarding any defect on the same structure has ever been lodged
before his office prior to the institution of the case at bench. It is a matter of judicial notice that typhoons are common occurrences in this country. If subject school buildings roofing was not firmly anchored to its trusses, obviously, it could not have withstood long years
and several typhoons even stronger than Saling.
Petitioner has not been shown negligent or at fault regarding the construction and maintenance of its school building in question and that typhoon Saling was the proximate cause of the damage suffered by private respondents house.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
48
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
49
Price
Arrival/Delivery
2 steel tanks
P21,000 (total)
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
50
P25,000 each
2 electric motors
P2,000 each
(In all these contracts, there is a final clause as follows: "The sellers are not responsible for delays caused by fires, riots on land or on the sea, strikes or other cause known as Force Majeure entirely beyond the control of the sellers or their representatives.")
Petitioner notified defendant of the arrival of these goods but the latter refused to receive them and pay the prices as stipulated.
The plaintiff sued defendant, alleging, that it immediately notified the defendant of the arrival of the goods, and asked instructions from him as to the delivery thereof, and that the defendant refused to receive any of them and to pay their price. The plaintiff, further,
alleged
that
the
expellers
and
the
motors
were
in
good
condition.
Defendant and intervenor, the Manila Oil Refining and By-Products Co., Inc., denied the plaintiffs allegations and alleged as special defense that Mr. Sotelo had made the contracts in question as manager of the intervenor. They are also claiming for damages as a
counterclaim or setoff due to plaintiffs delay in making delivery of the goods, which the intervenor intended to use in the manufacture of coconut oil, and for damages it suffered for the nondelivery of the tanks and on account of the expellers and the motors not having
arrived in due time.
The lower court ruled in favor of defendant in so far as the tanks and the motors are concerned but ordered it to receive the expellers and pay for their price with interest. Both parties appealed.
ISSUE:
WON plaintiff has fulfilled its obligation in brining the goods to Manila in due time. (Otherwise, plaintiff is liable for delay.)
HELD:
Yes. To solve the question, it is necessary to determine what period was fixed for the delivery of the goods. Under these stipulations, it cannot be said that any definite date was fixed for the delivery of the goods.
It appears that these contracts were executed at the time of the world war when there existed rigid restrictions on the export from the United States of articles like the machinery in question. At the time of the execution of the contracts, the parties were not unmindful of
the
contingency
of
the
United
States
Government
not
allowing
the
export
of
the
goods,
nor
of
the
fact
that
the
other
foreseen
circumstances
therein
stated
might
prevent
it.
The term which the parties attempted to fix is so uncertain that one cannot tell just whether, as a matter of fact, those articles could be brought to Manila or notthe obligation must be regarded as conditional. And as the export of the machinery in question was as
stated in the contract, contingent upon the sellers obtaining certificate of priority and permission of the United States Government, subject to the rules and regulations, as well as to railroad embargoes, then the delivery was subject to a condition the fulfillment of
which depended not only upon the effort of the herein plaintiff, but upon the will of third persons who could in no way be compelled to fulfill the condition. In cases like this, which are not expressly provided for, but impliedly covered, by the Civil Code, the
obligor will be deemed to have sufficiently performed his part of the obligation, if he has done all that was in his power, even if the condition has not been fulfilled in reality.
In an obligation to deliver, time is regarded unessential when the time of delivery is not fixed in the contract. In such case, the delivery must be made within a reasonable time.
The record shows that the plaintiff did all within its power to have the machinery arrive at Manila as soon as possible, and immediately upon its arrival it notified the purchaser of the fact and offered to deliver it to him. Taking these circumstances into account, the said
machinery was brought to Manila by the plaintiff within a reasonable time. Therefore, the plaintiff has not been guilty of any delay in the fulfillment of its obligation, and, consequently, it could not have incurred any of the liabilities mentioned by the intervenor in its
counterclaim or set-off.
*As to the issue of agency, the court held that the Mr. Sotelos acts were binding upon its principal.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
51
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
52
8 1. The stipulated price of P1,250,000.00 shall be paid by the VENDEE to the VENDOR in the following manner:(a) P200,000.00 upon signing x x x the Contract To Sell,(b) P300,000.00 payable on or before April 30, 1993,(c) P330,000.00 payable on or before July
31, 1993,(d) P417,000.00 payable to the New Capitol Estate, for 15 years at P6,867.12 a month,
2. x x x In the event the VENDEE fails to pay the second installment on time, the VENDEE will pay starting May 1, 1993 a 2% interest on the P300,000.00 monthly. Likewise, in the event the VENDEE fails to pay the amount of P630,000.00 on the stipulated time, this
CONTRACT TO SELL shall likewise be deemed cancelled and rescinded and x x x 5% of the total contract price of P1,250,000.00 shall be deemed forfeited in favor of the VENDOR. Unpaid monthly amortization shall likewise be deducted from the initial down payment
in favor of the VENDOR.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
53
YES.
On the installments
The letter expressing willingness to pay without accompanying payment, or consignation of the payment in court produces no effect and did not suspend the running of interest.
Tender of payment "is the manifestation by the debtor of a desire to comply with or pay an obligation. If refused without just cause, the tender of payment will discharge the debtor of the obligation to pay but only after a valid consignation of the sum due shall have been
made with the proper court." "To have the effect of payment and the consequent extinguishment of the obligation to pay, the law requires the companion acts of tender of payment and consignation."
On the amortizations
The spouses Bonrostro want to be relieved from paying interest on the amount of P214,492.62 which the spouses Luna paid to Bliss as amortizations, by asserting that they were prevented by the latter from fulfilling such obligation. They invoke Art. 1186 of the Civil
Code which provides that "the condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment."
However, Art. 1186 speaks of a situation where it is the obligor who voluntarily prevents fulfillment of the condition, not the obligee. Moreover, the mere intention to prevent the happening of the condition or the mere placing of ineffective obstacles to its compliance,
without actually preventing fulfillment is not sufficient for the application of Art. 1186. Two requisites must concur for its application, to wit: (1) intent to prevent fulfillment of the condition; and, (2) actual prevention of compliance.
Here, Sps. Luna is not the obligor but the obligee, and their actions were only sought to ensure and not defeat the fulfillment of the contract. Their payment (1) avoided the cancellation of both the contract of sale, and consequently, the contract to sell; and (2) avoid the
penalty for unpaid amortizations equivalent to 1/10th of 1% per day of delay shall be imposed for all payments made after due date (3% monthly or 36% per annum rate of interest).
Under the circumstances and considering that the spouses Bonrostro are obviously in delay in complying with their obligation to pay the amortizations due from February 1993 to January 1995 for which the spouses Luna paid P214,492.62,45 the CA correctly ordered
the reimbursement to the latter of the said amount with interest. "Delay in the performance of an obligation is looked upon with disfavor because, when a party to a contract incurs delay, the other party who performs his part of the contract suffers damages thereby." As
discussed, the spouses Luna obviously suffered damages brought about by the failure of the spouses Bonrostro to comply with their obligation on time. "And, sans elaboration of the matter at hand, damages take the form of interest x x x."
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
54
The Promissory Notes subject of the instant case became due and demandable early on and the only reason the mortgaged properties were not foreclosed was because of the restraining order from the court. Petitioners made a partial payment of P902,800.00 but no
subsequent payments were made. Although DBP could have foreclosed the mortgaged properties, it instead agreed to restructure the loan. In fact, e several extensions for petitioners to settle their loans, but they never did, thus, prompting DBP to cancel the
Restructuring Agreement.
Petitioners, however, insist that DBPs cancellation of the Restructuring Agreement justifies the extinguishment of their loan obligation under the Principle of Constructive Fulfillment found in Article 1186 of the Civil Code.
We do not agree.
As aptly pointed out by the CA, Article 1186 of the Civil Code, which states that "the condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment," does not apply in this case, viz:
Article 1186 enunciates the doctrine of constructive fulfillment of suspensive conditions, which applies when the following three (3) requisites concur, viz: (1) The condition is suspensive; (2) The obligor actually prevents the fulfillment of the
condition; and (3) He acts voluntarily. Suspensive condition is one the happening of which gives rise to the obligation. It will be irrational for any Bank to provide a suspensive condition in the Promissory Note or the Restructuring Agreement that
will allow the debtor-promissor to be freed from the duty to pay the loan without paying it.
Besides, petitioners have no one to blame but themselves for the cancellation of the Restructuring Agreement. It is significant to point out that when the Regional Credit Committee reconsidered petitioners proposal to restructure the loan, it imposed additional
conditions which petitioners failed to do. DBP therefore had reason to cancel the Restructuring Agreement.
Moreover, since the Restructuring Agreement was cancelled, it could not have novated or extinguished petitioners loan obligation. And in the absence of a perfected Restructuring Agreement, there was no impediment for DBP to exercise its right to foreclose the
mortgaged properties.
2. The foreclosure sale is not valid.
But while DBP had a right to foreclose the mortgage, we are constrained to nullify the foreclosure sale due to the banks failure to send a notice of foreclosure to petitioners.
We have consistently held that unless the parties stipulate, "personal notice to the mortgagor in extrajudicial foreclosure proceedings is not necessary" because Section 3 of Act 3135 only requires the posting of the notice of sale in three public places and the
publication of that notice in a newspaper of general circulation.
Paragraph 11 of the Mortgage contract requires this
However, no notice of the extrajudicial foreclosure was sent by DBP to petitioners about the foreclosure sale. The letters advising petitioners to immediately pay their obligation to avoid the impending foreclosure of their mortgaged properties are not the notices required
in paragraph 11 of the Mortgage. The failure of DBP to comply with their contractual agreement with petitioners, i.e., to send notice, is a breach sufficient to invalidate the foreclosure sale.
Precisely, the purpose of the foregoing stipulation is to apprise respondent of any action which petitioner might take on the subject property, thus according him the opportunity to safeguard his rights. When petitioner failed to send the notice of foreclosure sale to
respondent, he committed a contractual breach sufficient to render the foreclosure sale on November 23, 1981 null and void. (Emphasis supplied)
Article 1191
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
55
UNIVERSAL FOOD CORP V. CA, 33 SCRA 1 NB, CONCURRING OPINION OF JBL REYES
FACTS:
In 1938, Private Respondent Magdalo Francisco, Sr. invented a formula for the manufacture of a food seasoning sauce derived from banana fruits popularly known as Mafran. Magdalo later registered his trademark over the product as owner and inventor and
commenced the commercial manufacture of the Mafran. In 1960, due to lack of sufficient capital to finance the expansion of the business, Magdalo secured the financial assistance of Tirso Reyes who, after a series of negotiations, formed with other people, the
Petitioner Universal Food Corporation (UFC). Later, UFC and Magdalo executed a Bill of Assignment, wherein Magdalo was appointed chief chemist of UFC while Private Respondent Victoriano Francisco was appointed auditor and superintendent. Since the start of
UFCs operations, Magdalo, whenever preparing the secret materials never allowed anyone to enter the laboratory in order to keep the formula secret to himself. However, Magdalo expressed a willingness to give the formula to UFC provided that the same should be
kept inside a safe to be opened only when he is already incapacitated to perform his duties as chief chemist, but UFC never acquired a safe for that purpose. Later, UFCs president and general Manager Tirso Reyes wrote Magdalo, requesting him to permit one or two
members of his family to observe the preparation of Mafran, but the request was denied. In spite of this, Tirso did not compel or force Magdalo to accede to said request.
Subsequently, due to the alleged scarcity and high prices of raw materials, the UFCs secretary-treasurer issued a memorandum, duly approved by Tirso that only supervisor Ricardo Francisco should be retained in the factory and that the salary of Magdalo should be
stopped for the time being until the corporation should resume its operation. However, 5 days later, Tirso issued a memorandum to Victoriano ordering him to report to the factory and produce Mafran Sauce at the rate of not less than 100 cases a day and with
instructions to take only the necessary daily employees without employing permanent employees. Several memoranda were later on issued by Tirso in connection with the full swing production of Mafran and the hiring of additional employees for the purpose. Due to
these successive memoranda without Magdalo being recalled back to work, he filed against UFC an action for the rescission of the Bill of Assignment and prayed that UFC be adjudged to be without any right to use the Mafran trademark and formula. Tirso
subsequently requested Magdalo to report for duty, but the latter declined because of the pending action.
UFC contended that the Private Respondents are not entitled to rescission because it was Magdalo who had been remiss in the compliance of his contractual obligation to cede and transfer to UFC the formula for Mafran sauce. UFC argued that the right to rescind a
reciprocal obligation is not absolute and can be demanded only if one is ready, willing and able to comply with his own obligation and the other is not. UFC contends that a suit for rescission is primary, and can only be resorted to when there is no other remedy, which is
not the case here.
ISSUE:
(1) Whether Magdalo is entitled to rescind the Bill of Assignment.
(2) Whether the remedy of rescission is primary or subsidiary.
HELD:
(1) Yes. UFC violated the Bill of Assignment by terminating the services of Magdalo without lawful and justifiable cause. The general rule is that rescission of a contract will not be permitted for a slight or casual breach, but only for such substantial and fundamental
breach as would defeat the very object of the parties in making the agreement. The question of whether a breach of a contract is substantial depends upon the attendant circumstances. In this case the dismissal of Magdalo as the permanent chief chemist of the
corporation is a fundamental and substantial breach of the Bill of Assignment. He was dismissed without any fault or negligence on his part. Thus, apart from the legal principle that the option to demand performance or ask for rescission of a contract belongs to the
injured party, the fact remains that the Private Respondents had no alternative but to file the action for rescission and damages.
Magdalo would not have agreed to the other terms of the Bill of Assignment were it not for the basic commitment of UFC to appoint him as its second vice-president and chief chemist on a permanent basis; that in the manufacture of Mafran sauce and other food
products he would have "absolute control and supervision over the laboratory assistants and personnel and in the purchase and safeguarding of said products;" and that only by all these measures could Magdalo preserve effectively the secrecy of the formula, prevent
its proliferation, enjoy its monopoly, and, in the process afford and secure for himself a lifetime job and steady income.
The salient provisions of the Bill of Assignment, namely: the transfer to the corporation of only the use of the formula; the appointment of Magdalo as second vice-president and chief chemist on a permanent status, the obligation of Magdalo to continue research on the
patent to improve the quality of the products of the corporation, and the need of absolute control and supervision over the laboratory assistants and personnel and in the purchase and safekeeping of the chemicals and other mixtures used in the preparation of said
product are so interdependent that violation of one would result in virtual nullification of the rest.
(2) The SC majority impliedly said the remedy of rescission is subsidiary to the existence of any other remedy or recourse in law. They stated, however, as no other remedy was available to Magdalo, he can resort to rescission.
JBL Reyes, concurring:
I would like to add that the argument of petitioner, that the rescission demanded by the respondent-appellee, Magdalo Francisco, should be denied because under Article 1383 of the Civil Code of the Philippines rescission can not be demanded except when the party
suffering damage has no other legal means to obtain reparation, is predicated on a failure to distinguish between a rescission for breach of contract [faith] under Article 1191 of the Civil Code and a rescission by reason of lesion or economic prejudice, under Article
1381, et seq. The rescission on account of breach of stipulations is not predicated on injury to economic interests of the party plaintiff but on the breach of faith by the defendant, that violates the reciprocity between the parties. It is not a subsidiary action, and Article
1191 may be scanned without disclosing anywhere that the action for rescission thereunder is subordinated to anything other than the culpable breach of his obligations by the defendant. This rescission is in principal action retaliatory in character, it being unjust that a
party be held bound to fulfill his promises when the other violates his. As expressed in the old Latin aphorism: "Non servanti fidem, non est fides servanda." Hence, the reparation of damages for the breach is purely secondary.
On the contrary, in the rescission by reason of lesion or economic prejudice, the cause of action is subordinated to the existence of that prejudice, because it is the raison d'etre as well as the measure of the right to rescind. Hence, where the defendant makes good the
damages caused, the action cannot be maintained or continued, as expressly provided in Articles 1383 and 1384. But the operation of these two articles is limited to the cases of rescission for lesion enumerated in Article 1381 of the Civil Code of the
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
56
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
57
9 12) That upon failure of the BUYER to fulfill any of the conditions herein stipulated, BUYER automatically and irrevocably authorizes OWNER to recover extra-judicially, physical possession of the land, building and other improvements which are the subject of this
contract, and to take possession also extra-judicially whatever personal properties may be found within the aforesaid premises from the date of said failure to answer for whatever unfulfilled monetary obligations BUYER may have with OWNER; and this contract shall
be considered as without force and effect also from said date; all payments made by the BUYER to OWNER shall be deemed as rental payments without prejudice to OWNER's right to collect from BUYER whatever other monthly installments and other money
obligations which may have been paid until BUYER vacates the aforesaid premises; upon his failure to comply with any of the herein conditions BUYER forfeits all money claims against OWNER and shall pay a monthly rental equivalent to his monthly installment under
Condition 1 of this Contract from the date of the said failure to the date of recovery of physical possession by OWNER of the land, building and other improvements which are the subject of this Contract; BUYER shall not remove his personal properties without the
previous written consent of OWNER, who, should he take possession of such properties following the aforesaid failure of BUYER, shall return the same to BUYER only after the latter shall have fulfilled all money claims against him by OWNER; in all cases herein,
demand is waived;
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
58
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
59
Court
of
the
While
P3,920
First
Contract
it
plus
7%
is
interest
Instance
to
true
that
per
annum,
it
rendered
Sell
is
par.2
likewise
judgment
been
of
true
that
automatically
the
under
par
contract
12
the
in
favor
and
obligated
seller
is
of
validly
the
obligated
to
the
plaintiffs,
cancelled
plaintiffs-appellees
transfer
the
title
hence
by
to
to
the
pay
buyer
upon
this
the
the
payment
appeal.
defendants-appellants?
of
defendants
the
said
the
price.
The
contract
to
sell,
being
a
contract
of
adhesion,
must
be
construed
against
the
party
causing
it.
The
Supreme Court agree with the observation of the plaintiffs-appellees to the effect that the terms of a contract must be interpreted against the party who drafted the same, especially where such interpretation will help effect justice to buyers who, after having invested a
big amount of money, are now sought to be deprived of the same thru the prayed application of a contract clever in its phraseology, condemnable in its lopsidedness and injurious in its effect which, in essence, and its entirety is most unfair to the buyers.
Thus, since the principal obligation under the contract is only P3,920.00 and the plaintiffs-appellees have already paid an aggregate amount of P4,533.38, the courts should only order the payment of the few remaining installments but not uphold the cancellation of the
contract. Upon payment of the balance of P671.67 without any interest thereon, the defendant must immediately execute the final deed of sale in favor of the plaintiffs and execute the necessary transfer of documents, as provided in par.12 of the contract.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
60
It was stipulated that the bout would be held at the Rizal Memorial Stadium in Manila on September 30, 1961 or not later than thirty [30] days thereafter should a postponement be mutually agreed upon, and that Boysaw would not, prior to the date of the boxing contest,
engage in any other such contest without the written consent of Interphil Promotions, Inc.
Boysaw fought Louis Avila on June 19, 1961 in Las Vegas Nevada. Ketchum assigned to J. Amado Araneta the managerial rights over Solomon Boysaw. J. Amado Araneta assigned to Alfredo J. Yulo, Jr. the managerial rights over Boysaw that he earlier acquired from
Ketchum and Ruskay. Yulo, Jr. wrote to Sarreal informing him of his acquisition of the managerial rights over Boysaw and indicating his and Boysaw's readiness to comply with the boxing contract of May 1, 1961.
On the same date, on behalf of Interphil Sarreal wrote a letter to the Games and Amusement Board [GAB] expressing concern over reports that there had been a switch of managers in the case of Boysaw, of which he had not been formally notified, and requesting that
Boysaw be called to an inquiry to clarify the situation.
The GAB called a series of conferences of the parties concerned culminating in the issuance of its decision to schedule the Elorde-Boysaw fight for November 4, 1961. Yulo, Jr. refused to accept the change in the fight date, maintaining his refusal even after Sarreal on
September 26, 1961, offered to advance the fight date to October 28, 1961 which was within the 30-day period of allowable postponements provided in the principal boxing contract of May 1, 1961.
While an Elorde-Boysaw fight was eventually staged, the fight contemplated in the May 1, 1961 boxing contract never materialized.
As a result of the foregoing occurrences, on October 12, 1961, Boysaw and Yulo, Jr. sued Interphil, Sarreal, Sr. and Manuel Nieto, Jr. in the CFI of Rizal [Quezon City Branch] for damages allegedly occasioned by the refusal of Interphil and Sarreal, aided and abetted
by Nieto, Jr., then GAB Chairman, to honor their commitments under the boxing contract of May 1,1961.
ISSUE:
WON there was a violation of the fight contract of May 1, 1961; and if there was, who was guilty of such violation.
HELD:
YES. Boysaw and his manager violated the contract themselves
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
61
While the contract imposed no penalty for such violation, this does not grant any of the parties the unbridled liberty to breach it with impunity. Our law on contracts recognizes the principle that actionable injury inheres in every contractual breach. Thus:
Those who in the performance of their obligations are guilty of fraud, negligence or delay, and those who in any manner contravene the terms thereof, are liable for damages. [Art. 1170, Civil Code].
Also:
The power to rescind obligations is implied, in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. [Part 1, Art. 1191, Civil Code].
There is no doubt that the contract in question gave rise to reciprocal obligations. "Reciprocal obligations are those which arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the
obligation of the other. They are to be performed simultaneously, so that the performance of one is conditioned upon the simultaneous fulfillment of the other" [Tolentino, Civil Code of the Philippines, Vol. IV, p. 175.1
The power to rescind is given to the injured party. "Where the plaintiff is the party who did not perform the undertaking which he was bound by the terms of the agreement to perform, he is not entitled to insist upon the performance of the contract
by the defendant, or recover damages by reason of his own breach " [Seva vs. Alfredo Berwin 48 Phil. 581, Emphasis supplied].
Another violation of the contract in question was the assignment and transfer, first to J. Amado Araneta, and subsequently, to appellant Yulo, Jr., of the managerial rights over Boysaw without the knowledge or consent of Interphil.
The assignments, from Ketchum to Araneta, and from Araneta to Yulo, were in fact novations of the original contract which, to be valid, should have been consented to by Interphil.
Novation which consists in substituting a new debtor in the place of the original one, may be made even without the knowledge or against the will of the latter, but not without the consent of the creditor. [Art. 1293, Civil Code, emphasis
supplied].
That appellant Yulo, Jr., through a letter, advised Interphil on September 5, 1961 of his acquisition of the managerial rights over Boysaw cannot change the fact that such acquisition, and the prior acquisition of such rights by Araneta were done without the consent of
Interphil. There is no showing that Interphil, upon receipt of Yulo's letter, acceded to the "substitution" by Yulo of the original principal obligor, who is Ketchum. The logical presumption can only be that, with Interphil's letter to the GAB expressing concern over reported
managerial changes and requesting for clarification on the matter, the appellees were not reliably informed of the changes of managers. Not being reliably informed, appellees cannot be deemed to have consented to such changes.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
62
Under the law when a contract is unlawfully novated by an applicable and unilateral substitution of the obligor by another, the aggrieved creditor is not bound to deal with the substitute.
The consent of the creditor to the change of debtors, whether in expromision or delegacion is an, indispensable requirement . . . Substitution of one debtor for another may delay or prevent the fulfillment of the obligation by reason of the
inability or insolvency of the new debtor, hence, the creditor should agree to accept the substitution in order that it may be binding on him.
In a show of accommodation, the appellees offered to advance the November 4, 1961 fight to October 28, 1961 just to place it within the 30- day limit of allowable postponements stipulated in the original boxing contract.
The refusal of Yulo to accept a postponement without any other reason but the implementation of the terms of the original boxing contract entirely overlooks the fact that by virtue of the violations they have committed of the terms thereof, they have forfeited any right to
its enforcement.
On the validity of the fight postponement, the violations of the terms of the original contract by Yulo vested the Interphil with the right to rescind and repudiate such contract altogether. That they sought to seek an adjustment of one particular covenant of the contract, is
under the circumstances, within the appellee's rights.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
63
The promise of the spouses to sell was subject to the fulfillment of the suspensive condition of full payment of the purchase price by the petitioner. Petitioner, however, failed to complete payment of the purchase price. The non-fulfillment of the condition of full payment
rendered the contract to sell ineffective and without force and effect. It must be stressed that the breach contemplated in Article 1191 of the New Civil Code is the obligor's failure to comply with an obligation. Failure to pay, in this instance, is not even a breach but
merely an event which prevents the vendor's obligation to convey title from acquiring binding force. Hence, the agreement of the parties in the case at bench may be set aside, but not because of a breach on the part of petitioner for failure to
complete payment of the purchase price. Rather, his failure to do so brought about a situation which prevented the obligation of respondent spouses to convey title from acquiring an obligatory force.
Discussion on rescission under Article 1191 in relation to rescission under Article 1383.
Petitioner contends that Article 1191 of the New Civil Code is not applicable since he has already paid respondent spouses a considerable sum and has therefore substantially complied with his obligation. He cites Article 1383 instead, to the effect that where specific
performance is available as a remedy, rescission may not be resorted to.
Rescission, as contemplated in Articles 1380, et seq., of the New Civil Code, is a remedy granted by law to the contracting parties and even to third persons, to secure the reparation of damages caused to them by a contract, even if this should be valid, by restoration
of things to their condition at the moment prior to the celebration of the contract. It implies a contract, which even if initially valid, produces a lesion or a pecuniary damage to someone.
On the other hand, Article 1191 of the New Civil Code refers to rescission applicable to reciprocal obligations. Reciprocal obligations are those which arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of
one is dependent upon the obligation of the other. They are to be performed simultaneously such that the performance of one is conditioned upon the simultaneous fulfillment of the other. Rescission of reciprocal obligations under Article 1191 of the New Civil Code
should be distinguished from rescission of contracts under Article 1383. Although both presuppose contracts validly entered into and subsisting and both require mutual restitution when proper, they are not entirely identical.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
64
FACTS:
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
65
However, despite its full payment of the purchase price and subsequent demands, GPI failed to execute the deed and to deliver the title and physical possession of the subject lot.
Thus, Sps. Fajardo filed before the Housing and Land Use Regulatory Board-Expanded National Capital Region Field Office (HLURBENCRFO) a complaint for specific performance or rescission of contract with damages against GPI and the members of its Board of
Directors.
Sps. Fajardo averred that GPI violated Section 20 of Presidential Decree No. 957 10 (PD 957) due to its failure to construct and provide water facilities, improvements, infrastructures and other forms of development including water supply and lighting facilities for the
subdivision project. They also alleged that GPI failed to provide boundary marks for each lot and that the mother title including the subject lot had no technical description and was even levied upon by the Bangko Sentral ng Pilipinas (BSP) without their knowledge.
They thus prayed that GPI be ordered to execute the deed, to deliver the corresponding certificate of title and the physical possession of the subject lot within a reasonable period, and to develop Evergreen Executive Village; or in the alternative, to cancel and/or rescind
the contract and refund the total payments made plus legal interest.
For their part, claimed that the failure to deliver the title to Sps. Fajardo was beyond their control because while GPI's petition for inscription of technical description was favorably granted by the Regional Trial Court the same was reversed by the CA; this caused the
delay in the subdivision of the property into individual lots with individual titles. Given the foregoing incidents, petitioners thus argued that Article 1191 of the Civil Code (Code) the provision on which Sps. Fajardo anchor their right of rescission remained inapplicable
since they were actually willing to comply with their obligation but were only prevented from doing so due to circumstances beyond their control. Separately, petitioners pointed out that BSP's adverse claim/levy which was annotated long after the execution of the
contract had already been settled.
ISSUE:
WON Sps. Fajardo have no right to rescind the contract considering that GPI's inability to comply therewith was due to reasons beyond its control and thus, should not be held liable to refund the payments they had received.
HELD:
NO. Sps. Fajardo have a right to rescind the contract.
RATIO:
It is settled that in a contract to sell, the seller's obligation to deliver the corresponding certificates of title is simultaneous and reciprocal to the buyer's full payment of the purchase price. In this relation, Section 25 of PD 957, which regulates the subject transaction,
imposes on the subdivision owner or developer the obligation to cause the transfer of the corresponding certificate of title to the buyer upon full payment.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
66
Neither did petitioners sufficiently explain why GPI took no positive action to cause the immediate filing of a new petition for inscription within a reasonable time from notice of the July 15, 2003 CA Decision which dismissed GPIs earlier petition based on technical
defects, this notwithstanding Sps. Fajardo's full payment of the purchase price and prior demand for delivery of title. Clearly, the long delay in the performance of GPI's obligation from date of demand was unreasonable and unjustified. It cannot therefore be denied
that GPI substantially breached its contract to sell with Sps. Fajardo which thereby accords the latter the right to rescind the same pursuant to Article 1191 of the Code, viz:
ART. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law.
It is noteworthy to point out that rescission does not merely terminate the contract and release the parties from further obligations to each other, but abrogates the contract from its inception and restores the parties to their original positions as if no contract has been
made.31 Consequently, mutual restitution, which entails the return of the benefits that each party may have received as a result of the contract, is thus required. 32 To be sure, it has been settled that the effects of rescission as provided for in Article 1385 of the Code are
equally applicable to cases under Article 1191, to wit:
xxxx
Mutual restitution is required in cases involving rescission under Article 1191.1wphi1 This means bringing the parties back to their original status prior to the inception of the contract. Article 1385 of the Civil Code provides, thus:
ART. 1385. Rescission creates the obligation to return the things which were the object of the contract, together with their fruits, and the price with its interest; consequently, it can be carried out only when he who demands rescission can return
whatever he may be obligated to restore.
Neither shall rescission take place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith.
In this case, indemnity for damages may be demanded from the person causing the loss.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
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This Court has consistently ruled that this provision applies to rescission under Article 1191:
Since Article 1385 of the Civil Code expressly and clearly states that "rescission creates the obligation to return the things which were the object of the contract, together with their fruits, and the price with its interest," the Court finds no justification to sustain petitioners
position that said Article 1385 does not apply to rescission under Article 1191. x x x
In this light, it cannot be denied that only GPI benefited from the contract, having received full payment of the contract price plus interests as early as January 17, 2000, while Sps. Fajardo remained prejudiced by the persisting non-delivery of the subject lot despite full
payment. As a necessary consequence, considering the propriety of the rescission as earlier discussed, Sps. Fajardo must be able to recover the price of the property pegged at its prevailing market value.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
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Facts:
Healthcheck (HCI) is a health maintenance organization that provides health and medical insurance to its clients. It maintains a network of accredited hospitals and medical clinics, one of which is the De La Salle University Medical Center (DLSUMC) located at
Dasmarias, Cavite. Eds Manufacturing (EMI) entered into a one-year contract with HCI for the insurance coverage of the formers employees. After two months within the program, problems began to arise as HCIs accreditation with DLSUMC was suspended because
of the financial crisis. It happened again in two more instances and with other hospitals, prompting EMI to rescind the agreement. However, EMIs failed to collect the HMO cards and surrender them to HCI as stipulated in the agreement in order for the latter to finalize
the reconciliation of the accounts. Thus, EMI employees were still using HCIs services beyond the pre-termination date. HCI reminded EMI that it would consider the agreement ongoing and subsisting until the cards are surrendered. Without responding to this
reminder, EMI sent two letters demanding the payment of the premiums that remained unutilized from the date the agreement was rescinded.
Pre-empting EMIs threats of legal action, HCI instituted the present action based on the unlawful pre-termination of the agreement and EMIs failure to submit to a joint reconciliation of accounts and deliver such assets belonging to HCI. EMI responded by alleging that
HCI reneged on its duty to provide adequate medical coverage after paying the premium in full and interposed a counterclaim for damages and unutilized premiums. The trial court ruled in favor of HCI. The same was reversed on appeal, stating that although HCI
substantially breached its obligations, EMI did not validly rescind the agreement. Thus, the CA dismissed both the complaint by HCI and the counterclaim of EMI.
The trial court ruled in favor of HCI. It found that EMIs rescission of the Agreement on September 3, 1998 was not done through court action or by a notarial act and was based on casual or slight breaches of the contract. Moreover, despite the announced rescission,
the employees of EMI continued to avail of HCIs services until March 1999. The services rendered by HCI from May 1998 to March 1999 purportedly came to a total of P10,149,821.13. The court deducted from this figure the premium paid by EMI, leaving a net
payable to HCI of P1,323,513.63, in addition to moral damages and attorneys fees. EMIs counterclaims, on the other hand, were dismissed for lack of merit. 3
On appeal, the CA reversed the decision of the Regional Trial Court (RTC) of Pasig City and ruled that although Healthcheck International, (HCI) substantially breached their agreement, it also appears that Eds Manufacturing, Inc. (EMI) did not validly rescind the
contract between them. Thus, the CA dismissed the complaint filed by HCI, while at the same time dismissing the counterclaim filed by EMI.
ISSUE:
WON there was a valid rescission of the agreement between the parties.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
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HELD:
No. The general rule is that rescission (more appropriately, resolution) of a contract will not be permitted for a slight or casual breach, but only for such substantial and fundamental violations as would defeat the very object of the parties in making the agreement.
In his concurring opinion in Universal Food Corporation v. Court of Appeals, Justice J.B.L. Reyes clarifies:
It is probable that the petitioners confusion arose from the defective technique of the new Code that terms both instances as "rescission" without distinction between them; unlike the previous Spanish Code of 1889 that differentiated between "resolution" for
breach of stipulations from "rescission" by reason of lesion or damage. But the terminological vagueness does not justify confusing one case with the other, considering the patent difference in causes and results of either action.
Thus, the rescission referred to in Article 1191, more appropriately referred to as resolution, is on the breach of faith by one of the parties which is violative of the reciprocity between them.
In the present case, it is apparent that HCI violated its contract with EMI to provide medical service to its employees in a substantial way. As aptly found by the CA, there was gross denial of services to EMIs employees at a time when the delivery was crucial to their
health and lives. However, although a ground exists to validly rescind the contract between the parties, it appears that EMI failed to judicially rescind the same. In Iringan v. Court of Appeals, the SC reiterated the rule that in the absence of a stipulation, a party
cannot unilaterally and extrajudicially rescind a contract.
Clearly, a judicial or notarial act is necessary before a valid rescission can take place, whether or not automatic rescission has been stipulated. It is to be noted that the law uses the phrase "even though" emphasizing that when no stipulation is found on
automatic rescission, the judicial or notarial requirement still applies.
But in the SCs view, even if Article 1191 were applicable, petitioner would still not be entitled to automatic rescission. The requirement for the right to resolve reciprocal obligations under the old provision has been retained in the third paragraph of Article 1191, which
states that "the court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period." Consequently, even if the right to rescind is made available to the injured party, the obligation is not ipso facto erased by the failure of the other
party to comply with what is incumbent upon him.
The party entitled to rescind should apply to the court for a decree of rescission. The right cannot be exercised solely on a partys own judgment that the other committed a breach of the obligation. The operative act which produces the resolution of the
contract is the decree of the court and not the mere act of the vendor. Since a judicial or notarial act is required by law for a valid rescission to take place, the letter written by respondent declaring his intention to rescind did not operate to validly rescind the
contract.
What is more, it is evident that EMI had not rescinded the contract at all. The reports submitted by show entries as late as March 1999 (beyond pre-termination), signifying that EMI employees were availing of the services until the contract period were almost over. The
continued use by them of their privileges under the contract, with the apparent consent of EMI, belies any intention to cancel or rescind it, even as they felt that they ought to have received more than what they got.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
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In Eds, Eds unilaterally rescinded and it appears that Healthcheck was supposed to return the unused premiums upon delivery of the HMO cards (allow rescission so to speak) but Eds did not deliver so the employees were still able to use the cards (so this pertains to
the risk that Eds took for unilaterally rescinding). SC said there was indeed substantial breach by HCI but it is the judicial act that produces the effect. So when Eds "rescinded," such "rescission" was not yet operative and the continued use of Eds of HCI's services
beyond the contract period belied its intention to rescind.
Article 1192
Art. 1192. In case both parties have committed a breach of the obligation, the liability of the first infractor shall be equitably tempered by the courts. If it cannot be determined which of the parties first violated the contract, the same shall be
deemed extinguished, and each shall bear his own damages. (n)
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
71
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
72
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
73
it
tenable
for
Singson
Encarnacion
to
discontinue
the
lease
of
Baldomar
and
her
son?
RULING:
The continuance and fulfillment of the contract of lease cannot be made to depend solely and exclusively upon the free and uncontrolled choice of the lessees between continuing paying the rentals or not, completely depriving the owner of all say in the matter.
Furthermore, carried to its logical conclusion, the defense thus set up by defendant Lefrado Fernando would leave to the sole and exclusive will of one of the contracting parties (defendants in this case) the validity and fulfillment of the contract of lease, within the
meaning of article 1256 of the Civil Code, since the continuance and fulfillment of the contract would then depend solely and exclusively upon their free and uncontrolled choice between continuing paying the rentals or not, completely depriving the owner of all say in
the matter. If this defense were to be allowed, so long as defendants elected to continue the lease by continuing the payment of the rentals, the owner would never be able to discontinue it; conversely, although the owner should desire the lease to continue, the lessees
could effectively thwart his purpose if they should prefer to terminate the contract by the simple expedient of stopping payment of the rentals. This, of course, is prohibited by the aforesaid article of the Civil Code.
FACTS:
A contract of lease was executed on January 25, 1980 over a piece of land owned by the plaintiffs Eleizegui (Lessor) to the Manila Lawn Tennis Club, an English association (represented by Mr. Williamson) for a fixed consideration of P25 per month and accordingly, to
last at the will of the lessee. Under the contract, the lessee can make improvements deemed desirable for the comfort and amusement of its members. It appeared that the plaintiffs terminated the lease right on the first month. The defendant is in the belief that there
can be no other mode of terminating the lease than by its own will, as what they believe has been stipulated.
As a result the plaintiff filed a case for unlawful detainer for the restitution of the land claiming that article 1569 of the Civil Code provided that a lessor may judicially dispossess the lessee upon the expiration of the conventional term or of the legal term; the conventional
term that is, the one agreed upon by the parties; the legal term, in defect of the conventional, fixed for leases by articles 1577 and 1581. The Plaintiffs argued that the duration of the lease depends upon the will of the lessor on the basis of Art. 1581 which provides
that, "When the term has not been fixed for the lease, it is understood to be for years when an annual rental has been fixed, for months when the rent is monthly. . . ." The second clause of the contract provides as follows: "The rent of the said land is fixed at 25 pesos
per month."
The lower court ruled in favor of the Plaintiffs on the basis of Article 1581 of the Civil Code, the law which was in force at the time the contract was entered into. It is of the opinion that the contract of lease was terminated by the notice given by the plaintiff. The judgment
was entered upon the theory of the expiration of a legal term which does not exist, as the case requires that a term be fixed by the courts under the provisions of article 1128 with respect to obligations which, as is the present, are terminable at the will of the obligee.
ISSUES:
Whether or not the parties have agreed upon the duration of the lease, and that the lease depends upon the will of the lessee.
HELD:
YES, the parties have agreed upon a term hence Art. 1581 is inapplicable. The legal term cannot be applied under Art 1581 as it appears that there was actually an agreement between the parties as to the duration of the lease, albeit implied that the lease is to be
dependent upon the will of the lessee. It would be absurd to accept the argument of the plaintiff that the contract was terminated at its notice, given this implication.
Interestingly, the contract should not be understood as one stipulated as a life tenancy, and still less as a perpetual lease since the terms of the contract express nothing to this effect, even if they implied this idea. If the lease could last during such time as the lessee
might see fit, because it has been so stipulated by the lessor, it would last, first, as long as the will of the lessee that is, all his life; second, during all the time that he may have succession, inasmuch as he who contracts does so for himself and his heirs. (Art. 1257 of
the Civil Code.) The lease in question does not fall within any of the cases in which the rights and obligations arising from a contract cannot be transmitted to heirs, either by its nature, by agreement, or by provision of law. Moreover, being a lease, then it must be for a
determinate period. (Art. 1543.) By its very nature it must be temporary, just as by reason of its nature, an emphyteusis must be perpetual, or for an unlimited period. (Art. 1608.)
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
74
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
75
FACTS:
J. M. Tuason & Co., Inc. is the owner of a big tract land situated in Quezon City, otherwise known as the Sta. Mesa Heights Subdivision, and covered by a Torrens title in its name. On July 28, 1950, through Gregorio Araneta, Inc., it (Tuason & Co.) sold a portion thereof
to Philippine Sugar Estates Development Co., Ltd. The parties stipulated, among in the contract of purchase and sale with mortgage, that the buyer will
Build on the said parcel land the Sto. Domingo Church and Convent
The buyer, Philippine Sugar Estates Development Co., Ltd., finished the construction of Sto. Domingo Church and Convent, but the seller, Gregorio Araneta, Inc., which began constructing the streets, is unable to finish the construction of the street in the Northeast side
named (Sto. Domingo Avenue) because a certain third-party, by the name of Manuel Abundo, who has been physically occupying a middle part thereof, refused to vacate the same; hence, on May 7, 1958, Philippine Sugar Estates Development Co., Lt. filed its
complaint against J. M. Tuason & Co., Inc., and instance, seeking to compel the latter to comply with their obligation, as stipulated in the above-mentioned deed of sale, and/or to pay damages in the event they failed or refused to perform said obligation.
Both defendants J. M. Tuason and Co. and Gregorio Araneta, Inc. answered the complaint, the latter particularly setting up the principal defense that the action was premature since its obligation to construct the streets in question was without a definite period which
needs to he fixed first by the court in a proper suit for that purpose before a complaint for specific performance will prosper.
The lower court rendered a decision giving defendant Gregorio Araneta, Inc., a period of two (2) years from notice hereof, within which to comply with its obligation under the contract. Defendant Gregorio Araneta, Inc. presented a motion to reconsider the above quoted
order, which motion, plaintiff opposed.
Gregorio Araneta, Inc. contended mainly that the relief granted, i.e., fixing of a period, under the amendatory decision of July 16, 1960, was not justified by the pleadings and not supported by the facts submitted at the trial of the case in the court below and that the
relief granted in effect allowed a change of theory after the submission of the case for decision.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
76
ISSUE:
WON fixing a period for Araneta fulfill the obligation was justified
HELD: NO
RATIO:
The decision of the Court of Appeals, affirming that of the Court of First Instance is legally untenable. The fixing of a period by the courts under Article 1197 of the Civil Code of the Philippines is sought to be justified on the basis that petitioner (defendant below) placed
the absence of a period in issue by pleading in its answer that the contract with respondent Philippine Sugar Estates Development Co., Ltd. gave petitioner Gregorio Araneta, Inc. "reasonable time within which to comply with its obligation to construct and complete the
streets." Neither of the courts below seems to have noticed that, on the hypothesis stated, what the answer put in issue was not whether the court should fix the time of performance, but whether or not the parties agreed that the petitioner should
have reasonable time to perform its part of the bargain. If the contract so provided, then there was a period fixed, a "reasonable time;" and all that the court should have done was to determine if that reasonable time had already elapsed when suit was filed if it had
passed, then the court should declare that petitioner had breached the contract, as averred in the complaint, and fix the resulting damages. On the other hand, if the reasonable time had not yet elapsed, the court perforce was bound to dismiss the action for being
premature. But in no case can it be logically held that under the plea above quoted, the intervention of the court to fix the period for performance was warranted, for Article 1197 is precisely predicated on the absence of any period fixed by the
parties.
Even on the assumption that the court should have found that no reasonable time or no period at all had been fixed (and the trial court's amended decision nowhere declared any such fact) still, the complaint not having sought that the Court should set a period,
the court could not proceed to do so unless the complaint in as first amended; for the original decision is clear that the complaint proceeded on the theory that the period for performance had already elapsed, that the contract had been breached
and defendant was already answerable in damages.
Granting, however, that it lay within the Court's power to fix the period of performance, still the amended decision is defective in that no basis is stated to support the conclusion that the period should be set at two years after finality of the judgment. The list paragraph of
Article 1197 is clear that the period can not be set arbitrarily. The law expressly prescribes that
the Court shall determine such period as may under the circumstances been probably contemplated by the parties.
All that the trial court's amended decision says in this respect is that "the proven facts precisely warrant the fixing of such a period," a statement manifestly insufficient to explain how the two period given to petitioner herein was arrived at.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
77
In this connection, it is to be borne in mind that the contract shows that the parties were fully aware that the land described therein was occupied by squatters, because the fact is expressly mentioned therein. As the parties must have known that they could not take the
law into their own hands, but must resort to legal processes in evicting the squatters, they must have realized that the duration of the suits to be brought would not be under their control nor could the same be determined in advance. The conclusion is thus forced that
the parties must have intended to defer the performance of the obligations under the contract until the squatters were duly evicted, as contended by the petitioner Gregorio Araneta, Inc.
The Court of Appeals objected to this conclusion that it would render the date of performance indefinite. Yet, the circumstances admit no other reasonable view; and this very indefiniteness is what explains why the agreement did not specify any exact periods or dates
of performance.
It follows that there is no justification in law for the setting the date of performance at any other time than that of the eviction of the squatters occupying the land in question; and in not so holding, both the trial Court and the Court of Appeals committed reversible error. It
is not denied that the case against one of the squatters, Abundo, was still pending in the Court of Appeals when its decision in this case was rendered.
In view of the foregoing, the decision appealed from is reversed, and the time for the performance of the obligations of petitioner Gregorio Araneta, Inc. is hereby fixed at the date that all the squatters on affected areas are finally evicted therefrom.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
78
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
79
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
80
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
81
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
82
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
83
10 Ninety one (91) days after date, for value received, I/we, JOINTLY and SEVERALLY promise to pay to the PHILIPPINE BANK OF COMMUNICATIONS at its office in the City of Cagayan de Oro, Philippines the sum of FIFTY THOUSAND ONLY (P50,000.00)
Pesos, Philippine Currency, together with interest x x x at the rate of SIXTEEN (16) per cent per annum until fully paid.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
84
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
85
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
86
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
87
Shipments delivered
Shipments withheld
While the plastic sheetings were arriving in Manila, Pamintuan informed the president of Yu Ping Kun Co., Inc., Benito Y.C. Espiritu, that he was in dire need of cash with which to pay his obligations to the Philippine National Bank, and alleged that the computation of
the delivery would be too long a process to wait. They entered into an agreement to fix the price of the P0.782 a yard, regardless of the kind, quality or actual invoice value thereof. The parties arrived at that figure by dividing the total price of P265,550 by 339,440
yards, the aggregate quantity of the shipments.
After Pamintuan had delivered 224,150 yards of sheetings of inferior quality (P163,047.87), he refused to deliver the remainder of the shipments with a total value of P102,502.13. Pamintuan justified his refusal on the companys alleged failure to comply with the
change or novation in price.
The company filed a case for recovery of compensatory damages for breach of a contract of sale in addition to liquidated damages in the RTC on December 2, 1960. The court ruled for the company, including a grant of (a) P10,000 as stipulated liquidated damages,
(b) P10,000 as moral damages, (c) P1,102.85 as premium paid by the company on the bond of P102,502.13 for the issuance of the writ of preliminary attachment and (d) P10,000 as attorneys fees, or total damages of P110,559.28). In the computation for unrealized
profits, the court based it on the selling price at the time of delivery amounting in total to P67,174.17.
The overpayment of P12,282.26 made to Pamintuan by Yu Ping Kun Co., Inc. for the 224,150 yards, which the trial court regarded as an item of damages suffered by the company, was computed as follows (p. 71, Record on Appeal):
.
Liquidation value of 224.150 yards at P0.7822 a yard .......................................................................................... P175,330.13
.
Actual peso value of 224,150 yards as per firm offersor as per contract ........................................................... 163,047.87
.
Overpayment................................................................. P 12,282.26
The Court of Appeals affirmed that judgment with the modification, disallowing moral damages. The Court found that the contract of sale between Pamintuan and the company was partly consummated . The company fulfilled its obligation to obtain the Japanese
suppliers confirmation of their acceptance of firm offers totalling $47,000. Pamintuan reaped certain benefits from the contract. Hence, he is estopped to repudiate it; otherwise, he would unjustly enrich himself at the expense of the company.
The Court also found that the writ of attachment was properly issued. It also found that Pamintuan was guilty of fraud because (1) he was able to make the company agree to change the manner of paying the price by falsely alleging that there was a delay in obtaining
confirmation of the suppliers acceptance of the offer to buy; (2) he caused the plastic sheetings to be deposited in the bonded warehouse of his brother and then required his brother to make him (Pamintuan), his attorney-in-fact so that he could control the disposal of
the goods; (3) Pamintuan, as attorney-in-fact of the warehouseman, endorsed to the customs broker the warehouse receipts covering the plastic sheetings withheld by him and (4) he overpriced the plastic sheetings which he delivered to the company.
On present appeal to the SC, Pamintuan alleged that the buyer, Yu Ping Kun Co., Inc., is entitled to recover only liquidated damages. That contention is based on the stipulation that any violation of the provisions of this contract (of sale) shall entitle the aggrieved party
to collect from the offending party liquidated damages in the sum of P10,000. Pamintuan relies on the rule that a penalty and liquidated damages are the same; that in obligations with a penal clause, the penalty shall substitute the indemnity for damages and the
payment of interests in case of noncompliance, if there is no stipulation to the contrary (1st sentence of Art. 1226, Civil Code) and, it is argued, there is no such stipulation to the contrary in this case and that liquidated damages are those agreed upon by the parties to
a contract, to be paid in case of breach thereof (Art. 2226, Civil Code).
ISSUE/S
Whether the buyer, Yu Ping Kun Co., Inc., is entitled to recover only liquidated damages.
HELD
NO. SC ruled that as Pamintuan was guilty of fraud in the performance of his obligation, he responsible for all damages which may be reasonably attributed to the nonperformance of the obligation.
As a general rule, the penalty takes the place of the indemnity for damages and the payment of interest. This is subject to three exceptions [Art. 1152 SCC; Art. 1226 NCC]: (1) when there is an express stipulation to that effect; (2) when the obligor having failed to
comply with the principal obligation also refuses to pay the penalty, in which case the creditor is entitled to interest in the amount of the penalty, in accordance with Article 2209; and (3) when the obligor is guilty of fraud in the fulfillment of the obligation.
The reason for the third exception is based on the principle that an action to enforce is based on the principle that an action to enforce liability for future fraud cannot be renounced, as that would be against public policy and would contravene the express provisions of
Article 1171 of the Civil Code which states that any waiver of an action for future fraud is void.
The second sentence of article 1226 itself provides that nevertheless, damages shall be paid if the obligor x x x is guilty of fraud in the fulfillment of the obligation. Responsibility arising from fraud is demandable in all obligations (Art. 1171, Civil Code), and in case of
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
88
the amount of depositP600,000.00 as agreed upon, P300,000.00 of which was to be paid o1n June 13, 1977 and the balance on December 13, 1977was too big; and that OVEC had assured him that said forfeiture will not come to pass.
he sought reimbursement: of sums spent for major repairs (P1 00,000,00) on Broadway Theater; electrical current used by OVEC through its illegal connection to Capitol Theater (P48,000.00) Broadway Theater (P31,000.00) and for damages
Damages suffered by Sy due to the padlocking of the theaters for lost income and inability to push through with contracts entered into with movie and booking companies for the showing of movies at ABC.
he prayed for the issuance of a restraining order/preliminary injunction to enjoin OVEC and all persons employed by it from entering and taking possession of the three theaters, conditioned upon Sys filing of a P500,000.00 bond supplied by
Country Bankers Insurance Corporation (CBISCO).
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
89
The RTC held that Sy is not entitled to the reformation of the lease agreement; that the repossession of the leased premises by OVEC after the cancellation and termination of the lease and forfeiture of the cash deposit was in accordance with the lease agreement and
the law applicable thereto.
The RTC further held that Sy was not entitled to the writ of preliminary injunction issued in his favor after the commencement of the action and that the injunction bond filed by Sy is liable for whatever damages OVEC may have suffered by reason of the injunction. The
lessor was deprived of the possession and enjoyment of the leased premises and also suffered damages as a result of the filing of the case by Sy and his violation of the terms and conditions of the lease agreement. Hence, it held that OVEC is entitled to recover the
said damages in addition to the arrears in rentals and amusement tax delinquency of Sy and the accrued interest thereon:
OVEC finally regained the possession of the three (3) theaters under lease at the end of November, 1980, and Sys unpaid rentals and amusement tax liability amounted to P289,534.78.,
To pay P10,000.00 every month from February to November, 1980 or the total amount of P100,000.00 with interest on each amount of P1 0,000.00 from the time the same became due; This P10,000.00 portion of the monthly lease rental was
supposed to come from the remaining cash deposit of Sy but with the consequent forfeiture of the remaining cash deposit of P290,000.00, there was no more cash deposit from which said amount could be deducted.
Attorneys fees equivalent to 10% of the amounts above-mentioned.
Through the injunction bond liable to pay the sum of P10,000.00 every month from February to November, 1980. The amount represents the supposed increase in rental from P50,000.00 to P60,000.00 in view of the offer of one RTG Productions, Inc. to
lease the three theaters involved for P60,000.00 a month.
On appeal to the CA, the court affirmed and declared as lawful: the cancellation of the lease agreement, the forfeiture clause; ordered the payment of unremitted amusement tax, with interest at 12%/year in line with the lease agreement; the unpaid monthly lease
rentals, increase in rentals plus interest; and attorneys fees.
The court found no ambiguity in the provisions of the lease agreement. It held that the provisions are fair and reasonable and therefore, should be respected and enforced as the law between the parties. It held that the cancellation or termination of the agreement prior
to its expiration period is justified as it was brought about by Sys own default in his compliance with the terms of the agreement and not motivated by fraud or greed. It also affirmed the award to OVEC of the amount of P1 00,000.00 chargeable against the injunction
bond posted by CBISCO, which was soundly and amply justified by the trial court.
The respondent Court likewise found no merit in OVECs appeal and held that the trial court did not err in not charging and holding the injunction bond posted by Sy liable for all the awards as the undertaking of CBISCO under the bond referred only to damages which
OVEC may suffer as a result of the injunction.
ISSUE/S
(1)
Whether the penalty clauses unjustly enriched OVEC at the expense of Sy.
(2)
Whether there can be set-off arising from the damage caused by the injunction against the remaining cash deposit of Sy.
HELD
(1) NO.
A provision which calls for the forfeiture of the remaining deposit still in the possession of the lessor, without prejudice to any other obligation still owing, in the event of the termination or cancellation of the agreement by reason of the lessees violation of any of the
terms and conditions of the agreement is a penal clause that may be validly entered into. A penal clause is an accessory obligation which the parties attach to a principal obligation for the purpose of insuring the performance thereof by imposing on the debtor a special
prestation (generally consisting in the payment of a sum of money) in case the obligation is not fulfilled or is irregularly or inadequately fulfilled. (Eduardo P. Caguioa, Comments and Cases on Civil Law, Vol. IV, First Edition, pp. 199200) As a general rule, in obligations
with a penal clause, the penalty shall substitute the indemnity for damages and the payment of interests in case of non-compliance. This is specifically provided for in Article 1226, par. 1, New Civil Code. In such case, proof of actual damages suffered by the creditor is
not necessary in order that the penalty may be demanded (Article 1228, New Civil Code). However, there are exceptions to the rule that the penalty shall substitute the indemnity for damages and the payment of interests in case of non-compliance with the principal
obligation. They are first, when there is a stipulation to the contrary; second, when the obligor is sued for refusal to pay the agreed penalty; and third, when the obligor is guilty of fraud (Article 1226, par. 1, New Civil Code). It is evident that in all said cases, the purpose
of the penalty is to punish the obligor. Therefore, the obligee can recover from the obligor not only the penalty but also the damages resulting from the non-fulfillment or defective performance of the principal obligation.
In the case at bar, inasmuch as the forfeiture clause provides that the deposit shall be deemed forfeited, without prejudice to any other obligation still owing by the lessee to the lessor. the penalty cannot substitute for the P100,000.00 supposed damage resulting from
the issuance of the injunction against the P290,000.00 remaining cash deposit. This supposed damage suffered by OVEC was the alleged P10,000.00 a month increase in rental from P50,000.00 to P60,000.00), which OVEC failed to realize for ten months from
February to November, 1980 in the total sum of P1 00,000.00. This opportunity cost which was duly proven before the trial court, was correctly made chargeable by the said court against the injunction bond posted by CBISCO.
(2) NO.
The undertaking assumed by CBISCO under subject injunction refers to all such damages as such party may sustain by reason of the injunction if the Court should finally decide that the Plaintiff was/were not entitled thereto, (Rollo, p. 101) Thus, the respondent Court
correctly sustained the trial court in holding that the bond shall and may answer only for damages which OVEC may suffer as a result of the injunction. The arrears in rental, the unmeritted amounts of the amusement tax delinquency, the amount of P1 00,000.00
(P10,000.00 portions of each monthly rental which were not deducted from plaintiff s cash deposit from February to November, 1980 after the forfeiture of said cash deposit on February 11, 1980) and attorneys fees which were all charged against Sy were correctly
considered by the respondent Court as damages which OVEC sustained not as a result of the injunction.
BALANE NOTE
In case of any of the exception, you pay both the penalty and the entire amount of damages, because this is more in line with the nature of the penalty clause.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
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Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
91
Even if there has been no performance, the penalty may also be reduced by the courts if it is
The question of whether a penalty is reasonable or iniquitous is addressed to the sound discretion of the court and depends on several factors, including, but not limited to, the following: the type, extent and purpose of the penalty, the nature of the
obligation, the mode of breach and its consequences, the supervening realities, the standing and relationship of the parties.
In this case, the stipulated penalty was reduced by the appellate court for being unconscionable and iniquitous. As provided in the Contract of Lease, private respondent was obligated to pay a monthly rent of P30,000. On the other hand, the stipulated
penalty was pegged at P5,000 for each day of delay or P150,000 per month, an amount five times the monthly rent. This penalty was not only exorbitant but also unconscionable, taking into account that private respondents delay in surrendering the
leased premises was because of a well-founded belief that its right of preemption to purchase the subject premises had been violated. Considering further that private respondent was an agricultural cooperative, collectively owned by farmers with limited
resources, ordering it to pay a penalty of P150,000 per month on top of the monthly rent of P30,000 would seriously deplete its income and drive it to bankruptcy. In Rizal Commercial Banking Corp. vs. Court of Appeals, the Court tempered the penalty charges after
taking into account the debtors pitiful financial condition.
Accordingly, we rule that the Court of Appeals did not commit any reversible error in the exercise of its discretion when it reduced the award of penalty damages from P5,000 to P1,000 for each day of delay.
WHEREFORE, petition is hereby DENIED. The decision of the Court of Appeals reducing the amount of penalty damages against private respondent is AFFIRMED.
Article 1231
Art. 1231. Obligations are extinguished:
(1) By payment or performance:
(2) By the loss of the thing due:
(3) By the condonation or remission of the debt;
(4) By the confusion or merger of the rights of creditor and debtor;
(5) By compensation;
(6) By novation.
Other causes of extinguishment of obligations, such as annulment, rescission, fulfillment of a resolutory condition, and prescription, are governed elsewhere in this Code. (1156a)
BALANE NOTE, OTHER CASES WHERE OBLIGATIONS ARE EXTINGUISHED
(7) annulment
(8) rescission
(9) fulfillment of a resolutory condition
(10) prescription
(11) death
(12) renunciation
(13) compromise
(14) arrival of resolutory term
(15) mutual dissent or mutual disistance (See saura v. DBP)
(16) unilateral withdrawal
(17) change of civil status
(18) rebus sic stantibus [Art 1267] fortuitious event
(19) want of interest (see Tiu v. Platinum)
Non-involvent clause is invalid and no longer operable when the employer changes the nature of their business. A chef previously subject of the clause, if during the period stated in the contract that he should not be involved the employer changes his/her
business, is no longer bound.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
92
Source: http://lextheorica.blogspot.com/2012/02/credit-transactions-digest.html
FACTS
Saura applied to the Rehabilitation Finance Corporation (RFC), before its conversion into DBP, for an industrial loan to be used for construction of factory building, for payment of the balance of the purchase price of the jute machinery and equipment and as additional
working capital. In Resolution No.145, the loan application was approved to be secured first by mortgage on the factory buildings, the land site, and machinery and equipment to be installed.
The mortgage was registered and documents for the promissory note were executed. The cancellation of the mortgage was requested to make way for the registration of a mortgage contract over the same property in favor of Prudential Bank and Trust Co., the latter
having issued Saura letter of credit for the release of the jute machinery. As security, Saura execute a trust receipt in favor of the Prudential. For failure of Saura to pay said obligation, Prudential sued Saura.
After 9 years after the mortgage was cancelled, Saura sued RFc alleging failure to comply with tits obligations to release the loan proceeds, thereby prevented it from paying the obligation to Prudential Bank.
The trial court ruled in favor of Saura, ruling that there was a perfected contract between the parties ad that the RFC was guilty of breach thereof.
ISSUE
Whether or not there was a perfected contract between the parties.
HELD
The Court held in the affirmative. Article 1934 provides: An accepted promise to deliver something by way of
commodatum or simple loan is binding upon the parties, but the commodatum or simple loan itself shall not be perfected until delivery of the object of the contract.
There was undoubtedly offer and acceptance in the case. When an application for a loan of money was approved by resolution of the respondent corporation and the responding mortgage was executed and registered, there arises a perfected consensual contract
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
93
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
94
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
95
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
96
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
97
Thus, payment must be made to the obligee himself or to an agent having authority, express or implied, to receive the particular payment. Payment made to one having apparent authority to receive the money will, as a rule, be treated as though actual authority had
been given for its receipt. Likewise, if payment is made to one who by law is authorized to act for the creditor, it will work a discharge. The receipt of money due on a judgment by an officer authorized by law to accept it will, therefore, satisfy the debt.
The theory is where payment is made to a person authorized and recognized by the creditor, the payment to such a person so authorized is deemed payment to the creditor. Under ordinary circumstances, payment by the judgment debtor in the case at bar, to the
sheriff should be valid payment to extinguish the judgment debt.
There are circumstances in this case, however, which compel a different conclusion.
The payment made by the petitioner to the absconding sheriff was not in cash or legal tender but in checks. The checks were not payable to Amelia Tan or Able Printing Press but to the absconding sheriff.
The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
98
In the meantime, the action derived from the original obligation shall be held in abeyance.
In the absence of an agreement, either express or implied, payment means the discharge of a debt or obligation in money and unless the parties so agree, a debtor has no rights, except at his own peril, to substitute something in lieu of cash as medium of payment of
his debt. Consequently, unless authorized to do so by law or by consent of the obligee a public officer has no authority to accept anything other than money in payment of an obligation under a judgment being executed. Strictly speaking, the acceptance by the sheriff of
the petitioner's checks, in the case at bar, does not, per se, operate as a discharge of the judgment debt.
Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does not, by itself, operate as payment. A check, whether a manager's check or ordinary cheek, is not legal tender, and an offer of a check in payment of a
debt is not a valid tender of payment and may be refused receipt by the obligee or creditor. 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 (Art. 1249, Civil Code, par. 3).
If bouncing checks had been issued in the name of Amelia Tan and not the Sheriff's, there would have been no payment. After dishonor of the checks, Ms. Tan could have run after other properties of PAL. The theory is that she has received no value for what had been
awarded her. Because the checks were drawn in the name of Emilio Z. Reyes, neither has she received anything. The same rule should apply.
It is argued that if PAL had paid in cash to Sheriff Reyes, there would have been payment in full legal contemplation. The reasoning is logical but is it valid and proper? Logic has its limits in decision making. We should not follow rulings to their logical extremes if in
doing so we arrive at unjust or absurd results.
In the first place, PAL did not pay in cash. It paid in cheeks.
And second, payment in cash always carries with it certain cautions. Nobody hands over big amounts of cash in a careless and inane manner. Mature thought is given to the possibility of the cash being lost, of the bearer being waylaid or running off with what he is
carrying for another. Payment in checks is precisely intended to avoid the possibility of the money going to the wrong party. The situation is entirely different where a Sheriff seizes a car, a tractor, or a piece of land. Logic often has to give way to experience and to
reality. Having paid with checks, PAL should have done so properly.
Payment in money or cash to the implementing officer may be deemed absolute payment of the judgment debt but the Court has never, in the least bit, suggested that judgment debtors should settle their obligations by turning over huge amounts of cash or legal tender
to sheriffs and other executing officers. Payment in cash would result in damage or interminable litigations each time a sheriff with huge amounts of cash in his hands decides to abscond.
As a protective measure, therefore, the courts encourage the practice of payments by cheek provided adequate controls are instituted to prevent wrongful payment and illegal withdrawal or disbursement of funds. If particularly big amounts are involved, escrow
arrangements with a bank and carefully supervised by the court would be the safer procedure. Actual transfer of funds takes place within the safety of bank premises. These practices are perfectly legal. The object is always the safe and incorrupt execution of the
judgment.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
99
It is, indeed, out of the ordinary that checks intended for a particular payee are made out in the name of another. Making the checks payable to the judgment creditor would have prevented the encashment or the taking of undue advantage by the sheriff, or any person
into whose hands the checks may have fallen, whether wrongfully or in behalf of the creditor. The issuance of the checks in the name of the sheriff clearly made possible the misappropriation of the funds that were withdrawn.
As between two innocent persons, one of whom must suffer the consequence of a breach of trust, the one who made it possible by his act of confidence must bear the loss.
Having failed to employ the proper safeguards to protect itself, the judgment debtor whose act made possible the loss had but itself to blame.
Article 1244
Art. 1244. The debtor of a thing cannot compel the creditor to receive a different one, although the latter may be of the same value as, or more valuable than that which is due.
In obligations to do or not to do, an act or forbearance cannot be substituted by another act or forbearance against the obligee's will. (1166a)
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
100
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
101
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
102
The legal principle, in any event, is that "the creditor cannot be compelled partially to receive the presentations in which the obligation consists" unless "there is an express stipulation to that effect," in much the same way that the debtor may not "be required to make
partial payments.
Article 1249
Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines.
The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired.
In the meantime, the action derived from the original obligation shall be held in the abeyance. (1170)
Facts:
Sima Wei acquired a loan from Development Bank of Rizal. He executed and delivered to the former a promissory note, engaging to pay the petitioner Bank or order the amount of P1,820,000.00 on or before June 24, 1983 with interest at 32% per annum.
Sima Wei made partial payments on the note, leaving a balance of P1,032,450.02. On November 18, 1983, Sima Wei issued two crossed checks payable to petitioner Bank drawn against China Banking Corporation, bearing respectively the serial numbers 384934, for
the amount of P550,000.00 and 384935, for the amount of P500K. The said checks were allegedly issued in full settlement of the drawers account evidenced by the promissory note.
These two checks were not delivered to the Development Bank. For reasons not shown, these checks came into the possession of respondent Lee Kian Huat, who deposited the checks without the Developments indorsement (forged or otherwise) to the account of
respondent Plastic Corporation, at the Balintawak branch, Caloocan City, of the Producers Bank. The Branch Manager of the Balintawak branch of Producers Bank, relying on the assurance of respondent Samson Tung, President of Plastic Corporation, that the
transaction was legal and regular, instructed the cashier of Producers Bank to accept the checks for deposit and to credit them to the account of said Plastic Corporation, inspite of the fact that the checks were crossed and payable to petitioner Bank and bore no
indorsement of the latter. Hence, Development filed the complaint for sum of money against Wei and/or Kian Huat, Uy, Tung, Plastic Corporation and the Producers Bank.
Bank alleged that its cause of action was not based on collecting the sum of money evidenced by the negotiable instruments stated but on quasi-delict a claim for damages on the ground of fraudulent acts and evident bad faith of the alternative respondents.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
103
Issue:
WON Development Bank has a cause of action against the respondents?
Held:
No. Unless respondent Sima Wei proves that she has been relieved from liability on the promissory note by some other cause, petitioner Bank has a right of action against her for the balance due thereon.
The normal parties to a check are the drawer, the payee and the drawee bank. Courts have long recognized the business custom of using printed checks where blanks are provided for the date of issuance, the name of the payee, the amount payable and the drawers
signature. All the drawer has to do when he wishes to issue a check is to properly fill up the blanks and sign it. However, the mere fact that he has done these does not give rise to any liability on his part, until and unless the check is delivered to the payee or his
representative.
A negotiable instrument, of which a check is, is not only a written evidence of a contract right but is also a species of property. Just as a deed to a piece of land must be delivered in order to convey title to the grantee, so must a negotiable instrument be delivered to the
payee in order to evidence its existence as a binding contract.
Thus, the payee of a negotiable instrument acquires no interest with respect thereto until its delivery to him. Delivery of an instrument means transfer of possession, actual or constructive, from one person to another. Without the initial delivery of the instrument from the
drawer to the payee, there can be no liability on the instrument. Moreover, such delivery must be intended to give effect to the instrument. Without the delivery of said checks to petitioner-payee, the former did not acquire any right or interest therein and cannot therefore
assert any cause of action, founded on said checks, whether against the drawer Sima Wei or against the Producers Bank or any of the other respondents.
However, insofar as the other respondents are concerned, petitioner Bank has no privity with them. Since petitioner Bank never received the checks on which it based its action against said respondents, it never owned them (the checks) nor did it acquire any interest
therein
Velasco vs. Manila Electric Co., 42 SCRA 556 , No. L-18390, December 20, 1971
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
104
A complaint for sum of money was then filed against BPI. The lower courts eventually decided in favor of respondent and ordered BPI to pay the value of the check and damages.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
105
Ratio:
As a general rule, under the above provision, every holder is presumed prima facie to be a holder in due course. One who claims otherwise has the onus probandi to prove that one or more of the conditions required to constitute a holder in due course are lacking. In
this case, petitioner contends that the element of "value" is not present, therefore, respondent could not be a holder in due course.
Furthermore, it bears emphasis that the disputed check is a cashiers check. In International Corporate Bank v. Spouses Gueco, this Court held that a cashiers check is really the banks own check and may be treated as a promissory note with the bank as the maker.
The check becomes the primary obligation of the bank which issues it and constitutes a written promise to pay upon demand . In New Pacific Timber & Supply Co. Inc. v. Seeris, this Court took judicial notice of the "well-known and accepted practice in the
business sector that a cashiers check is deemed as cash." This is because the mere issuance of a cashiers check is considered acceptance thereof.
In view of the above pronouncements, petitioner bank became liable to respondent from the moment it issued the cashiers check. Having been accepted by respondent, subject to no condition whatsoever, petitioner should have paid the same upon presentment by the
former
Article 1250
Art. 1250. In case an extraordinary inflation or deflation of the currency stipulated should supervene, the value of the currency at the time of the establishment of the obligation shall be the basis of payment, unless there is an agreement to the
contrary. (n)
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
106
On 1924, the government took private respondent Victor Amigable's land for road-right-of-way purpose.
On 1959, Amigable filed in the Court of First Instance a complaint to recover the ownership and possession of the land and for damages for the alleged illegal occupation of the land by the government (entitled Victor Amigable vs. Nicolas Cuenco, in his
capacity as Commissioner of Public Highways and Republic of the Philippines).
Amigable's complaint was dismissed on the grounds that the land was either donated or sold by its owners to enhance its value, and that in any case, the right of the owner to recover the value of said property was already barred by estoppel and the
statute of limitations. Also, the non-suability of the government was invoked.
In the hearing, the government proved that the price of the property at the time of taking was P2.37 per square meter. Amigable, on the other hand, presented a newspaper showing that the price was P6.775.
The public respondent Judge ruled in favor of Amigable and directed the Republic of the Philippines to pay Amigable the value of the property taken with interest at 6% and the attorney's fees.
Whether or not the provision of Article 1250 of the New Civil Code is applicable in determining the amount of compensation to be paid to private respondent Amigable for the property taken.
Not applicable.
Article 1250 of the NCC provides that the value of currency at the time of the establishment of the obligation shall be the basis of payment which would be the value of peso at the time of taking of the property when the obligation of the government to pay
arises. It is only when there is an agreement that the inflation will make the value of currency at the time of payment, not at the time of the establishment, the basis for payment.
The correct amount of compensation would be P14,615.79 at P2.37 per square meter, not P49,459.34, and the interest in the sum of P145,410.44 at the rate of 6% from 1924 up to the time respondent court rendered its decision as was awarded by the
said court should accordingly be reduced.
Issue:
Held:
Ratio:
NAWASA entered into a contract with the plaintiff FPFC for the latter to supply iron pressure pipes worth P270,187.50 to be used in the construction of the Anonoy Waterworks in Masbate and the Barrio San Andres-Villareal Waterworks in Samar.
NAWASA paid in installments on various dates, a total of P134,680.00 leaving a balance of P135,507.50 excluding interest.
FPFC demanded payment from NAWASA of the unpaid balance of the price with interest in accordance with the terms of their contract
NAWASA failed to pay, plaintiff filed a collection suit
RTC rendered judgment orderedNAWASA to pay the unpaid balance in NAWASA negotiable bonds
NAWASA did not deliver the bonds to the judgment creditor
FPFC filed another complaint seeking an adjustment of the unpaid balance in accordance with the value of the Philippine peso
FPFC presented voluminous records and statistics showing that a spiralling inflation has marked the progress of the country from 1962 up to the present. There is no denying that the price index of commodities, which is the usual evidence of the value of
the currency has been rising.
ISSUE
W/N there exists an extraordinary inflation of the currency justifying an adjustment of NAWASA's unpaid judgment obligation to FPFC.
RULING
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
107
Extraordinary inflation exists "when there is a decrease or increase in the purchasing power of the Philippine currency which is unusual or beyond the common fluctuation in the value said currency, and such decrease or increase could not have
reasonably foreseen or was manifestly beyond contemplation the the parties at the time of the establishment of the obligation. (Tolentino Commentaries and Jurisprudence on the Civil Code Vol. IV, p. 284.)
While appellant's voluminous records and statistics proved that there has been a decline in the purchasing power of the Philippine peso, this downward fall of the currency cannot be considered "extraordinary." It is simply a universal trend that has not
spared our country.
On November 6, 1965, President Diosdado Macapagal promulgated Executive Order No. 195 changing the par value (official quoted exchange rate) of the Peso.
By reason of this Executive Order No. 195, plaintiff-appellant demanded from the defendant-appellee ailieged increase in the monthly rentals from P250.00 a month to P487.50 a month.
On January 16, 1967, plaintiff-appellant filed a complaint (Civil Case No. 68154) with the CFI of Manila, Branch XVII praying that defendant-appellee be ordered to pay the monthly rentals as increased by reason of Executive Order 195 and further prayed that plaintiffappellant be paid the following amounts: The difference between P487.50 and P250.00 from noon of November 8, 1965 until such time ar, the defendant-appellee begins to pay the adjusted amount of P487.50 a month.
The court ruled against Del Rosario, reasoning that the Peso did not devalue but its par value merely changed.
Issue:
W/N petitioner Del Rosario is entitled to the increased rentals based on the contract.
Held:
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
108
Sloan and Zurchers classic treatise, "A Dictionary of Economics," 1951 ed. pp. 80-81, defines devaluation (as applied to a monetary unit) as.
"a reduction in its metallic content as determined by law 2 resulting in "the lowering of the value of one nations currency in terms of the currencies of other nations" (Emphasis supplied)
Samuelson and Nordhaus, writing in their book, "Economics" (Singapore, Mc-Graw Hill Book Co., 1985, p. 875)
"when a countrys of official exchange rate 3 relative to gold or another currency is lowered, as from $35 an ounce of gold to $38, we say the currency has been devalued."
(b)
Upon the other hand, "depreciation" (opposite of "appreciation" the term used in the contract), according to Gerardo P. Sicat in his "Economics" (Manila: National Book Store, 1983, p. 636).
"occurs when a currencys value falls in relation to foreign currencies."
(c)
It will be noted that devaluation is an official act of the government (as when a law is enacted thereon) and refers to a reduction in metallic content; depreciation can take place with or without an official act, and does not depend on metallic content (although
depreciation may be caused by devaluation).
Even assuming there has been no official devaluation as the term is technically understood, the fact is that there has been a diminution or lessening in the purchasing power of the peso, thus, there has been a "depreciation" (opposite of "appreciation").
Moreover, when laymen unskilled in the semantics of economics use the terms "devaluation" or "depreciation" they certainly mean them in their ordinary signification decrease in value. Hence as contemplated by the parties herein in their lease
agreement, the term "devaluation" may be regarded as synonymous with "depreciation," for certainly both refer to a decrease in the value of the currency. The rentals should therefore by their agreement be proportionately increased .
Facts:
Sps Valderrama obtained a loan from Manuel Asencio in the amount of 500k. It was secured by a real estate mortgage on the spouses house and lot. Foreseeing that they would not be able to pay the loan and redeem their property upon maturity of the loan, the
defendants scouted around for money-lenders who would be willing to lend them money with which to pay off their mortgage to Asencio. Through the help of a loan broker, Wilson Jesena, they were able to obtain on April 6, 1984 a P1,000,000 loan from the plaintiff
Teresita Sangrador, who is an aunt of Jesena, on the security of the same property which they redeemed from Asencio. The loan is evidenced by promissory note (Exh. B) dated April 6, 1 984 providing for the payment of P1,400,000 to the creditor eight months after
date wherein they promise to jointly and severally pay Sangrador. There was also a stipulation that if there is a default, 20 percentum of the amount due will be paid.
Another stipulation said that in the event that an extraordinary inflation of the Philippine Peso should supervene between now and eight (8) months after date, then the value of the Philippine Peso at the time of the establishment of this obligation, shall be the basis of
payment pursuant to Art. 1250, and for this purpose, we hereby acknowledge the official exchange rate of the Philippine Peso to the US Dollar at P14.002 to $1. The corresponding adjustment in the value of the Philippine Peso shall be made in the event that at the
time of the maturity of this obligation, the rate of exchange will have changed as a result of the supervening inflation. We further agree that the official rate of exchange as set by the Central Bank of the Philippines for private transactions, shall be the basis of this
adjustment.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
109
Issue:
WON the escalation clause is valid? NO / WON there is a cause for extraordinary inflation? NO
Ratio:
The disputed amount of P400,000.00 was a hidden interest that the petitioners had required the respondents to pay at the maturity of the loan, but said amount of P400,000.00 was not received by or delivered to the respondents. This conclusion is strengthened by the
fact that the promissory note and the deed of real estate mortgage, strangely enough, do not contain any express stipulation on interest, or rate of interest, when the loan involved therein is in the substantial amount of allegedly P1,400,000.00.
Despite having no interest ceiling on loans, if no interest rate is expressly stipulated in the agreement, Circular 905 of the BSP is controlling which provides:
Section 1. The rate of interest, including commissions, premiums, fees and other charges on a loan or forbearance of any money, goods, or credits, regardless of maturity and whether secured or unsecured, that may be charged or collected
by any person, whether natural or juridical, shall not be subject to any ceiling prescribed under or pursuant to the Usury law, as amended.
Section 2. The rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed in judgments, in the absence of express contract as to such rate of interest, shall continue to be twelve per cent (1 2%) per annum.
The rate of interest for loans or forbearance of money, in the absence of express contract as to such rate of interest, shall continue therefore to be twelve per cent (12%) per annum.
In Filipino Pipe and Foundry Corporation vs. National Waterworks and Sewerage Authority, this Court held:
Extraordinary inflation exists when 'there is a decrease or increase in the purchasing power of the Philippine currency which is unusual or beyond the common fluctuation in the value of said currency, and such decrease or increase could not
have been reasonably foreseen or was manifestly beyond the contemplation of the parties at the time of the establishment of the obligation.
While appellant's voluminous records and statistics proved that there has been a decline in the purchasing power of the Philippine peso, this downward fall of the currency cannot be considered "extraordinary." It is simply a universal trend
that has not spared our country.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
110
In April 1986, petitioner and private respondent entered into a Supplemental Agreement with the following stipulations:
WHEREAS, the VENDOR/MORTGAGEE is willing to sell said portion of her lots to the VENDEE/MORTGAGOR for a total price of P37,485.00 payable in monthly installments of P500.00 with an interest of 10 % per annum on the remaining balance until
the full amount is paid.
Payments of the monthly installments of P500.00 shall be made not later than the fifth day of every month without need of demand starting January, 1986. Failure to pay any of the monthly installments when due for three months, shall be sufficient cause for
rescission of this contract and all payments made shall be applied as corresponding rentals.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
111
Respondent filed a complaint against petitioner in the Regional Trial Court of Pasay City for rescission of the Deed of Conditional Sale with Mortgage and Supplemental Agreement which the court granted.
The controversial provision in the Supplemental Agreement reads: ". . . the VENDOR/MORTGAGEE is willing to sell said portion of her lot to the VENDEE/MORTGAGOR for a total price of P37,485.00 payable in monthly installments of P500.00 with an interest of 10%
per annum on the remaining balance until the full amount is paid"
Private respondent's view is that the 10% interest must be paid every year and posits that the P500.00 monthly installments include the 10% interest.
Issue:
W/N the 10% interest must be paid every year and the P500.00 paid by petitioner monthly inludes the 10% interest.
Held:
After pondering on the meaning of Article 1253, we reach the conclusion that in a contract involving installment payments with interest chargeable against the remaining balance of the obligation, it is the duty of the creditor to inform of the amount of interest that falls
due and that he is applying the installment payments to cover said interest. Otherwise, the creditor cannot apply the payments to the interest and then hold the debtor in default for non-payment of installments on the principal.
A liberal interpretation of the contracts in question is that at the end of each year, all payments made shall be deducted from the principal obligation. The 10% interest on the balance is then added to whatever remains of the principal. Thereafter, petitioner shall
pay the monthly installments on the stipulated dates. In other words, the interest due are added to and paid like the remaining balance of the principal . Thus, we must rule that the parties intended that petitioner pay the monthly installments at predetermined
dates, until the full amount, consisting of the purchase price and the interests on the balance, is paid.
Significant is the fact that private respondent accepted the payments petitioner religiously made for four years. Private respondent cannot rely on the clause in the contract stating that no demand is necessary to explain her silence for four years as to the 10% interest,
as such clause refers to the P500.00 monthly installments.
Even granting as acceptable private respondent's theory that the monthly amortizations shall first be applied to the payment of the interests, we must still rule for petitioner.
The contracts provided for private respondent's right of rescission which may be exercised upon petitioner's failure to pay installments for three months. Private respondent's failure to exercise her right of rescission after petitioner's alleged default constitutes a waiver of
such right. Her continued acceptance of the installment payments places her in estoppel.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
112
Facts:
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
113
Despite the offer, Alfonso refused to vacate the premises; spouses then filed a complaint for ejectment. Alfonso, through counsel, prayed that the rentals be ordered deposited in court. The spouses, on the other hand, contended that the deposit of the rentals cannot
render ineffective the provision of BP25 which allows the ejectment of a lessee in case of arrears in payment of rent for three (3) months at one time, provided, that in case of refusal by the lessor to accept payment of the rental agreed upon, the lessee shall either
deposit by way of consignation, the amount in Court or in a bank in the name of and with notice to the lessor.
Issue:
WON Alfonso incurred default? YES
WON the METC had jurisdiction to determine the ejectment case since there was no demand to vacate on the part of the spouses? YES
Ratio:
The tenor of the two letters dated March 19, 1984 and May, 1984, respectively, shows that the free rent offer was merely a proposal of plaintiffs to defendant who rejected it by tendering his payment corresponding to the April, 1984 rental and by consistently refusing to
vacate the premises.
Such rejection rendered the proposal of free rental without force and effect. Defendant therefore was duty bound to pay the rentals as they fall due in order to abort any ejectment proceedings against him. If the lessor refuses to accept the payment, as in the case at
bar, defendant had a remedy provided for by law, namely consignation in court or deposit in a bank in the lessor's name with due notice to the lessor. Unfortunately, it is of record that defendant did not avail of such remedy so that when plaintiffs filed the ejectment
proceedings against him on July 30, 1984, the rentals corresponding to the month of April to July 1984 had not yet been paid by defendant. Tender of payment is not enough consignation must follow in order to extinguish the debt. Otherwise failure to comply with
the requirements provided for under Sec. 5, paragraph (b) Batas Pambansa Blg. 25 is a ground for ejectment. Delayed consignation or deposit will not do.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
114
Held:
YES. PETITION Granted.
Rationale:
While Esters refusal was unjustified and unreasonable, Manuels position that this refusal had the effect of payment that extinguished his obligation to MTLC is wrong because a refusal without just cause is not equivalent to payment; to have the effect of payment and
the consequent extinguishment of the obligation to pay, the law requires the companion acts of tender of payment and consignation. Article 1256 is clear and unequivocal on this point.
Nevertheless, the spouses Go Cinco duly established that they have legitimately secured a means of paying off their loan with MTLC; they were only prevented from doing so by the unjust refusal of Ester to accept the proceeds of the PNB loan through her refusal to
execute the release of the mortgage on the properties mortgaged to MTLC.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
115
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
116
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
117
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
118
due to the increase in price of oil and its derivatives and the concomitant worldwide spiralling of prices, which are not within the control of plaintiff, of all commodities including basis raw materials required for such development work, the cost of
development has risen to levels which are unanticipated, unimagined and not within the remotest contemplation of the parties at the time said agreement was entered into and to such a degree that the conditions and factors which formed the original
basis of said contract, have been totally changed;
further performance by the plaintiff under the contract will result in situation where defendants would be unustly enriched at the expense of the plaintiff; will cause an inequitous distribution of proceeds from the sales of subdivided lots in manifest
actually result in the unjust and intolerable exposure of plaintiff to implacable losses, all such situations resulting in an unconscionable, unjust and immoral situation contrary to and in violation of the primordial concepts of good faith, fairness and
equity which should pervade all human relations.
Petitioners insist that the worldwide increase in prices cited by respondent does not constitute a sufficient cause of action for modification of the subdivision contract.
Issue/Held:
Does the increase in prices constitute a sufficient cause of action of for modification of the subdivision contract? No.
Rationale:
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
119
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
120
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
121
Nonetheless, petitioners insist that the voucher covering the Pilipinas Bank check for P410,854.47, containing the notation that the amount is in "full payment of IGLF loan," constitutes documentary evidence of such oral agreement. This contention is without merit. The
notation in "full payment of IGLF loan" merely states petitioners' intention in making the payment, but in no way does it bind private respondent. It would have been a different matter if the notation appeared in a receipt issued by respondent corporation, through its
receiver, because then it would be an admission against interest. Indeed, if private respondent really condoned the amount in question, petitioners should have asked for a certificate of full payment from respondent corporation, as they did in the case of their first IGLF
loan of P500,000.00.
Petitioners, however, contend that the Central Bank examiner assigned to respondent corporation, Cristina Destajo, signed the voucher in question. Destajo claimed that, when she signed the voucher, she failed to notice the statement that the amount of P410,854.47
was being given in "full payment of IGLF Loan." She said she merely took note of the amount and the check number indicated therein. In any event, Destajo, by countersigning the voucher, did no more than acknowledge receipt of the payment. She cannot be held to
have ascented thereby to the payment in full of petitioners' indebtedness to private respondent. It was obvious she had no authority to condone any indebtedness, her "issuing official receipts, preparing check vouchers and documentation."
Article 1271
Art. 1271. The delivery of a private document evidencing a credit, made voluntarily by the creditor to the debtor, implies the renunciation of the action which the former had against the latter.
If in order to nullify this waiver it should be claimed to be inofficious, the debtor and his heirs may uphold it by proving that the delivery of the document was made in virtue of payment of the debt. (1188)
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
122
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
123
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
124
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
125
The promise of the spouses to sell was subject to the fulfillment of the suspensive condition of full payment of the purchase price by the petitioner. Petitioner, however, failed to complete payment of the purchase price. The non-fulfillment of the condition of full payment
rendered the contract to sell ineffective and without force and effect. It must be stressed that the breach contemplated in Article 1191 of the New Civil Code is the obligor's failure to comply with an obligation. Failure to pay, in this instance, is not even a breach but
merely an event which prevents the vendor's obligation to convey title from acquiring binding force. Hence, the agreement of the parties in the case at bench may be set aside, but not because of a breach on the part of petitioner for failure to
complete payment of the purchase price. Rather, his failure to do so brought about a situation which prevented the obligation of respondent spouses to convey title from acquiring an obligatory force.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
126
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
127
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
128
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
129
never presumed;
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
130
the change brought about by any subsequent agreement is merely incidental to the main obligation (e.g., a change in interest rates or an extension of time to pay; in this instance, the new agreement will not have the effect of extinguishing the first but would
merely supplement it or supplant some but not all of its provisions.)
Implied novation
the acts of the parties must clearly demonstrate their intent to dissolve the old obligation as the moving consideration for the emergence of the new one.
necessitates that the incompatibility between the old and new obligation be total on every point such that the old obligation is completely superseded by the new one.
The test of incompatibility is whether they can stand together, each one having an independent existence; if they cannot and are irreconcilable, the subsequent obligation would also extinguish the first.
The obligation to pay a sum of money is not novated by an instrument that expressly recognizes the old, changes only the terms of payment, adds other obligations not incompatible with the old ones or the new contract merely supplements the old one.
The extension of the 45 day credit did not novate the obligation to extinguish it because
a.
1. it wasnt incompatible with the 30% provision
b.
2. there was no intention to supersede the contract
45 day extension was precisely to revive the application of the contract since it expired without the obligation having been fulfilled.
Besides, there was no waiver. A waiver is a voluntary and intentional relinquishment or abandonment of a known legal right or privilege. A waiver must be couched in clear and unequivocal terms which leave no doubt as to the intention of a party to give up a right or
benefit which legally pertains to him.
Nonetheless, the interest should be 24%.Betonval sent FSI a statement of account with 24% interest + this was impliedly accepted by FSI when it sent a proposed schedule of payments with the same 24% interest. FSI is thus estopped from claiming that there was NO
interest. (So in effect what happened was merely a modificatory novation, not an extinctive novation.)
*12% interest after finality of decision is correct = it is treated as a forbearance of credit.
Article 1292
Art. 1292. In order that an obligation may be extinguished by another which substitute the same, it is imperative that it be so declared in unequivocal terms, or that the old and the new obligations be on every point incompatible with each other.
(1204)
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
131
We see no substantial incompatibility between the mortgage obligation and the judgment liability of the respondent sufficient to justify a conclusion of implied novation. The stipulation for the payment of the obligation under the terms of the deed of chattel mortgage
serves only to provide an express and specific method for its extinguishment - payment in two equal installments. The chattel mortgage simply gave the respondent a method and more time to enable him to fully satisfy the judgment indebtedness. The chattel mortgage
agreement in no manner introduced any substantial modification or alteration of the judgment. Instead of extinguishing the obligation of the respondent arising from the judgment, the deed of chattel mortgage expressly ratified and confirmed the existence of the same,
amplifying only the mode and period for compliance by the respondent.
The defense of implied novation requires clear and convincing proof of complete incompatibility between the two obligations. 2 The law requires no specific form for an effective novation by implication. The test is whether the two obligations can stand together. If they
cannot, incompatibility arises, and the second obligation novates the first. If they can stand together, no incompatibility results and novation does not take place.
We do not see any substantial incompatibility between the two obligations as to warrant a finding of an implied novation. Nor do we find satisfactory proof showing that the parties, by explicit terms, intended the full discharge of the respondent's liability under the
judgment by the obligation assumed under the terms of the deed of chattel mortgage so as to justify a finding of express novation.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
132
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
133
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
134
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
135
Following the above-quoted stipulation is a statement that the subject parcels of land had in fact been partitioned, but that the former co-owner intended to share with petitioners the proceeds of any sale of said land.
The MOA falls short of producing a novation, because it does not express a clear intent to dissolve the old obligation as a consideration for the emergence of the new one. Likewise, petitioners fail to show that the DPP and the MOA are materially and substantially
incompatible with each other. Petitioners admit that, under the MOA, they and the Tamayo spouses agreed to equally share in the proceeds of the sale of the lots. Indeed, the DPP granted title to the lots in question to the co-owner to whom they were assigned, and the
MOA created an obligation on the part of such co-owner to share with the others the proceeds of the sale of such parcels. There is no incompatibility between these two contracts.
Verily, the MOA cannot be construed as a repudiation of the earlier DPP. Both documents can exist together and must be so interpreted as to give life to both.
All in all, the basic principle underlying this ruling is simple: when the text of a contract is explicit and leaves no doubt as to its intention, the court may not read into it any intention that would contradict its plain import. The hornbook rule on interpretation of contracts
gives primacy to the intention of the parties, which is the law among them. Ultimately, their intention is to be deciphered not from the unilateral post facto assertions of one of the parties, but from the language used in the contract. And when the terms of the
agreement, as expressed in such language, are clear, they are to be understood literally, just as they appear on the face of the contract.
Indeed, the legal effects of a contract are determined by extracting the intention of the parties from the language they used and from their contemporaneous and subsequent acts. This principle gains more force when third parties are concerned. To require such
persons to go beyond what is clearly written in the document is unfair and unjust. They cannot possibly delve into the contracting parties minds and suspect that something is amiss, when the language of the instrument appears clear and unequivocal.
Article 1293
Art. 1293. Novation which consists in substituting a new debtor in the place of the original one, may be made even without the knowledge or against the will of the latter, but not without the consent of the creditor. Payment by the new debtor gives
him the rights mentioned in Articles 1236 and 1237. (1205a)
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
136
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
137
PLDT and RCA Communications, an American company authorized to transact business in the Phils, entered into an agreement whereby tel. msgs coming from the US and received by RCAs domestic station could automatically be transferred to PLDT and vice
versa
Contracting parties agreed to divide tolls as follows: 30% to PLDT, 70% to RCA
Contract contained a stipulation that either party could terminate the contract w/in a 24-month notice.
Soon after its creation in 1947, Bureau of Telecommunications, a branch of gov, rented trunk lines of PLDT to enable gov offices to call private parties. Their agreement stated that public use of the service would be prohibited.
BOT then entered into an agreement w/ RCA for a service where BOT would convey radio-telephone calls received by RCAs station to and from local residents.
PLDT complained that BOT violated the conditions of the agreement, by providing services not only to government officers but also to the public and private persons, competing with the business of PLDT.
It gave notice that it would server tel connections if violations were not stopped. When it received no reply, PLDT disconnected trunk lines, resulting in the isolation of the Phils in telephone services from the rest of the world, save the US.
Parties cannot be coerced to enter into a contract where no agreement is had between them as to the principal terms and conditions of the contract. Freedom to stipulate such terms and conditions is of the essence of our contractual system,
and by express provision of the statute, a contract may be annulled if tainted by violence, intimidation, or undue influence (Articles 1306, 1336, 1337, Civil Code of the Philippines).
HOWEVER, while the Republic may not compel the PLDT to celebrate a contract with it, the Republic may, in the exercise of the sovereign power of eminent domain, require the telephone company to permit interconnection of the government telephone system
and that of the PLDT, as the needs of the government service may require, subject to the payment of just compensation to be determined by the court.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
138
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
139
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
140
The theory is where payment is made to a person authorized and recognized by the creditor, the payment to such a person so authorized is deemed payment to the creditor. Under ordinary circumstances, payment by the judgment debtor in the case at bar, to the
sheriff should be valid payment to extinguish the judgment debt.
There are circumstances in this case, however, which compel a different conclusion.
The payment made by the petitioner to the absconding sheriff was not in cash or legal tender but in checks. The checks were not payable to Amelia Tan or Able Printing Press but to the absconding sheriff.
The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired.
In the meantime, the action derived from the original obligation shall be held in abeyance.
In the absence of an agreement, either express or implied, payment means the discharge of a debt or obligation in money and unless the parties so agree, a debtor has no rights, except at his own peril, to substitute something in lieu of cash as medium of payment of
his debt. Consequently, unless authorized to do so by law or by consent of the obligee a public officer has no authority to accept anything other than money in payment of an obligation under a judgment being executed. Strictly speaking, the acceptance by the sheriff of
the petitioner's checks, in the case at bar, does not, per se, operate as a discharge of the judgment debt.
Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does not, by itself, operate as payment. A check, whether a manager's check or ordinary cheek, is not legal tender, and an offer of a check in payment of a
debt is not a valid tender of payment and may be refused receipt by the obligee or creditor. 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 (Art. 1249, Civil Code, par. 3).
If bouncing checks had been issued in the name of Amelia Tan and not the Sheriff's, there would have been no payment. After dishonor of the checks, Ms. Tan could have run after other properties of PAL. The theory is that she has received no value for what had been
awarded her. Because the checks were drawn in the name of Emilio Z. Reyes, neither has she received anything. The same rule should apply.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
141
In the first place, PAL did not pay in cash. It paid in cheeks.
And second, payment in cash always carries with it certain cautions. Nobody hands over big amounts of cash in a careless and inane manner. Mature thought is given to the possibility of the cash being lost, of the bearer being waylaid or running off with what he is
carrying for another. Payment in checks is precisely intended to avoid the possibility of the money going to the wrong party. The situation is entirely different where a Sheriff seizes a car, a tractor, or a piece of land. Logic often has to give way to experience and to
reality. Having paid with checks, PAL should have done so properly.
Payment in money or cash to the implementing officer may be deemed absolute payment of the judgment debt but the Court has never, in the least bit, suggested that judgment debtors should settle their obligations by turning over huge amounts of cash or legal tender
to sheriffs and other executing officers. Payment in cash would result in damage or interminable litigations each time a sheriff with huge amounts of cash in his hands decides to abscond.
As a protective measure, therefore, the courts encourage the practice of payments by cheek provided adequate controls are instituted to prevent wrongful payment and illegal withdrawal or disbursement of funds. If particularly big amounts are involved, escrow
arrangements with a bank and carefully supervised by the court would be the safer procedure. Actual transfer of funds takes place within the safety of bank premises. These practices are perfectly legal. The object is always the safe and incorrupt execution of the
judgment.
It is, indeed, out of the ordinary that checks intended for a particular payee are made out in the name of another. Making the checks payable to the judgment creditor would have prevented the encashment or the taking of undue advantage by the sheriff, or any person
into whose hands the checks may have fallen, whether wrongfully or in behalf of the creditor. The issuance of the checks in the name of the sheriff clearly made possible the misappropriation of the funds that were withdrawn.
As between two innocent persons, one of whom must suffer the consequence of a breach of trust, the one who made it possible by his act of confidence must bear the loss.
Having failed to employ the proper safeguards to protect itself, the judgment debtor whose act made possible the loss had but itself to blame.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
142
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
143
The validity of the stipulation in the contract providing for the automatic reversion of the donated property to the donor upon non-compliance cannot be doubted. It is in the nature of an agreement granting a party the right to rescind a contract unilaterally in case of
breach, without need of going to court. Upon the happening of the resolutory condition of non-compliance with the conditions of the contract, the donation is automatically revoked without need of a judicial declaration to that effect.
The case was then ordered by the court to be heard by a judge to determine the propriety of the revocation of the donation.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
144
However, BECC, in a letter dated July 13, 1990, pointed out to Luis the following stipulation in their contract:
In the event the card is lost or stolen, the cardholder agrees to immediately report its loss or theft in writing to BECC ... purchases made/incurred arising from the use of the lost/stolen card shall be for the exclusive account of the cardholder and the
cardholder continues to be liable for the purchases made through the use of the lost/stolen BPI Express Card until after such notice has been given to BECC and the latter has communicated such loss/theft to its member establishments.
Issue:
WON the stipulation embodied in a standard application form for credit cards making the cardholder liable for purchases made through his lost or stolen card is valid? NO
Ratio:
At the outset, we note that the contract between the parties in this case is indeed a contract of adhesion, so-called because its terms are prepared by only one party while the other party merely affixes his signature signifying his adhesion thereto. Such contracts are not
void in themselves. They are as binding as ordinary contracts. Parties who enter into such contracts are free to reject the stipulations entirely. This Court, however, will not hesitate to rule out blind adherence to such contracts if they prove to be too one-sided under the
attendant facts and circumstances.
In this case, the cardholder, Manuelita, has complied with what was required of her under the contract with BECC. Having thus performed her part of the notification procedure, it was reasonable for Manuelita -- and Luis, for that matter -- to expect that BECC would
perform its part of the procedure, which is to forthwith notify its member-establishments. It is not unreasonable to assume that BECC would do this immediately, precisely to avoid any unauthorized charges. Clearly, what happened in this case was that BECC failed to
notify promptly the establishment in which the unauthorized purchases were made with the use of Manuelitas lost card. Thus, Manuelita was being liable for those purchases, even if there is no showing that Manuelita herself had signed for said purchases, and after
notice by her concerning her cards loss was already given to BECC.
Prompt notice by the cardholder to the credit card company of the loss or theft of his card should be enough to relieve the former of any liability occasioned by the unauthorized use of his lost or stolen card. The questioned stipulation in this case, which still requires the
cardholder to wait until the credit card company has notified all its member-establishments, puts the cardholder at the mercy of the credit card company which may delay indefinitely the notification of its members to minimize if not to eliminate the possibility of incurring
any loss from unauthorized purchases. Or, as in this case, the credit card company may for some reason fail to promptly notify its members through absolutely no fault of the cardholder. To require the cardholder to still pay for unauthorized purchases after he has
given prompt notice of the loss or theft of his card to the credit card company would simply be unfair and unjust. The Court cannot give its assent to such a stipulation which could clearly run against public policy.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
145
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
146
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
147
HELD:
PETITION Granted. The stipulation is void for being contrary to public policy.
RATIONALE:
A stipulation providing that the effectivity of the credit card cancellation rests on an act entirely beyond the control of the cardholder is void for being contrary to public policy. Worse, the phrase "after a reasonable time" gives the issuer the opportunity to actually profit
from unauthorized charges despite receipt of immediate written notice from the cardholder.
Under such a stipulation, petitioner could have theoretically done everything in his power to give respondent the required written notice. But if respondent took a "reasonable time (which could be indefinite) to include the card in its cancellation bulletin, it could still hold
the cardholder liable for whatever unauthorized charges were incurred within that span of time. This would have been truly iniquitous, considering the amount respondent wanted to hold petitioner liable for.
Article 1306 of the Civil Code11 prohibits contracting parties from establishing stipulations contrary to public policy.
11 Art. 1306. 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.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
148
Should the interest rate be reduced from 9.25% to 2% since the stipulated rate of interest was unconscionable and iniquitious? Yes
RATIONALE:
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
In its Complaint, respondent BPI originally imposed the interest and penalty charges at the rate of 9.25% per month or 111% per annum. This was declared as unconscionable by the lower courts for being clearly excessive, and was thus reduced to 2%
per month or 24% per annum. On appeal, the CA modified the rate of interest and penalty charge and increased them to 3% per month or 36% per annum based on the Terms and Conditions Governing the Issuance and Use of the BPI Credit Card, which
governs the transaction between petitioner Macalinao and respondent BPI. BPI asserts that said interest rate and penalty charge are reasonable as the same are based on the Terms and Conditions Governing the Issuance and Use of the BPI Credit
Card.
We find for petitioner. The interest rate and penalty charge of 3% per month should be equitably reduced to 2% per month or 24% per annum.
Indeed, in the Terms and Conditions Governing the Issuance and Use of the BPI Credit Card, there was a stipulation on the 3% interest rate. Nevertheless, it should be noted that this is not the first time that this Court has considered the interest rate of
36% per annum as excessive and unconscionable. We held in Chua vs. Timan: The stipulated interest rates of 7% and 5% per month imposed on respondents loans must be equitably reduced to 1% per month or 12% per annum. 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. Such stipulations are 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. Hence, courts may reduce the interest rate as reason and equity demand.
The same is true with respect to the penalty charge. Notably, under the Terms and Conditions Governing the Issuance and Use of the BPI Credit Card, it was also stated therein that respondent BPI shall impose an additional penalty charge of 3% per
month. Pertinently, Article 1229 of the Civil Code states: The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be
reduced by the courts if it is iniquitous or unconscionable.
In the instant case, the records would reveal that petitioner Macalinao made partial payments to respondent BPI, as indicated in her Billing Statements. Further, the stipulated penalty charge of 3% per month or 36% per annum, in addition to regular
interests, is indeed iniquitous and unconscionable.
Thus, under the circumstances, the Court finds it equitable to reduce the interest rate pegged by the CA at 1.5% monthly to 1% monthly and penalty charge fixed by the CA at 1.5% monthly to 1% monthly or a total of 2% per month or 24% per annum in
line with the prevailing jurisprudence and in accordance with Art. 1229 of the Civil Code.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
149
FACTS:
Platinum Plans Philippines, Inc. is a domestic corporation engaged in the pre-need industry. From 1987 to 1989, Tiu Daisy B. Tiu was its Division Marketing Director.
In 1993, Platinum re-hired Tiu as Senior AVP and Territorial Operations Head in charge of its Hongkong and Asean operations and executed a contract of employment valid for five years. In 1995, Tiu stopped reporting for work. After a couple of months, she became
the VP for Sales of Professional Pension Plans, Inc., a pre-need company.
Platinum sued Tiu for damages for violation of the non-involvement clause in her contract of employment which states that during her employment with Platinum and for the next TWO (2) years thereafter, she cannot engage with any corporation belonging to the same
pre-need industry. Breach thereof would amount to 100,000.00.
Tiu countered that the non-involvement clause was unenforceable for being against public order or public policy.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
150
RATIO:
A non-involvement clause is not necessarily void for being in restraint of trade as long as there are reasonable limitations as to time, trade, and place.
In this case, the non-involvement clause has a time limit: two years from the time Tius employment with Platinum ends. It is also limited as to trade, since it only prohibits Tiu from engaging in any pre-need business akin to Platinums.
More significantly, since Tiu was the Senior Assistant Vice-President and Territorial Operations Head in charge of Platinums Hongkong and Asean operations, she had been privy to confidential and highly sensitive marketing strategies of Platinums business. To allow
her to engage in a rival business soon after she leaves would make Platinums trade secrets vulnerable especially in a highly competitive marketing environment. In sum, we find the non-involvement clause not contrary to public welfare and not greater than is
necessary to afford a fair and reasonable protection to Platinum.
Article 1159 of the same Code also provides that obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. Courts cannot stipulate for the parties nor amend their agreement where the same does
not contravene law, morals, good customs, public order or public policy, for to do so would be to alter the real intent of the parties, and would run contrary to the function of the courts to give force and effect thereto. Not being contrary to public policy, the noninvolvement clause, which Tiu and Platinum freely agreed upon, has the force of law between them, and thus, should be complied with in good faith.
BALANE NOTE
Non-involvement clause. Court traced the jurisprudential history of the non-involvement clause. The clause is not itself void, it can be valid if it is reasonable and can be restricted as to time, place or industry.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
151
BSP-MB
can
continue
enforcing
the
CB-MB
circular
lifting
the
ceilings
on
interest
rates
(thus
allowing
interests
to
go
beyond
the
rates
under
the
Usury
Law)
Held
The power of the CB to effectively suspend the Usury Law pursuant to P.D. No. 1684 has long been recognized and upheld in many cases (because a circular cannot repeal a law). P.D. No. 1684 and C.B. Circular No. 905 no more than allow contracting parties to
stipulate freely regarding any subsequent adjustment in the interest rate that shall accrue on a loan or forbearance of money, goods or credits. In fine, they can agree to adjust, upward or downward, the interest previously stipulated.
Thus, by lifting the interest ceiling, CB Circular No. 905 merely upheld the parties' freedom of contract to agree freely on the rate of interest. It cited Article 1306 of the New Civil Code, under which 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.crala
However, the lifting of the ceilings for interest rates does not authorize stipulations charging excessive, unconscionable, and iniquitous interest. Stipulations authorizing iniquitous or unconscionable interests have been invariably struck down for being contrary to morals,
if not against the law.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
152
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
153
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
154
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
155
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
156
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
157
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
158
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
159
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
160
RATIONALE:
Petitioners are NOT real parties-in-interest
Article 1311 of the Civil Code, states:
Contracts take effect only between the parties, their assigns, and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation, or by provision of law. x x x.
If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not
sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person. (Underscoring supplied.)
Petitioners are not parties to the contract of sale between their principals and NHA. They are mere agents of the owners of the land subject of the sale. As agents, they only render some service or do something in representation or on behalf of their principals.
Rendering of such service did not make them parties to the contracts of sale executed in behalf of the latter. Since a contract may be violated only by the parties thereto as against each other, the real parties-in-interest, either as plaintiff or defendant, in an action upon
that contract must, generally, either be parties to said contract. Neither are they heirs nor assigns of the owners of the property.
Also, it does not appear that petitioners are beneficiaries of a stipulation pour autrui under the second paragraph of Article 1311 of the Civil Code. Indeed, there is no stipulation in any of the Deeds of Absolute Sale clearly and deliberately conferring a favor to any
third person.
As petitioners are not parties, heirs, assignees, or beneficiaries of a stipulation pour autrui under the contracts of sale, they do not, under substantive law, possess the right they seek to enforce. Therefore, they are not the real parties-in-interest in this case.
NHA was justified in cancelling the contract
Petitioners were wrong to say that NHA rescinded the contract. NHA cannot rescind the contract because did not commit any breach of their contract. The cancellation, therefore, was not a rescission under Article 1191. Rather, the cancellation was based on the
negation of the cause arising from the realization that the lands, which were the object of the sale, were not suitable for housing.
Cause is the essential reason which moves the contracting parties to enter into it. In other words, the cause is the immediate, direct and proximate reason which justifies the creation of an obligation through the will of the contracting parties. Cause, which is the
essential reason for the contract, should be distinguished from motive, which is the particular reason of a contracting party which does not affect the other party.
Ordinarily, a partys motives for entering into the contract do not affect the contract. However, when the motive predetermines the cause, the motive may be regarded as the cause. In this case, NHA would not have entered into the contract had it known that properties
were not suitable for housing. On the part of the NHA, therefore, the motive was the cause for its being a party to the sale.
The realization of the mistake as regards the quality of the land resulted in the negation of the motive/cause thus rendering the contract inexistent. Article 1318 of the Civil Code states that:
Art. 1318. There is no contract unless the following requisites concur:
1
Consent of the contracting parties;
2
Object certain which is the subject matter of the contract;
3
Cause of the obligation which is established. (Underscoring supplied.)
SPS. MAMARIL V. BOY SCOUTS OF THE PHILIPPINES, 688 SCRA 437 [2013]
Civil Law; Quasi-Delicts; Article 20 of the Civil Code provides that every person, who, contrary to law, willfully or negligently causes damage to another, shall indemnify the latter for the same. Article 20 of the Civil Code provides that every person, who, contrary to law,
willfully or negligently causes damage to another, shall indemnify the latter for the same. Similarly, Article 2176 of the Civil Code states: Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage
done. Such fault or negligence, if there is no preexisting contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter. In this case, it is undisputed that the proximate cause of the loss of Sps. Mamarils vehicle was
the negligent act of security guards Pea and Gaddi in allowing an unidentified person to drive out the subject vehicle. Proximate cause has been defined as that cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces
the injury or loss, and without which the result would not have occurred. Moreover, Pea and Gaddi failed to refute Sps. Mamarils contention that they readily admitted being at fault during the investigation that ensued.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
161
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
162
Article 1318
Art. 1318. There is no contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established. (1261)
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
163
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
164
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
165
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
166
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
167
FACTS:
On June 7, 1985, the Bible Baptist Church entered into a contract of lease [4] with Mr. & Mrs. Elmer Tito Medina Villanueva. The pertinent stipulations in the lease contract were:
4. That upon signing of the LEASE AGREEMENT, the LESSEE shall pay the sum of Eighty Four Thousand Pesos ( P84,000.00) Philippine Currency. Said sum is to be paid directly to the Rural Bank, Valenzuela, Bulacan for the purpose of redemption of
said property which is mortgaged by the LESSOR.
8. That the LESSEE has the option to buy the leased premises during the Fifteen (15) years of the lease. If the LESSEE decides to purchase the premises the terms will be: A) A selling Price of One Million Eight Hundred Thousand Pesos ( P1.8 million),
Philippine Currency. B) A down payment agreed upon by both parties. C) The balance of the selling price may be paid at the rate of One Hundred Twenty Thousand Pesos (P120,000.00), Philippine Currency, per year.
The foregoing stipulations of the lease contract are the subject of the present controversy.
ISSUE:
1)
Whether or not the option to buy given to the Baptist Church is founded upon a consideration; NO
2)
WON the consideration for the option could be the agreement for petitioners to rescue the property of the respondents. -NO
HELD:
(1) The second paragraph of Article 1479 provides for the definition and consequent rights and obligations under an option contract. For an option contract to be valid and enforceable against the promissor, there must be a separate and distinct consideration that
supports it.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
168
In the petition, the Baptist Church states that [t]rue, the Baptist Church did not pay a separate and specific sum of money to cover the option alone . But the P84,000 it paid the Villanuevas in advance should be deemed consideration for the one contract they entered
into the lease with option to buy.[9] They rely on the case of Teodoro v. Court of Appeals[10] to support their stand.
First, petitioners cannot insist that the P84,000 they paid in order to release the Villanuevas property from the mortgage should be deemed the separate consideration to support the contract of option. It must be pointed out that said amount was in fact apportioned into
monthly rentals spread over a period of one year, at P7,000 per month. Thus, for the entire period of June 1985 to May 1986, petitioner Baptist Churchs monthly rent had already been paid for, such that it only again commenced paying the rentals in June 1986. This is
shown by the testimony of petitioner Pastor Belmonte where he states that the P84,000 was advance rental equivalent to monthly rent of P7,000 for one year, such that for the entire year from 1985 to 1986 the Baptist Church did not pay monthly rent. [11]
This Court agrees with respondents that the amount of P84,000 has been fully exhausted and utilized by their occupation of the premises and there is no separate consideration to speak of which could support the option. [12]
Second, petitioners reliance on the case of Teodoro v. Court of Appeals [13] is misplaced. Consequently, unlike this case, Teodoro paid over and above the amount due for her own occupation of a portion of the property. Hence, in Teodoro, this Court was able to find that
a separate consideration supported the option contract and thus, its enforcement may be demanded..
(2) In Villamor v. Court of Appeals,[14] this Court defined consideration as the why of the contracts, the essential reason which moves the contracting parties to enter into the contract. [15]This definition illustrates that the consideration contemplated to support an option
contract need not be monetary.
Specifically, in Villamor v. Court of Appeals,[16] half of a parcel of land was sold to the spouses Villamor for P70 per square meter, an amount much higher than the reasonable prevailing price. Thereafter, a deed of option was executed whereby the sellers undertook to
sell the other half to the same spouses. It was stated in the deed that the only reason the spouses bought the first half of the parcel of land at a much higher price, was the undertaking of the sellers to sell the second half of the land, also at the same price . This Court
held that the cause or consideration for the option, on the part of the spouses-buyers, was the undertaking of the sellers to sell the other half of the property. On the part of the sellers, the consideration supporting the option was the much higher amount at which the
buyers agreed to buy the property. It was explicit from the deed therein that for the parties, this was the consideration for their entering into the contract.
Villamor is distinct from the present case because, First, this Court cannot find that petitioner Baptist Church parted with anything of value, aside from the amount of P84,000 which was in fact eventually utilized as rental payments. Second, there is no document that
contains an agreement between the parties that petitioner Baptist Churchs supposed rescue of the mortgaged property was the consideration which the parties contemplated in support of the option clause in the contract. As previously stated, the amount advanced
had been fully utilized as rental payments over a period of one year. While the Villanuevas may have them to thank for extending the payment at a time of need, this is not the separate consideration contemplated by law.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
169
FACTS
Respondent-heirs told petitioner-lessees that they had decided to sell their interest in the property. They asked if the petitioners would like to exercise their right of pre-emption as lessees and were given 30 days to exercise their right. Silence would mean a
waiver of the right.
Offer #1 by P: P asked for a 30-day extension to come up with their bid for the property. Their first proposal was a bid price of P4M, 80% payment upon signing = P3.2M, and upon delivery of the certificate of title to each one = 20% of the balance (P800K).
The respondents requested petitioner-lessees to increase their bid for the property but the latter failed to make another offer so the heirs had decided to sell to another buyer who offered a higher price. Nevertheless, R informed the P that they would wait for a
reply within 15 days and that should the period lapse without any reply from petitioner-lessees, it would mean that petitioner-lessees were no longer interested in buying the property.
Asking price of R (counter-offer): When P requested for their asking price, respondents indicated 5M.
In a conference subsequently held, the parties failed to agree on the price and terms for the sale of the property.
Offer #2 by P: Ps wrote another stating that after waiting for Rs reply (for 68 days) but not receiving any, they announced their willingness to pay the P5M asking price, excluding unpaid taxes and documentary stamps shall be for the account of the sellers.
Rs replied that as previously informed, some of the co-owners were no longer willing to sell. Only a few who represent 75% of the property were still willing ; thus, the offer to sell the entire property was no longer effective. They added that the P5M was meant to
be the net price, meaning the taxes should be for the account of the buyers.
Counter-offer by R: The respondent-heirs who were still willing to sell collectively owned 75% of the property. Their asking price was P3.8M. P were given 2 week to respond. The petitioners did not reply so the property was sold to a third party, Lita Sy. The
other heirs sold the remaining 25% portion of the property to "Villegas brothers".
P filed an action against respondent-heirs and Spouses Sy for Annulment of Deed of Sale/Title.
Note: The Spouses Sy filed a complaint for Specific Performance against the heirs of Atanacio Villegas (apparently the Spouses redeemed the 25% portion from the latter). not so important to the issue
Ps insist that there was already a perfected contract of sale when the R accepted the P5M offer for the property and that the contract of sale between R and Lita Sy should be annulled since it violated the right of first refusal of P.
On the other hand, R maintain that the P5M offer already lapsed because petitioner-lessees did not accept the offer within the period granted. Instead, petitioner-lessees opted for a conference during which the parties failed to agree on the price. There was
therefore no perfected contract of sale because there was no meeting of minds between the parties.
ISSUES:
Whether the contract of sale between respondent-heirs and Lita Sy violated the right of first refusal of petitioner-lessees
(second issue about redemption not relevant to contracts)
RULING:
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
170
When a lease contains a right of first refusal, the lessor has the legal duty to the lessee not to sell the leased property to anyone at any price until after the lessor has made an offer to sell the property to the lessee and the lessee has failed to accept it. Only after the
lessee has failed to exercise his right of first priority could the lessor sell the property to other buyers under the same terms and conditions offered to the lessee, or under terms and conditions more favorable to the lessor.
The records show that the heirs of Dr. Lorenzo C. Reyes did recognize the right of first refusal of petitioner-lessees over the property. This is clear from the letter dated 19 May 1988 informing petitioner-lessees that the property they were leasing is for sale. There was
an exchange of letters between the R and P evidencing the offer and counter-offer of both parties.
There was no meeting of the minds between the parties. Where a time is stated in an offer for its acceptance, the offer is terminated at the expiration of the time given for its acceptance. The offer may also be terminated when the person to whom the offer is made
either rejects the offer outright or makes a counter-offer of his own.
The offer of P5,000,000 in the letter already lapsed when petitioner-lessees failed to accept it within the period granted. The offer was superseded by the new offer of respondent-heirs during the conference . However, it appears from the records that no settlement was
reached between the parties during their conference.
Petitioner-lessees admit that there was an ongoing negotiation for the sale of the property. Precisely, theP5,000,000 price for the property indicated in the letter dated 3 August 1988 was superseded by the subsequent offer of respondent-heirs during the conference.
Thus, the letter dated 18 October 1988 of petitioner-lessees is merely another counter-offer for the property in their continuing negotiation for the property. The latest offer of respondent-heirs was contained in their letter dated 3 November 1988 wherein only the 75%
undivided interest of the property was for sale at P3,825,000. When petitioner-lessees opted not to respond to this offer, respondent-heirs had the right to sell the property to other buyers.
Petitioner-lessees already exercised their right of first refusal when they refused to respond to the latest offer of respondent-heirs, which amounted to a rejection of the offer. Upon petitioner-lessees failure to respond to this latest offer of respondent-heirs, the latter
could validly sell the property to other buyers under the same terms and conditions offered to petitioner-lessees. Thus, when respondent-heirs sold the property to Lita Sy, respondent-heirs did not violate the right of first refusal of petitioner-lessees. Indeed, petitionerlessees were given more than ample opportunity to purchase the property
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
171
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
172
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
173
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
174
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
175
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
176
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
177
DOCTRINE
Where a person, in order to place his property beyond the reach of his creditors, simulates a transfer of it to another, he does not really intend to divest himself of his title and control of the property; hence, the deed of transfer is but a sham.
Valerio v. Refresca, 485 SCRA 494 (2006) differentiates absolute simulation of contracts from relative simulation:
In absolute simulation, there is a colorable contract but it has no substance as the parties have no intention to be bound by it. The main characteristic of an absolute simulation is that the apparent contract is not really desired or intended to produce legal effect or in
any way alter the juridical situation of the parties. As a result, an absolutely simulated or fictitious contract is void, and the parties may recover from each other what they may have given under the contract.
However, if the parties state a false cause in the contract to conceal their real agreement, the contract is relatively simulated and the parties are still bound by their real agreement. Hence, where the essential requisites of a contract are present and the simulation
refers only to the content or terms of the contract, the agreement is absolutely binding and enforceable between the parties and their successors in interest. Lacking, therefore, in an absolutely simulated contract is consent which is essential to a valid and enforceable
contract.
FACTS
Alfonso Ureta was a well-off man with several properties and 14 children. His property included several fishpens, a fishpond, a sari-sari store, a passenger jeep, and the business of buying and selling copra. In order to avoid paying inheritance tax he made it appear
that he sold some of his properties to his children. Alfonso executed four (4) Deeds of Sale covering several parcels of land in favor of his children Policronio, Liberato, Prudencia, and his common-law wife, Valeriana Dela Cruz.
The Deed of Sale executed on October 25, 1969, in favor of Policronio, covered six parcels of land, which are the properties in dispute in this case.
Alfonso, however, continued to pay and declare the properties for tax purposes and continued to own, possess and enjoy the lands and their produce.
After Alfonso died, his younger children, Liberato and Prudencio, became administratrix of his estate.
Except for a portion of parcel 5, the rest of the parcels transferred to Policronio were tenanted by the Fernandez Family. These tenants never turned over the produce of the lands to Policronio or any of his heirs, but to Alfonso and, later, to the administrators of his
estate.
Policronio died on November 22, 1974. Except for the said portion of parcel 5, neither Policronio nor his heirs ever took possession of the subject lands.
On April 19, 1989, Alfonso's heirs executed a Deed of Extra-Judicial Partition, which included all the lands that were covered by the four (4) deeds of sale that were previously executed by Alfonso for taxation purposes. Conrado, Policronio's eldest son, representing the
Heirs of Policronio, signed the Deed of Extra-Judicial Partition in behalf of his co-heirs.
After their father's death, the Heirs of Policronio found tax declarations in his name covering the six parcels of land. On June 15, 1995, they obtained a copy of the Deed of Sale executed on October 25, 1969 by Alfonso in favor of Policronio.
Believing that the six parcels of land belonged to their late father, and as such, excluded from the Deed of Extra-Judicial Partition, the Heirs of Policronio sought to amicably settle the matter with the Heirs of Alfonso. Earnest efforts proving futile, the Heirs of Policronio
filed a Complaint for Declaration of Ownership, Recovery of Possession, Annulment of Documents, Partition, and Damages against the Heirs of Alfonso before the RTC on November 17, 1995
RTC dismissed the complaint and found that the deed of sale was void because no price was paid, and even if there was P2000 paid such price was grossly inadequate. In addition, the RTC stated that the circumstances showed that Alfonso and his heirs never lost
possession of the property and the tenants acknowledged Alfonso and his heirs as the owner by sending them the produce.
Conrados assertion that he did not understand the significance of signing the deed of extrajudicial partition was disregarded.
CA affirmed the finding of the RTC that the Deed of Sale was void. It found the Deed of Sale to be absolutely simulated as the parties did not intend to be legally bound by it. As such, it produced no legal effects and did not alter the juridical situation of the parties.
ISSUE/S
1. Whether or not the Deed of Sale was valid
2. Whether or not the Deed of sale absolutely simulate void or relatively simulated.
3. Whether or not the Deed of Extra-Judicial Partition was valid
4. Whether the right to set-up inexistence of the contract has prescribed
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
178
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
179
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
180
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
181
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
182
There was no written agreement. There was no bond w/c is usually posted.
ISSUES
WON Deloso was correctly found guilty
HELD
NO. All 3 beneficiaries (Ferrer, Encarnacion, Lim) were presented and all declared that they rcvd tractors upon understanding that theyd pay rentals and keep them in good repair. The facts they established are the same as those demonstrated by the evidence
of defense.
Sison (Municipal Treas) testified that payments were made by lessees.
Deloso himself took witness stand. He said he asked that the terms of lease be embodied in Resolution but Sanggunian had declined at that time, saying its unable to do so bec docs werent yet in its possession. What Deloso did was to instruct Municipal Treas to
incorporate general terms in a memorandum receipt. Deloso also personally explained terms of lease to the beneficiaries.
Sandiganbayans conclusions are erroneous. The lease in this case isnt one of those required by law to be in writing / in any particular form to be valid / enforceable. Absence of bond doesnt make transactions criminal. Theres also no evidence that canvass / bidding
is a requirement.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
183
Articles 1370-1379
Art. 1370. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control.
If the words appear to be contrary to the evident intention of the parties, the latter shall prevail over the former. (1281)
Art. 1371. In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered. (1282)
Art. 1372. However general the terms of a contract may be, they shall not be understood to comprehend things that are distinct and cases that are different from those upon which the parties intended to agree. (1283)
Art. 1373. If some stipulation of any contract should admit of several meanings, it shall be understood as bearing that import which is most adequate to render it effectual. (1284)
Art. 1374. The various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly. (1285)
Art. 1375. Words which may have different significations shall be understood in that which is most in keeping with the nature and object of the contract. (1286)
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
184
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
185
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
186
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
187
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
188
FACTS:
The plaintiff averred that long before and until her house had been completely destroyed during the liberation of the City of Manila, she occupied Lot I, located at San Andres Street, Malate, Manila. After liberation she re-occupied it. She asserted her right thereto as
occupant for purposes of purchase.
Defendant also asserted a similar right, alleging occupancy of a portion of the land subsequent to plaintiff's. During the investigation of such conflicting interests, defendant asked plaintiff to desist from pressing her claim and definitely promised that if and when he
succeeded in getting title to Lot I, he would sell to her a portion thereof with an area of 55.60 square meters, provided she paid for the surveying and subdivision of the Lot and provided further that after he acquired title, she could continue holding the lot as tenant by
paying a monthly rental of P10.00 until said portion shall have been segregated and the purchase price fully paid.
Plaintiff accepted defendant's offer, and desisted from further claiming Lot I, thus defendant finally acquired title thereto.
Plaintiff, relying upon their agreement, caused the survey and segregation of the portion which defendant had promised to sell incurring expenses therefor. She also remodelled her son's house and extended it over to the said lot.
After defendant had acquired Lot I plaintiff regularly paid him the monthly rental of P10.00. Thereafter, plaintiff tendered to defendant the purchase price which the latter refused to accept, without cause or reason.
The trial court dismissed plaintiffs action, applying the general rule on statute of frauds, saying that an oral agreement to sell a piece of land is not enforceable.
ISSUE:
WON the oral contract to sell a piece of land was enforceable! YES!!! There are exceptions to the general rule and this case falls under one of those exceptions.
RATIO:
ACTS OF PARTIAL PERFORMANCE; EXCEPTIONS TO THE ABOVE STATED GENERAL RULE
American Jurisprudence in its title "Statute of Frauds" lists other acts of partial performance, such as possession, the making of improvements, rendition of services, payment of taxes, relinquishment of rights, etc.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
189
Thus, it is stated that "The continuance in possession MAY, in a proper case, be sufficiently referable to the parol contract of sale to constitute a part performance thereof. Continued possession under an oral contract of sale, by one already in possession as a
tenant, has been held a sufficient part performance, where accompanied by other acts which characterize the continued possession and refer it to the contract of purchase.
It is also stated that "The making of valuable permanent improvements on the land by the purchaser, in pursuance of the agreement and with the knowledge of the vendor, has been said to be the strongest and the most unequivocal act of part performance
by which a verbal contract to sell land is taken out of the statute of frauds, and is ordinarily an important element in such part performance. The entry into possession and the making of the improvements are held on amount to such an alteration in the
purchaser's position as will warrant the court's entering a degree of specific performance."
Again, it is stated that "A tender or offer of payment, declined by the vendor, has been said to be equivalent to actual payment, for the purposes of determining whether or not there has been a part performance of the contract. This is apparently true where the
tender is by a purchaser who has made improvements. But the doctrine now generally accepted, that not even the payment of the purchase price, without something more, . . . is a sufficient part performance.
And the relinquishment of rights or the compromise thereof has likewise been held to constitute part performance.
As there was partial performance, the principle excluding parol contracts for the sale of realty, does not apply.
FACTS:
Carbonnel purchased from Poncio a parcel of land. Carbonnel paid P247.26 and assumed Poncio's obligation with the Republic Savings Bank, with the understanding that the balance would be payable upon execution of the corresponding deed of conveyance. One of
the conditions of the sale was that Poncio would continue staying in said land for one year.
Poncio refused to execute the corresponding deed of sale, despite repeated demand. Poncio instead conveyed the same property to defendants Infantes, who knew, of the first sale to Carbonnel. Thus, Carbonnel claims having suffered damages due to Poncio and the
Infantes.
Carbonnel prays that she be declared owner of the land in question; that the sale to the Infantes be annulled; that Poncio be required to execute the corresponding deed of conveyance in Carbonnel's favor; and that defendants be sentenced to pay damages.
Defendants moved to dismiss said complaint upon the ground that Carbonnel's claim is unenforceable under the Statute of Frauds.
Carbonnel introduced presented a witness to prove that Carbonnel and Poncio entered into a written agreement and that Poncio signed the agreement. The witness testified that the written agreement showed that Carbonnel allowed Poncio to stay in the lot that
Carbonnel bought until one year without payment and if after one year Poncio could not find a place, then Poncio can remain as long as he pays according to the agreement.
Carbonnel also took the witness stand. However, defense counsel moved to strike out the Carbonnels statement as witness, invoking the Statute of Frauds.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
190
ISSUE:
Whether the Statute of Frauds is applicable in this case No. Case remanded.
RATIO:
The Statute of Frauds is applicable only to executory contracts, not to contracts that are totally or partially performed.
A sufficient part performance by the purchaser under a parol contract for the sale of real estate removes the contract from the operation of the statute of frauds.
Chief Justice Moran: "The reason is simple. In executory contracts there is a wide field for fraud because unless they be in writing there is no palpable evidence of the intention of the contracting parties. The statute has precisely been enacted to prevent fraud."
However, if a contract has been totally or partially performed, the exclusion of parol evidence would promote fraud or bad faith , for it would enable the defendant to keep the benefits already denied by him from the transaction in litigation, and, at the same time,
evade the obligations, responsibilities or liabilities assumed or contracted by him thereby.
It is not enough for a party to allege partial performance in order to hold that there has been such performance and to render a decision declaring that the Statute of Frauds is inapplicable. But neither is such party required to establish such partial performance
by documentary proof before he could have the opportunity to introduce oral testimony on the transaction. Indeed, such oral testimony would usually be unnecessary if there were documents proving partial performance. Thus, the rejection of any and all testimonial
evidence on partial performance, would nullify the rule that the Statute of Frauds is inapplicable to contracts which have been partly executed, and lead to the very evils that the statute seeks to prevent.
The true basis of the doctrine of part performance is that it would be a fraud upon the plaintiff if the defendant were permitted to escape performance of his part of the oral agreement after he has permitted the plaintiff to perform in reliance upon the agreement. The
oral contract is enforced in harmony with the principle that courts of equity will not allow the statute of frauds to be used as an instrument of fraud. In other words, the doctrine of part performance was established for the same purpose for which, the statute of frauds
itself was enacted, namely, for the prevention of fraud, and arose from the necessity of preventing the statute from becoming an agent of fraud for it could not have been the intention of the statue to enable any party to commit a fraud with impunity.
When the party concerned has pleaded partial performance, such party is entitled to a reasonable chance to; establish by parol evidence the truth of this allegation, as well as the contract itself. "The recognition of the exceptional effect of part performance in taking an
oral contract out of the statute of frauds involves the principle that oral evidence is admissible in such cases to prove both the contract and the part performance of the contract".
If the evidence of record fails to prove clearly that there has been partial performance, then the Court should apply the Statute of Frauds, if the cause of action involved falls within the purview thereof. If the Court is, however, convinced that the obligation in question has
been partly executed and that the allegation of partial performance was not resorted to as a devise to circumvent the Statute, then the same should not be applied.
In the case at bar, Poncio admitted in his answer that plaintiff had offered several times to purchase his land. Carbonnel and Poncio entered in a written agreement signed and read by Poncio. This agreement states that Poncio would stay in the land sold by him to
plaintiff for one year free of charge, and that, if he cannot find a place where to transfer his house thereon, he may remain in said lot under such terms as may be agreed upon.
How shall we know whether there is any relation between the P247.26 entry therein and the partial payment of P247.26 allegedly made by plaintiff to Poncio on account of the price of his land, if we do not allow the plaintiff to explain it on the witness stand? Without
expressing any opinion on the merits of plaintiff's claim, it is clear, therefore, that she is entitled, legally as well as from the viewpoint of equity, to an opportunity to introduce parol evidence in support of the allegations of her complaint.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
191
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
192
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
193
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
194
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
195
What did your father do when you arrived at the house of Eusebio Cruz in Calle Javier, Taytay, Rizal?
My father asked Eusebio Cruz whether the signature affixed in Exhibit A was his signature.
What did Eusebio Cruz answer to the question asked by your father if he ever answered anything?
A.
Eusebio Cruz could hardly answer because he was already very old.
Q
A
Q
A
As a matter of fact, did Eusebio Cruz answer your father when your father asked him the question?
Eusebio Cruz could not answer. He could not understand him.
What happened after your father asked Eusebio Cruz and the latter could not answer?
Delfin Cruz told my father that it was really the signature of Eusebio Cruz so that my father went home to have the document ratified at home.
Eusebio Cruz could not talk, was very ill and was about to die when his thumbmark was affixed on the deed of sale, Exhibit A.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
196
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
197
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
198
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
199
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
200
A "lease-purchase" agreement on June 22, 1978 where GSIS agreed to transfer the property to the OGCC for P1.5 million, payable in equal yearly amortization-lease rentals of P100,000 for a period of 15 years.
On December 22, 1980, petitioner offered to purchase the property.
2.
On May 10, 1982, GSIS and petitioner executed a second "lease-purchase" agreement. GSIS agreed to sell the same property to petitioner for P2,000,000, with a down payment of P200,000 and the balance payable within a period of 15 years at 12% interest
per annum, compounded yearly.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
201
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
202
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
203
DOCTRINE
The principle of in pari delicto provides that when two parties are equally at fault, the law leaves them as they are and denies recovery by either one of them. The principle applies to cases where the nullity arises from the illegality of the consideration or the purpose of
the contract. However, this principle does not apply with respect to inexistent and void contracts.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
204
FACTS:
Parties are husband (Guan) and wife (Ong), having been married according to Chinese rites on April 30, 1961. They lived together until Ong and her children were abandoned by Guan on August 26, 1992, because of the latter's 'incurable promiscuity, volcanic temper
and other vicious vices'.
Ong purchased on March 20, 1968, out of her personal funds, a parcel of land, then referred to as the Rizal property, from Aurora Seneris.
Before their separation in 1992, Ong 'reluctantly agreed' to Guans 'importunings' that she execute a Deed of Sale of the Rizal property in his favor, but on the promise that he would construct a commercial building for the benefit of the children. He suggested that the
Rizal property should be in his name alone so that she would not be involved in any obligation. The consideration for the 'simulated sale' was that, after its execution in which he would represent himself as single, a Deed of Absolute Sale would be executed in favor of
the three (3) children and that he would pay the Allied Bank, Inc. the loan he obtained.
Because of the 'glib assurances' of Guan, Ong executed a Deed of Absolute Sale in 1992, but then he did not pay the consideration of P200,000.00, supposedly the 'ostensible' valuable consideration. On the contrary, she paid for the capital gains tax and all the other
assessments even amounting to not less than P60,000.00, out of her personal funds.
Because of the sale, a new title was issued in his name, but to 'insure' that he would comply with his commitment, she did not deliver the owner's copy of the title to him.
Because of the refusal of Guan to perform his promise, and also because he insisted on delivering to him the owner's copy of the title the Rizal property, in addition to threats and physical violence, she decided executing an Affidavit of Adverse Claim.
Also to avoid burdening the JP Rizal property with an additional loan amount, she wrote the Allied Bank, Inc. on August 25, 1992, withdrawing her authority for Guan to apply for additional loans.
Guan, on the other hand, filed with the RTC, Makati, a 'Petition for Replacement' of an owner's duplicate title. Attached to the Petition was the Affidavit of Loss in which he falsely made it appear that the owner's copy of the title was lost or misplaced, and that was
granted by the court in an Order, following which a new owner's copy of the title was issued to him.
Upon discovery of the 'fraudulent steps' taken by Guan, Ong immediately executed an Affidavit of Adverse Claim. She precisely asked the court that the sale of the Rizal property be declared as null and void; for the title to be cancelled; payment of actual, moral and
exemplary damages; and attorney's fees.
Guan argued that that his wife could not have purchased the property because she had no financial capacity to do so; on the other hand, he was financially capable although he was financially capable although he was disqualified to acquire the property by reason of
his nationality. Ong was in pari delicto being privy to the simulated sale.
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
205
After examining the evidence adduced by both parties, the RTC found that the JP Rizal property was the paraphernal property of the respondent. The trial court further held that the in pari delicto rule found in Articles 1411 and 1412 of the Civil Code was not applicable
to the present case, because it would apply only to existing contracts with an illegal cause or object, not to simulated or fictitious contracts or to those that were inexistent due to lack of an essential requisite such as cause or consideration. 8 It likewise voided the Deed of
Absolute Sale of the Rizal property for having been simulated and executed during the marriage of the parties. 9
ISSUE:
Whether or not the '[in] pari delicto' rule applies to the sale of the subject property?
HELD:
NO.
The principle of in pari delicto provides that when two parties are equally at fault, the law leaves them as they are and denies recovery by either one of them. However, this principle does not apply with respect to inexistent and void contracts. Said
this Court in Modina v. Court of Appeals:21
"The principle of in pari delicto non oritur actio denies all recovery to the guilty parties inter se. It applies to cases where the nullity arises from the illegality of the consideration or the purpose of the contract. When two persons are
equally at fault, the law does not relieve them. The exception to this general rule is when the principle is invoked with respect to inexistent contracts."
Article 1412
Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed:
(1) When the fault is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the other's undertaking;
(2) When only one of the contracting parties is at fault, he cannot recover what he has given by reason of the contract, or ask for the fulfillment of what has been promised him. The other, who is not at fault, may demand the return of what he has
given without any obligation to comply his promise. (1306)
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
206
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
207
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
208
Based on Compiled digests of 2011A, 2012D, Mark Calida doctrines and 2014A class notes. Updated digests by Abu, Almadro, Barron, Cabile, Carpena, Chan, Lacanlalay, Panganiban, Peamante.
209
210