ANG YU V. CA
December 02, 1994
Topic: Elements
FACTS: Petitioner Ang Yu Asuncion and Keh Tiong leased a property of respondents Bobby
Cu Unjieng, Rose Cu Unjieng and Jose Tan in Binondo Manila.
Respondents informed plaintiffs that they are offering to sell the premises and are giving them
priority to acquire the same.
Respondents 6M for the property but petitioners offered 5M. Respondents acceted and asked
petitioners to put in writing the terms and conditions but the latter never provided such.
When defendants were about to sell the property, plaintiffs were compelled to file the complaint
to compel defendants to sell the property to them. Court recognizes the right of first refusal of the
petitioner. Notwithstanding the courts decision, respondent sold the property to Buen Realty and
Development Corporation.
ISSUE: Whether or not petitioners can demand specific performance to the respondents to sell to
them the property.
HELD: An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil Code).
The obligation is constituted upon the concurrence of the essential elements thereof, viz: (a) The
vinculum juris or juridical tie which is the efficient cause established by the various sources of
obligations (law, contracts, quasi-contracts, delicts and quasi-delicts); (b) the object which is the
prestation or conduct; required to be observed (to give, to do or not to do); and (c) the subjectpersons who, viewed from the demandability of the obligation, are the active (obligee) and the
passive (obligor) subjects.
The petitioners never accepted the offer when they refused to make the terms and condition of
the sale. As such, respondents has the right to sell the property to other parties.
Even if petitioners are aggrieved by the failure of private respondents to honor the right of first
1
refusal, the remedy is not a writ of execution on the judgment, since there is none to execute, but
an action for damages in a proper forum for the purpose
PAGUIO v PLDT
December 03, 2002
Topics: Arts. 19 & 21
FACTS: Petitioner Alfredo Paguio was appointed Head of PLDTs Garnet Exchange. The
PLDT implemented the Greater Metro Manila Network Performance Assessment program
covering 27 exchanges of the 5 centers. Petitioner wrote the respondent, complaining that the
rating and ranking of the Exchanges were unfair. Respondent furnished petitioner with a blank
assessment sheet with instruction to rate his own performance. Petitioner gave himself an
outstanding rating with a total statistical points of 976 based on Garnets performance, but
respondent Santos reduced it to 958, in turn lowering Garnets rank to number four. The
respondent issued a memorandum reassigning petitioner to a position in the Office of the GMM
East Center Head for Special Assignments. The reassignment was based on the respondents well
founded conclusion that the petitioner is not a team player and cannot accept the decisions of
management. As a result, petitioner filed a complaint for illegal demotion and damages against
respondents.
ISSUE: Whether or not the reassignment of the petitioner, Paguio, was valid.
HELD: NO. According to NLRC, the petitioners transfer was not justified by the
circumstances. It noted that petitioner was well intentioned in criticizing the management of the
company and that even as he criticized the management decisions, petitioner nevertheless
complied with them. Under Art. 21 of the Civil Code, any person who willfully causes loss or
injury to another in a manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage. The illegal transfer of petitioner to a functionless office
was clearly an abuse by respondent PLDT of its right to control the structure of its organization.
Petitioner is entitled to an award of moral damages as he suffered anxiety, sleepless nights,
besmirched reputation and social humiliation by reason of the act complained of.
In the case at bar, petitioners verbal reproach against respondent was certainly uncalled for
considering that by her own account nobody knew that she brought such kind and amount of
jewellery inside the paper bag. This being the case, she had no right to attack respondent with her
innuendos which were not merely inquisitive but out rightly accusatory. By openly accusing
respondent as the only person who went out of the room before the loss of the jewellery in the
presence of all the guests therein, and ordering that she be immediately bodily searched,
petitioner virtually branded respondent as the thief. True, petitioner had the right to ascertain the
identity of the malefactor, but to malign respondent without an iota of proof that she was the one
who actually stole the jewellery is an act which, by any standard or principle of law is
impermissible. Petitioner had wilfully caused injury to respondent in a manner which is contrary
to morals and good customs. Her firmness and resolve to find her missing jewellery cannot
justify her acts toward respondent.
FACTS: Petitioner Khristine Rea M. Regino was a first year computer science student at
Respondent Pangasinan Colleges of Science and Technology (PCST). During the second
semester of school year 2001-2002, she enrolled in logic and statistics subjects under
Respondents Rachelle A. Gamurot and Elissa Baladad, respectively, as teachers.
In February 2002, PCST held a fund raising campaign dubbed the Rave Party and Dance
Revolution, the proceeds of which were to go to the construction of the schools tennis and
volleyball courts. Each student was required to pay for two tickets at the price of P100 each. The
project was allegedly implemented by recompensing students who purchased tickets with
additional points in their test scores; those who refused to pay were denied the opportunity to
take the final examinations.
Financially strapped and prohibited by her religion from attending dance parties and
celebrations, Regino refused to pay for the tickets. On March 14 and March 15, 2002, the
scheduled dates of the final examinations in logic and statistics, her teachers -- Respondents
Rachelle A. Gamurot and Elissa Baladad -- allegedly disallowed her from taking the tests.
According to petitioner, Gamurot made her sit out her logic class while her classmates were
taking their examinations. The next day, Baladad, after announcing to the entire class that she
was not permitting petitioner and another student to take their statistics examinations for failing
to pay for their tickets, allegedly ejected them from the classroom. Petitioners pleas ostensibly
went unheeded by Gamurot and Baladad, who unrelentingly defended their positions as
compliance with PCSTs policy.
ISSUE: Whether or not Respondent Colleges abused its right by not permitting Petitioner to take
the Final Exams
HELD: Yes. Private respondents inhumanly punish students x x x by reason only of their
poverty, religious practice or lowly station in life, which inculcated upon [petitioner] the feelings
of guilt, disgrace and unworthiness; as a result of such punishment, she was allegedly unable to
finish any of her subjects for the second semester of that school year and had to lag behind in her
studies by a full year. The acts of respondents supposedly caused her extreme humiliation,
mental agony and demoralization of unimaginable proportions in violation of Articles 19, 21 and
26 of the Civil Code.
NIKKO HOTEL MANILA GARDEN and RUBY LIM vs. ROBERTO REYES, a.k.a.
"AMAY BISAYA"
February 28, 2005
Topics: Arts. 19 & 21
FACTS: This is a petition for review on certiorari of the resolution and the decision of the Court
of Appeals whereby making the petitioners liable for moral and exemplary damages. Roberto
Reyes, aka Amay Bisaya, was at the lobby of the Nikko Hotel Manila Garden when a friend
saw him and allegedly invited him to the party. He carried the basket full of fruits being carried
by his friend while they were going up the penthouse of the hotel where the party was being
held. When the coordinator, Ms. Ruby Lim, saw him, she asked him to just leave the place after
eating as he was not invited but he did not. Instead, he shouted at the coordinator. His version
was that, in a loud voice, the coordinator shouted at him telling him to leave. He refused as he
was allegedly invited by one of the guests who later on denied having invited him. Instead, the
guest testified that he carried the basket but warned him not to join as he was not invited, but still
he went into the place. He sued the hotel, the coordinator and the guest for damages. The RTC
dismissed the complaint due to lack of cause of action. The Court of Appeals reversed, holding
that the manner he was asked to leave exposed him to ridicule, thus, held the defendants liable
for damages. They appealed, contending that pursuant to the doctrine of volenti non fit injuria,
they cannot be made liable for damages as he assumed the risk of being asked to leave and being
embarrassed and humiliated in the process, as he was a gate-crasher.
ISSUE: Whether or not the coordinator acted abusively in asking Roberto Reyes, a.k.a. Amay
Bisaya, to leave the party where he was not invited by the celebrant, thus, becoming liable
under Articles 19 and 21 of the Civil Code.
HELD: NO. The coordinator is not liable under Articles 19 and 21 of the Civil Code and was
deemed to have acted within the bounds of propriety and good faith.
Upon careful scrutiny of the multiple versions of the incident, it was ruled that it is unlikely to
happen that the coordinator exposed him to ridicule and shame because admittedly, Amay Bisaya
stated that she was close enough for them to kiss when she asked him to leave the party. This
suggests that it was her intention that only he heard what she had to say. It was his reaction to the
request that must have made the other guests aware of what had transpired between them.
The doctrine of volenti non fit injuria (to which a person assents is not esteemed in law as
injury) refers to self-inflicted injury or to the consent to injury which precludes the recovery of
damages by one who has knowingly and voluntarily exposed himself to danger, even if he is not
8
negligent in doing so. This doctrine does not find application to the case at bar because even if
Reyes assumed the risk of being asked to leave the party, the defendants, under Articles 19 and
21 of the New Civil Code, were still under obligation to treat him fairly in order not to expose
him to unnecessary ridicule and shame.
The petition was thus granted and the Decision of the Court of Appeals reversed and set aside.
The coordinator did not abuse her right in asking Reyes to leave the party to which he was not
invited, hence, he cannot be made liable under Articles 19 and 21 of the New Civil Code. The
employer cannot likewise be liable.
10
Another ground which would justify why claims for rentals cannot be made is because there was
no express agreement between the Alien Property Custodian and the defendant-appellant for
such. The existence of an implied agreement to that effect is contrary to the circumstances.
11
contrary to law, morals, good customs, public order or public policy, the same are binding as
between the parties.
In this case, the contracts entered into by the parties were valid contracts. The two (2)
complementary instruments gave rise to reciprocal obligations which are defined as those that
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.
In the interpretation of contracts, it is the general rule that if the terms thereof are clear as to the
intention of the contracting parties, the literal meaning of the stipulations shall
control. Furthermore, subsequent or contemporaneous acts of the contracting parties shall be
considered in judging their intention.
And even if We are to assume that the private respondent breached the agreement by not fully
accomplishing his obligation within the stipulated period, said breach was not of a nature which
would justify a rescission of the contract, 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 contract
is substantial depends upon the attending circumstances. In the case at bar, no substantial breach
was committed by the private respondent sufficient enough to warrant a rescission.
13
In the case at bar, the Court ruled that mere showing of recruitment guidelines and company
policies for safety were not sufficient to exempt MMTC from the liability arising from the
negligence of its employee. There must be satisfactory showing that MMTC followed these
guidelines in order to disprove the presumption of negligence on its part.
15
SEC en banc did correctly dismiss the Petition in SEC Case No. 02-94-4678 for its failure to
state the basis for respondents alleged right, to wit:
Private respondent Campos has failed to establish the basis or authority for his alleged right to
participate equally in the IPO allocations of the Exchange. He cited paragraph 11 of the amended
articles of incorporation of the Exchange in support of his position but a careful reading of the
said provision shows nothing therein that would bear out his claim. The provision merely created
the position of chairman emeritus of the Exchange but it mentioned nothing about conferring
upon the occupant thereof the right to receive IPO allocations.
17
ISSUES:
a.) Whether petitioner breached its contract with respondents
b.) Whether petitioner is liable for damages
HELD:
a.) Yes. Petitioner claims that it did not breach its contract with respondents because it has a
valid reason for issuing the "Hold Out" order. Petitioner anchors its right to withhold
respondents deposits on the Application and Agreement for Deposit Account. However, the
court held that Petitioners reliance on the "Hold Out" clause in the Application and Agreement
for Deposit Account is misplaced. The "Hold Out" clause applies only if there is a valid and
existing obligation arising from any of the sources of obligation enumerated in Article 115779 of
the Civil Code, to wit: law, contracts, quasi-contracts, delict, and quasi-delict. In this case,
petitioner failed to show that respondents have an obligation to it under any law, contract, quasicontract, delict, or quasi-delict. And although a criminal case was filed by petitioner against
respondent Rosales, this is not enough reason for petitioner to issue a "Hold Out" order as the
case is still pending and no final judgment of conviction has been rendered against respondent
Rosales. In fact, it is significant to note that at the time petitioner issued the "Hold Out" order,
the criminal complaint had not yet been filed. Thus, considering that respondent Rosales is not
liable under any of the five sources of obligation, there was no legal basis for petitioner to issue
the "Hold Out" order. Accordingly, we agree with the findings of the RTC and the CA that the
"Hold Out" clause does not apply in the instant case.
In view of the foregoing, the court find that petitioner is guilty of breach of contract when it
unjustifiably refused to release respondents deposit despite demand.
b.) Yes. Having breached its contract with respondents, petitioner is liable for damages. In cases
of breach of contract, moral damages may be recovered only if the defendant acted fraudulently
or in bad faith,80 or is "guilty of gross negligence amounting to bad faith, or in wanton disregard
of his contractual obligations." In this case, a review of the circumstances surrounding the
issuance of the "Hold Out" order reveals that petitioner issued the order in bad faith. The court
find that petitioner indeed acted in a wanton, fraudulent, reckless, oppressive or malevolent
manner when it refused to release the deposits of respondents without any legal basis.
19
exchange. Only imports against proceeds of contracts entered into prior to April 25, 1960, not
otherwise classified as dollar-to-dollar transactions, are entitled to the preferred rate of exchange.
It is for this reason that the contractor is required to first file an application with defendant
Central Bank (Import Department) thru the Authorized Agent Banks, for the purpose of
determining whether the imports against proceeds of contracts entered into prior to April 25,
1960 are classified as dollar-to-dollar transactions (which are not entitled to the preferred rate of
exchange), or not (which are entitled to the preferred rate of exchange), and that if said imports
are entitled to the preferred rate of exchange, defendant Central Bank would issue a license to the
contractor for authority to buy foreign exchange at the preferred rate for the payment of said
imports."
Had there been greater care therefore on the part of the plaintiff to show why in his opinion he
could assert a right in accordance not with a contract binding on the Central Bank, because there
is none, but by virtue of compliance with rules and regulations of an administrative tribunal, then
perhaps a different outcome would have been justified.
21
22
customs, public order, or public policy. The 1988 contract neither shortens the period provided
under Section 119 nor does away with it. Instead, it gives the Nisperos spouses more time to
reacquire the land that the State gratuitously gave them. The 1988 contract therefore is not
contrary to law; instead it is merely in keeping with the purpose of the homestead law. Since the
1988 contract is valid, it should be given full force and effect. In Roxas v. De Zuzuarregui, Jr.,
the Court held:
It is basic that a contract is the law between the parties. Obligations arising from contracts have
the force of law between the contracting parties and should be complied with in good faith.
Unless the stipulations in a contract are contrary to law, morals, good customs, public order or
public policy, the same are binding as between the parties.
Petitioner, who freely signed the 1988 contract, cannot now be allowed to renege on his
obligation under it, simply because he changed his mind. The contract must bind both
contracting parties; its validity or compliance cannot be left to the will of one of them. Petitioner
is thus bound by the terms of the 1988 Contract, and must comply with it in good faith. Since the
right to repurchase was exercised by the Nisperos spouses before the expiration of the time given
to them by the Morla brothers, the lower courts correctly ruled in their favor.
24
25
confers upon the injured party a valid cause for recovering that which may have been
lost/suffered
Agreements can accomplish little unless they are made the basis for action. The effect of every
infraction is to create a new duty, or to make recompense to the one who has been injured by the
failure of another to observe his contractual obligation 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.
A default on, or failure of compliance with, the obligation gives rise to a presumption of lack of
care & corresponding liability on the part of the contractual obligor the burden being on him to
establish otherwise. GPS has failed to do so.
Eroles, on the other hand, may not be ordered to pay petitioner without concrete proof of his
negligence/fault. The driver, not being a party to the contract of carriage between petitioners
principal and defendant, may not be held liable under the agreement. A contract can only bind
the parties who have entered into it or their successors who have assumed their
personality/juridical position. Consonantly with the axiom res inter alios acta aliis neque nocet
prodest, such contract can neither favor nor prejudice a third person. Petitioners civil action
against the driver can only be based on culpa aquiliana, which would require the claimant for
damages to prove the defendants negligence/fault.
27
VILLANUEVA vs DOMINGO
September 20, 2004
Topic: Culpa Aquiliana
FACTS: This is a petition to review the decision made by Court of Appeals in the above case
which affirming Notradamus Villanueva (petitioner) to be held liable with the respondents
Leandro Luis and Priscilla Domingo for the damages.
On October 22, 1991 at about 9:45pm in the evening, Priscilla R. Domingo together with
Leandro Luis R. Domingo Domingo was cruising along the middle lane of South Superhighway
at moderate speed from north to south. Suddenly, towards their path was also a car darted
directly in their direction causing the hitting and bumping the left front portion of their car. As a
result of the impact, the said car also hit three parked vehicles at the roadside. It found out that
the car was driven by Renato Ocfemia with an expired license and also positive for alcoholic
breath.
Upon filing the case made by the respondents, it appears that the owner of the car driven by
Ocfemia was registered under the name of Nostradamus Villanueva. Under the law, the
registered owner of the car is also liable to pay for the damages. The court ordered that
Villanueva, as the owner of the car, should also liable for the damages made by Ocfemia through
the accident. Villanueva claimed that he was no longer the owner of the car at the time of the
mishap because it was swapped with a Pajero owned by Albert Jaucian (an agent of Auto Palace
Car Exchange). It was also found out that there still no transferring of ownership happened
between the two, and according to Motor Vehicle Registration, the car is still registered under
Nostradamus Villanueva.
ISSUE: Whether or not the registered owner of a motor vehicle be held liable for damages
arising from a vehicular accident involving his motor vehicle while being operated by the
employee of its buyer without the latters consent and knowledge?
HELD: YES. It has been consistently ruled that the registered owner of any vehicle is directly
and primarily responsible to the public and third persons while it is being operated. The rationale
behind such doctrine was explained way back in 1957 in Erezo vs. Jepte:
The principle upon which this doctrine is based is that in dealing with vehicles registered under
the Public Service Law, the public has the right to assume or presume that the registered owner is
the actual owner thereof, for it would be difficult for the public to enforce the actions that they
28
may have for injuries caused to them by the vehicles being negligently operated if the public
should be required to prove who the actual owner is. How would the public or third persons
know against whom to enforce their rights in case of subsequent transfers of the vehicles? We do
not imply by his doctrine, however, that the registered owner may not recover whatever amount
he had paid by virtue of his liability to third persons from the person to whom he had actually
sold, assigned or conveyed the vehicle.
The Revised Motor Vehicle Law (Act No. 3992, as amended) provides that no vehicle may be
used or operated upon any public highway unless the same is property registered. It has been
stated that the system of licensing and the requirement that each machine must carry a
registration number, conspicuously displayed, is one of the precautions taken to reduce the
danger of injury to pedestrians and other travelers from the careless management of automobiles.
And to furnish a means of ascertaining the identity of persons violating the laws and ordinances,
regulating the speed and operation of machines upon the highways (2 R.C.L. 1176). Not only are
vehicles to be registered and that no motor vehicles are to be used or operated without being
properly registered for the current year, but that dealers in motor vehicles shall furnish thee
Motor Vehicles Office a report showing the name and address of each purchaser of motor
vehicle during the previous month and the manufacturers serial number and motor number.
(Section 5(c), Act No. 3992, as amended.)
Registration is required not to make said registration the operative act by which ownership in
vehicles is transferred, as in land registration cases, because the administrative proceeding of
registration does not bear any essential relation to the contract of sale between the parties
(Chinchilla vs. Rafael and Verdaguer, 39 Phil. 888), but to permit the use and operation of the
vehicle upon any public highway (section 5 [a], Act No. 3992, as amended). The main aim of
motor vehicle registration is to identify the owner so that if any accident happens, or that any
damage or injury is caused by the vehicle on the public highways, responsibility therefore can be
fixed on a definite individual, the registered owner. Instances are numerous where vehicles
running on public highways caused accidents or injuries to pedestrians or other vehicles without
positive identification of the owner or drivers, or with very scant means of identification. It is to
forestall these circumstances, so inconvenient or prejudicial to the public, that the motor vehicle
registration is primarily ordained, in the interest of the determination of persons responsible for
damages or injuries caused on public highways:
One of the principal purposes of motor vehicles legislation is identification of the vehicle and of
the operator, in case of accident; and another is that the knowledge that means of detection are
always available may act as a deterrent from lax observance of the law and of the rules of
29
conservative and safe operation. Whatever purpose there may be in these statutes, it is
subordinate at the last to the primary purpose of rendering it certain that the violator of the law or
of the rules of safety shall not escape because of lack of means to discover him. The purpose of
the statute is thwarted, and the displayed number becomes a share and delusion, if courts would
entertain such defenses as that put forward by appellee in this case. No responsible person or
corporation could be held liable for the most outrageous acts of negligence, if they should be
allowed to pace a middleman between them and the public, and escape liability by the manner in
which they recompense servants. (King vs. Brenham Automobile Co., Inc. 145 S.W. 278, 279.)
The main purpose of vehicle registration is the easy identification of the owner who can be held
responsible for any accident, damage or injury caused by the vehicle. Easy identification
prevents inconvenience and prejudice to a third party injured by one who is unknown or
unidentified. To allow a registered owner to escape liability by claiming that the driver was not
authorized by the new (actual) owner results in the public detriment the law seeks to avoid.
Finally, the issue of whether or not the driver of the vehicle during the accident was authorized is
not at all relevant to determining the liability of the registered owner. This must be so if we are to
comply with the rationale and principle behind the registration requirement under the motor
vehicle law.
30
party because complete relief is available from either. Therefore, jurisdiction over Foronda is not
even necessary as Tuazon may collect from Mrs. Cerezo alone.
Moreover, an employer's liability based on a quasi-delict is primary and direct, while the
employer's liability based on a delict is merely subsidiary. The word primary and direct, as
contrasted with subsidiary, refers to the remedy provided by law for enforcing the obligation
rather than to the character and limits of the obligation. Although liability under Art. 2180
originates from the negligent act of the employee; the aggrieved party may sue the employer
directly. When an employee causes damage, the law presumes that the employer has himself
committed an act of negligence in not preventing or avoiding the damage. This is the fault that
the law condemns. While the employer is civilly liable in a subsidiary capacity for the
employee's criminal negligence, the employer is also civilly liable directly and separate for his
own civil negligence in failing to exercise due diligence in selecting and supervising his
employee. The idea that the employer's liability is wholly subsidiary is wrong.
The action can be brought directly against the person responsible (for another) without including
the author of the act. The action against the principal is accessory in the sense that it implies the
existence of a prejudicial act committed by the employee, but is not subsidiary in the sense that it
cannot be instituted till after the judgment against the author of the act or at least, that it is
subsidiary to the principal action; action for responsibility (of the employer) is in itself a
principal action.
In contrast, an action based on a delict seeks to enforce the subsidiary liability of the employer
for the criminal negligence of the employee as provided in Art. 103, RPC. To hold the employer
liable in a subsidiary capacity under a delict, the aggrieved party must initiate a criminal action
where the employee's delict and corresponding primary liability are established. If the present
action proceeds from a delict, then the trial court's jurisdiction over Foronda is necessary.
However, the action filed by Tuazon was based on a quasi-delict, which is separate and
independent from an action based on a delict. Hence, there was no need to reserve the filing of a
separate civil action. The purpose of allowing the filing of an independent action based on quasidelict against the employer is to facilitate the remedy for civil wrongs.
32
LRTA VS NATIVIDAD
February 6, 2003
Topic: Employer/employee solidarily liable
FACTS: The case before the Court is an appeal from the decision and resolution of the Court of
Appeals, exonerating Prudent Security Agency (Prudent) from liability and finding Light Rail
Transit Authority (LRTA) and Rodolfo Roman liable for damages on account of the death of
Nicanor Navidad.
On 14 October 1993, about half an hour past seven oclock in the evening, Nicanor Navidad,
then drunk, entered the EDSA LRT station after purchasing a "token" (representing payment of
the fare). While Navidad was standing on the platform near the LRT tracks, Junelito Escartin, the
security guard assigned to the area approached Navidad. A misunderstanding or an altercation
between the two apparently ensued that led to a fist fight. No evidence, however, was adduced to
indicate how the fight started or who, between the two, delivered the first blow or how Navidad
later fell on the LRT tracks. At the exact moment that Navidad fell, an LRT train, operated by
petitioner Rodolfo Roman, was coming in. Navidad was struck by the moving train, and he was
killed instantaneously.
ISSUE: Whether or not LRTA and Roman should be liable according to the contract of carriage.
HELD: The law requires common carriers to carry passengers safely using the utmost diligence
of very cautious persons with due regard for all circumstances. Such duty of a common carrier to
provide safety to its passengers so obligates it not only during the course of the trip but for so
long as the passengers are within its premises and where they ought to be in pursuance to the
contract of carriage. The statutory provisions render a common carrier liable for death of or
injury to passengers (a) through the negligence or wilful acts of its employees or b) on account of
wilful acts or negligence of other passengers or of strangers if the common carriers employees
through the exercise of due diligence could have prevented or stopped the act or omission.
In case of such death or injury, a carrier is presumed to have been at fault or been negligent, and
by simple proof of injury, the passenger is relieved of the duty to still establish the fault or
negligence of the carrier or of its employees and the burden shifts upon the carrier to prove that
the injury is due to an unforeseen event or to force majeure. In the absence of satisfactory
explanation by the carrier on how the accident occurred, which petitioners, according to the
appellate court, have failed to show, the presumption would be that it has been at fault,an
exception from the general rule that negligence must be proved.
33
The foundation of LRTAs liability is the contract of carriage and its obligation to indemnify the
victim arises from the breach of that contract by reason of its failure to exercise the high
diligence required of the common carrier. In the discharge of its commitment to ensure the safety
of passengers, a carrier may choose to hire its own employees or avail itself of the services of an
outsider or an independent firm to undertake the task. In either case, the common carrier is not
relieved of its responsibilities under the contract of carriage.
This Court is concluded by the factual finding of the Court of Appeals that "there is nothing to
link (Prudent) to the death of Nicanor (Navidad), for the reason that the negligence of its
employee, Escartin, has not been duly proven x x x." This finding of the appellate court is not
without substantial justification in our own review of the records of the case.
There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any
culpable act or omission, he must also be absolved from liability. Needless to say, the contractual
tie between the LRT and Navidad is not itself a juridical relation between the latter and Roman;
thus, Roman can be made liable only for his own fault or negligence.
34
petitioner was negligent in the supervision or selection of its employees, as its negligence is
presumed by operation of law.
As employers of the bus driver, the petitioner is, under Article 2180 of the Civil Code, directly
and primary liable for the resulting damages. The presumption that they are negligent flows from
the negligence of their employee. That presumption, however, is only juris tantum , not juris et
de jure. Their only possible defense is that they exercised all the diligence of a good father of a
family to prevent the damage. Article 2180 reads as follows:
The obligation imposed by Article 2176 is demandable not only for ones own acts or
omissions, but also for those of persons for whom one is responsible.
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.
36
PLEYTO VS LOMBOY
June 16, 2004
Topic: Employees fault or negligence presumed
FACTS: Petitioner Philippine Rabbit Bus Lines, Inc. (PRBL), with principal office at Tarlac
City, Tarlac, is a public carrier, engaged in carrying passengers and goods for a fare. It serviced
various routes in Central and Northern Luzon. Petitioner Ernesto Pleyto was a bus driver
employed by PRBL at the time of the incident in question.
At approximately 11:30 a.m., PRBL Bus No. 1539, with Plate No. CVD 556, driven by
petitioner Pleyto, was traveling along MacArthur Highway in Gerona, Tarlac bound for Vigan,
Ilocos Sur. It was drizzling that morning and the macadam road was wet. Right in front of the
bus, headed north, was the tricycle with Plate No. CX 7844, owned and driven by one Rodolfo
Esguerra.
According to a witness and one of the bus passengers, Pleyto tried to overtake Esguerras tricycle
but hit it instead. Pleyto then swerved into the left opposite lane. Coming down the
lane,Mitsubishi Lancer car, driven by Arnulfo Asuncion. The car was headed for Manila with
some passengers. PRBL Bus No. 1539 smashed head-on the car, killing Arnulfo and Ricardo
instantly. Carmela and Rhino suffered injuries.
proving that they have indeed exercised such diligence, both in the selection of the employee and
in the supervision of the performance of his duties.
In the selection of prospective employees, employers are required to examine them as to their
qualifications, experience and service records. With respect to the supervision of employees,
employers must formulate standard operating procedures, monitor their implementation and
impose disciplinary measures for breaches thereof. These facts must be shown by concrete proof,
including documentary evidence.
In the instant case, petitioner presented the results of Joson, Jr.'s written examination, actual
driving tests, x-ray examination, psychological examination, NBI clearance, physical
examination, hematology examination, urinalysis, student driver training, shop training, birth
certificate, high school diploma and reports from the General Maintenance Manager and the
Personnel Manager showing that he had passed all the tests and training sessions and was ready
to work as a professional driver. However, as the trial court noted, petitioner did not present
proof that Joson, Jr. had nine years of driving experience.
39
acting within the scope of his assigned task, only if he can show that he observed all the
diligence of a good father of a family to prevent damage. A plaintiff who is partly responsible for
his own injury should not be entitled to recover damages in full but must bear the consequences
of his own negligence. The defendant must thus be held liable only for the damages actually
caused by his negligence.
41
42
therefore liable for the negligent act of Capt. Jusep. The amount of P 456, 198.27 due earn 6%
interest per annum from October 3, 1995 until the finality of the decision.
44
Safety Deposit Box" which disclaims any liability of the hotel for things put inside the box. On
17 May 1988 McLoughlin went back to AU and consulted his lawyers. They wrote a letter
addressed to Pres. Cory Aquino which was pushed back to the DOJ and the Western Police
District. He went back from the PH to AU several times more to attend business and follow up
but the matter was only filed on 3 Dec 1990 since he was not there to personally follow up.
McLoughlin filed an action against YHT Realty Corporation, Lopez, Lainez, Payam and Tan.
The RTC rendered judgment in favor of McLoughlin. The CA modified only the amount of
damages awarded. Tan and Lopez, however, were not served with summons, and trial proceeded
with only Lainez, Payam and YHT Realty Corporation as defendants.
ISSUES:
1. Whether or not there was gross negligence on the part of the innkeepers.
2. Whether or not the "Undertaking for the Use of the Safety Deposit Box" is null and void.
HELD:
1. Yes. Payam and Lainez, who were employees of Tropicana, had custody of the master key of
the management when the loss took place. They even admitted that they assisted Tan on three
separate occasions in opening McLoughlins safety deposit box.
The management contends that McLoughlin made its employees believe that Tan was his spouse
for she was always with him most of the time. The evidence on record is bereft of any showing
that McLoughlin introduced Tan to the management as his wife. Mere close companionship and
intimacy are not enough to warrant such conclusion. They should have confronted him as to his
relationship with Tan considering that the latter had been observed opening McLoughlins safety
deposit box a number of times at the early hours of the morning.
Art 2180, par (4) of the same Code provides that the owners and managers of an establishment or
enterprise are likewise responsible for damages caused by their employees in the service of the
branches in which the latter are employed or on the occasion of their functions. Given the fact
that the loss of McLoughlins money was consummated through the negligence of Tropicanas
employees both the employees and YHT, as owner of Tropicana, should be held solidarily liable
pursuant to Art 2193.
2. Yes, it is null and void. Art. 2003[1] is controlling. This is an expression of public policy that
the hotel business like common carriers are imbued with public interest. This responsibility
cannot be waived away by any contrary stipulation in so-called "undertakings" that ordinarily
46
appear in prepared forms imposed by hotel keepers on guests for their signature. The CA (former
case) even ruled before that hotelkeepers are liable even though the effects are not delivered to
them or their employees, but it is enough that the effects are within the hotel or inn. Pars. 2 and 4
of the undertaking manifestly contravene Art. 2003 of the NCC. Meanwhile, the defense that Art.
2002 exempts the hotel-keeper from liability if the loss is due to the acts of the guest, family or
visitors falls because the hotel is guilty of negligence as well. This provision presupposes that the
hotel-keeper is not guilty of concurrent negligence or has not contributed in any degree to the
occurrence of the loss.
Hotel payments
Moral 50K
ED 10K
AF 200K
47
was done here. It bears reiterating that the subject card would not have been confiscated and cut
had respondent talked to petitioners representative and identified himself as the genuine
cardholder. It is thus safe to conclude that there was no negligence on the part of petitioner and
that, therefore, it cannot be held liable to respondent for damages.
49
50
To the mind of this Court, the cause of action in the present case arose on July 24, 1974, when
respondent discovered the short deliveries with certainty. Prior to the discovery, the latter had no
indication that it was not getting what it was paying for. There was yet no issue to speak of; thus,
it could not have brought an action against petitioner. It was only after the discovery of the short
deliveries that respondent got into a position to bring an action for specific performance.
Evidently then, that action was brought within the prescriptive period when it was filed on
August 20, 1980.
Actions based upon a written contract should be brought within ten years from the time the right
of action accrues. This accrual refers to the cause of action, which is defined as the act or the
omission by which a party violates the right of another.
Jurisprudence is replete with the elements of a cause of action: (1) a right in favor of the plaintiff
by whatever means and under whatever law it arises or is created; (2) an obligation on the part of
the named defendant to respect or not to violate the right; and (3) an act or omission on the part
of the defendant violative of the right of the plaintiff or constituting a breach of an obligation to
the latter. It is only when the last element occurs that a cause of action arises.
Applying the foregoing elements, it can readily be determined that a cause of action in a contract
arises upon its breach or violation. Therefore, the period of prescription commences, not from
the date of the execution of the contract, but from the occurrence of the breach.
51
Both leases contained a provision granting Mayfair a right of first refusal to purchase the subject
properties. However, on July 30, 1978 - within the 20-year-lease term -- the subject properties
were sold by Carmelo to Equatorial Realty Development, Inc. (Equatorial) for the total sum
of P11,300,000, without their first being offered to Mayfair.As a result Mayfair filed a Complaint
before the Regional Trial Court of Manila (Branch 7) and the lowered court rendered a Decision
in favor of Carmelo and Equatorial. On appeal (docketed as CA-GR CV No. 32918), the Court
of Appeals (CA) completely reversed and set aside the judgment of the lower court. Meanwhile,
on September 18, 1997 barely five months after Mayfair had submitted its Motion for
Execution before the RTC of Manila, Branch 7 Equatorial filed with the Regional Trial Court
of Manila, Branch 8, an action for the collection of a sum of money against Mayfair, claiming
payment of rentals or reasonable compensation for the defendant's use of the subject
premises after its lease contracts had expired.
ISSUE: Whether
or
not
Equatorial
is
entitled
to
back
rentals
HELD: No. The execution of a public instrument gives rise, therefore, only to a prima facie
presumption of delivery. Such presumption is destroyed when the instrument itself expresses or
implies that delivery was not intended; or when by other means it is shown that such delivery
was not effected, because a third person was actually in possession of the thing. In the latter
case, the sale cannot be considered consummated.
52
However, the point may be raised that under Article 1164 of the Civil Code, Equatorial as buyer
acquired a right to the fruits of the thing sold from the time the obligation to deliver the property
to petitioner arose. That time arose upon the perfection of the Contract of Sale on July 30, 1978,
from which moment the laws provide that the parties to a sale may reciprocally demand
performance. Does this mean that despite the judgment rescinding the sale, the right to the fruits
belonged to, and remained enforceable by, Equatorial?
Article 1385 of the Civil Code answers this question in the negative, because "[r]escission
creates the obligation to return the things which were the object of the contract, together with
their fruits, and the price with its interest; x x x" Not only the land and building sold, but also the
rental payments paid, if any, had to be returned by the buyer.
At bottom, it may be conceded that, theoretically, a rescissible contract is valid until rescinded.
However, thisgeneral principle is not decisive to the issue of whether Equatorial ever acquired
the right to collect rentals. What is decisive is the civil law rule that ownership is acquired, not
by mere agreement, but by tradition or delivery. Under the factual environment of this
controversy as found by this Court in the mother case, Equatorial was never put in actual and
effective control or possession of the property because of Mayfair's timely objection.
53
HELD: NO. In our Civil Code, it is a fundamental principle in all matters of contracts and a
well-known doctrine of law that "non mudis pactis, sed traditione dominia rerum transferuntur."
In conformity with said doctrine as established in paragraph 2 of article 609 of said code, that
"the ownership and other property rights are acquired and transmitted by law, by gift, by testate
or intestate succession, and, in consequence of certain contracts, by tradition." And as the logical
application of this disposition article 1095 prescribes the following: "A creditor has the rights to
the fruits of a thing from the time the obligation to deliver it arises. However, he shall not acquire
a real right." (and the ownership is surely such) "until the property has been delivered to him."
Terrell claimed that by virtue of the said transfer, the ownership of Wilson in and to the funds
was transferred to him in fact and in law. However, the Court ruled that the transfer by itself, and
afterwards the notification of the same of Treasurer Branagan, did not produce nor could it
produce the effect of transfer to Terrell of the ownership of the funds so transferred and which
were then in the possession of the said Treasurer. To have this effect, it would have been
necessary that the delivery of the funds had been made directly Terrell, which fact has not been
proved at any time. The funds were in the possession of Branagan and afterwards were
transferred to the possession of the depositary appointed, by the court where such funds now are,
and this without their ever having been taken possession of the intervenor Terrell. It is not
alleged, nor it is claimed by Terrell, that the delivery of the funds was ever made in any manner
recognized by the law. He claims the right of ownership from the mere fact of having derived the
same, not from the fact of any delivery, but from the very fact of the transfer and of his
subsequent notification to Treasurer Branagan, it being, in addition, very clear that such
notification does not constitute, in any manner, the fact of delivery as established by articles
1462, 1463, and 1464 of the Civil Code, all of which cover, in full this subject-matter.
Therefore, by reason of the non-delivery Terrell did not acquire the ownership of the property
transferred to him by Wilson. It is only the jus ad rem, and not the jus in re, that was acquired by
Terrell by virtue of the transfer, made by the consent of the transferor and the transferee but not
consummated by the delivery which never came to pass and which delivery was the object of
such transfer. But if Terrell could not be considered as the owner of said funds in question, it is
undeniable that he had rights with regard to the same as a creditor by virtue of that transfer. The
same right, that of a creditor, and no other is the right of the appellant in that it has not been
contradicted that the rights of the Government, in its judicial relation to Wilson, had not been
subrogated to the appellant.
55
JIMMY CO, doing business under the name & style DRAGON METAL
MANUFACTURING vs. COURT OF APPEALS and BROADWAY MOTOR SALES
CORPORATION
June 22, 1998
Topic: Article 1165
FACTS: On July 18, 1990, petitioner entrusted his Nissan pick-up car 1988 model to private
respondent - which is engaged in the sale, distribution and repair of motor vehicles - for the
following job repair services and supply of parts:
- Bleed injection pump and all nozzles;
- Adjust valve tappet;
- Change oil and filter;
- Open up and service four wheel brakes, clean and adjust;
- Lubricate accelerator linkages;
- Replace aircon belt; and
- Replace battery[2]
Petitioner paid in full the repair bill in the amount of P1,397.00. Private respondent
promised to return the vehicle on July 21, 1990. However, the delivery of the car was
rescheduled to July 24, 1990 or three (3) days later because battery was not installed. When
petitioner sought to reclaim his car in the afternoon of July 24, 1990, he was told that it was
carnapped earlier that morning while being road-tested.
Petitioner filed a suit for damages against private respondent anchoring his claim on the latters
alleged negligence. For its part, private respondent contended that it has no liability because the
car was lost as a result of a fortuitous event - the carnapping.
ISSUE: WON the respondent is liable.
HELD: The Court resolves the query in favor of the customer. First, on the technical aspect
involved. The question of delay, though not specifically mentioned as an issue at the pre-trial
may be tackled by the court considering that it is necessarily intertwined and intimately
connected with the principal issue agreed upon by the parties, i.e. who will bear the loss and
whether there was negligence. It is a not a defense for a repair shop of motor vehicles to escape
liability simply because the damage or loss of a thing lawfully placed in its possession was due
to carnapping. Carnapping per se cannot be considered as a fortuitous event. The fact that a thing
was unlawfully and forcefully taken from anothers rightful possession, as in cases of
56
carnapping, does not automatically give rise to a fortuitous event. To be considered as such,
carnapping entails more than the mere forceful taking of anothers property. It must be proved
and established that the event was an act of God or was done solely by third parties and that
neither the claimant nor the person alleged to be negligent has any participation.
Even assuming arguendo that carnapping was duly established as a fortuitous event, still private
respondent cannot escape liability. Article 1165[11] of the New Civil Code makes an obligor
who is guilty of delay responsible even for a fortuitous event until he has effected the delivery. In
this case, private respondent was already in delay as it was supposed to deliver petitioners car
three (3) days before it was lost. Petitioners agreement to the rescheduled delivery does not
defeat his claim as private respondent had already breached its obligation. Moreover, such
accession cannot be construed as waiver of petitioners right to hold private respondent liable
because the car was unusable and thus, petitioner had no option but to leave it.
Articles 1174 and 1262 of the New Civil Code, liability attaches even if the loss was due to a
fortuitous event if the nature of the obligation requires the assumption of risk.[14] Carnapping
is a normal business risk for those engaged in the repair of motor vehicles. For just as the owner
is exposed to that risk so is the repair shop since the car was entrusted to it. That is why, repair
shops are required to first register with the Department of Trade and Industry (DTI)[15] and to
secure an insurance policy for the shop covering the property entrusted by its customer for
repair, service or maintenance as a pre-requisite for such registration/accreditation.
Moreover, on the assumption that private respondents repair business is duly registered, it
presupposes that its shop is covered by insurance from which it may recover the loss. If private
respondent can recover from its insurer, then it would be unjustly enriched if it will not
compensate petitioner to whom no fault can be attributed. Otherwise, if the shop is not
registered, then the presumption of negligence applies.
57
she was more concerned in insuring the carrying out of her testamentary provisions than in
precluding any contest or opposition to it. By the withdrawal of the contest which appellant
brought in good faith, no prejudice has been done into the intention of the testatrix. The
dispositions of her will can now be safely carried out.
From the foregoing premises it cannot be said that Flora's actuations impaired the true intention
of the testatrix in regard to the "no-contest and forfeiture" clause of the will. Flora's act of
withdrawing her opposition before she had rested her case contributed to the speedy probation of
the will. Since the withdrawal came before Flora had rested her case, it precluded the defeat of
the probate upon the strength of Flora's evidence. Through said withdrawal, Flora conformed to
the testatrix's wish that her dispositions of her properties under the will be carried out. It follows
that, taken as a whole, Flora's actuations subserved rather than violated the testatrix's intention.
RESOLUTION:
Flora Blas De Buenaventura contends, first, that she is entitled to and should be awarded, not
only the devised fishpond, but all the fruits or rents of said property from the death of the
testatrix on October 5, 1956 up to the time said property will be delivered to her. Appellant, it be
noted, did not expressly seek recovery of fruits or rents in her petition for delivery of specific
legacy (devise) filed below. She started to mention also the fruits or rents in her amended motion
for reconsideration of the court a quo's denial of said petition. And, thereafter she has raised the
point in her third assignment of error in the present appeal.
This notwithstanding, We believe that appellant should receive the fruits of the property given to
her in devise. The provisions of law regarding devised proper are emphatic in stating that a
devise of a specific things includes its fruits and income accruing after the testator's death,
ordering that these shall be delivered with the thing devised under Art. 948 and 951 of the Civil
Code.
Furthermore, since fruits or rents are accessions (Arts. 441, 442, Civil Code), strictly speaking,
there was really no need to mention them in the petition or the decision. Article 1166 of the Civil
Code applies: "The obligation to give a determinate thing includes that of delivering all its
accessions and accessories, even though they may not have been mentioned." To remove doubts
on the matter, however, We here expressly state that appellant is also entitled to, and appellee
should deliver to her, the fruits or rents of the devised fishpond accruing after the testatrix's
death. The precise determination of the same, however, should be threshed out in the court
below, before which appellee must render an accounting.
59
which
has
already
benefited
from
the
formers
work.
61
62
64
FACTS: The controversy arose when petitioners, despite repeated warnings from respondent,
extended the roof of their house to the property line and expanded the second floor of their house
to a point directly above the original front wall.
"Easements. For the good of the entire community, the homeowner must observe a two-meter
easement in front. No structure of any kind (store, garage, bodega, etc.) may
be built on the front easement.
"Upward expansion. A second storey is not prohibited. But the second storey expansion must be
placed above the back portion of the house and should not extend forward beyond the apex of the
original building.
"Front expansion: 2nd Storey: No unit may be extended in the front beyond the line as designed
and implemented by the developer in the 60 sq. m. unit. In other words, the 2nd floor expansion,
in front, is 6 meters back from the front property line and 4 meters back from the front wall of
the house, just as provided in the 60 sq. m. units."
65
ISSUE: Whether or not Petitioners are to abolish the constructed extensions in violation of the
Contract to Sell
HELD: There appears to be no cogent reasons for not upholding restrictive covenants aimed to
promote aesthetics, health, and privacy or to prevent overcrowding. Petitioners argue that for
lack of a specific provision, prescribing the penalty of demolition in the "Restrictive Covenant"
in the event of a breach thereof, the prayer of respondent to demolish the structure should fail.
This argument has no merit; Article 1168 of the New Civil Code states: "When the obligation
consists in not doing and the obligor does what has been forbidden him, it shall be undone at his
expense."
66
ISSUE: Whether or not petitioner may claim reimbursements from respondent because of the
delay in the fulfillment of obligation
HELD: No. Without a previous demand for the fulfillment of the obligation, as is evident in the
instant petition when Que only made follow-ups and not demands, petitioner would not have
a cause for rescission against respondent as the latter would not yet be considered in breach of
contractual obligations.
The claim for reimbursement by petitioner is actually one for rescission or resolution of contract,
governed by Article 1191 of the Civil Code. The right to rescind a contract arises once the party
defaults in the performance of his obligation. This must be taken in conjunction with Article
1169. In reciprocal obligations, as in a contract of sale, the general rule is that the fulfillment of
the parties respective obligations should be simultaneous. However, when different dates are set
for the performance of the obligations, the default for each must be determined according to the
first paragraph of 1169. Thus, the party would incur in delay only from the moment the other
party demands fulfillment of the obligation. Demand would be necessary upon the obligee in
such cases before the obligor can be considered in default and before a cause of action for
rescission will accrue.
68
69
On June 2, 1995, Santos and Riverland Inc. filed a Complaint for Declaratory Relief and
Damages alleging that there was delay on the part of petitioner in paying the balance of P13
million.
ISSUE: Whether the respondents are entitled to legal interest.
HELD:
Delay as used in this article is synonymous to default or mora which means delay in the
fulfillment of obligations. It is the non-fulfillment of the obligation with respect to time. In the
case at bar, the obligation was already due and demandable after the lapse of the two-year period
from the execution of the contract. The two-year period ended on October 26, 1992. When the
respondents gave a demand letter on October 28, 1992, to the petitioner, the obligation was
already due and demandable. Furthermore, the obligation is liquidated because the debtor knows
precisely how much he is to pay and when he is to pay it.
In the case at bar, the Compromise Agreement was entered into by the parties on October 26,
1990. It was judicially approved on September 30, 1991. Applying existing jurisprudence, the
compromise agreement as a consensual contract became binding between the parties upon its
execution and not upon its court approval. From the time a compromise is validly entered into, it
becomes the source of the rights and obligations of the parties thereto. The purpose of the
compromise is precisely to replace and terminate controverted claims.
As to the remaining P13 million, the terms and conditions of the compromise agreement are clear
and unambiguous. It provides that the balance of P13 Million shall be paid, whether in one lump
sum or in installments, at the discretion of the Foundation, within a period of not more than two
(2) years from the execution of this agreement.
70
FACTS: From 1987 up to the filling of the case, respondent supplied spare parts to petitioner, a
domestic corporation engaged in coastwise shipping. Sometime in 1989, petitioner asked
respondent for a quotation for various machine parts; on May 31, 1989, respondent provided a
quotation which stated, along with the items and prices, the following: delivery - within 2
months after receipt of firm order, terms- 25% upon delivery, balance payable in 5 bi-monthly
equal and installment[s] not to exceed 90 days.
After approximately 6 months, petitioners issued a purchase order for one set of cylinder liner
valued at P477,000, to be used for M/V Dadiangas Express. In the purchase order, it was
indicated that the term of payment shall be 25% down payment, but it did not state the date of
the cylinder liner's delivery. Instead of paying the down payment, petitioner issued 10 postdated
checks as full payment. On 15 January 1990, petitioner issued another purchase order for another
set of cylinder liner, and said purchase order also did not have delivery date.
Respondent encountered issues with the postdated checks as the first one was dishonored due to
insufficiency of funds. After returning the 9 remaining postdated checks to petitioner, respondent
opened a letter of credit and placed an order to its principal supplier in Japan. On 20 April 1990,
the two sets of cylinder liners were delivered to petitioners warehouse. The payment for the two
cylinder liners remained unsettled, and respondent issued a demand letter to which petitioner
responded by stating that it would only pay P150,000 because of the delay in delivery.
Respondent filed a case because petitioner refused to settle its obligation. Petitioner countered by
claiming that time was of the essence in the delivery of the cylinder liners, and respondent failed
to comply with the "within two (2) months after receipt of firm order" stipulation; thus, there was
a cancellation of orders, and the contract was validly rescinded by petitioner.
The trial court ruled in favor of petitioner, but the Court of Appeals reversed the ruling and held
that there was no incurred delay in the delivery of cylinder liners for there was no demand,
judicial or extrajudicial pursuant to Article 1169 of the Civil Code.
ISSUES:
71
1. Whether or not respondent incurred delay in performing its obligation under the contract of
sale
2. Whether or not said contract was validly rescinded by petitioner.
HELD:
1. No, the respondent did not incur delay. The Court held that time is not of the essence in
the contract, as inferred from the lack of delivery date in both purchase orders issued by
petitioner. Furthermore, the petitioner did not advise the respondent of the target date of
maintenance of M/V Dadiangas Express which was supposed to be on the later part of
December 1989 to early January 1990. The Court reiterated its ruling in Smith, Bell &
Co., Ltd. v. Matti which stated that [w]hen the time of delivery is not fixed or is stated in
general and indefinite terms, time is not of the essence of the contract In such cases,
the delivery must be made within a reasonable time in the absence of any showing that an
immediate delivery was intended. The Court held that respondents delivery of the
cylinder liners were considered as within reasonable time given that the principal
supplier was in Japan, and the respondent was facing volume of work.
2. No, the Supreme Court held that "[e]ven where time is of the essence, a breach of the
contract in that respect by one of the parties may be waived by the other party's
subsequently treating the contract as still in force." Petitioner, despite claiming that it had
already considered the orders cancelled and the contract rescinded, still received the
cylinder liners delivered to its warehouse which shows that the contract was still
considered as subsisting up to that point. The Court stated that if petitioner cancelled the
order, it had no reason to receive said delivery and by receiving said cylinders, petitioner
indisputably waived the claimed delay in the delivery of said items.
72
Court. In this case, the factual findings of the trial court and the Court of Appeals were based on
substantial evidence which were not refuted with contrary proof by petitioner. The Court thus
found no reason to disturb the factual findings of the trial court and the Court of Appeals.
Petitioner insists that the trial court and the Court of Appeals had no legal basis to award interest,
liquidated damages, and attorneys fees because the delivery receipts and sales invoices, which
served as the basis for the award, were not formally offered as evidence by respondent. Petitioner
also alleges that the delivery receipts and sales invoices were in the nature of contracts of
adhesion and petitioner had no option but to accept the conditions imposed by respondent.
On the allegation that the delivery receipts and sales invoices are in the nature of contracts of
adhesion, the Court has repeatedly held that contracts of adhesion are as binding as ordinary
contracts. Those who adhere to the contract are in reality free to reject it entirely and if they
adhere, they give their consent. It is true that on some occasions the Court struck down such
contract as void when the weaker party is imposed upon in dealing with the dominant party and
is reduced to the alternative of accepting the contract or leaving it, completely deprived of the
opportunity to bargain on equal footing.
Considering that petitioner and respondent have been doing business from 1990 to 1993 and that
petitioner is not a small time construction company, petitioner is "presumed to have full
knowledge and to have acted with due care or, at the very least, to have been aware of the terms
and conditions of the contract. The Court, therefore, upholds the validity of the contract
between petitioner and respondent.
However, the Court will reduce the amount of attorneys fees awarded by the trial court and the
Court of Appeals. In this case, aside from the award of P324,147.94 as liquidated damages, the
trial court and the Court of Appeals also ordered petitioner to pay respondent attorneys fees
"equivalent to 25% of whatever amount is due and payable."
Articles 1229 and 2227 of the Civil Code empower the courts to reduce the penalty if it is
iniquitous or unconscionable. The determination of whether the penalty is iniquitous or
unconscionable is addressed to the sound discretion of the court and depends on several factors
such as the type, extent, and purpose of the penalty, the nature of the obligation, the mode of
breach and its consequences.
The Court notes that respondent had more than adequately protected itself from a possible breach
of contract because of the stipulations on the payment of interest, liquidated damages, and
attorneys fees. The Court finds the award of attorneys fees "equivalent to 25% of whatever
74
amount is due and payable" to be exorbitant because it includes (1) the principal of
P1,404,114.00; (2) the interest charges of P504,114.00 plus accrued interest charges at 24% per
annum compounded yearly reckoned from July 1995 up to the time of full payment; and (3)
liquidated damages of P324,147.94. Moreover, the liquidated damages and the attorneys fees
serve the same purpose, that is, as penalty for breach of the contract. Therefore, we reduce the
award of attorneys fees to 25% of the principal obligation, or P351,028.50.
75
The penalty of 12% for late payment for after demand, Moonwalk would be in delay and
therefore liable for the penalty.
77
1. The Supreme Court ruled in the affirmative. The cancellation of the contracts to sell by
petitioner corporation accords with the contractual covenants of the parties, and such
cancellation must be respected. It may be noteworthy to add that in a contract to sell, the
non-payment of the purchase price (which is normally the condition for the final sale) can
prevent the obligation to convey title from acquiring any obligatory force
2. The Supreme Court ruled in the negative. In fine, while we must conclude that petitioner
corporation still acted within its legal right to declare the contracts to sell rescinded or
cancelled, considering, nevertheless, the peculiar circumstances found to be extant by the
trial court, confirmed by the Court of Appeals, it would be unconscionable, in our view,
to likewise sanction the forfeiture by petitioner corporation of payments made to it by
private respondent. Indeed, in the opening statement of this ponencia, we have intimated
that the relationship between parties in any contract must always be characterized and
punctuated by good faith and fair dealing. Judging from what the courts below have said,
petitioners did fall well behind that standard. We do not find it equitable, however, to
adjudge any interest payment by petitioners on the amount to be thus refunded, computed
from judicial demand, for, indeed, private respondent should not be allowed to totally
free itself from its own breach.
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80
CATHAY PACIFIC AIRWAYS, LTD. vs. SPOUSES DANIEL VAZQUEZ and MARIA
LUISA MADRIGAL VAZQUEZ
March 14, 2003
Topic: Article 1171
FACTS: Cathay is a common carrier engaged in the business of transporting passengers and
goods by air. As part of its marketing strategy, Cathay accords its frequent flyers membership in
its Marco Polo Club. The members enjoy several privileges, such as priority for upgrading of
booking without any extra charge whenever an opportunity arises. Thus, a frequent flyer booked
in the Business Class has priority for upgrading to First Class if the Business Class Section is
fully booked. Respondent-spouses Dr. Daniel Earnshaw Vazquez and Maria Luisa Madrigal
Vazquez together with two friends went to Hong Kong for business and pleasure. On their
return flight to Manila, they were booked on Cathay Pacifics flight CX-905. Upon boarding, Dr.
Vazquez was informed by ground attendant Ms. Chiu that they were being upgraded to First
Class from Business Class because Business Class was fully booked. Dr. Vazquez refused the
upgrade, explaining that it would not look good for them as hosts to travel in First Class while
their guests remained in the Business Class section. Moreover, they were going to discuss
business matters during the flight. He also told Ms. Chiu that she could have other passengers
transferred to the First Class Section instead of them. Ms. Chiu informed them that since they
were Marco Polo Club members they are priority to be upgraded to First Class. Dr. Vazquez
continued to refuse, so Ms. Chiu told them that if they would not avail of the privilege, they
would not be allowed to take the flight. Eventually, Dr. Vazquez gave in and proceeded to the
First Class.
ISSUE: Whether or not the upgrading of booking of Sps. Vazquez was tainted with fraud or bad
faith.
HELD: No. The Supreme Court are not, however, convinced that the upgrading or the breach of
contract was attended by fraud or bad faith. The Court finds no persuasive proof of fraud or bad
faith in this case. The Vazquezes were not induced to agree to the upgrading through insidious
words or deceitful machination or through willful concealment of material facts. Upon boarding,
Ms. Chiu told the Vazquezes that their accommodations were upgraded to First Class in view of
their being Gold Card members of Cathays Marco Polo Club. She was honest in telling them that
their seats were already given to other passengers and the Business Class Section was fully
booked. Ms. Chiu might have failed to consider the remedy of offering the First Class seats to
other passengers. But, the Court finds no bad faith in her failure to do so, even if that amounted
to an exercise of poor judgment.
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Neither was the transfer of the Vazquezes effected for some evil or devious purpose. As testified
to by Mr. Robson, the First Class Section is better than the Business Class Section in terms of
comfort, quality of food, and service from the cabin crew. Needless to state, an upgrading is for
the better condition and, definitely, for the benefit of the passenger.
The Court is not persuaded by the Vazquezes argument that the overbooking of the Business
Class Section constituted bad faith on the part of Cathay. Section 3 of the Economic Regulation
No. 7 of the Civil Aeronautics Board, as amended, provides:
Sec 3. Scope. This regulation shall apply to every Philippine and foreign air carrier with respect
to its operation of flights or portions of flights originating from or terminating at, or serving a
point within the territory of the Republic of the Philippines insofar as it denies boarding to a
passenger on a flight, or portion of a flight inside or outside the Philippines, for which he holds
confirmed reserved space. Furthermore, this Regulation is designed to cover only honest
mistakes on the part of the carriers and excludes deliberate and willful acts of nonaccommodation. Provided, however, that overbooking not exceeding 10% of the seating capacity
of the aircraft shall not be considered as a deliberate and willful act of non-accommodation.
It is clear from this section that an overbooking that does not exceed ten percent is not
considered deliberate and therefore does not amount to bad faith. Here, while there was
admittedly an overbooking of the Business Class, there was no evidence of overbooking of the
plane beyond ten percent, and no passenger was ever bumped off or was refused to board the
aircraft.
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YAMBAO VS ZUIGA
December 11, 2003
Topic: Article 1173 (Negligence)
FACTS: Petitioner Cecilia Yambao is the registered owner of Lady Cecil and Rome Trans
passenger bus with Plate No. CVK 606, with a public transport franchise to ply the Novalichesvia Quirino-Alabang route. The bus owned by the petitioner was being driven by her driver, one
Ceferino G. Venturina along the northbound lane of Epifanio delos Santos Avenue (EDSA),
within the vicinity of Bagong Barrio, Kalookan City. With Venturina was the bus conductor,
Fernando Dumaliang. Suddenly, the bus bumped Herminigildo Zuiga, a pedestrian. Zuiga was
rushed to the Quezon City General Hospital where he was given medical attention, but due to the
massive injuries sustained, he succumbed shortly thereafter.
Private respondents, as heirs of the victim, filed a Complaint against petitioner and her driver,
Venturina, for damages. The complaint essentially alleged that Venturina drove the bus in a
reckless, careless and imprudent manner, in violation of traffic rules and regulations, without due
regard to public safety, thus resulting in the victims premature death.
The petitioner vehemently denied the material allegations of the complaint. She tried to shift the
blame for the accident upon the victim, theorizing that Herminigildo bumped into her bus, while
avoiding an unidentified woman who was chasing him. She further alleged that she was not
liable for any damages because as an employer, she exercised the proper diligence of a good
father of a family, both in the selection and supervision of her bus driver.
ISSUE: Whether petitioner exercised the diligence of a good father of a family in the selection
and supervision of her employees, thus absolving her from any liability.
HELD: NO. When an employee, while performing his duties, causes damage to persons or
property due to his own negligence, there arises the juris tantum presumption that the employer
is negligent, either in the selection of the employee or in the supervision over him after the
selection. For the employer to avoid the solidary liability for a tort committed by his employee,
an employer must rebut the presumption by presenting adequate and convincing proof that in the
selection and supervision of his employee, he or she exercises the care and diligence of a good
father of a family. In the instant case, we find that petitioner has failed to rebut the presumption
of negligence on her part.
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Her allegation that before she hired Venturina she required him to submit his drivers license and
clearances is worthless, in view of her failure to offer in evidence certified true copies of said
license and clearances. Bare allegations, unsubstantiated by evidence, are not equivalent to proof
under the rules of evidence.
Case law teaches that for an employer to have exercised the diligence of a good father of a
family, he should not be satisfied with the applicants mere possession of a professional drivers
license; he must also carefully examine the applicant for employment as to his qualifications, his
experience and record of service. Petitioner failed to present convincing proof that she went to
this extent of verifying Venturinas qualifications, safety record, and driving history. The
presumption juris tantum that there was negligence in the selection of her bus driver, thus,
remains unrebutted.
Nor did petitioner show that she exercised due supervision over Venturina after his selection. For
as pointed out by the Court of Appeals, petitioner did not present any proof that she drafted and
implemented training programs and guidelines on road safety for her employees. In fact, the
record is bare of any showing that petitioner required Venturina to attend periodic seminars on
road safety and traffic efficiency.Hence, petitioner cannot claim exemption from any liability
arising from the recklessness or negligence of Venturina.
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2. From the date the judgment is made. Where the demand is established with reasonable
certainty, the interest shall begin to run from the time the claim is made judicially or extra
judicially but when such certainty cannot be so reasonably established at the time the
demand is made, the interest shall begin to run only from the date of judgment of the
court is made.
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ISSUES: whether or not (1) the non-ratification by the Senate of the Treaty of Friendship,
Cooperation and Security and its Supplementary Agreements constitutes force majeurewhich
exempts Globe from complying with its obligations under the Agreement
(2) Globe is not liable to pay the rentals for the remainder of the term of the Agreement
HELD: The Court agrees with the Court of Appeals and the trial court that the abovementioned
requisites are present in the instant case. Philcomsat and Globe had no control over the nonrenewal of the term of the RP-US Military Bases Agreement when the same expired in 1991,
because the prerogative to ratify the treaty extending the life thereof belonged to the Senate.
Neither did the parties have control over the subsequent withdrawal of the US military forces and
personnel from Cubi Point in December 1992.
The aforementioned events made impossible the continuation of the Agreement until the end of
its five-year term without fault on the part of either party. The Court of Appeals was thus correct
in ruling that the happening of such fortuitous events rendered Globe exempt from payment of
rentals for the remainder of the term of the Agreement.
Moreover, it would be unjust to require Globe to continue paying rentals even though Philcomsat
cannot be compelled to perform its corresponding obligation under the Agreement.
Notes:
Philcomsat and Globe agreed in Section 8 of the Agreement that the following events shall be
deemed events constituting force majeure one of which is Any law, order, regulation, direction
or request of the Philippine Government;
the foregoing are either unforeseeable, or foreseeable but beyond the control of the parties. There
is nothing in the enumeration that runs contrary to, or expands, the concept of a fortuitous event
under Article 1174.
Furthermore, under Article 130626 of the Civil Code, parties to a contract may establish such
stipulations, clauses, terms and conditions as they may deem fit, as long as the same do not run
counter to the law, morals, good customs, public order or public policy.
Article 1159 of the Civil Code also provides that "[o]bligations arising from contracts have the
force of law between the contracting parties and should be complied with in good faith."28
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
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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 law, morals, good customs, public order, or public policy, Section 8 of the
Agreement which Philcomsat and Globe freely agreed upon has the force of law between them.
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blatant negligence of ANCOs employees is of such gross character that it amounts to a wrongful
act which must exonerate FGU from liability under the insurance contract.
WHEREFORE, premises considered, the Decision of the Court of Appeals dated 24 February
1999 is hereby AFFIRMED with MODIFICATION dismissing the third-party complaint.SO
ORDERED.
NOTE:
In this case, the calamity which caused the loss of the cargoes was not unforeseen nor was it
unavoidable. In fact, the other vessels in the port of San Jose, Antique, managed to transfer to
another place, a circumstance which prompted SMCs District Sales Supervisor to request that the
D/B Lucio be likewise transferred, but to no avail. The D/B Lucio had no engine and could not
maneuver by itself. Even if ANCOs representatives wanted to transfer it, they no longer had any
means to do so as the tugboat M/T ANCO had already departed, leaving the barge to its own
devices. The captain of the tugboat should have had the foresight not to leave the barge alone
considering the pending storm.
While the loss of the cargoes was admittedly caused by the typhoon Sisang, a natural disaster,
ANCO could not escape liability to respondent SMC. The records clearly show the failure of
petitioners representatives to exercise the extraordinary degree of diligence mandated by law. To
be exempted from responsibility, the natural disaster should have been the proximate and only
cause of the loss. There must have been no contributory negligence on the part of the common
carrier.
93
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FACTS: There was a collision between the vessel Dona Nati of NDC which contained
American raw cotton to be delivered to Manila and the vessel SS Yasushima Maru of Kyokuto
Boekui, Kaisa, Ltd., consigned to the order of Manila Banking Corporation consisting of 200
cartons of sodium lauryl sulfate and 10 cases of aluminum foil. The said collision happened at
Ise Bay, Japan and as a result of which 550 bales of aforesaid cargo of American raw cotton
were lost and/or destroyed.
ISSUE: Whether or not Philippine law will govern a collision outside of Philippine waters
HELD: This issue has already been laid to rest by this Court of Eastern Shipping Lines Inc. v.
IAC to which the goods are to be transported governs the liability of the common carrier in case
of their loss, destruction or deterioration" (Article 1753, Civil Code). Thus, the rule was
specifically laid down that for cargoes transported from Japan to the Philippines, the liability of
the carrier is governed primarily by the Civil Code and in all matters not regulated by said Code,
the rights and obligations of common carrier shall be governed by the Code of commerce and by
laws (Article 1766, Civil Code).
In the case at bar, it has been established that the goods in question are transported from San
Francisco, California and Tokyo, Japan to the Philippines and that they were lost or due to a
collision which was found to have been caused by the negligence or fault of both captains of the
colliding vessels. Under the above ruling, it is evident that the laws of the Philippines will apply,
and it is immaterial that the collision actually occurred in foreign waters, such as Ise Bay, Japan.
Under Article 1733 of the Civil Code, common carriers from the nature of their business and for
reasons of public policy are bound to observe extraordinary diligence in the vigilance over the
goods and for the safety of the passengers transported by them according to all circumstances of
each case. Accordingly, under Article 1735 of the same Code, in all other than those mentioned
is Article 1734 thereof, the common carrier shall be presumed to have been at fault or to have
acted negigently, unless it proves that it has observed the extraordinary diligence required by
law.
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96
OSMENA VS SSS
September 13, 2007
Topic: Article 1174 (Fortuitous Event)
FACTS: Senator Sergio R. Osmea III and four (4) other members of the Philippine Senate,
joined by Social Security System (SSS) members Luis F. Sison and Patricia C. Sison,
specifically seek in this original petition for certiorari and prohibition the nullification of
Resolution Nos. 428 and 485 of respondent Social Security Commission (SSC). Resolution No.
428 approved the proposed sale of the entire equity stake of the SSS in what was then the
Equitable PCI Bank, Inc. (EPCIB) through the Swiss Challenge bidding procedure. Under the
Swiss Challenge format, one of the bidders is given the option or preferential "right to match"
the winning bid. Resolution No. 485 approved the Timetable and Instructions to Bidder.
Sometime in 2003, SSS, a government financial institution placed under the direction and control
of SSC, took steps to liquefy its long-term investments and diversify them into higher yielding
and less volatile investment products. Among its assets determined as needing to be liquefied
were its shareholdings in EPCIB. The shares in question have substantially declined in value and
the SSS could no longer afford to continue holding on to them at the present level of EPCIB's
income. Albeit there were other interested parties, only Banco de Oro Universal Bank (BDO)
and its investment subsidiary, respondent BDO Capital, appeared in earnest to acquire the shares
in question. Both Resolution Nos. 428 and 485 were passed. Thereafter, SSS advertised an
Invitation to Bid for the block purchase of the Shares. The Invitation to Bid expressly provided
that the "result of the bidding is subject to the right of BDO Capital . . . to match the highest bid."
Petitioners assert, in gist, that a public bidding with a Swiss Challenge component is contrary to
COA Circular No. 89-296 and public policy which requires adherence to competitive public
bidding in a government-contract award to assure the best price possible for government assets.
Accordingly, the petitioners urge that the planned disposition of the Shares through a Swiss
Challenge method be scrapped. Pending consideration of the petition, BDO made public its
intent to merge with EPCIB which resulted with a merger. BDO, or BDO-EPCI, Inc. to be
precise, has since issued BDO common shares to respondent SSS corresponding to the number
of its former EPCIB. In net effect, SSS, once the owner of a block of EPCIB shares, is now a
large stockholder of BDO-EPCI, Inc.
ISSUE: Whether or not there would be an actual substantial relief which the petitioners are
entitled to.
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HELD: NO. The case has become moot and academic for interrelated reasons. The shares, as a
necessary consequence of the BDO-EPCIB merger which saw EPCIB being absorbed by the
surviving BDO, have been transferred to BDO and converted into BDO common shares. As thus
converted, the subject shares are no longer equity security issuances of the now defunct EPCIB,
but those of BDO-EPCI, which, needless to stress, is a totally separate and distinct entity from
what used to be EPCIB. In net effect, therefore, the EPCIB common shares are now lost or
inexistent. And in this regard, the Court takes judicial notice of the disappearance of EPCIB
stocks from the local bourse listing. Instead, BDO-EPCI Stocks are presently listed and being
traded in the PSE.
Under the law on obligations and contracts, the obligation to give a determinate thing is
extinguished if the object is lost without the fault of the debtor. A thing is considered lost when it
perishes or disappears in such a way that it cannot be recovered. In a very real sense, the
interplay of the ensuing factors: a) the BDO-EPCIB merger; and b) the cancellation of subject
Shares and their replacement by totally new common shares of BDO, has rendered the EPCIB
shares of SSS "unrecoverable."
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FACTS: Petitioner hired respondent SMCC to undertake the structural and architectural work
for the first 12 floors of a 16-floor building (JLID Building) in Kalaw corner Cortada Streets,
Ermita, Manila. Under the Construction Agreement (Agreement) between petitioner and SMCC,
petitioner agreed to pay SMCC P63,333,085.84 for the project. The Agreement also required
SMCC to submit monthly progress billings to petitioner To supply the concrete piles needed for
the structural work, SMCC subcontracted respondent TPI, a local manufacturer of pre-cast
concrete products. Accordingly, TPI delivered 142 pieces of concrete piles to SMCC worth
P4,118,000 payable on installment basis. By early August 1996, SMCC, using the concrete piles
that TPI supplied, finished the pile driving work for the first 12 floors of the JLID Building. On
13 September 1996, petitioner paid SMCC for the pile driving work as indicated in SMCCs
seventh progress billing dated 30 August 1996. Claiming that SMCC did not fully pay for the
concrete piles, TPI sought payment of the balance from petitioner. Petitioner ignored TPIs
demand. Thus, TPI sued SMCC, SMCCs President, respondent Sta. Maria, and petitioner
(respondents) in the Regional Trial Court of Pasig City, Branch 167 (trial court), to collect the
unpaid balance of P1,389,330. TPI prayed that the trial court hold respondents solidarily liable
for the balance with interest, attorneys fees, and the costs of suit.
.
ISSUE: Whether or not the petitioner is solidarily liable with SMCC and Sta. Maria to TPI for
the unpaid balance under the contract between SMCC and TPI, and, if in the negative.
HELD: The petition is partly meritorious. Although petitioner is solidarily liable with SMCC
and Sta. Maria to TPI for the balance under TPIs contract with SMCC, petitioner has a right to
reimbursement under its cross-claim against SMCC.
Article 1729 of the Civil Code provides:
Those who put their labor upon or furnish materials for a piece of work undertaken by the
contractor have an action against the owner up to the amount owing from the latter to the
contractor at the time the claim is made. However, the following shall not prejudice the laborers,
employees and furnishers of materials:
1. Payments made by the owner to the contractor before they are due;
2. Renunciation by the contractor of any amount due from the owner.
This article is subject to the provisions of special laws.
This provision imposes a direct liability on an owner of a piece of work in favor of suppliers of
materials (and laborers) hired by the contractor "up to the amount owing from the [owner] to the
contractor at the time the claim is made." Thus, to this extent, the owners liability is solidary
with the contractor, if both are sued together. By creating a constructive vinculum between
suppliers of materials (and laborers), on the one hand, and the owner of a piece of work, on the
99
other hand, as an exception to the rule on privity of contracts, Article 1729 protects suppliers of
materials (and laborers) from unscrupulous contractors and possible connivance between owners
and contractors. As the Court of Appeals correctly ruled, the suppliers cause of action under this
provision, reckoned from the time of judicial or extra-judicial demand, subsists so long as any
amount remains owing from the owner to the contractor. Only full payment of the agreed
contract price serves as a defense against the suppliers claim.
Here, petitioner resists TPIs suit on the ground that it had fully paid, if not overpaid, SMCC at
the time TPI demanded payment on 3 December 1996. However, as the Court of Appeals found,
petitioner failed to substantiate its claim. What petitioner submits as proof of its alleged full or
over payment, namely, its answer to TPIs interrogatories and the testimony of one of its
witnesses, are no more than mere uncorroborated allegations. The only proof of payment on
record are the official receipt, voucher, and check for the seventh progress billing dated 30
August 1996, nearly four months before TPI sought payment from petitioner on 3 December
1996. Allegation of payments, advance or otherwise, is no substitute for proof of such fact. Thus,
absent incontrovertible proof of payment such as receipts, checks, cash disbursement vouchers,
and the like, petitioners claim of full or over payment remains only that. At any rate, Article
1729 clearly provides that "payments made by the owner to the contractor before they are due"
do not prejudice suppliers of materials.
Therefore, petitioner JL Investment and Development, Inc. and respondents J. Sta. Maria
Construction Corporation and Jaime T. Sta. Maria, Jr. to pay solidarily respondent Tendon
Philippines, Inc. P1,389,330, with interest at 6% per annum computed from the time of the filing
of respondent Tendon Philippines, Inc.s complaint, and attorneys fees equivalent to 10% of the
principal obligation. Upon finality of this judgment, the entire obligation shall earn interest at
12% per annum until its satisfaction
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contracts ordained in Article 1308 of the Civil Code. Onesided impositions do not have the
force of law between the parties, because such impositions are not based on the parties essential
equality. Although escalation clauses are valid in maintaining fiscal stability and retaining the
value of money on longterm contracts, giving respondent an unbridled right to adjust the
interest independently and upwardly would completely take away from petitioners the
right to assent to an important modification in their agreement and would also negate the
element of mutuality in their contracts. The clause cited earlier made the fulfillment of the
contracts dependent exclusively upon the uncontrolled will of respondent and was
therefore void. Besides, the pro forma promissory notes have the character of a contract
dadhsion, where the parties do not bargain on equal footing, the weaker partys [the debtors]
participation being reduced to the alternative to take it or leave it. Circular that lifted the
ceiling of interest rates of usury law did not authorize either party to unilaterally raise the interest
rate without the others consent. The interest ranging from 26 percent to 35 percent in the
statements of account must be equitably reduced for being iniquitous, unconscionable and
exorbitant. Rates found to be iniquitous or unconscionable are void, as if it there were no
express contract thereon. Above all, it is undoubtedly against public policy to charge excessively
for the use of money. It cannot be argued that assent to the increases can be implied either from
the June 18, 1991 request of petitioners for loan restructuring or from their lack of response to
the statements of account sent by respondent. Such request does not indicate any agreement to
an interest increase; there can be no implied waiver of a right when there is no clear, unequivocal
and decisive act showing such purpose. Besides, the statements were not letters of information
sent to secure their conformity; and even if we were to presume these as an offer, there was no
acceptance. No one receiving a proposal to modify a loan contract, especially interest a vital
component is obliged to answer the proposal. Besides, PNB did not comply with its own
stipulation that should the loan not be paid 2 years after release of money then it shall be
converted to a medium term loan.
*Court applied 12% interest rate instead for being a forbearance of money (there were some
pieces of evidence presented by PNB in court that Sampaguita objected to. Lower courts
overruled the objections but SC said the objections were correct and the evidence should
not have been admitted. I.e. contract wasnt signed by the parties, a part of the contract wasnt
properly annexed/no reference was made in the main contract. In addition to the preceding
discussion, it is then useless to labor the point that the increase in rates violates the impairment
clause of the Constitution, because the sole purpose of this provision is to safeguard the integrity
of valid contractual agreements against unwarranted interference by the State in the form of
laws. Private individuals intrusions on interest rates is governed by statutory enactments like
the Civil Code.
102
3. YES. Mandarin Villa Seafood Village is affiliated with BANKARD. Mandarin and
BANKARD entered into agreement which states that The MERCHANT shall honor validly
issued PCCCI credit cards presented by their corresponding holders in the purchase of
goods and/or services supplied by it provided that the card expiration date has not elapsed
and the card number does not appear on the latest cancellation bulletin of lost, suspended
and canceled PCCCI credit cards and, no signs of tampering, alterations or irregularities
appear on the face of the credit card. While De Jesus may not be a party to the said
agreement, the abovequoted stipulation conferred a favor upon DE Jesus, a holder of
credit card validly issued by BANKARD. This stipulation is a stipulation pour auturi and
under Article 1311 of the Civil Code, De Jesus may demand its fulfillment provided he
communicated his acceptance to Mandarin before its revocations. IN the case at bar, De
Jesus offer to pay by means of his BANKARD credit card constitutes not only as an
acceptance of the said stipulation but also an explicit communication of his acceptance to
the obligor. In addition, the record shows that petitioner posted a logo inside Mandarin
Villa Seafood Village stating that "Bankard is accepted here. This representation is
conclusive upon the petitioner which it cannot deny or disprove as against De Jesus, the
party relying thereon. Mandarin, therefore, cannot disclaim its obligation to accept De Jesus'
BANKARD credit card without violating the equitable principle of estoppel.
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Third on the petitioners list of unliquidated claims is the yet-to-be established value of the onehalf partnership share and interest adjudicated to Chua, which, they submit, must first be
determined with reasonable certainty in a judicial proceeding. And in this regard, petitioners,
citing Eastern Shipping Lines, Inc. v. Court of Appeals, would ascribe error on the RTC for
adding a 12% per annum interest on the approved valuation of the one-half share of the assets,
inclusive of goodwill, due Chua.
ISSUE: Whether or not the Regional Trial Court can impose interest on a final judgment of
unliquidated claims?
HELD: Petition partly granted. The legal interest at 12% per annum under Central Bank (CB)
Circular No. 416 shall be adjudged only in cases involving the loan or forbearance of money.
And for transactions involving payment of indemnities in the concept of damages arising from
default in the performance of obligations in general and/or for money judgment not involving a
loan or forbearance of money, goods, or credit, the governing provision is Art. 2209 of the Civil
Code prescribing a yearly 6% interest. Art. 2209 pertinently provides:
Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in
delay, the indemnity for damages, there being no stipulation to the contrary, shall be the
payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is
six per cent per annum.
The term forbearance, within the context of usury law, has been described as a contractual
obligation of a lender or creditor to refrain, during a given period of time, from requiring the
borrower or debtor to repay the loan or debt then due and payable.
Eastern Shipping Lines, Inc. synthesized the rules on the imposition of interest, if proper, and the
applicable rate, as follows: The 12% per annum rate under CB Circular No. 416 shall apply only
to loans or forbearance of money, goods, or credits, as well as to judgments involving such loan
or forbearance of money, goods, or credit, while the 6% per annum under Art. 2209 of the Civil
Code applies when the transaction involves the payment of indemnities in the concept of damage
arising from the breach or a delay in the performance of obligations in general, with the
application of both rates reckoned from the time the complaint was filed until the [adjudged]
amount is fully paid. In either instance, the reckoning period for the commencement of the
running of the legal interest shall be subject to the condition that the courts are vested with
discretion, depending on the equities of each case, on the award of interest.
106
The award to Chua of the amount representing earned but unremitted profits, i.e.. PhP 35,000
monthly, from January 1988 until May 30, 1992, must earn interest at 6% per annum reckoned
from October 7, 1997, the rendition date of the RTC decision, until December 20, 2001, when
the said decision became final and executory. Thereafter, the total of the monthly profits
inclusive of the add on 6% interest shall earn 12% per annum reckoned from December 20, 2001
until fully paid, as the award for that item is considered to be, by then, equivalent to a
forbearance of credit. Likewise, the PhP 250,000 award, representing the goodwill value of the
business, the award of PhP 50,000 for moral and exemplary damages, PhP 25,000 attorneys fee,
and PhP 25,000 litigation fee shall earn 12% per annum from December 20, 2001 until fully
paid.
Anent the impasse over the partnership assets, we are inclined to agree with petitioners assertion
that Chuas share and interest on such assets partake of an unliquidated claim which, until
reasonably determined, shall not earn interest for him. As may be noted, the legal norm for
interest to accrue is reasonably determinable, not, as Chua suggested and the CA declared,
determinable by mathematical computation. Considering that Chuas computation of claim, as
approved by the trial court, was submitted only on October 15, 2002, no interest in his favor can
be added to his share of the partnership assets.
107
GOLD STAR MINING CO., INC. vs. MARTA LIM-JIMENA, CARLOS JIMENA,
GLORIA JIMENA, AURORA JIMENA, JAIME JIMENA, DANTE JIMENA, JORGE
JIMENA, JOYCE JIMENA, as legal heirs of the deceased VICTOR JIMENA, and JOSE
HIDALGO
October 26, 1968
Topic: Article 1177
FACTS: Ananias Lincallo bound himself in an equal sharing arrangement in writing to turn to
Victor Jimena one-half (1/2) of the proceeds from all mining claims that he would purchase with
the money to be advanced by the latter among others. Apparently, the mining rights over part of
the claims were assigned by Lincallo to Gold Star Mining Co., Inc., sometime before World War
Il because in 1950 the corporation paid him P5,000 in consideration of, and as a quitclaim for,
pre-war royalties.
On several occasions thereafter, the mining claims in question were made subject-matter of
contracts entered into by Lincallo in his own name and for his benefit alone. On September 19,
1951, Lincallo and Alejandro Marquez entered into an agreement regarding the allotment to
Lincallo of 45% of the royalties due from the corporation. Four months later, a lease contract
was entered into by Lincallo, Marquez and Congressman Panfilo Manguerra leasing certain
mining claims to Jacob Cabarrus, who then transferred to Marinduque Iron Mines Agents, Inc.,
his rights under the lease contract. By virtue of another contract executed by the said lessors on
29 February 1952, 43% of the royalties due from Marinduque Iron Mines Agents, Inc., were
agreed upon to be paid to Lincallo.
From August, 1939 to September, 1952, Jimena repeatedly apprised Gold Star Mining Co., Inc.,
and Marinduque Iron Mines Agents, Inc., of his interests over the mining claims so assigned
and/or leased by Lincallo. Both corporations, however, ignored Jimena's demands. Payment of
the P5,800 advanced for the purchase of the mining claims, as well as the one-half share in the
royalties paid by the two corporations, were also repeatedly demanded by Jimena from Lincallo.
Despite his promise to fulfill his obligations, Lincallo transferred 35 of his 45% share in the
royalties due from Gold Star Mining Co., Inc., to one Gregorio Tolentino for an alleged
consideration of P10,000.00.
On 2 September 1954, Jimena filed a suit against Lincallo for recovery of his advances and his
one-half share in the royalties. Jimena and Tolentino died successively during the pendency of
the case in the trial court and were, accordingly, substituted by their respective widows and
children. The lower court rendered a decision condemning inter alia the defendants Gold Star
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and Marinduque Iron Mines to pay direct to plaintiffs said 1/2 shares of the royalties until said
contracts are terminated.
Upon appeal, the Court of Appeals rendered a decision sustaining in its entirety that of the trial
court. The motion for reconsideration of Gold Star Mining Co., Inc., was denied. In its appeal,
the petitioner contended inter alia that there is no privity of contract between Gold Star and
Jimena.
ISSUE: WON Jimena has the right to the mining claims and royalties he sought to recover from
the corporations
HELD: YES. The Court upheld in toto the decision of the trial court. It was held that in this case
Jimena sought for the direct payment to himself of his share of the royalties, and evidence show
that Jimena made prewar and postwar demands upon Gold Star for the payment of his 1/2 share
of the royalties but all in vain so he (Jimena) was constrained to implead Gold Star because it
refused to recognize his right. Under Article 1177, new Civil Code which provides that
"creditors, after having pursued the property in possession of the debtor to satisfy their claims,
may exercise all the rights and bring all the actions of the latter (debtor) for the same purpose,
save those which are inherent in his person; they may also impugn the acts which the debtor may
have done to defraud them (1111)."
Furthermore, the trial court ruled that it can be said that Lincallo, in transferring the mining
claims to Gold Star (without disclosing that Jimena was a co-owner although Gold Star had
knowledge of the fact as shown by the proofs heretofore mentioned) acted as Jimena's agent with
respect to Jimena's share of the claims. Under such conditions, Jimena has an action against Gold
Star, pursuant to Article 1883, New Civil Code, which provides that the principal may sue the
person with whom the agent dealt with in his (agent's) own name, when the transaction "involves
things belonging to the principal."
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FACTS: On April 21, 1999, ASB filed a verified complaint for sum of moneyand damages with
application for replevin against Ciudad Transport Services, Inc. (CTS), its president, respondent
Henry H. Furigay; his wife, respondent Gelinda C. Furigay; and a John Doe.
While Civil Case No. 99-865 was pending, respondent spouses donated their registered
properties in Alaminos, Pangasinan, to their minor children, respondents Hegem G. Furigay and
Herriette C. Furigay. Claiming that the donation of these properties was made in fraud of
creditors, ASB filed a Complaint for Rescission of Deed of Donation, Title and Damages against
the respondent spouses and their children. RTC dismissed the complaint for failure of ASB to
pay the correct docket fees and for prescription. On appeal, the CA agreed with ASB that its
complaint should not have been dismissed on the ground that it failed to pay the correct docket
fees.
ISSUE: WON the complaint for rescission should prosper?
HELD: NO. The remedy of rescission is subsidiary in nature; it cannot be instituted except when
the party suffering damage has no other legal means to obtain reparation for the same.
Article 1177 of the New Civil Code provides: The creditors, after having pursued the property in
possession of the debtor to satisfy their claims, may exercise all the rights and bring all the
actions of the latter for the same purpose, save those which are inherent in his person; they may
also impugn the actions which the debtor may have done to defraud them.
Consequently, following the subsidiary nature of the remedy of rescission, a creditor would have
a cause of action to bring an action for rescission, if it is alleged that the following successive
measures have already been taken: (1) exhaust the properties of the debtor through levying by
attachment and execution upon all the property of the debtor, except such as are exempt by law
from execution; (2) exercise all the rights and actions of the debtor, save those personal to him
(accion subrogatoria); and (3) seek rescission of the contracts executed by the debtor in fraud of
their rights (accion pauliana).
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A cursory reading of the allegations of ASBs complaint would show that it failed to allege the
ultimate facts constituting its cause of action and the prerequisites that must be complied before
the same may be instituted. ASB, without availing of the first and second remedies, that is,
exhausting the properties of CTS, Henry H. Furigay and Genilda C. Furigay or their
transmissible rights and actions, simply undertook the third measure and filed an action for
annulment of the donation. Petition is denied.
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