CONCEPTS AND DEFAULTS OF

OBLIGATION
 Rufina Causing vs. Alfonso Bencer
G.R. No. L-11328, January 15, 1918
Street,J,

Facts:

Rufina Causing, the plaintiff of this case, owned a land for rice
and sugar cane in the Province of Iloilo, having an area of 70
hectares. In the year 1909, negotiations were made between
her and Alfonso Bencer, the defendant, with a view of sale to
the land to him and an agreement was formed by which
Causing undertook to convey the property to him for the sum
of P1, 200. In order for the conveyance to be made, they sought
the plaintiff’s relative, Casiano Causing, attorney, for legal
assistance. Since the plaintiff had nieces of hers who were then
minors and whom she seems to have exercised an informal
guardianship and who had interest in the property, he informed
the parties that the conveyance could not be legalized without
judicial sanction.

The effort to effect the transfer of the title of the deed was
abandoned for the time being but Bencer had already paid her
P800 of the purchase price upon August 14, 1909, took
possession of the land, with the understanding that he was to
pay the balance later and she would have to procure the judicial
approval of the sale as regards to the interests of the minors.
In 1910, a new engagement was made with regard to the price
paid, which was Bencer should pay P600 in addition of the
P800 he had already paid or P1, 400 in all, provided that the
plaintiff would give him an extension of time to May 1911 to pay
the balance.

Time went on and neither of the parties performed the

engagement; as the plaintiff alleges, Bencer’s failure may have
been due to his lack of ready money or, as the defendant
alleges, it may have been due to the plaintiff’s reluctance to
carry out the engagement, and she also did not appear to
collect the money at the place stipulated as the place of
payment. However, it also may have been due to the fact that
the plaintiff was not yet in position to execute a deed as no
steps had been taken to get a judicial approval for the sale of
the shares of the minors. However, as the heirs reached
majority, the plaintiff successively acquired their respective
interests by purchase, and before the action in this case was
instituted, she had become possessor of all their shares. The
property meanwhile increased in value—possibly because of
the improvements which the defendant claims to have made on
the property. In view of the changed contract, the plaintiff
appears to have become desirous of rescinding the contract,
and brought this suit to annul the contract, recover the property,
together with the sum of P3, 850, alleged to be due as damages
for the use and occupation of the land by the defendant during
the time he has been in possession. The plaintiff also prayed
for general relief.

Issue:

The delay in the part of the plaintiff, which was she never
procured the judicial approval for the sale of the land, and the
delay of the defendant, which was he did not pay the balance
per se to the agreement resulted to the non-fulfillment of the
obligations of the two parties. So, Rufina Causing filed this suit
to annul the contract for the sale of a parcel of land, recover the
property itself from Alfonso Bencer, and collect the sum of P3,
850 alleged to be due as damages for the use and occupation
of the land by the defendant during the time he has been in
possession.

Decision:

The court dismissed the action for the recovery of the land and
damages for use and occupation but gave judgment in
plaintiff’s favor for P600 with interest at 6% from August 14,
1910 until paid.

Ratio Decidendi:
The court can see no valid reason for the plaintiff to rescind the
contract because this has been a case that entailed a mutual
obligation. That is according to Article 1100 of the Civil Code,
that no party shall be deemed to be in default if the other does
not fulfill, or offer to fulfill his own obligation, and from the time
one person obligated fulfills his obligation, the default begins
for the other party. Moreover, it was actually Causing who was
in default here rather than the defendant Bencer, as the
contract contemplated a conveyance of the entire interest of
the land and the plaintiff clearly obligated herself to that extent.
Thus, she was not in position to compel Bencer to pay until she
could offer him a deed nor is she permitted to rescind the
contract on the ground that the defendant failed to pay the
balance.
For the prayer of general relief, the court gave judgment in favor
of the plaintiff for the sum of P600 with an interest of 6% per
annum from August 14, 1910 for the unpaid balance of the
purchase money. The right of the plaintiff to recover interest for
the period prior to the institution of the suit is questionable in
point of law, but the justice of allowing it is evident, in view of
the fact that the defendant has had continuous use of the
property.
Malayan Insurance Corp vs CA
 G.R. 119599 March 20, 1997
J. Romero

Facts:

TKC Marketing imported 3,000 metric tons of soya from Brazil

to Manila. It was insured by Malayan at the value of almost 20
million pesos. The vessel, however, was stranded on South
Africa because of a lawsuit regarding the possession of the
soya. TKC consulted Malayan on recovery of the amount, but
the latter claimed that it wasn’t covered by the policy. The soya
was sold in Africa for Php 10 million, but TKC wanted Malayan
to shoulder the remaining value of 10 million as well.
Petitioner filed suit due to Malayan’s reticence to pay. Malayan
claimed that arrest by civil authorities wasn’t covered by the
policy. The trial court ruled in TKC’s favor with damages to
boot. The appellate court affirmed the decision under the
reason that clause 12 of the policy regarding an excepted risk
due to arrest by civil authorities was deleted by Section 1.1 of
the Institute War Clauses which covered ordinary arrests by
civil authorities. Failure of the cargo to arrive was also covered
by the Theft, Pilferage, and Non-delivery Clause of the
contract. Hence this petition.

Issues:

1. WON the arrest of the vessel was a risk covered under the
subject insurance policies.
2. WON the insurance policies must strictly construed against
the insurer.

Held: Yes. Yes. Petition dismissed.

Ratio:
1. Section 12 or the "Free from Capture & Seizure Clause"
states: "Warranted free of capture, seizure, arrest, restraint or
detainment, and the consequences thereof or of any attempt
thereat… Should Clause 12 be deleted, the relevant current
institute war clauses shall be deemed to form part of this
insurance.”
This was really replaced by the subsection 1.1 of section 1 of
Institute War Clauses (Cargo) which included “the risks
excluded from the standard form of English Marine Policy by
the clause warranted free of capture, seizure, arrest, restraint
or detainment, and the consequences thereof of hostilities or
warlike operations, whether there be a declaration of war or
not.”
The petitioner’s claim that the Institute War Clauses can be
operative in case of hostilities or warlike operations on account
of its heading "Institute War Clauses" is not tenable. It
reiterated the CA’s stand that “its interpretation in recent years
to include seizure or detention by civil authorities seems
consistent with the general purposes of the clause.” This
interpretation was regardless of the fact whether the arrest was
in war or by civil authorities.
The petitioner was said to have confused the Institute
War clauses and the F.C.S. in English law.
“It stated that "the F.C. & S. Clause was "originally incorporated
in insurance policies to eliminate the risks of warlike
operations". It also averred that the F.C. & S. Clause applies
even if there be no war or warlike operations. In the same vein,
it contended that subsection 1.1 of Section 1 of the Institute
War Clauses (Cargo) "pertained exclusively to warlike
operations" and yet it also stated that "the deletion of the F.C.
& S. Clause and the consequent incorporation of subsection
1.1 of Section 1 of the Institute War Clauses (Cargo) was to
include "arrest, etc. even if it were not a result of hostilities or
warlike operations."
The court found that the insurance agency tried to interpret
executive and political acts as those not including
ordinary arrestsin the exceptions of the FCS clause ,
and claims that the War Clauses now included executive and
political acts without including ordinary arrests in the new
stipulation.
“A strained interpretation which is unnatural and forced, as to
lead to an absurd conclusion or to render the policy
nonsensical, should, by all means, be avoided.”
2. Indemnity and liability insurance policies are construed in
accordance with the general rule of resolving
any ambiguitytherein in favor of the insured, where the contract
or policy is prepared by the insurer. A contract of insurance,
being a contract of adhesion, means that any ambiguity should
be resolved against the insurer.

ALLIED BANKING CORPORATION vs. BANK OF THE

PHILIPPINE ISLANDS
G.R. No. 188363, February 27, 2013
Leonardo-De Castro, J.

FACTS:
On October 10, 2002, a check in the amount of
P1,000,000.00 payable to "Mateo Mgt. Group
International" (MMGI) was presented for deposit and
accepted at petitioner's (Allied Bank) Kawit Branch. The
check, post-dated "Oct. 9, 2003", was drawn against the
account of Marciano Silva, Jr. (Silva) with respondent BPI
Bel-Air Branch. Upon receipt, petitioner sent the check for
clearing to respondent through the Philippine Clearing
House Corporation (PCHC).
The check was cleared by respondent and petitioner
credited the account of MMGI with P1,000,000.00. On
October 22, 2002, MMGI’s account was closed and all the
funds therein were withdrawn. A month later, Silva
discovered the debit of P1,000,000.00 from his account.
In response to Silva’s complaint, respondent credited his
account with the aforesaid sum.
Petitioner filed a complaint before the Arbitration
Committee, asserting that respondent should solely bear
the entire face value of the check due to its negligence in
failing to return the check to petitioner within the 24-hour
reglementary period as provided in Section 20.1of the
Clearing House Rules and Regulations (CHRR) 2000. In
its Answer with Counterclaims, respondent charged
petitioner with gross negligence for accepting the post-
dated check in the first place. It contended that petitioner’s
admitted negligence was the sole and proximate cause of
the loss.
ISSUE: What does the Doctrine of Last Clear Chance
enunciate?
RULING:
The doctrine of last clear chance, stated broadly, is that
the negligence of the plaintiff does not preclude a recovery
for the negligence of the defendant where it appears that
the defendant, by exercising reasonable care and
prudence, might have avoided injurious consequences to
the plaintiff notwithstanding the plaintiff’s negligence. The
doctrine necessarily assumes negligence on the part of
the defendant and contributory negligence on the part of
the plaintiff, and does not apply except upon that
assumption. Stated differently, the antecedent negligence
of the plaintiff does not preclude him from recovering
damages caused by the supervening negligence of the
defendant, who had the last fair chance to prevent the
impending harm by the exercise of due diligence.
Moreover, in situations where the doctrine has been
applied, it was defendant’s failure to exercise such
ordinary care, having the last clear chance to avoid loss or
injury, which was the proximate cause of the occurrence
of such loss or injury.
ISSUE: Does the Doctrine of Last Clear Chance apply
in this case?
RULING: YES. In this case, the evidence clearly shows
that the proximate cause of the unwarranted encashment
of the subject check was the negligence of respondent
who cleared a post-dated check sent to it thru the PCHC
clearing facility without observing its own verification
procedure. As correctly found by the PCHC and upheld by
the RTC, if only respondent exercised ordinary care in the
clearing process, it could have easily noticed the glaring
defect upon seeing the date written on the face of the
check "Oct. 9, 2003". Respondent could have then
promptly returned the check and with the check thus
dishonored, petitioner would have not credited the amount
thereof to the payee’s account. Thus, notwithstanding the
antecedent negligence of the petitioner in accepting the
 post-dated check for deposit, it can seek reimbursement
from respondent the amount credited to the payee’s
account covering the check.

Elcano vs. Hill

77 SCRA 100 – May 26, 1977
Barredo,J.

Facts:
Reginald Hill, a minor, caused the death of Agapito (son of
Elcano). Elcano filed a criminal case against Reginald but
Reginald was acquitted for “lack of intent coupled with
mistake.” Elcano then filed a civil action against Reginald and
his dad (Marvin Hill) for damages based on Article 2180 of the
Civil Code. Hill argued that the civil action is barred by his son’s
acquittal in the criminal case; and that if ever, his civil liability
as a parent has been extinguished by the fact that his son is
already an emancipated minor by reason of his marriage.
ISSUE: Whether or not Marvin Hill may be held civilly liable
under Article 2180.

HELD:

Yes. The acquittal of Reginald in the criminal case does not bar
the filing of a separate civil action. A separate civil action lies
against the offender in a criminal act, whether or not he is
criminally prosecuted and found guilty or acquitted, provided
that the offended party is not allowed, if accused is actually
charged also criminally, to recover damages on both scores,
and would be entitled in such eventuality only to the bigger
award of the two, assuming the awards made in the two cases
vary. In other words, the extinction of civil liability referred to in
Par. (e) of Section 3, Rule 111, refers exclusively to civil liability
founded on Article 100 of the Revised Penal Code, whereas
the civil liability for the same act considered as a quasi-
delict only and not as a crime is not extinguished even by a
declaration in the criminal case that the criminal act charged
has not happened or has not been committed by the accused.
Briefly stated, culpa aquiliana includes voluntary and negligent
acts which may be punishable by law.
While it is true that parental authority is terminated upon
emancipation of the child (Article 327, Civil Code), and under
Article 397, emancipation takes place “by the marriage of the
minor child”, it is, however, also clear that pursuant to Article
399, emancipation by marriage of the minor is not really full or
absolute. Thus “Emancipation by marriage or by voluntary
concession shall terminate parental authority over the child’s
person. It shall enable the minor to administer his property as
though he were of age, but he cannot borrow money or alienate
or encumber real property without the consent of his father or
mother, or guardian. He can sue and be sued in court only with
the assistance of his father, mother or guardian.” Therefore,
Article 2180 is applicable to Marvin Hill – the SC however ruled
since at the time of the decision, Reginald is already of age,
Marvin’s liability should be subsidiary only – as a matter of
equity.
Abella vs Francisco
55 Phil 447, November 29, 1955
Bengzon, J.
FACTS
Guillermo Francisco (defendant) purchased from the
Government on installments, lots 937-945 of the Tala Estate in
Novaliches, Caloocan, Rizal.He was behind in payment for
these installments and on October 31, 1928, he signed a
document stating that he received P500 from Julio Abella
(plaintiff) on account of lots no. 937-945, containing an area of
221 hectares, at the rate of 100/hectare, the balance of which
is due on or before December 15 of the same year, extendible
fifteen days thereafter

On Novemer 13, 1928, Abella made another payment of

P415.31, upon demand made by Francisco. On December
27,1928, Francisco, being in Cebu, wrote a letter to Roman.
Mabanta, attaching a power of attorney authorizing him to sign
in behalf of the defendant all the documents required by the
Bureau of Land for the transfer of lots to the plaintiff. In the
same letter, defendant instructed Mabanta to inform the plaintiff
that the option would be considered cancelled, and to return
the amount of P915.31, in the event that the plaintiff failed to
pay the remainder of the selling price

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 to execute the deed
of sale upon payment of the balance due .The plaintiff asked
for a few days’ time, but Mabanta only gave him until January
5. Plaintiff failed to pay the rest of the price on January 5, but
attempted to do so on January 9, but Mabanta refused to
accept it and instead returned by check the sum of P915.31.
Plaintiff brought an action to compel the defendant to execute
the deed of sale upon receipt of the balance of the price, and
asked that he be judicially declared the owner of said lots, and
that the defendant be ordered to deliver it to him. The CFI
absolved the defendant from the complaint, and the plaintiff
appealed
ISSUE
WON the time was an essential element in the contract, and
therefore, the defendant was entitled to rescind the contract for
failure of plaintiff to pay the price within the time specified

HELD
Yes. The defendant is entitled to resolve the contract for failure
to pay the price within the time specified.

In holding that the time was an essential element in the

contract, the CFI considered that the agreement in question
was an option for the purchase of the lots. The SC, however,
was divided on the question of whether the agreement was an
option or a sale. But the SC ruled that regardless of whether it
was an option or a sale, having agreed that the selling price
would be paid not later than December, 1928, and in view of
the fact that the vendor executed the contract to pay off with
the proceeds thereof certain obligations which fell due in the
same month of December, the time fixed for the payment of the
selling price was essential in the transaction.