Velarde v CA
Facts: Petitioners entered into a deed of sale with
assumption of mortgage with private respondents
paying a downpayment of P800,000 and assuming
the mortgage amount of P1.8M in favor of BPI.
Petitioners further agreed "to strictly and faithfully
comply with all the terms and conditions appearing
in the real estate mortgage signed and executed by
the vendor in favor of BPI . . . as if the same were
originally signed and executed by the vendee." As
part of the deed, petitioner Avelina with her
husband's consent executed an undertaking that
during the pendency of the application for the
assumption of mortgage she agreed to continue
paying said loan in accordance with the mortgage
deed and that in the event of violation of any of the
terms and conditions of the deed of real estate
mortgage, she agreed that the P800,000 down
payment shall be forfeited as liquidated damages and
the deed of sale with assumption of mortgage shall
be deemed automatically cancelled. When the bank
denied the application for assumption of mortgage,
petitioners stopped making payments. Thus, notice
of cancellation/rescission was sent to petitioners for
non-performance of their obligation. Aggrieved,
petitioners filed a complaint against private
respondent for specific performance, nullity of
cancellation, writ of possession and damages.
Both parties admitted that their agreement mandated
that petitioners should pay the purchase price
balance of P1.8M to private respondents in case the
request to assume the mortgage would be
disapproved. The trial court dismissed the complaint,
but on reconsideration, directed the parties to
proceed with the sale. On appeal, the Court of
Appeals upheld the validity of the rescission. Hence,
this recourse
Issue:
1. The Court of Appeals erred in holding that the
non-payment of the mortgage obligation resulted in
a breach of the contract.
2. The Court of Appeals erred in holding that the
rescission (resolution) of the contract by private
respondents was justified.
3. The Court of Appeals erred in holding that
petitioners' January 7, 1987 letter gave three 'new
conditions' constituting mere offers or an attempt to
novate necessitating a new agreement between the
parties."
Ruling: The petition is granted
The failure of the vendee to pay the balance of the
purchase price constitutes a breach on the
performance of a reciprocal obligation, and not a
violation of the terms and conditions of the
mortgage contract. This gave rise to the vendor's
right to rescind the contract. However, the automatic
rescission and forfeiture of payment clauses in the
mortgage contract does not apply. Considering that
the rescission of the contract was based on Article
1191 of the Civil Code, mutual restitution by the
parties is required.
CIVIL LAW; SPECIAL CONTRACTS; SALES;
CONSTRUED; CASE AT BAR. In a contract of
sale, the seller obligates itself to transfer the
ownership of and deliver a determinate thing, and
the buyer to pay therefor a price certain in money or
its equivalent. Private respondents had already
performed their obligation through the execution of
the Deed of Sale, which effectively transferred
ownership of the property to petitioner through
constructive delivery. Prior physical delivery or
possession is not legally required, and the
execution of the Deed of Sale is deemed
equivalent to delivery.
RESCISSION; OBLIGOR'S FAILURE TO
COMPLY WITH EXISTING OBLIGATION.
The right of rescission of a party to an obligation
under Article 1191 of the Civil Code is predicated on
a breach of faith by the other party who violates the
reciprocity between them. The breach contemplated
in the said provision is the obligor's failure to
comply with an existing obligation. When the
obligor cannot comply with what is incumbent upon
it, the obligee may seek rescission and, in the
absence of any just cause for the court to determine
the period of compliance, the court shall decree the
rescission.
CASE AT BAR. In the present case, private
respondents validly exercised their right to rescind
the contract, because of the failure of petitioners to
comply with their obligation to pay the balance of
the purchase price. Indubitably, the latter violated
the very essence of reciprocity in the contract of
sale, a violation that consequently gave rise to
private respondents' right to rescind the same in
accordance with law.
FORFEITURE OF PAYMENT DOES NOT APPLY
WHERE BREACH WAS NON-PERFORMANCE;
MUTUAL RESTITUTION, REQUIRED. As
discussed earlier, the breach committed by
petitioners was the nonperformance of a reciprocal
obligation, not a violation of the terms and
conditions of the mortgage contract. Therefore, the
automatic rescission and forfeiture of payment
clauses stipulated in the contract does not apply.
Instead, Civil Code provisions shall govern and
regulate the resolution of this controversy.
Considering that the rescission of the contract is
based on Article 1191 of the Civil Code, mutual
restitution is required to bring back the parties to
their original situation prior to the inception of the
contract. Accordingly, the initial payment of
P800,000 and the corresponding mortgage payments
in the amounts of P27,225, P23,000 and P23,925
(totaling P874,150.00) advanced by petitioners
should be returned by private respondents, lest the
latter unjustly enrich themselves at the expense of
the former.
OBLIGATION CREATED. Rescission creates
the obligation to return the object of the contract. It
can be carried out only when the one who demands
rescission can return whatever he may be obliged to
restore. To rescind is to declare a contract void at its
inception and to put an end to it as though it never
was. It is not merely to terminate it and release the
parties from further obligations to each other, but to
abrogate it from the beginning and restore the parties
to their relative positions as if no contract has been
made.
Song Fo v Hawaiian Philippines
Facts: In the court of First Instance of Iloilo, Song
Fo & Company, plaintiff, presented a complaint with
two causes of action for breach of contract against
the Hawaiian-Philippine Co., defendant, in which
judgment was asked for P70,369.50, with legal
interest, and costs
The defendant set up the special defense that since
the plaintiff had defaulted in the payment for the
molasses delivered to it by the defendant under the
contract between the parties, the latter was
compelled to cancel and rescind the said contract.
The case was submitted for decision on a stipulation
of facts and the exhibits therein mentioned
The judgment of the trial court condemned the
defendant to pay to the plaintiff a total of
P35,317.93, with legal interest from the date of the
presentation of the complaint, and with costs
Issue:
1. The lower court erred in finding that appellant had
agreed to sell to the appellee 400,000, and not only
300,000, gallons of molasses
2. The lower court erred in finding that the appellant
rescinded without sufficient cause the contract for
the sale of molasses executed by it and the appellee
3. The lower court erred in rendering judgment in
favor of the appellee and not in favor of the
appellant in accordance with the prayer of its answer
and cross-complaint
4. The lower court erred in denying appellant's
motion for a new trial
Ruling: The petition is granted with modification
(Molasses- thick, dark brown syrup obtained from
raw sugar during the refining process, a version of
which is used in baking)
1. The trial court found the former amount to be
correct. The appellant contends that the smaller
amount was the basis of the agreement.
We agree with appellant that the above quoted
correspondence is susceptible of but one
interpretation. The Hawaiian-Philippine Co. agreed
to deliver to Song Fo & Company 300,000 gallons
of molasses. The Hawaiian-Philippine Co. also
believed it possible to accommodate Song Fo &
Company by supplying the latter company with an
extra 100,000 gallons. But the language used with
reference to the additional 100,000 gallons was not a
definite promise. Still less did it constitute an
obligation
2. Some doubt has risen as to when Song Fo &
Company was expected to make payments for the
molasses delivered. Exhibit F speaks of payments
"at the end of each month." Exhibit G is silent on the
point. Exhibit M, a letter of March 28, 1923, from
Warner, Barnes & Co., Ltd., the agent of the
Hawaiian-Philippine Co. to Song Fo & Company,
mentions "payment on presentation of bills for each
delivery." Exhibit O, another letter from Warner,
Barnes & Co., Ltd. to Song Fo & Company dated
April 2, 1923, is of a similar tenor. Exhibit P, a
communication sent direct by the Hawaiian-
Philippine Co. to Song Fo & Company on April 2,
1923, by which the Hawaiian-Philippine Co. gave
notice of the termination of the contract, gave as the
reason for the rescission, the breach by Song Fo &
Company of this condition: "You will recall that
under the arrangements made for taking our
molasses, you were to meet our accounts upon
presentation and at each delivery." Not far removed
from this statement, is the allegation of plaintiff in
its complaint that "plaintiff agreed to pay defendant,
at the end of each month upon presentation
accounts."
Resolving such ambiguity as exists and having in
mind ordinary business practice, a reasonable
deduction is that Song Fo & Company was to pay
the Hawaiian-Philippine Co. upon presentation of
accounts at the end of each month. Under this
hypothesis, Song Fo & Company should have paid
for the molasses delivered in December, 1922, and
for which accounts were received by it on January 5,
1923, not later than January 31 of that year. Instead,
payment was not made until February 20, 1923. All
the rest of the molasses was paid for either on time
or ahead of time.
The terms of payment fixed by the parties are
controlling. The time of payment stipulated for in
the contract should be treated as of the essence of
the contract. Theoretically, agreeable to certain
conditions which could easily be imagined, the
Hawaiian-Philippine Co. would have had the right to
rescind the contract because of the breach of Song
Fo & Company. But actually, there is here present no
outstanding fact which would legally sanction the
rescission of the contract by the Hawaiian-Philippine
Co.
The general rule is that rescission will not be
permitted for a slight or casual breach of the
contract, but only for such breaches as are so
substantial and fundamental as to defeat the
object of the parties in making the agreement. A
delay in payment for a small quantity of molasses
for some twenty days is not such a violation of an
essential condition of the contract was warrants
rescission for non-performance. Not only this, but
the Hawaiian-Philippine Co. waived this condition
when it arose by accepting payment of the overdue
accounts and continuing with the contract.
Thereafter, Song Fo & Company was not in default
in payment so that the Hawaiian-Philippine co. had
in reality no excuse for writing its letter of April 2,
1923, cancelling the contract.
We rule that the plaintiff is entitled to recover
damages from the defendant for breach of contract
on the first cause of action in the amount of P3,000
and on the second cause of action in no amount.
Appellant's assignments of error are accordingly
found to be well taken in part and not well taken in
part.
Vermen Realty v CA
Facts: On March 2, 1981, petitioner Vermen Realty
and Development Corporation, as First Party, and
private respondent Seneca Hardware Co., Inc., as
Second Party, entered into a contract denominated as
"Offsetting Agreement"
On June 21, 1985, private respondent filed a
complaint with the Regional Trial Court of Quezon
City (Branch 92) for rescission of the Offsetting
Agreement with damages. In said complaint, private
respondent alleged that petitioner Vermen Realty
Corporation had stopped issuing purchase orders of
construction materials after April, 1982, without
valid reason, thus resulting in the stoppage of
deliveries of construction materials on its (Seneca
Hardware) part, in violation of the Offsetting
Agreement.
In its Answer filed on August 15, 1985, petitioner
alleged that the fault lay with private respondent
(plaintiff therein): although petitioner issued
purchase orders, it was private respondent who
could not deliver the supplies ordered, alleging that
they were out of stock. (However, during a hearing
on January 28, 1987, the Treasurer of petitioner
corporation, when asked where the purchase orders
were, alleged that she was going to produce the
same in court, but the same was never produced
(Rollo. p. 30). Moreover, private respondent quoted
higher prices for the construction materials which
were available. Thus, petitioner had to resort to its
other suppliers. Anent the query as to why Unit 602
was leased to another tenant, petitioner averred that
this was done because private respondent had not
paid anything for it.
As of December 16, 1986, private respondent had
paid petitioner P110,151.75 in cash, made deliveries
of construction materials worth P219,727.00,
leaving a balance of P27,848.25 representing the
purchase price of unit 601 (Rollo, p. 28). The price
of one condominium unit was P138,000.00.
After conducting hearings, the trial court rendered a
decision dismissing the complaint and ordering the
plaintiff (private respondent in this petition) to pay
defendant (petitioner in this petition) on its
counterclaim in the amount of P27,848.25
representing the balance due on the purchase price
of condominium unit 601.
Issue: Whether or not the circumstances of the case
warrant rescission of the Offsetting Agreement as
prayed for by Private Respondent when he instituted
the case before the trial court.
Ruling: The petition is denied.
CIVIL LAW; OBLIGATION AND CONTRACTS;
RECIPROCAL OBLIGATION; ITS NATURE.
Reciprocal obligations are those created or
established at the same time, out of the same cause,
and which results in a mutual relationship of creditor
and debtor between parties. In reciprocal
obligations, the performance of one is conditioned
on the simultaneous fulfillment of the other
obligation (Abaya vs. Standard Vacuum Oil Co., 101
Phil. 1262 [1957]).
Under the agreement, private respondent shall
deliver to petitioner construction materials worth
P552,000.00 under the conditions set forth in the
Offsetting Agreement. Petitioner's obligation under
the agreement is three-fold: he shall pay private
respondent P276,000.00 in cash; he shall deliver
possession of units 601 and 602, Phase I, Vermen
Pines Condominiums (with total value of
P276,000.00) to private respondent; upon
completion of Vermen Pines Condominiums Phase
II, private respondent shall be given option to
transfer to similar units therein.
RESCISSION (BETTER TERM IS
"RESOLUTION") OF RECIPROCAL
OBLIGATION
UNDER ARTICLE 1191 OF THE CIVIL CODE;
GENERAL RULE; PETITIONER'S
NONFULFILLMENT OF ITS OBLIGATION
UNDER THE OFFSETTING AGREEMENT
CONSTITUTES SUBSTANTIAL BREACH,
NECESSITATING RESOLUTION OF THE
CONTRACT. Article 1191 of the Civil Code
provides the remedy of rescission in (more
appropriately, the term is "resolution") in case of
reciprocal obligations, where one of the obligors
fails to comply with what is incumbent upon him.
The general rule is that rescission of a contract will
not be permitted for a slight or causal breach, but
only for such substantial and fundamental breach as
would defeat the very object of the parties in
executing the agreement. The question of whether a
breach of contract is substantial depends upon the
attendant circumstances (Universal Food Corp. vs.
Court of Appeals, 33 SCRA 1, [1970]). The
impossibility of fulfillment of the obligation on the
part of petitioner necessitates resolution of the
contract for indeed, the non-fulfillment of the
obligation aforementioned constitutes substantial
breach of the Offsetting Agreement. The possibility
of exercising the option of whether or not to transfer
to condominium units in Phase II was one of the
factors which were considered by private respondent
when it entered into the agreement.
Since the construction of the Vermen Pines
Condominium Phase II has stopped, petitioner
would be in no position to perform its obligation to
give private respondent the option to transfer to
Phase II. It would be the height of injustice to make
private respondent wait for something that may
never come.
Woodhouse v Halili
Facts:
On November 29, 1947, plaintiff Woodhouse entered
into a written agreement with defendant Halili
stating among others that:
1) that they shall organize a partnership for the
bottling and distribution of Missionsoft drinks,
plaintiff to act as industrial partner or manager, and
the defendant as a capitalist, furnishing the capital
necessary therefore;
2) that plaintiff was to secure the Mission Soft
Drinks franchise for and in behalf of the proposed
partnership and
3) that the plaintiff was to receive 30 per cent of the
net profits of the business.
Prior to entering into this agreement, plaintiff had
informed the Mission Dry Corporation of Los
Angeles, California, that he had interested a
prominent financier (defendant herein) in the
business, who was willing to invest half a
milliondollars in the bottling and distribution of the
said beverages, and requested, in order that he may
close the deal with him, that the right to bottle and
distribute be granted him for a limited time under the
condition that it will finally be transferred to the
corporation. Pursuant to this request, plaintiff was
given a thirty days option on exclusive bottling and
distribution rights for the Philippines. The contract
was finally signed by plaintiff on December 3, 1947.
When the bottling plant was already in operation,
plaintiff demanded of defendant that the partnership
papers be executed. Defendant Halili gave excuses
and would not execute said agreement, thus the
complaint by the plaintiff.
Plaintiff prays for the:
1)execution of the contract of partnership;
2) accounting of profits
3)share thereof of 30 percent with 4) damages in the
amount of P200,000.
The Defendant on the other hand claims that:
1) the defendants consent to the agreement, was
secured by the representation of plaintiff that he was
the owner, or was about to become owner of an
exclusive bottling franchise, which representation
was false, and that plaintiff did not secure the
franchise but was given to defendant himself
2) that defendant did not fail to carry out his
undertakings, but that it was plaintiff who failed and
3)that plaintiff agreed to contribute to the exclusive
franchise to the partnership, but plaintiff failed to do
so with a
4) counterclaim for P200,00 as damages.
The CFI ruling: 1) accounting of profits and to pay
plaintiff 15 % of the profits and that the
2) execution of contract cannot be enforced upon
parties. Lastly, the
3) fraud wasnt proved
Issue:1. WON plaintiff falsely represented that he
had an exclusive franchise to bottle Mission
beverages
2. WON false representation, if it existed, annuls the
agreement to form the partnership
Ruling: With modification above indicated, the
judgment appealed from is hereby affirmed.
FRAUD; FALSE REPRESENTATION; DOLO
CAUSANTE AND DOLO
INCIDENTE; IT IS THE FORMER THAT
VITIATES CONSENT. Fraud is manifested in
illimitable number of degrees or gradations from
the innocent praises of a salesman about the
excellence of his wares to those malicious
machinations and representations that the law
punishes as a crime. In consequence, article 1270
of the Spanish Civil Code distinguishes two kinds
of (civil) fraud, the causal fraud which may be a
ground for the annulment of a contract, and the
incidental deceit which only renders the party who
employs it liable for damages. In order that fraud
may vitiate consent, it must be the causal (dolo
causante), not merely the incidental (dolo
incidente), inducement to the making of the contract
(art. 1270, Span. Civ. Code; Hill vs. Veloso, 31 Phil.,
160).
In the case at bar, inasmuch as the principal
consideration, the main cause that induced defendant
to enter into the partnership agreement with plaintiff,
was the ability of plaintiff to get the exclusive
franchise to bottle and distribute for the defendant or
for the partnership, the false representation made by
the plaintiff was not the casual consideration, or the
principal inducement, that led the defendant to enter
into the partnership agreement.
DAMAGES FOR DOLO INCIDENTE;
PARTNERSHIP. While the representation that
plaintiff had the exclusive franchise did not vitiate
defendant' consent to the contract, it was used by
plaintiff to get from defendant a share of 30 percent
of the net profits; in other words, by pretending that
he had the exclusive franchise and promising to
transfer it to defendant, he obtained the consent of
the latter to give him (plaintiff) a big slice in the net
profits. This is the dolo incidente defined in article
1270 of the Spanish Civil Code, because it was used
to get the other party's consent to a big share in the
profits, an incidental matter in the agreement. (8
Manresa, 602.)
 CONTRACTS AND OBLIGATIONS; CONSENT,
NOT VITIATED BY DOLO INCIDENTE;
PARTNERSHIP; AGREEMENT TO FORM
PARTNERSHIP, CANNOT BE ENFORCED.
Having arrived at the conclusion that the agreement
to organize a partnership may not be declared null
and void, may the agreement be carried out or
executed? Held: Under the Spanish Civil Code, the
defendant has an obligation to do, not to give. The
law recognizes the individual's freedom or liberty to
do an act he has promised to do, or not to do it, as he
pleases. This is a very personal act (acto
personalisimo) of which courts may not compel
compliance, as it is considered as an act of violence
to do so. (29 as it is considered as an act of violence
to do so. (19 Scaevolla, 428, 431-432.)
FALSE REPRESENTATION; DAMAGES FOR
DOLO INCIDENTE. Plaintiff is entitled under
the terms of the agreement to 30 per cent of the net
profits of the business. Against this amount of
damages, the damage the defendant suffered by
plaintiff's misrepresentation that he had the
exclusive franchise, must be set off. (Art. 1101,
Span. Civ. Code.) When the defendant learned, in
Los Angeles, California, that plaintiff did not have
the exclusive franchise which he pretended he had
and which he had agreed to transfer to the
partnership, his spontaneous reaction was to reduce
the plaintiff's share from 30 per cent to 15 per cent
only, to which reduction plaintiff appears to have
readily given his assent. Held: By the
misrepresentation of the plaintiff, he obtained a very
high percentage (30%) of share in the profits. Upon
learning of the misrepresentation, defendant reduced
plaintiff's share to 15 per cent, to which defendant
assented. The court can do no better than follow
such appraisal of the damages as the parties
themselves had adopted.
Guiterrez v Guiterrez
Facts: On February 2, 1930, a passenger truck and
an automobile of private ownership collided while
attempting to pass each other on a bridge. The truck
was driven by the chauffeur Abelardo Velasco, and
was owned by saturnine Cortez. The automobile was
being operated by Bonifacio Gutierrez, a lad 18
years of age, and was owned by Bonifacios father
and mother, Mr. and Mrs. Manuel Gutierrez. At the
time of the collision, the father was not in the car,
but the mother, together with several other members
of the Gutierrez family were accommodated therein.
A passenger in the autobus, by the name of Narciso
Gutierrez, was en route from San Pablo, Laguna, to
Manila. The collision between the bus and the
automobile resulted in Narciso Gutierrez suffering a
fractured right leg which required medical
attendance for a considerable period of time, and
which even at the date of the trial appears not to
have healed properly.
Issue: Whether or not both the driver of the truck
and automobile are liable for damages and
indemnification due to their negligence. What are
the legal obligations of the defendants?
Ruling: The petition is granted
DAMAGES; MASTER AND SERVANT; MOTOR
VEHICLES; LIABILITY OF
HEAD OF HOUSE FOR ACTS OF DRIVER WHO
IS HIS MINOR CHILD. The head of a house, the
owner of an automobile, who maintains it for the
general use of his family, is
liable for its negligent operation by one of his
children, whom he designates or permits to run it,
where the car is occupied and being used at the time
of the injury for the
pleasure of other members of the owner's family
than the child driving it.
CASE AT BAR. One G, a passenger in a truck,
recovers damages in the amount of P5,000 from the
owner of a private automobile not in the car, the
machine being operated by a son 18 years of age,
with other members of the family accommodated
therein, and from the chauffeur and owner of the
truck which collided with the private automobile on
a bridge, causing physical injuries to G as a result of
the automobile accident
Vasquez v Borja
Facts:
In January 1932, Francisco De Borja entered into a
contract of sale with the NVSD (Natividad-Vasquez
Sabani Development Co., Inc.). The subject of the
sale was 4,000 cavans of rice valued at Php2.10 per
cavan. On behalf of the company, the contract was
executed by Antonio Vasquez as the companys
acting president. NVSD. only delivered 2,488
cavans and failed and refused despite demand to
deliver the rest hence De Borja incurred damages
(apparently, NVSD was insolvent). He then sue
Vasquez for payment of damages.
Issue: Whether or not Vasquez is liable for damages.
Ruling: The petition is dismissed.
CORPORATIONS; OFFICERS' PERSONAL
LIABILITY ON CONTRACTS. It is well known
that a corporation is an artificial being invested by
law with a personality of its own, separate and
distinct from that of its stockholders and from that of
its officers who manage and run its affairs. The mere
fact that its personality is owing to a legal fiction
and that it necessarily has to act thru its agents, does
not make the latter personally liable on a contract
duly entered into, or for an act lawfully performed,
by them for and in its behalf. The legal fiction by
which the personality of a corporation is created is a
practical reality and necessity. Without it no
corporate entities may exist and no corporate
business may be transacted. Such legal fiction may
be disregarded only when an attempt is made to use
it as a cloak to hide an unlawful or fraudulent
purpose. No such thing has been alleged or proven
in this case. It has not been alleged nor even
intimated that Vazquez personally benefited by the
contract of sale in question and that he is merely
invoking the legal fiction to avoid personal liability.
Neither is it contended that he entered into said
contract for the corporation in bad faith and with
intent to defraud the plaintiff. We find no legal and
factual basis upon which to hold him liable on the
contract either principally or subsidiarily
NEGLIGENCE. The trial court found him guilty
of negligence in the performance of the contract and
held him personally liable on that account. On the
other hand, the Court of Appeals found that he "no
solamente obro con negligencia, sino interviniendo
culpa de su parte, por lo que de acuerdo con los arts.
1102, 1103 y 1902 del Codigo Civil, el debe ser
responsable subsidiariamente del pago de la
cantidad objeto de la demanda." We think both the
trial court and the Court of Appeals erred in law in
so holding. They have manifestly failed to
distinguish a contractual from an extracontractual
obligation, or an obligation arising from contract
from an obligation arising from culpa aquiliana. The
fault and negligence referred to in articles 1101-1104
of the Civil Code are those incidental to the
fulfillment or nonfulfillment of a contractual
obligation; while the fault or negligence referred to
in article 1902 is the culpa aquiliana of the civil law,
homologous but not identical to tort of the common
law, which gives rise to an obligation independently
of any contract. (Cf. Manila R. R. Co. vs. Cia.
Trasatlantica, 38 Phil., 875, 887-890; Cangco vs.
Manila R. R. Co., 38 Phil., 768.) The fact that the
corporation, acting thru Vazquez as its manager, was
guilty of negligence in the fulfillment of the
contract, did not make Vazquez principally or even
subsidiarily liable for such negligence. Since it was
the corporation's contract, its nonfulfillment,
whether due to negligence or fault or to any other
cause, made the corporation and not its agent liable.
On the other hand, independently of the contract
Vazquez by his fault or negligence caused damage to
the plaintiff, he would be liable to the latter under
article 1902 of the Civil Code. But then the
plaintiff's cause of action should be based on culpa
aquiliana and not on the contract alleged in his
complaint herein; and Vazquez' liability would be
principal and not merely subsidiary, as the Court of
Appeals has erroneously held.
NO CAUSE OF ACTION BASED ON "CULPA
AQUILIANA" ALLEGED IN COMPLAINT OR
LITIGATED IN TRIAL COURT; NO
JURISDICTION OVER THE ISSUE. No such
cause of action was alleged in the complaint or tried
by express or implied consent of the parties by virtue
of section 4 of Rule 17. Hence the trial court had no
jurisdiction over the issue and could not adjudicate
upon it. (Reyes vs. Diaz, G. R. No. 48754.)
Consequently it was error for the Court of Appeals
to remand the case to the trial court to try and decide
such issue
De Guia v Manila Electric
Facts:
The plaintiff had boarded the car as a passenger for
the city of Manila and the company undertook to
convey him for hire. The relation between the parties
was, therefore, of a contractual nature, and the duty
of the carrier is to be determined with reference to
the principles of contract law, that is, the company
was bound to convey and deliver the plaintiff safely
and securely with reference to the degree of care
which, under the circumstances, is required by law
and custom applicable to the case (art. 1258, Civil
Code). Upon failure to comply with that obligation
the company incurred the liability defined in articles
1103-1107 of the Civil Code. (Cangco vs. Manila
Railroad Company, 38 Phil. Rep., 768; Manila
Railroad Company vs. Compaia Trasatlantica, and
Atlantic, Gulf & Pacific Co., 38 Phil. Rep., 875
Ruling:
From the nature of the liability thus incurred, it is
clear that the defendant company can not avail
itself of the last paragraph of article 1903 of the
Civil Code, since that provision has reference to
liability incurred by negligence in the absence of
contractual relation, that is, to the culpa aquiliana
of the civil law. It was therefore irrelevant for the
defendant company to prove, as it did, that the
company had exercised due care in the selection and
instruction of the motorman who was in charge of its
car and that he was in fact an experienced and
reliable servant.
At this point, however, it should be observed that
although in case like this the defendant must answer
for the consequences of the negligence of its
employee, the court has the power to moderate
liability according to the circumstances of the case
(art. 1103, Civ. Code) . Furthermore, we think it
obvious that an employer who has in fact
displayed due diligence in choosing and
instructing his servants is entitled to be
considered a debtor in good faith, within the
meaning of article 1107 of the same Code.
Construing these two provisions together, and
applying them to the facts of this case, it results
that the defendant's liability is limited to such
damages as might, at the time of the accident,
have been reasonably foreseen as a probable
consequence of the physical injuries inflicted
upon the plaintiff and which were in fact a
necessary result of those injuries. There is nothing
novel in this proposition, since both the civil and the
common law are agreed upon the point that the
damages ordinarily recoverable for the breach of a
contractual obligation, against a person who has
acted in good faith, are such as can reasonably be
foreseen at the time the obligation is contracted. In
Daywalt vs. Corporacion de PP. Agustinos Recoletos
(39 Phil., 687), we said: "The extent of the liability
for the breach of a contract must be determined in
the light of the situation in existence at the time the
contract is made; and the damages ordinarily
recoverable are in all events limited to such as might
be reasonably foreseen in the light of the facts then
known to the contracting parties."
It results from the foregoing that the judgment
appealed from must be modified by reducing the
amount of the recovery to eleven hundred pesos
(P1,100), with legal interest from November 8,
1916. As thus modified the judgment is affirmed,
without any special pronouncement as to costs of
this instance
LIABILITY OF CARRIER FOR NEGLIGENCE
OF EMPLOYEE. Upon failure to comply with
this obligation the carrier incurs the liability
commonly incident to the breach of contractual
obligations; and where the delinquency is due to the
negligence if its employee, the carrier cannot avail
itself of the defense that it had exercised due care in
the selection and instruction of such employee and
that he was in fact an experienced and reliable
servant.
EXTENT OF CARRIER S LIABILITY FOR
LOSSES AND DAMAGES; GOOD FAITH. A
street-railway company which has exercised due
care in the selection and instruction of the motorman
upon one of its cars should be considered a debtor in
good faith as regards liability towards a passenger
who is injured by the negligence of the motorman in
directing the car; and the liability of the carrier to the
injured party extends to such losses and damages
only as could be reasonably foreseen as a probable
consequence of the physical injuries inflicted upon
the passenger and which are in fact a necessary
result of those injuries.
PHYSICAL INJURIES; DAMAGES; EXPENSES
OF MEDICAL SERVICE. A person who is
entitled to recover expenses of cure as an item of
damage in a civil action for physical injuries cannot
recover doctor's bills for services gratuitously
rendered; and the claim must furthermore be limited
to medical services reasonably suited to the case.
Charges of professional experts retained merely with
a view to promote the success of the action for
damages should not be allowed.
Sarmiento v Spouses Cabrido
Facts:
The controversy herein arose when a piece of
diamond was broken by Zenon Santos, an employee
at the jewelry shop, in the process of dismounting it
from an original setting. The diamond was claimed
to be .33 carat and almost perfect in cut and clarity.
As a result of the incident, the petitioner herein was
forced to replace the broken diamond to its owner in
the amount of P30,000.00. The petitioner filed a
complaint for damages with the Metropolitan Trial
Court in Cities (MTCC) and claimed that the
dismounting of the diamond from its original setting
was part of the obligation assumed by the
respondents under the contract of service, the
respondent spouses being the owner of the jewelry
shop and the other respondent their employee. Thus,
they should be held liable for the damages arising
from its breakage. The MTCC decided in favor of
the petitioner herein. But on appeal, the Regional
Trial Court (RTC) reversed the decision; thus
absolving the respondents of any responsibility
arising from breach of contract. The Court of
Appeals affirmed the judgment of the RTC, hence,
this petition for review.
Ruling: The petition is granted.
According to the Supreme Court, preponderance of
evidence supported the view that Marilou and Zenon
Santos were employed at the jewelry shop in order
to perform activities, which were usually necessary
or desirable in its business. The Court, therefore,
held that an obligation to pay actual damages arose
in favor of the petitioner against the respondent
spouses who admittedly owned and managed the
jewelry shop. It was proven that petitioner replaced
the damaged jewelry in the amount of P30,000.00.
The facts of the case also justified the award of
moral damages. The petition was granted and the
assailed decision of the Court of Appeals was
reversed and set aside by the Supreme Court
ordering the respondent spouses to pay petitioner
actual damages of P30,000.00 and moral damages of
P10,000.00.
CIVIL LAW; OBLIGATIONS; SHALL HAVE THE
FORCE OF LAW BETWEEN PARTIES
WHEN THE SAME AROSE FROM CONTRACTS;
EFFECT OF FAULT OR NEGLIGENCE IN THE
PERFORMANCE THEREOF. Obligations
arising from contracts have the force of law between
the contracting parties. Corollarily, those who in the
performance of their obligations are guilty of fraud,
negligence or delay and those who in any manner
contravene the tenor thereof, are liable for damages.
The fault or negligence of the obligor consists in the
omission of that diligence which is required by the
nature of the obligation and corresponds with the
circumstances of the persons, of the time and of the
place.
DAMAGES; MORAL DAMAGES; GENERALLY
NOT RECOVERABLE IN ACTIONS
FOR BREACH OF CONTRACT; EXCEPTION.
As a general rule, moral damages are not
recoverable in actions for damages predicated on a
breach of contract for it is not one of the items
enumerated under Article 2219 of the Civil Code.
Moral damages may be awarded in a breach of
contract only when there is proof that defendant
acted in bad faith, or was guilty of gross negligence
amounting to bad faith, or in wanton disregard of his
contractual obligation.
Crisostomo v CA
Facts:
Petitioner Estela L. Crisostomo contracted the
services of respondent Caravan Travel and Tours
International, Inc. to facilitate her tour known as
"Jewels of Europe." On June 12, 1991, Meriam
Menor, respondent's ticketing manager as well as
petitioner's niece, delivered petitioner's travel
documents and plane tickets and informed her to be
at the airport on June 15, 1991, two hours before
departure. On the stated date when the petitioner
went to the airport, the flight that she was supposed
to take had departed the previous day. She
complained to Menor, but the latter prevailed upon
her to take another tour known as "British Pageant."
Upon petitioner's return from Europe, she demanded
from respondent the reimbursement of P61,421.70
representing the difference between the sum she paid
for "Jewels of Europe" and the amount she owed
respondent for the "British Pageant" tour, but despite
several demands, respondent company refused to
reimburse the amount, contending that the same was
non-refundable. Thus, she filed a complaint against
respondent for breach of contract of carriage and
damages. In its answer, respondent denied the
responsibility and insisted that petitioner was duly
informed of the correct departure as legibly printed
on the plane ticket two days ahead of the scheduled
trip. After trial, the lower court awarded damages to
the petitioner on the basis that the respondent was
negligent, but it deducted 10% from the amount for
the contributory negligence of petitioner. On appeal,
the Court of Appeals found petitioner to be more
negligent, hence, it directed her to pay the balance of
the price for the "British Pageant." Hence, this
petition.
Issue: Whether or not Menor is liable for negligence
Ruling: The petition is denied.
The Court did not agree with the finding of the
lower court that Menor's negligence concurred with
the negligence of petitioner and resultantly caused
damage to the latter. Menor's negligence was not
sufficiently proved, considering that the only
evidence presented was petitioner's uncorroborated
narration of the events. It is well-settled that the
party alleging a fact has the burden of proving it and
a mere allegation cannot take the place of evidence.
If the plaintiff, upon whom rests the burden of
proving his cause of action, fails to show in a
satisfactory manner facts upon which he bases his
claim, the defendant is under no obligation to prove
his exception or defense. Contrary to petitioner's
claim, the evidence on record showed that
respondent exercised due diligence in performing its
obligation under the contract and followed standard
procedure in rendering its services to petitioner.
Accordingly, petitioner was ordered to pay
respondent the amount of P12,901.00 representing
the balance of the price of the British Pageant
Package tour.
CIVIL LAW; LEASE; COMMON CARRIERS;
CONTRACT OF CARRIAGE; ELUCIDATED.
By definition, a contract of carriage or transportation
is one whereby a certain person or association of
persons obligate themselves to transport persons,
things, or news from one place to another for a fixed
price. Such person or association of persons are
regarded as carriers and are classified as private or
special carriers and common or public carriers.
A common carrier is defined under Article 1732 of
the Civil Code as persons, corporations, firms or
associations engaged in the business of carrying or
transporting passengers or goods or both, by land,
water or air, for compensation, offering their
services to the public.
TRAVEL AGENCY IS NOT A COMMON
CARRIER. It is obvious from the above
definition that respondent is not an entity engaged in
the business of transporting either passengers or
goods and is therefore, neither a private nor a
common carrier. Respondent did not undertake to
transport petitioner from one place to another since
its covenant with its customers is simply to make
travel arrangements in their behalf.
Respondent's services as a travel agency include
procuring tickets and facilitating travel permits or
visas as well as booking customers for tours. While
petitioner concededly bought her plane ticket
through the efforts of respondent company, this does
not mean that the latter ipso facto is a common
carrier. At most, respondent acted merely as an agent
of the airline, with whom petitioner ultimately
contracted for her carriage to Europe.
OBLIGATIONS AND CONTRACTS; CONTRACT
BETWEEN THE TRAVEL AGENCY
AND ITS CLIENT IS ONE FOR SERVICES AND
NOT ONE OF CARRIAGE. Respondent's
obligation to petitioner in this regard was simply to
see to it that petitioner was properly booked with the
airline for the appointed date and time. Her transport
to the place of destination, meanwhile, pertained
directly to the airline. The object of petitioner's
contractual relation with respondent is the latter's
service of arranging and facilitating petitioner's
booking, ticketing and accommodation in the
package tour. In contrast, the object of a contract of
carriage is the transportation of passengers or goods.
It is in this sense that the contract between the
parties in this case was an ordinary one for services
and not one of carriage. Petitioner's submission is
premised on a wrong assumption.
TRAVEL AGENCY IS NOT BOUND TO
OBSERVE EXTRAORDINARY DILIGENCE IN
THE PERFORMANCE OF ITS OBLIGATION.
The nature of the contractual relation
between petitioner and respondent is determinative
of the degree of care required in the performance of
the latter's obligation under the contract. For reasons
of public policy, a common carrier in a contract of
carriage is bound by law to carry passengers as far
as human care and foresight can provide using the
utmost diligence of very cautious persons and with
due regard for all the circumstances. As earlier
stated, however, respondent is not a common carrier
but a travel agency. It is thus not bound under the
law to observe extraordinary diligence in the
performance of its obligation, as petitioner claims.
STANDARD OF CARE REQUIRED FOR THE
TRAVEL AGENCY IS THAT OF A
GOOD FATHER OF A FAMILY. Since the
contract between the parties is an ordinary one for
services, the standard of care required of respondent
is that of a good father of a family under Article
1173 of the Civil Code. This connotes reasonable
care consistent with that which an ordinarily prudent
person would have observed when confronted with a
similar situation. The test to determine whether
negligence attended the performance of an
obligation is: did the defendant in doing the alleged
negligent act use that reasonable care and caution
which an ordinarily prudent person would have used
in the same situation? If not, then he is guilty of
negligence.
CIVIL LAW; OBLIGATIONS AND CONTRACTS;
TRAVEL AGENCY EXERCISED DUE
DILIGENCE IN PERFORMING ITS
OBLIGATIONS UNDER THE CONTRACT; CASE
AT BAR. Contrary to petitioner's claim the
evidence on record shows that respondent exercised
due diligence in performing its obligations under the
contract and followed standard procedure in
rendering its services to petitioner. As correctly
observed by the lower court, the plane ticket issued
to petitioner clearly reflected the departure date and
time, contrary to petitioner's contention. The travel
documents, consisting of the tour itinerary, vouchers
and instructions, were likewise delivered to
petitioner two days prior to the trip. Respondent also
properly booked petitioner for the tour, prepared the
necessary documents and procured the plane tickets.
It arranged petitioner's hotel accommodation as well
as food, land transfers and sightseeing excursions, in
accordance with its avowed undertaking. Therefore,
it is clear that respondent performed its prestation
under the contract as well as everything else that was
essential to book petitioner for the tour. Had
petitioner exercised due diligence in the conduct of
her affairs, there would have been no reason for her
to miss the flight. Needless to say, after the travel
papers were delivered to petitioner, it became
incumbent upon her to take ordinary care of her
concerns. This undoubtedly would require that she at
least read the documents in order to assure herself of
the important details regarding the trip.
NEGLIGENCE OF THE OBLIGOR IN THE
PERFORMANCE OF THE OBLIGATION
RENDERS HIM LIABLE FOR DAMAGES FOR
THE RESULTING LOSS SUFFERED BY THE
OBLIGEE. The negligence of the obligor in the
performance of the obligation renders him liable for
damages for the resulting loss suffered by the
obligee. Fault or negligence of the obligor consists
in his failure to exercise due care and prudence in
the performance of the obligation as the nature of the
obligation so demands. There is no fixed standard of
diligence applicable to each and every contractual
obligation and each case must be determined upon
its particular facts. The degree of diligence required
depends on the circumstances of the specific
obligation and whether one has been negligent is a
question of fact that is to be determined after taking
into account the particulars of each case.
NPC v CA
Facts:
It appears that in the early morning hours of October
27, 1978, at the height of typhoon "Kading", a
massive flood covered the towns near Angat Dam,
particularly the town of Norzagaray, causing several
deaths and the loss and destruction of houses, farms,
plants, working animals and other properties of the
people residing near the Angat River.
Private respondents blamed the sudden rush of water
to the reckless and imprudent opening of all the
three (3) floodgates of the Angat Dam spillway,
without prior warning to the people living near or
within the vicinity of the dam.
One of the contentions of the petitioner that it had
always exercised the diligence of a good father in
the selection of its officials and employees and in
their supervision. It also claimed that written
warnings were earlier sent to the towns concerned.
At the time typhoon "Kading" hit Bulacan with its
torrential rain, a great volume of flood water flowed
into the dam's reservoir necessitating the release of
the water therein in order to prevent the dam from
collapsing and causing the loss of lives and
tremendous damage to livestock and properties.

Petitioners further contended that there was no direct
causal relationship between the alleged damages
suffered by the respondents and the acts and
omissions attributed to the former. That it was the
respondents who assumed the risk of residing near
the Angat River, and even assuming that respondents
suffered damages, the cause was due to a fortuitous
event and such damages are of the nature and
character of damnum absque injuria, hence,
respondents have no cause of action against them
Issue: Whether or not the petitioners NPC is guilty
of negligence.
Ruling: The petition is denied.
CIVIL LAW; OBLIGATIONS AND CONTRACTS;
NATURE AND EFFECT OF
OBLIGATIONS; CONCURRENT LIABILITY OF
OBLIGOR IN CASE OF FORCE MAJEURE.
The doctrine laid down in the case of Juan F. Nakpil
and Sons vs. Court of Appeals, (144 SCRA 596
[1986]) is still good law, as far as the concurrent
liability of an obligor, in case of a force majeure, is
concerned. The case of National Power Corp. v.
Court of Appeals, (L-47481, 161 SCRA 334 [1988])
reiterated the ruling in Juan F. Nakpil & Sons. In the
former case, this Court ruled that the obligor cannot
escape liability, if upon the happening of a fortuitous
event or an act of God, a corresponding fraud,
negligence, delay or violation or contravention in
any manner of the tenor of the obligation as
provided in Article 1170 of the Civil Code which
results in loss or damage.
EXTRA-CONTRACTUAL OBLIGATIONS;
QUASI-DELICT; LIABILITY REGARDLESS
OF CONTRACTUAL RELATIONS. Petitioners
contended that unlike in Juan F. Nakpil &
Sons, (supra) there was no privity of contract
between herein petitioners and private respondents.
They further alleged that they owed no specific duty
to private respondents in the same way that the
architect of a building owed a specific duty to its
owner.
Petitioners, however, failed to consider that even if
there was no contractual relation between
themselves and private respondents, they are still
liable under the law on quasi-delict.
Article 2176 of the Civil Code explicitly provides
"whoever by act or omission causes damage to
another there being fault or negligence is obliged to
pay for the damage done."
FORCE MAJEURE; CONSTRUED. Neither can
petitioners escape liability by invoking force
majeure. Act of God or force majeure, by definition,
are extraordinary events not foreseeable or
avoidable, events that could not be foreseen, or
which, though foreseen, are inevitable. It is therefore
not enough that the event should not have been
foreseen or anticipated, as is commonly believed,
but it must be one impossible to foresee or to avoid.
WHERE NEGLIGENCE CONCURS
THEREWITH, LIABILITY ATTACH. As a
general rule, no person shall be responsible for those
events which could not be foreseen or which though
foreseen, were inevitable. However, the principle
embodied in the act of God doctrine strictly requires
that the act must be occasioned solely by the
violence of nature. Human intervention is to be
excluded from creating or entering into the cause of
the mischief. When the effect is found to be in part
the result of the participation of man, whether due to
his active intervention or neglect or failure to act, the
whole occurrence is then humanized and removed
from the rules applicable to the acts of God. It has
been held in several cases that when the negligence
of a person concurs with an act of God in producing
a loss, such person is not exempt from liability by
showing that the immediate cause of the damage
was the act of God. To be exempt he must be free
from any previous negligence or misconduct by
which the loss or damage may have been
occasioned.
LIABILITY; PRINCIPLE OF DAMNUM ABSQUE
INJURIA; NOT APPLICABLE IN
THE PRESENCE OF GROSS NEGLIGENCE;
CASE AT BAR. We cannot give credence to
petitioners' third assignment of error that the damage
caused by the opening of the dam was in the nature
of damnum absque injuria, which presupposes that
although there was physical damage, there was no
legal injury in view of the fortuitous events. There is
no question that petitioners have the right, duty and
obligation to operate, maintain and preserve the
facilities of Angat Dam, but their negligence cannot
be countenanced, however noble their intention may
be. The end does not justify the means, particularly
because they could have done otherwise than
simultaneously opening the spillways to such extent.
PRIOR WRITTEN WARNING; INADEQUATE IN
CASE AT BAR. Petitioners insist that their
giving of prior written warning should absolve them
from liability. However, as observed by the Court of
Appeals: "The notices were not delivered, or even
addressed to responsible officials of the
municipalities concerned who could have
disseminated the warning properly. They were
delivered to ordinary employees and policemen. As
it happened, the said notices do not appear to have
reached the people concerned, which are the
residents beside the Angat River. The plaintiffs in
this case definitely did not receive any such warning.
Indeed, the methods by which the defendants
allegedly sent the notice or warning was so
ineffectual that they cannot claim, as they do in their
second assignment of error, that the sending of said
notice has absolved them from liability."
Cetus Development v CA
Facts:
The private respondents, Ederlina Navalta, Ong
Teng, Jose Liwanag, Leandro Canlas, Victoria
Sudario, and Flora Nagbuya were the lessees of the
premises located at No. 512 Quezon Boulevard,
Quiapo, Manila, here private respondents were the
lessees of the premises originally owned by Susana
Realty. The payments of the rentals were paid by
them to a collector of the Susana Realty who went
the premises monthly. Susana Realty, however, sold
the property to petitioner Cetus Development, Inc.
The private respondents then continued to pay their
monthly rentals to a collector sent by the petitioner.
In succeeding months, for three months, the private
respondents failed to pay their rentals because no
collector came. They then contacted the petitioner
over the telephone as to where they should pay their
rentals. The petitioner then told them that they
would send a collector to collect the rentals. Private
respondents waited but no collector came. Petitioner
then sent a letter to each of the private respondents
demanding that they vacate the subject premises and
to pay their arrearages within 15 days from the
receipt thereof. With this, private respondents
immediately upon the receipt of such demand,
tendered their payments which were accepted by the
petitioner with the condition that the acceptance was
without prejudice to the filing of ejectment suit. For
failure of the private respondents to vacate the
premises as demanded, petitioner filed an ejectment
suit against them.
Issue: Whether or not there is delay on the part of
the private respondents to pay for monthly rental
Ruling: The petition is denied.
CIVIL LAW; OBLIGATIONS AND CONTRACTS;
ARTICLE 1169 OF THE CIVIL CODE;
APPLICABLE IN CASE AT BAR. It is very
clear that in the case at bar, no cause of action for
ejectment has accrued. There was no failure yet on
the part of private respondents to pay rents for three
consecutive months. As the terms of the individual
verbal leases which were on a month-to-month basis
were not alleged and proved, the general rule on
necessity of demand applies, to wit: there is default
in the fulfillment of an obligation when the creditor
demands payment at the maturity of the obligation
or at anytime thereafter. This is explicit in Article
1169, New Civil Code which provides that "(t)hose
obliged to deliver or to do something incur in delay
from the time the obligee judicially or extrajudicially
demands from them the fulfillment of their
obligation." Petitioner has not shown that its case
falls on any of the following exceptions where
demand is not required: (a) when the obligation or
the law so declares; (b) when from the nature and
circumstances of the obligation it can be inferred
that time is of the essence of the contract; and (c)
when demand would be useless, as when the obligor
has rendered it beyond his power to perform
The facts on record fail to show proof that petitioner
demanded the payment of the rentals when the
obligation matured. Coupled with the fact that no
collector was sent as previously done in the past, the
private respondents cannot be held guilty of mora
solvendi or delay in the payment of rentals. Thus,
when petitioner first demanded the payment of the
3-month arrearages and private respondents lost no
time in making tender and payment, which petitioner
accepted, no cause of action for ejectment accrued.
Hence, its demand to vacate was premature as it was
an exercise of a non-existing right to rescind.
In contradistinction, where the right of rescission
exists, payment of the arrearages in rental after the
demand to pay and to vacate under Section 2, Rule
70 does not extinguish The cause of action for
ejectment as the lessor is not only entitled to recover
the unpaid rents but also to eject the lessee.
REQUISITES THAT MUST CONCUR BEFORE
AN ACTION MAY BE FILED. For the purpose
of bringing an ejectment suit, two requisites must
concur, namely:
(1) there must be failure to pay rent or comply with
the conditions of the lease and
(2) there must be demand both to pay or to comply
and vacate with in the period specified
in Section 2, Rule 70, namely 15 days in case of
lands and 5 days in case of buildings.
The first requisite refers to the existence of the cause
of action for unlawful detainer while the second
refers to the jurisdictional requirement of demand in
order that said cause of action may be pursued.
DEMAND REQUIRED UNDER ART. 1169 CIVIL
CODE; MAY BE ORAL OR WRITTEN. The
demand required in Article 1169 of the Civil Code
may be in any form, provided that it can be proved.
The proof of this demand lies upon the creditor.
Without such demand, oral or written, the effects of
default do not arise. This demand is different from
the demand required under Section 2, Rule 70,
which is merely a jurisdictional requirement before
an existing cause of action may be pursued
FAILURE TO SEND COLLECTOR WHEN
CUSTOMARY, CONSIDERED VALID
DEFENSE FOR NON-PAYMENT OF RENT;
DOMICILE OF LESSEE, PLACE OF PAYMENT
IN THE ABSENT OF AGREEMENT. Petitioner
claims that its failure to send a collector to collect
the rentals cannot be considered a valid defense for
the reason that sending a collector is not one of the
obligations of the lessor under Article 1654. While it
is true that a lessor is not obligated to send a
collector, it has been duly established that it has been
customary for private respondents to pay the rentals
through a collector. Besides Article 1257, New Civil
Code provides that where no agreement has been
designated for the payment of the rentals, the place
of payment is at the domicile of the defendants.
Hence, it could not be said that they were in default
in the payment of their rentals as the delay in paying
the same was not imputable to them. Rather, it was
attributable to petitioner's omission or neglect to
collect.
WHERE THERE IS LACK OF DEMAND FOR
PAYMENT, ARTICLE 1256 OF THE CIVIL CODE,
NOT APPLICABLE; CASE AT BAR. Petitioner
argues that neither is its refusal to accept the rentals
a defense for non-payment as Article 1256 provides
that "[i]f the creditor to whom the tender of payment
has been made refuses without just cause to accept
it, the debtor shall be released from responsibility by
the consignation of the thing due." It bears emphasis
that in this case there was no unjustified on the part
of petitioner or non-acceptance without reason that
would constitute mora accipiendi and warrant
consignation. There was simply lack of demand for
payment of the rentals.
Abella v Francisco
Facts:
Defendant Guillermo B. Francisco purchased from
the Government on installments, lots 937 to 945 of
the Tala Estate in Novaliches, Caloocan, Rizal. He
was in arrears for some of these installments
After having made this agreement, the plaintiff
proposed the sale of these lots at
a higher price to George C. Sellner, collecting
P10,000 on account thereof on December
29, 1928.
Besides the P500 which, according to the instrument
quoted above, the plaintiff paid, he made another
payment of P415.31 on November 13, 1928, upon
demand made by the defendant. On December 27th
of the same year, the defendant, being in the
Province of Cebu, wrote to Roman Mabanta of this
City of Manila, attaching a power of attorney
authorizing him to sign in behalf of the defendant all
the documents required by the Bureau of Lands for
the transfer of the lots to the plaintiff. In that letter
the defendant instructed Roman Mabanta, in the
event that the plaintiff failed to pay the remainder of
the selling price, to inform him that the option would
be considered cancelled, and to return to him the
amount of P915.31 already delivered. On January 3,
1929, Mabanta notified the plaintiff that he had
received the power of attorney to sign the deed of
conveyance of the lots to him, and that he was
willing go execute the proper deed of sale upon
payment of the balance due. The plaintiff asked for a
few days' time, but Mabanta, following the
instructions he had received from the defendant,
only gave him until the 5th of that month. The
plaintiff did not pay the rest of the price on the 5th of
January, but on the 9th of the month attempted to do
so; Mabanta, however, refused to accept it, and gave
him to understand that he regarded the contract as
rescinded. On the same day, Mabanta returned by
check the sum of P915.31 which the plaintiff had
paid.
The plaintiff brought this action to compel the
defendant to execute the deed of sale of the lots in
question, upon receipt of the balance of the price,
and asks that he be judicially declared the owner of
said lots and that the defendant be ordered to deliver
them to him.
The court below absolved the defendant from the
complaint, and the plaintiff appealed.
Ruling: The petition is denied.
It is to be noted that in the document signed by the
defendant, the 15th of December was fixed as the
date, extendible for fifteen days, for the payment by
the plaintiff of the balance of the selling price. It has
been admitted that the plaintiff did not offer to
complete the payment until January 9, 1929. He
contends that Mabanta, as attorney-in-fact for the
defendant in this transaction, granted him an
extension of time until the 9th of January. But
Mabanta has stated that he only extended the time
until the 5th of that month. Mabanta's testimony on
this point is corroborated by that of Paz Vicente and
by the plaintiff's own admission to Narciso Javier
that his option to purchase those lots expired on
January 5, 1929.
In holding that the period was an essential element
of the transaction between plaintiff and defendant,
the trial court considered that the contract in
question was an option for the purchase that the
contract in question was an option for the purchase
of the lots, and that in an agreement of this nature
the period is deemed essential. The opinion of the
court is divided upon the question of whether the
agreement was an option or a sale, but even
supposing it was a sale, the court holds that time was
an essential element in the transaction. The
defendant wanted to sell those lots to the plaintiff in
order to pay off certain obligation which fell due in
the month of December, 1928. The time fixed for the
payment of the price was therefore essential for the
defendant, and this view in borne out by his letter to
his representative Mabanta instructing him to
consider the contract rescinded if the price was not
completed in time. In accordance with article 1124
of the Civil Code, the defendant is entitled to resolve
the contract for failure to pay the price within the
time specified.
CONTRACT OF SALE; PERIOD FOR PAYMENT
OF SELLING PRICE; RESOLUTION OF
CONTRACT. Having agreed that the selling
price (even supposing it was a contract of sale)
would be paid not later than December, 1928, and in
view of the fact that the vendor executed said
contract in order to pay off with the proceeds thereof
certain obligations which fell due in the same month
of December, it is held that the time fixed for the
payment of the selling price was essential in the
transaction, and, therefore, the vendor, under article
1124 of the Civil Code, is entitled to resolve the
contract for failure to pay the price within the time
specified.
Vda. De Villaruel v Manila Motor
Facts:
On May 31, 1940, the plaintiffs Villaruel and
defendant Manila Motor Co. Inc. entered into a
contract whereby the defendant agreed to lease
plaintiffs building premises. On October 31, 1940,
the leased premises were placed in the possession of
the defendant until the invasion of 1941. The
Japanese military occupied and used the property
leased as part of their quarters from June, 1942 to
March, 1945, in which no payment of rentals were
made. Upon the liberation of the said city, the
American forces occupied the same buildings that
were vacated by the Japanese. When the United
States gave up the occupancy of the premises,
defendant decided to exercise their option to renew
the contract, in which they agreed. However, before
resuming the collection of rentals, Dr. Alfredo
Villaruel upon advice demanded payment of rentals
corresponding to the time the Japanese military
occupied the leased premises, but the defendant
refused to pay. As a result plaintiff gave notice
seeking the rescission of the contract and the
payment of rentals from June, 1942 to March, 1945;
this was rejected by the defendant. Despite the fact
the defendant under new branch manager paid to
plaintiff the sum of P350 for the rent, the plaintiff
still demanded for rents in arrears and for the
rescission of the contract of lease. The plaintiff
commenced an action before the CFC of Neg.
Occidental against defendant company. During the
pendency of the case, the leased building was burned
down. Because of the occurrence, plaintiffs
demanded reimbursement from the defendants, but
having been refused, they filed a supplemental
complaint to include a 3rd cause of action, the
recovery of the value of the burned building. The
trial court rendered judgment in favor of the
plaintiff. Hence the defendants appeal.
Issue: Is Manila Motor Co. Inc. liable for the loss of
the leased premises?
Ruling: The petition is granted.
It is also worthy of note that the lessors, through Dr.
Javier Villaruel, agreed after liberation to a renewal
of the contract of lease for another five years (from
June 1, 1946 to May 31 of 1951) without making
any reservation regarding the alleged liability of the
lessee company for the rentals corresponding to the
period of occupancy of the premises by the Japanese
army, and without insisting that the non-payment of
such rental was a breach of the contract of lease.
This passivity of the lessors strongly supports the
claim of the lessees that the rentals in question were
verbally waived. The proffered explanation is that
the lessors could not refuse to renew the lease,
because the privilege of renewal had been granted to
the lessees in the original contract. Such excuse is
untenable: if the lessors deemed that the contract had
been breached by the lessee's non-payment of the
occupation rents how could they admit the lessee's
right to renew a contract that the lessee itself had
violated?
But this is not all. The lessors accepted payment of
current rentals from October 1945 to June 1946. It
was only in July 1946 that they insisted upon
collecting also the 1942-1945 rents, and refused to
accept further payments tendered by the lessee
unless their right to collect the occupation rental was
recognized or reserved. After refusing the rents from
July to November 1946, unless the lessee recognized
their right to occupation rentals, the appellees
(lessors) demanded rescission of the contract and
a rental of P1,740 monthly in lieu of the stipulated
P350 per month. (Exhibit "C").
This attitude of the lessors was doubly wrongful:
first, because as already shown, the dispossession by
the Japanese army exempted the lessee from his
obligation to pay rent for the period of its ouster; and
second, because even if the lessee had been liable
for that rent, its collection in 1946 was barred by the
moratorium order, Executive Order No. 32, that
remained in force until replaced by Rep. Act 342 in
1948. To apply the current rentals to the occupation
obligations would amount to enforcing them
contrary to the moratorium decreed by the
government.
Clearly, then, the lessor' insistence upon collecting
the occupation rentals for 1942-1945 was
unwarranted in law. Hence, their refusal to accept
the current rentals without qualification placed them
in default (mora creditoris or acci piendi) with the
result that thereafter, they had to bear all
supervening risks of accidental injury or destruction
of the leased premises. While not expressly declared
by the Code of 1889, this result is clearly inferable
from the nature and effects of mora, and from
Articles 1185, 1452 [par. 3] and 1589
While there is a presumption that the loss of the
thing leased is due to the fault of the lessee (Civil
Code of 1889, Art. 1563), it is noteworthy that the
lessors have not invoked that presumption either
here or in the court below. On the contrary, the
parties and the trial court have all proceeded and
discussed the issues taking for granted that the
destruction of the leased buildings was purely
fortuitous. We see no reason for departing from that
assumption and further prolonging this litigation.
That the lessee and sublessee did not consign or
deposit in court the rentals tendered to and
improperly rejected by the lessors, did not render the
debtor liable for default (mora solvendi) nor
answerable for fortuitous events because, as
explained by the Supreme Court of Spain in its
Sentencia of 5 June 1944
LIABILITY OF LESSEE FOR RENTS DURING
OCCUPATION OF PROPERTY. Such
dispossession, though not due to the fault of the
lessors or lessee nevertheless deprived the lessee of
the enjoyment of the thing leased. Wherefore, the
lessee's corresponding obligation to pay rentals
ceased during such deprivation.
IMPORTER REFUSAL TO ACCEPT RENTS
PLACES LESSORS IN DEFAULT; LIABILITY
FOR SUPERVENING RISK. Since the lessee
was exempt from paying the rents for the period of
its ouster, the insistence of the lessors to collect the
rentals corresponding to said period was
unwarranted and their refusal to accept the currant
rents tendered by the lessee was unjustified. Such
refusal places the lessors in default (mora) and they
must shoulder the subsequent accidental loss of the
premises leased.
MORA OF LESSORS NOT CURED BY FAILURE
OF LESSEE TO CONSIGN RENTS IN COURT.
The mora of the lessors was not cured by the failure
of the lessee to make the consignation of the rejected
payments, but the lessee remained obligated to pay
the amounts tendered and not consigned by it in
court.
PLEADING AND PRACTICE; CHANGE IN THE
RELIEF PRAYED DURING THE PENDENCY OF
THE ACTION. A change in the relief prayed,
brought about by circumstances occurring during the
pendency of the action, is not improper. This is
justified under Section 2, Rule 17 of the Rules of
Court (on amendments) "to the end that the real
matter in dispute and all matters in the action in
dispute between the parties may, as far as possible be
completely determined in a single proceeding."
DISMISSAL WITHOUT PREJUDICE. The
dismissal of plaintiffs' two causes of action in the
case at bar was premised on the existence of the
"Debt Moratorium" which suspended the
enforcement of the obligation up to a certain time.
The reference thereto by the court amounted to a
dismissal "without prejudice", since in effect it ruled
that the plaintiffs could not, at the time they sought
it, enforce their right of action against the
defendants, but they must wait until the moratorium
was lifted. In this way, the court qualified its
dismissal.
Central Bank v CA
Facts: Island Savings Bank, upon favorable
recommendation of its legal department, approved
the loan application for P80,000.00 of Sulpicio M.
Tolentino, who, as a security for the loan, executed
on the same day a real estate mortgage over his 100-
hectare land located in Cubo, Las Nieves, Agusan.
The loan called for a lump sum of P80,000,
repayable in semi-annual installments for 3 yrs, with
12% annual interest. After the agreement, a mere
P17K partial release of the loan was made by the
bank and Tolentino and his wife signed a promissory
note for the P17,000 at 12% annual interest payable
w/in 3 yrs. An advance interest was deducted fr the
partial release but this prededucted interest was
refunded to Tolentino after being informed that there
was no fund yet for the release of the P63K balance.
Monetary Board of Central Bank, after finding that
bank was suffering liquidity problems, prohibited
the bank fr making new loans and investments. And
after the bank failed to restore its solvency, the
Central Bank prohibited Island Savings Bank from
doing business in the Philippines. Island Savings
Bank in view of the non-payment of the P17K filed
an application for foreclosure of the real estate
mortgage. Tolentino filed petition for specific
performance or rescission and damages with
preliminary injunction, alleging that since the bank
failed to deliver P63K, he is entitled to specific
performance and if not, to rescind the real estate
mortgage.
Issue:
1. Can the action of Sulpicio M. Tolentino for
specific performance prosper?
2. Is Sulpicio M. Tolentino liable to pay the
P17,000.00 debt covered by the promissory note?
3. If Sulpicio M. Tolentino's liability to pay the
P17,000.00 subsists, can his real estate mortgage be
foreclosed to satisfy said amount?
Ruling: The petition is granted.
When Island Savings Bank and Sulpicio M.
Tolentino entered into an P80,000.00 loan agreement
on April 28, 1965, they undertook reciprocal
obligations. In reciprocal obligations, the obligation
or promise of each party is the consideration for that
of the other (Penaco vs. Ruaya, 110 SCRA 46
[1981]; Vda. de Quirino vs. Pelarca, 29 SCRA 1
[1969]); and when one party has performed or is
ready and willing to perform his part of the contract,
the other party who has not performed or is not
ready and willing to perform incurs in delay (Art.
1169 of the Civil Code). The promise of Sulpicio M.
Tolentino to pay was the consideration for the
obligation of Island Savings Bank to furnish the
P80,000.00 loan. When Sulpicio M. Tolentino
executed a real estate mortgage on April 28, 1965,
he signified his willingness to pay the P80,000.00
loan. From such date, the obligation of Island
Savings Bank to furnish the P80,000.00 loan
accrued. Thus, the Bank's delay in furnishing the
entire loan started on April 28, 1965, and lasted for a
period of 3 years or when the Monetary Board of the
Central Bank issued Resolution No. 967 on June 14,
1968, which prohibited Island Savings Bank from
doing further business. Such prohibition made it
legally impossible for Island Savings Bank to
furnish the P63,000.00 balance of the P80,000.00
loan. The power of the Monetary Board to take over
insolvent banks for the protection of the public is
recognized by Section 29 of R.A. No. 265, which
took effect on June 15, 1948, the validity of which is
not in question.
The Monetary Board Resolution No. 1049 issued on
August 13, 1965 cannot interrupt the default of
Island Savings Bank in complying with its
obligation of releasing the P63,000.00 balance
because said resolution merely prohibited the Bank
from making new loans and investments, and
nowhere did it prohibit Island Savings Bank from
releasing the balance of loan agreements previously
contracted. Besides, the mere pecuniary inability to
fulfill an engagement does not discharge the
obligation of the contract, nor does it constitute any
defense to a decree of specific performance
(Gutierrez Repide vs. Afzelins and Afzelins, 39 Phil.
190 [1918]). And, the mere fact of insolvency of a
debtor is never an excuse for the non-fulfillment of
an obligation but instead it is taken as a breach of the
contract by him (Vol. 17A, 1974 ed., CJS p. 650).
Since Island Savings Bank was in default in
fulfilling its reciprocal obligation under their
loan agreement, Sulpicio M. Tolentino, under Article
1191 of the Civil Code, may choose
between specific performance or rescission with
damages in either case. But since Island
Savings Bank is now prohibited from doing further
business by Monetary Board Resolution
No. 967, WE cannot grant specific performance in
favor of Sulpicio M. Tolentino.
Rescission is the only alternative remedy left. WE
rule, however, that rescission is only for the
P63,000.00 balance of the P80,000.00 loan, because
the bank is in default only insofar as such amount is
concerned, as there is no doubt that the bank failed
to give the P63,000.00. As far as the partial release
of P17,000.00, which Sulpicio M. Tolentino
accepted and executed a promissory note to cover it,
the bank was deemed to have complied with its
reciprocal obligation to furnish a P17,000.00 loan.
The promissory note gave rise to Sulpicio M.
Tolentino's reciprocal obligation to pay the
P17,000.00 loan when it falls due. His failure to
pay the overdue amortizations under the
promissory note made him a party in default,
hence not entitled to rescission (Article 1191 of the
Civil Code). If there is a right to rescind the
promissory note, it shall belong to the aggrieved
party, that is, Island Savings Bank. If Tolentino
had not signed a promissory note setting the date
for payment of P17,000.00 within 3 years, he
would be entitled to ask for rescission of the
entire loan because he cannot possibly be in
default as there was no date for him to perform
his reciprocal obligation to pay.
Since both parties were in default in the performance
of their respective reciprocal obligations, that is,
Island Savings Bank failed to comply with its
obligation to furnish the entire loan and Sulpicio M.
Tolentino failed to comply with his obligation to pay
his P17,000.00 debt within 3 years as stipulated,
they are both liable for damages.
Article 1192 of the Civil Code provides that in case
both parties have committed a breach
of their reciprocal obligations, the liability of the
first infractor shall be equitably tempered
by the courts. WE rule that the liability of Island
Savings Bank for damages in not furnishing
the entire loan is offset by the liability of Sulpicio
M. Tolentino for damages, in the form of
penalties and surcharges, for not paying his overdue
P17,000.00 debt. The liability of
Sulpicio M. Tolentino for interest on his P17,000.00
debt shall not be included in offsetting
the liabilities of both parties. Since Sulpicio M.
Tolentino derived some benefit for his use
of the P17,000.00, it is just that he should account
for the interest thereon.
2) Whether or not the mortgagor is liable to pay the
amount covered by the promissory note
The promissory note gave rise to Sulpicio M.
Tolentinos reciprocal obligation to pay the
P17,000.00 loan when it falls due. His failure to pay
the overdue amortizations under the promissory note
made him a party in default, hence not entitled to
rescission (Article 1191 of the Civil Code). If there
is a right to rescind the promissory note, it shall
belong to the aggrieved party, that is, Island Savings
Bank. If Tolentino had not signed a promissory note
setting the date for payment of P17,000.00 within 3
years, he would be entitled to ask for rescission of
the entire loan because he cannot possibly be in
default as there was no date for him to perform his
reciprocal obligation to pay. Since both parties were
in default in the performance of their respective
reciprocal obligations, that is, Island Savings Bank
failed to comply with its obligation to furnish the
entire loan and Sulpicio M. Tolentino failed to
comply with his obligation to pay his P17,000.00
debt within 3 years as stipulated, they are both liable
for damages.
3) Whether or not the real estate mortgage can be
foreclosed
Since Island Savings Bank failed to furnish the
P63,000.00 balance of the P80,000.00 loan, the real
estate mortgage of Sulpicio M. Tolentino became
unenforceable to such extent. P63,000.00 is 78.75%
of P80,000.00, hence the real estate mortgage
covering 100 hectares is unenforceable to the extent
of 78.75 hectares. The mortgage covering the
remainder of 21.25 hectares subsists as a security for
the P17,000.00 debt. 21.25 hectares is more than
sufficient to secure a P17,000.00 debt.
Chavez v Gonzales
Facts: On July 1963, Rosendo Chavez brought his
typewriter to Fructuoso Gonzales a typewriter
repairman for the cleaning and servicing of the said
typewriter but the latter was not able to finish the
job. During October 1963, the plaintiff gave the
amount of P6.00 to the defendant which the latter
asked from the plaintiff for the purchase of spare
parts, because of the delay of the repair the plaintiff
decided to recover the typewriter to the defendant
which he wrapped it like a package. When the
plaintiff reached their home he opened it and
examined that some parts and screws was lost. That
on October 29, 1963 the plaintiff sent a letter to the
defendant for the return of the missing parts, the
interior cover and the sum of P6.00 (Exhibit D). The
following day, the defendant returned to the plaintiff
some of the missing parts, the interior cover and the
P6.00. The plaintiff brought his typewriter to Freixas
Business Machines and the repair cost the amount of
P89.85. He commenced this action on August 23,
1965 in the City Court of Manila, demanding from
the defendant the payment of P90.00 as actual and
compensatory damages, P100.00 for temperate
damages, P500.00 for moral damages, and P500.00
as attorneys fees. The defendant made no denials of
the facts narrated above, except the claim of the
plaintiff that the cost of the repair made by Freixas
Business Machines be fully chargeable against him.
Issue: Whether or not the defendant is liable for the
total cost of the repair made by Freixas Business
Machines with the plaintiff typewriter?
Ruling: The petition granted
On the other hand, the position of the defendant-
appellee, Fructuoso Gonzales, is that he is not liable
at all, not even for the sum of P31.10, because his
contract with plaintiffappellant did not contain a
period, so that plaintiff-appellant should have first
filed a petition for the court to fix the period, under
Article 1197 of the Civil Code, within which the
defendant appellee was to comply with the contract
before said defendant-appellee could be held liable
for breach of contract
The appealed judgment states that the "plaintiff
delivered to the defendant . . . a portable typewriter
for routine cleaning and servicing"; that the
defendant was not able to finish the job after some
time despite repeated reminders made by the
plaintiff"; that the "defendant merely gave
assurances, but failed to comply with the same"; and
that "after getting exasperated with the delay of the
repair of the typewriter", the plaintiff went to the
house of the defendant and asked for its return,
which was done. The inferences derivable from
these findings of fact are that the appellant and the
appellee had a perfected contract for cleaning and
servicing a typewriter; that they intended that the
defendant was to finish it at some future time
although such time was not specified; and that such
time had passed without the work having been
accomplished, far the defendant returned the
typewriter cannibalized and unrepaired, which in
itself is a breach of his obligation, without
demanding that he should be given more time to
finish the job, or compensation for the work he had
already done. The time for compliance having
evidently expired, and there being a breach of
contract by non-performance, it was academic for
the plaintiff to have first petitioned the court to fix a
period for the performance of the contract before
filing his complaint in this case. Defendant cannot
invoke Article 1197 of the Civil Code for he
virtually admitted non-performance by returning the
typewriter that he was obliged to repair in a non-
working condition, with essential parts missing. The
fixing of a period would thus be a mere formality
and would serve no purpose than to delay (cf.
Tiglao. et al. V. Manila Railroad Co. 98 Phil. 181).
CIVIL LAW; CONTRACTS; BREACH OF
CONTRACT FOR NON-PERFORMANCE;
FIXING OF PERIOD BEFORE FILING OF
COMPLAINT FOR NON-PERFORMANCE,
ACADEMIC. Where the time for compliance had
expired and there was breach of contract by non-
performance, it was academic for the plaintiff to
have first petitioned the court to fix a period for the
performance of the contract before filing his
complaint.
DEFENDANT CANNOT INVOKE ARTICLE 1197
OF THE CIVIL CODE OF THE PHILIPPINES.
Where the defendant virtually admitted non-
performance of the contract by returning the
typewriter that he was obliged to repair in a non-
working condition, with essential parts missing,
Article 1197 of the Civil Code of the Philippines
cannot be invoked. The fixing of a period would thus
be a mere formality and would serve no purpose
than to delay.
DAMAGES RECOVERABLE; CASE AT BAR.
Where the defendant-appellee contravened the tenor
of his obligation because he not only did not repair
the typewriter but returned it "in shambles,'' he is
liable for the cost of the labor or service expended in
the repair of the typewriter, which is in the amount
of P58.75, because the obligation or contract was to
repair it. In addition, he is likewise liable under Art.
1170 of the Code, for the cost of the missing parts, in
the amount of P31.10, for in his obligation to repair
the typewriter he was bound, but failed or neglected,
to return it in the same condition it was when he
received it.
CLAIMS FOR DAMAGES OR ATTORNEY'S
FEES NOT RECOVERABLE; NOT
ALLEGED OR PROVED IN INSTANT CASE.
Claims for damages and attorney's fees must be
pleaded, and the existence of the actual basis thereof
must be proved. As no findings of fact were made on
the claims for damages and attorney's fees, there is
no factual basis upon which to make an award
therefor.
No, he is not liable for the total cost of the repair
made by Freixas Business Machines instead he is
only liable for the cost of the missing parts and
screws. The defendant contravened the tenor of his
obligation in repairing the typewriter of the plaintiff
that he fails to repair it and returned it with the
missing parts, he is liable under ART. 1167. If a
person obliged to do something fails to do it, the
same shall be executed at his cost.
This same rule shall be observed if he does it in
contravention of the tenor of the obligation.
Furthermore it may be decreed that what has been
poorly done he undone.
Telefast v Castro
Facts:
The petitioner is a company engaged in transmitting
telegrams. The plaintiffs are the children and spouse
of Consolacion Castro who died in the Philippines.
One of the plaintiffs, Sofia sent a telegram thru
Telefast to her father and other siblings in the USA
to inform about the death of their mother.
Unfortunately, the deceased had already been
interred but not one from the relatives abroad was
able to pay their last respects. Sofia found out upon
her return in the US that the telegram was never
received. Hence the suit for damages on the ground
of breach of contract. The defendant-petitioner
argues that it should only pay the actual amount paid
to it.
The lower court ruled in favor of the plaintiffs and
awarded compensatory, moral, exemplary, damages
to each of the plaintiffs with 6% interest p.a. plus
attorneys fees. The Court of Appeals affirmed this
ruling but modified and eliminated the
compensatory damages to Sofia and exemplary
damages to each plaintiff, it also reduced the moral
damages for each. The petitioner appealed
contending that, it can only be held liable for P
31.92, the fee or charges paid by Sofia C. Crouch for
the telegram that was never sent to the addressee,
and that the moral damages should be removed since
defendant's negligent act was not motivated by
"fraud, malice or recklessness.
Issue: Whether or not the award of the moral,
compensatory and exemplary damages is proper.
Ruling: The petition is denied.
Art. 1170 of the Civil Code provides that "those who
in the performance of their obligations are guilty of
fraud, negligence or delay, and those who in any
manner contravene the tenor thereof, are liable for
damages." Art. 2176 also provides that "whoever by
act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the
damage done."
In the case at bar, petitioner and private respondent
Sofia C. Crouch entered into a contract whereby, for
a fee, petitioner undertook to send said private
respondent's message overseas by telegram. This,
petitioner did not do, despite performance by said
private respondent of her obligation by paying the
required charges. Petitioner was therefore guilty of
contravening its obligation to said private
respondent and is thus liable for damages.
This liability is not limited to actual or quantified
damages. To sustain petitioner's contrary position in
this regard would result in an inequitous situation
where petitioner will only be held liable for the
actual cost of a telegram fixed thirty (30) years ago.
CIVIL LAW; DAMAGES; PARTY WHO FAILED
TO TRANSMIT TELEGRAM LIABLE
THEREON. In the case at bar, petitioner and
private respondent Sofia C. Crouch entered into a
contract whereby, for a fee, petitioner undertook to
send said private respondent's message overseas by
telegram. This, petitioner did not do, despite
performance by said private respondent of her
obligation by paying the required charges. Petitioner
was therefore guilty of contravening its obligation to
said private respondent and is thus liable for
damages under Articles 1170 and 2196 of the Civil
Code.
MORAL DAMAGES; PARTY WHO SUFFERED
EMOTIONAL SUFFERING
ENTITLEDTHERETO. We find Art. 2217 of the
Civil Code applicable to the case at bar. It states:
"Moral damages include physical suffering, mental
anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social
humiliation, and similar injury. Though incapable of
pecuniary computation, moral damages may be
recovered if they are the proximate results of the
defendant's wrongful act or omission." Here,
petitioner's act or omission, which amounted to
gross negligence, was precisely the cause of the
suffering private respondents had to undergo.
COMPENSATORY DAMAGES; AWARDED TO A
PARTY WHO INCURRED TRAVEL EXPENSES
TO TESTIFY IN A COURT CASE. We also
sustain the trial court's award of
P16,000.00 as compensatory damages to Sofia C.
Crouch representing the expenses she incurred when
she came to the Philippines from the United States to
testify before the trial court. Had petitioner not been
remiss in performing its obligation, there would
have been no need for this suit or for Mrs. Crouch's
testimony.
EXEMPLARY DAMAGES; AWARDED TO A
PARTY AS A WARNING TO ALL
TELEGRAM COMPANIES. The award of
exemplary damages by the trial court is likewise
justified and, therefore, sustained in the amount of
P1,000.00 for each of the private respondents, as a
warning to all telegram companies to observe due
diligence in transmitting the messages of their
customers.
Arrieta v NARIC
Facts:
Mrs. Paz Arrieta participated in public bidding
called by NARIC on May 19, 1952 for the supply of
20,000 metric tons of Burmese rice. Her bid was $
203.00 per metric ton, it was the lowest thats why
the contract was awarded to her. On July 1,1952,
Arrieta and NARIC entered into contract. Arrieta
was obligated to deliver 20,000 metric ton of
Burmese rice at $203.00 per metric ton to NARIC.
In return, NARIC committed itself to pay for the
imported rice by means of an irrevocable,
confirmed and assignable letter of credit in US
currency in favour of Arrieta and/or supplier in
Burma (THIRI SETKYA), immediately. NARIC
took the first step to open the letter of credit on July
30, 1952 by forwarding to the PNB its application
for commercial letter of credit. Arrieta with the help
of a counsel, advised NARIC of the necessity for the
opening of the letter because she tender her supplier
in Ragoon, Burma of 5 % of the price of 20,000
tons at $180.70 and if she didnt comply the 5% will
be confiscated if the required letter of credit is not
received by them before August 4, 1952. PNB
informed NARIC that their application of credit
letter amounting to $3,614,000.00 was approved
with the condition of 50% marginal cash be paid.
NARIC does not meet the condition. The allocation
of Arrietas supplier in Ragoon was cancelled and
the 5% deposit was forfeited.
Issue: Does NARIC liable for damages
Ruling: The petition is denied.
OBLIGATIONS AND CONTRACTS; LIABILITY
FOR NON-PERFORMANCE; FAILURE TO PUT
UP LETTER OF CREDIT WITHIN AGREED
PERIOD. One who assumes a contractual
obligation and fails to perform the same on account
of his inability to meet certain bank requirements,
which inability he knew and was aware of when he
entered into the contract, should be held liable in
damages for breach of contract.
OBLIGATIONS AND CONTRACTS; LIABILITY
OF NON-PERFORMANCE. Under Article 1170
of the Civil Code, not only debtors guilty of fraud,
negligence or default but also every debtor, in
general, who fails in the performance of his
obligations is bound to indemnify for the losses and
damages caused thereby.
MEANING OF PHRASE "IN ANY MANNER
CONTRAVENE THE TENOR" OF THE
OBLIGATION IN ART. 1170, CIVIL CODE. The
phrase "in any manner contravene the tenor" of the
obligation in Art. 1170, Civil Code, includes any
illicit task which impairs the strict and faithful
fulfillment of the obligation, or every kind of
defective performance.
WAIVER OF BREACH OF CONTRACT NOT
PRESUMED. Waivers are not presumed, but
must be clearly and convincingly shown, either by
express stipulation or
acts admitting of no other reasonable explanation.
PAYMENT OF AWARD; PHILIPPINE
CURRENCY. In view of Republic Act 529 which
specifically requires the discharge of obligations
only "in any coin or currency which
at the time of payment is legal tender for public and
private debt", the award of damages in
U.S. dollars made by the lower court in the case at
bar is modified by converting it into
Philippine pesos at the rate of exchange prevailing at
the time the obligation was incurred or when the
contract in question was executed.