SSS VS.

MOONWALK DEVELOPMENT AND HOUSING CORPORATION

FACTS:
Plaintiff SSS approved the application of Defendant Moonwalk for a
loan of P30,000,000 for the purpose of developing and constructing a
housing project.
Out of P30,000,000 approved loan, the sum of P9,595,000 was
released to defendant Moonwalk.
A third Amendment Deed of Mortgage was executed for the payment
of the amount of P9,595,000. Moonwalk made a total payment of
P23,657,901.84 to SSS for the loan principal of P12,254,700. After
settlement of the account, SSS issued to Moonwalk the release of
Mortgage for Moonwalks Mortgaged properties. In letter to Moonwalk,
SSS alleged that it committed an honest mistake in releasing
defendant. That Moonwalk has still 12% penalty for failure to pay on
time the amortization which is in the penal clause of the contract.
Moonwalks counsel told SSS that it had completely paid its obligation
to SSS and therefore there is no recovery of any penalty.
ISSUE:
Is the penalty demandable even after the extinguishment of the
principal obligation?
HELD: No. There has been a waiver of the penal clause as it was not
demanded before the full obligation was fully paid and extinguished.
Default begins from the moment the creditor demands the
performance of the obligation. In this case, although there were late
amortizations there was no demand made by SSS for the payment of
the penalty. Hence, Moonwalk is not in delay in the payment of the
penalty. No delay occurred and there was no occasion when the
penalty became demandable and enforceable.
Since there was no default in the performance of the main obligationpayment of the loan- SSS was never entitled to recover any penalty.
If the demand for the payment of the penalty was made prior to the
extinguishment of the obligation which are: 1. e principal obligation 2.

The interest of 12% on the principal obligation 3.The penalty of 12% for
late payment for after demand, Moonwalk would be in delay and
therefore liable for the penalty.
RCBC v. CA - Insurance Proceeds
289 SCRA 292 (1998)
Facts:
> GOYU applied for credit facilities and accommodations with RCBC.
After due evaluation, a credit facility in the amount of P30 million was
initially granted. Upon GOYU's application increased GOYU's credit
facility to P50 million, then to P90 million, and finally to P117 million
> As security for its credit facilities with RCBC, GOYU executed two
REM and two CM in favor of RCBC, which were registered with the
Registry of Deeds at. Under each of these four mortgage contracts,
GOYU committed itself to insure the mortgaged property with an
insurance company approved by RCBC, and subsequently, to endorse
and deliver the insurance policies to RCBC.
> GOYU obtained in its name a total of 10 insurance policies from
MICO. In February 1992, Alchester Insurance Agency, Inc., the
insurance agent where GOYU obtained the Malayan insurance policies,
issued nine endorsements in favor of RCBC seemingly upon
instructions of GOYU
> On April 27, 1992, one of GOYU's factory buildings in Valenzuela was
gutted by fire. Consequently, GOYU submitted its claim for indemnity.
> MICO denied the claim on the ground that the insurance policies
were either attached pursuant to writs of attachments/garnishments
issued by various courts or that the insurance proceeds were also
claimed by other creditors of GOYU alleging better rights to the
proceeds than the insured.
> GOYU filed a complaint for specific performance and damages.
RCBC, one of GOYU's creditors, also filed with MICO its formal claim
over the proceeds of the insurance policies, but said claims were also
denied for the same reasons that AGCO denied GOYU's claims.
> However, because the endorsements do not bear the signature of
any officer of GOYU, the trial court, as well as the Court of Appeals,
concluded that the endorsements are defective and held that RCBC has
no right over the insurance proceeds.

Issue:
Whether or not RCBC has a right over the insurance proceeds.
Held:
RCBC has a right over the insurance proceeds.
It is settled that a mortgagor and a mortgagee have separate and
distinct insurable interests in the same mortgaged property, such that
each one of them may insure the same property for his own sole
benefit. There is no question that GOYU could insure the mortgaged
property for its own exclusive benefit. In the present case, although it
appears that GOYU obtained the subject insurance policies naming
itself as the sole payee, the intentions of the parties as shown by their
contemporaneous acts, must be given due consideration in order to
better serve the interest of justice and equity.

It is to be noted that 9 endorsement documents were prepared by

Alchester in favor of RCBC. The Court is in a quandary how Alchester
could arrive at the idea of endorsing any specific insurance policy in
favor of any particular beneficiary or payee other than the insured had
not such named payee or beneficiary been specifically disclosed by the
insured itself. It is also significant that GOYU voluntarily and purposely
took the insurance policies from MICO, a sister company of RCBC, and
not just from any other insurance company. Alchester would not have
found out that the subject pieces of property were mortgaged to RCBC
had not such information been voluntarily disclosed by GOYU itself.
Had it not been for GOYU, Alchester would not have known of GOYU's
intention of obtaining insurance coverage in compliance with its
undertaking in the mortgage contracts with RCBC, and verify, Alchester
would not have endorsed the policies to RCBC had it not been so
directed by GOYU.

On equitable principles, particularly on the ground of estoppel, the

Court is constrained to rule in favor of mortgagor RCBC. RCBC, in good
faith, relied upon the endorsement documents sent to it as this was
only pursuant to the stipulation in the mortgage contracts. We find
such reliance to be justified under the circumstances of the case. GOYU
failed to seasonably repudiate the authority of the person or persons
who prepared such endorsements. Over and above this, GOYU
continued, in the meantime, to enjoy the benefits of the credit facilities

extended to it by RCBC. After the occurrence of the loss insured

against, it was too late for GOYU to disown the endorsements for any
imagined or contrived lack of authority of Alchester to prepare and
issue said endorsements. If there had not been actually an implied
ratification of said endorsements by virtue of GOYU's inaction in this
case, GOYU is at the very least estopped from assailing their operative
effects.

To permit GOYU to capitalize on its non-confirmation of these

endorsements while it continued to enjoy the benefits of the credit
facilities of RCBC which believed in good faith that there was due
endorsement pursuant to their mortgage contracts, is to countenance
grave contravention of public policy, fair dealing, good faith, and
justice. Such an unjust situation, the Court cannot sanction. Under the
peculiar circumstances obtaining in this case, the Court is bound to
recognize RCBC's right to the proceeds of the insurance policies if not
for the actual endorsement of the policies, at least on the basis of the
equitable principle of estoppel.

GOYU cannot seek relief under Section 53 of the Insurance Code which
provides that the proceeds of insurance shall exclusively apply to the
interest of the person in whose name or for whose benefit it is made.
The peculiarity of the circumstances obtaining in the instant case
presents a justification to take exception to the strict application of
said provision, it having been sufficiently established that it was the
intention of the parties to designate RCBC as the party for whose
benefit the insurance policies were taken out. Consider thus the
following:
1.
It is undisputed that the insured pieces of property were the
subject of mortgage contracts entered into between RCBC and GOYU in
consideration of and for securing GOYU's credit facilities from RCBC.
The mortgage contracts contained common provisions whereby GOYU,
as mortgagor, undertook to have the mortgaged property properly
covered against any loss by an insurance company acceptable to
RCBC.
2.
GOYU voluntarily procured insurance policies to cover the
mortgaged property from MICO, no less than a sister company of RCBC
and definitely an acceptable insurance company to RCBC.

3.
Endorsement documents were prepared by MICO's underwriter,
Alchester Insurance Agency, Inc., and copies thereof were sent to
GOYU, MICO and RCBC. GOYU did not assail, until of late, the validity of
said endorsements.
4.
GOYU continued until the occurrence of the fire, to enjoy the
benefits of the credit facilities extended by RCBC which was
conditioned upon the endorsement of the insurance policies to be
taken by GOYU to cover the mortgaged properties.

This Court can not over stress the fact that upon receiving its copies of
the endorsement documents prepared by Alchester, GOYU, despite the
absence written conformity thereto, obviously considered said
endorsement to be sufficient compliance with its obligation under the
mortgage contracts since RCBC accordingly continued to extend the
benefits of its credit facilities and GOYU continued to benefit therefrom.
Just as plain too is the intention of the parties to constitute RCBC as the
beneficiary of the various insurance policies obtained by GOYU. The
intention of the parties will have to be given full force and effect in this
particular case. The insurance proceeds may, therefore, be exclusively
applied to RCBC, which under the factual circumstances of the case, is
truly the person or entity for whose benefit the policies were clearly
intended.
Barzaga v CA Digest
G.R. No. 115129 February 12, 1997
Facts:
The petitioners wife was suffering from a debilitating ailment and with
forewarning of her impending death, she expressed her wish to be laid
to rest before Christmas day to spare her family of the long vigils as it
was almost Christmas. After his wife passed away, petitioner bought
materials from herein private respondents for the construction of her
niche. Private respondents however failed to deliver on agreed time
and date despite repeated follow-ups. The niche was completed in the
afternoon of the 27th of December, and Barzaga's wife was finally laid
to rest. However, it was two-and-a-half (2-1/2) days behind schedule.
Issue: Was there delay in the performance of the private
respondent's obligation?
Ruling: Yes. Since the respondent was negligent and incurred delay in
the performance of his contractual obligations, the petitioner is entitled
to be indemnified for the damage he suffered as a consequence of the
delay or contractual breach. There was a specific time agreed upon for

the delivery of the materials to the cemetery.

This is clearly a case of non-performance of a reciprocal obligation, as
in the contract of purchase and sale, the petitioner had already done
his part, which is the payment of the price. It was incumbent upon
respondent to immediately fulfill his obligation to deliver the goods
otherwise delay would attach. An award of moral damages is
incumbent in this case as the petitioner has suffered so much.
PANTALEON VS AMERICAN EXPRESS
Posted by kaye lee on 11:30 PM
G.R. No. 174269, May 8 2009 [Credit Transaction]
FACTS:
After the Amsterdam incident that happened involving the delay of
American Express Card to approve his credit card purchases worth
US$13,826.00 at the Coster store, Pantaleon commenced a complaint
for moral and exemplary damages before the RTC against American
Express. He said that he and his family experienced inconvenience and
humiliation due to the delays in credit authorization. RTC rendered a
decision in favor of Pantaleon. CA reversed the award of damages in
favor of Pantaleon, holding that AmEx had not breached its obligations
to Pantaleon, as the purchase at Coster deviated from Pantaleon's
established charge purchase pattern.
ISSUE:
1. Whether or not AmEx had committed a breach of its obligations to
Pantaleon.
2. Whether or not AmEx is liable for damages.
RULING:
1. Yes. The popular notion that credit card purchases are approved
within seconds, there really is no strict, legally determinative point of
demarcation on how long must it take for a credit card company to
approve or disapprove a customers purchase, much less one
specifically contracted upon by the parties. One hour appears to be
patently unreasonable length of time to approve or disapprove a credit
card purchase.
The culpable failure of AmEx herein is not the failure to timely approve
petitioners purchase, but the more elemental failure to timely act on
the same, whether favorably or unfavorably. Even assuming that
AmExs credit authorizers did not have sufficient basis on hand to

make a judgment, we see no reason why it could not have promptly

informed Pantaleon the reason for the delay, and duly advised him that
resolving the same could take some time.
2. Yes. The reason why Pantaleon is entitled to damages is not simply
because AmEx incurred delay, but because the delay, for which
culpability lies under Article 1170, led to the particular injuries under
Article 2217 of the Civil Code for which moral damages are
remunerative. The somewhat unusual attending circumstances to the
purchase at Coster that there was a deadline for the completion of
that purchase by petitioner before any delay would redound to the
injury of his several traveling companions gave rise to the moral
shock, mental anguish, serious anxiety, wounded feelings and social
humiliation sustained by Pantaleon, as concluded by the RTC.
LORENZO SHIPPING VS. BJ MARTHEL Case Digest
LORENZO SHIPPING VS. BJ MARTHEL
443 SCRA 163
November 19, 2004
FACTS: Petitioner Lorenzo Shipping is engaged in coastwise shipping and owns
the cargo M/V Dadiangas Express. BJ Marthel is engaged in trading, marketing
an dselling various industrial commodities. Lorenzo Shipping ordered for the
second time cylinder lines from the respondent stating the term of payment to be
25% upon delivery, the balance payable in 5 bi-monthly equal installments, no
again stating the date of the cylinders delivery. It was allegedly paid through post
dated checks but the same was dishonored due to insufficiency of funds. Despite
due demands by the respondent, petitioner falied contending that time was of the
essence in the delivery of the cylinders and that there was a delay since the
respondent committed said items within two months after receipt of fir order.
RTC held respondents bound to the quotation with respect to the term of
payment, which was reversed by the Court of appeals ordering appellee to pay
appellant P954,000 plus interest. There was no delay since there was no
demand.
ISSUE: Whether or not respondent incurred delay in performing its obligation
under the contract of sale
RULING: By accepting the cylinders when they were delivered to the warehouse,
petitioner waived the claimed delay in the delivery of said items. Supreme Court
geld that time was not of the essence. There having been no failure on the part of
the respondent to perform its obligations, the power to rescind the contract is
unavailing to the petitioner.
Petition is denied. Court of appeals decision is affirmed.

Solar Harvest, Inc. Vs. Davao Corrugated Carton Corporation

GR No. 176858, July 26, 2010
FACTS: In the 1st Quarter of 1998, Solar Harvest and Davao Corrugated
entered into an unwritten agreement. Solar Harvest placed orders for
customized boxes for its business of exporting bananas at USD 1.10
each. Petitioner made a full payment of USD 40,150.00. By Jan. 3, 2001
petitioner had not received any of the ordered boxes. On Feb. 19, 2001
Davao Corrugated replied that as early as April 3, 1998, order/boxes
are completed and Solar Harvest failed to pick them up from their
warehouse within 30 days from completion as agreed upon.
Respondent mentioned that petitioner even placed additional order of
24,000.00 boxes, out of which, 14,000 had already been manufactured
without any advance payment from Solar Harvest. Davao Corrugated
then demanded that Solar Harvest remove boxes from their
warehouse, pay balance of USD 15,400.00 for the additional boxes and
P132,000 as storage fee. On August 17, 2001 Solar harvest filed
complaint against Davao Corrugated for sum of money and damages
claiming that the agreement was for the delivery of the boxes, which
Davao Corrugated did not do. They further alleged that whenever
repeated follow-up was made to Davao Corrugated, they would only
see sample boxes and get promise of delivery. Due to Davao
Corrugateds failure to deliver, Solar Harvest had to cancel the order
and demanded payment and/or refund which Davao Corrugated
refused to pay. Davao Corrugated counterclaimed that they had
already completed production of the 36,500 boxes plus an additional
14,000 boxes (which was part of the additional 24,000 order that is
unpaid). The agreement was for Solar Harvest to pick up the boxes,
which they did not do. They even averred that on Oct. 8, 1998 Solar
Harvests representative Bobby Que even went to the warehouse to
inspect and saw that indeed boxes were ready for pick up. On Feb. 20,
1999, Que visited the factory again and said that they ought to sell the
boxes to recoup some of the costs of the 14,000 additional orders
because their transaction to ship the bananas did not materialize. Solar
Harvest denies that they made the additional order. On March 20, 2004
the RTC ruled in favor of Davao Corrugated.
ISSUE: Whether or not Davao Corrugated was responsible for breach
of contract as Solar Harvest had not yet demanded from it the delivery
of the boxes?
HELD: NO. The CA held that it was unthinkable that for around 2 years
petitioner merely followed up and did not demand the delivery of the
boxes. Even assuming that the agreement is for delivery by Davao
Corrugated, respondent would not be liable for breach of contract as
petitioner had not yet demanded from it the delivery of the boxes.
There is no error in the decision of the RTC. Furthermore, the claim for
reimbursement is actually one for rescission or resolution of contract

under Article 1191 of the Civ. Code. The right to rescind contracts
arises once the party defaults in the performance of his obligation.
Article 1191 should be taken in conjunction with Article 1169: Those
obliged to deliver or to do something in delay from the time the obligee
judicially or extrajudicially demands form them the fulfilment of their
obligation. However the demand from creditor shall not be necessary
in order that delay may exist.:
1. When the obligation or the law expressly so declares, or
2. When from the nature and the circumstance of the obligation it
appears that the designation of the time when the thing is to be
delivered or the service is to be rendered was a controlling motive
for the establishment of the contract; OR
3. When the demand would be useless, as when the obligor has
rendered it beyond his power to perform.

In reciprocal obligations, the general rule is that the fulfilment of the

partiess respective obligations should be simultaneous. No demand is
necessary because once a party fulfills his obligation and the other party fails
to do his, the latter automatically incurs delay. When dates are set, the
default for each obligation is determined by the rules given in the 1 st
paragraph of the article. Thus even in reciprocal obligations, if the period for
the fulfilment of the obligation is fixed, demand from the obligee is still
necessary before the obligor can be considered in default and before a cause
of action for rescission will accrue. In the case of Solar Harvest, merely
following up the order was not the same as demanding for the boxes. The SC
held that Solar Harvests petition is denied and that Davao Corrugated did
not commit breach of contract and may remove the boxes from their
premises after petitioner is given a period of time to remove them from their
warehouse as they deem proper (Court gave 30day period to comply with
this)

CASE DIGEST (Transportation Law): Singson vs. CA

SINGSON vs. COURT OF APPEALS and CATHAY PACIFIC AIRWAYS
(G.R. No. 119995. November 18, 1997)
FACTS:
Petitioner CARLOS SINGSON and his cousin Crescentino Tiongson bought from
respondent Cathay Pacific Airways two (2) open-dated, identically routed, round trip
plane tickets (Manila to LA and vice versa). Each ticket consisted of six (6) flight
coupons, each would be detached at the start of each leg of the trip.
Singson failed to obtain a booking in LA for their to Manila; apparently, the coupon
corresponding to the 5th leg of the trip was missing and instead the 3rd was still

attached. It was not until few days later that the defendant finally was able to arrange for
his return to Manila.
Singson commenced an action for damages based on breach of contract of carriage
against CATHAY before the Regional Trial Court.
CATHAY alleged that there was no contract of carriage yet existing such that CATHAYs
refusal to immediately book him could not be construed as breach of contract of
carriage.
The trial court rendered a decision in favor of petitioner herein holding that CATHAY was
guilty of gross negligence amounting to malice and bad faith for which it was adjudged to
pay petitioner P20,000.00 for actual damages with interest at the legal rate of twelve
percent (12%) per annum from 26 August 1988 when the complaint was filed until fully
paid, P500,000.00 for moral damages, P400,000.00 for exemplary damages,
P100,000.00 for attorneys fees, and, to pay the costs.
On appeal by CATHAY, the Court of Appeals reversed the trial courts finding that there
was gross negligence amounting to bad faith or fraud and, accordingly, modified its
judgment by deleting the awards for moral and exemplary damages, and the attorneys
fees as well.
ISSUES:
1.) whether a breach of contract was committed by CATHAY when it failed to confirm the
booking of petitioner.
2.) whether the carrier was liable not only for actual damages but also for moral and
exemplary damages, and attorneys fees.
HELD:
1.) Yes. x x x the round trip ticket issued by the carrier to the passenger was in itself a
complete written contract by and between the carrier and the passenger. It had all the
elements of a complete written contract, to wit: (a) the consent of the contracting parties
manifested by the fact that the passenger agreed to be transported by the carrier to and
from Los Angeles via San Francisco and Hong Kong back to the Philippines, and the
carriers acceptance to bring him to his destination and then back home; (b) cause or
consideration, which was the fare paid by the passenger as stated in his ticket; and, (c)
object, which was the transportation of the passenger from the place of departure to the
place of destination and back, which are also stated in his ticket. In fact, the contract of
carriage in the instant case was already partially executed as the carrier complied with
its obligation to transport the passenger to his destination, i.e., Los Angeles. , x x x the
loss of the coupon was attributable to the negligence of CATHAYs agents and was the
proximate cause of the non-confirmation of petitioner's return flight.
2.) Yes. x x x Although the rule is that moral damages predicated upon a breach of
contract of carriage may only be recoverable in instances where the mishap results in
the death of a passenger, or where the carrier is guilty of fraud or bad faith, there are
situations where the negligence of the carrier is so gross and reckless as to virtually
amount to bad faith, in which case, the passenger likewise becomes entitled to recover

moral damages.
x x x these circumstances reflect the carriers utter lack of care and sensitivity to the
needs of its passengers, clearly constitutive of gross negligence, recklessness and
wanton disregard of the rights of the latter, acts evidently indistinguishable or no different
from fraud, malice and bad faith. As the rule now stands, where in breaching the contract
of carriage the defendant airline is shown to have acted fraudulently, with malice or in
bad faith, the award of moral and exemplary damages, in addition to actual damages, is
proper.
However, the P500,000.00 moral damages and P400,000.00 exemplary damages
awarded by the trial court have to be reduced. The well-entrenched principle is that the
grant of moral damages depends upon the discretion of the court based on the
circumstances of each case. This discretion is limited by the principle that the "amount
awarded should not be palpably and scandalously excessive" as to indicate that it was
the result of prejudice or corruption on the part of the trial court. Damages are not
intended to enrich the complainant at the expense of the defendant. They are awarded
only to alleviate the moral suffering that the injured party had undergone by reason of
the defendant's culpable action. There is no hard-and-fast rule in the determination of
what would be a fair amount of moral damages since each case must be governed by its
own peculiar facts.
In the instant case, the injury suffered by petitioner is not so serious or extensive as to
warrant an award amounting to P900,000.00. The assessment of P200,000.00 as moral
damages and P50,000.00 as exemplary damages in his favor is, in our view, reasonable
and realistic.
On the issue of actual damages, we agree with the Court of Appeals that the amount of
P20,000.00 granted by the trial court to petitioner should not be disturbed.
As regards attorney's fees, they may be awarded when the defendant's act or omission
has compelled the plaintiff to litigate with third persons or to incur expenses to protect his
interest. It was therefore erroneous for the Court of Appeals to delete the award made by
the trial court; consequently, petitioner should be awarded attorney's fees and the
amount of P25,000.00, instead of P100,000.00 earlier awarded, may be considered
rational, fair and reasonable.