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OBLIGATIONS (Cases 1-48)

Case No. 1 1. On July 25, 1956, appellants filed against
appellees in the Court of First Instance of
Villaroel v. Estrada Manila a complaint praying for a 20%
71 Phil 140 Christmas bonus for the years 1954 and
1955. The court a quo on appellees'
FACTS: motion to dismiss, issued the following
On May 9 1912, Alejandra F. Callao mother of order:
herein petitioner obtained from the Sps Mariano
Estrada and Severina a loan of 1000 pesos xxx considering that the action in brief is
payable in 6 years. Alejandra died leaving one to compel respondents to declare a
petitioner as the sole heir. The Sps Mariano Christmas bonus for petitioners workers
Estrada and Severina died as well leaving the in the National Development Company;
respondent as the sole heir. On Aug 9 1930, considering that the Court does not see
petitioner signed a document assuming the how petitioners may have a cause of action
obligation to pay the respondent 1000 plus 12% to secure such bonus because:
per annum interest. Hence the action filed to
recover said amount. (a) A bonus is an act of liberality and the court
The CFI ruled in favor of the respondent ordering takes it that it is not within its judicial
the petitioner to pay 1000 plus interest of 12% powers to command respondents to be
per annum to be counted from Aug 9 1930. liberal;
Whether or not the present action may prosper 2. Petitioners admit that respondents are not
notwithstanding the prescription of the action to under legal duty to give such bonus but
recover the original debt? that they had only ask that such bonus be
HELD: given to them because it is a moral
Yes. The present action is not based on the obligation of respondents to give that but
original debt contracted by petitioner’s mother – as this Court understands, it has no power
which has already prescribed – but on petitioner’s to compel a party to comply with a moral
undertaking on Aug 9 1930 to assume the original obligation (Art. 142, New Civil Code.).
obligation. For the petitioner who is the sole heir
of the original debtor with rights to the latter’s 3. A motion for reconsideration of the afore-
inheritance, the debt legally contracted by his quoted order was denied. Hence this
mother even if it has already lost enforceability appeal.
due to prescription, has become a moral
obligation which is a sufficient consideration to ISSUE: whether there exists a cause of action in
make the obligation he voluntarily assumed on the complaint because the appellants claim
Aug 9 1930 enforceable and legally demandable. rests on moral grounds or what in brief is
defined by law as a natural obligation.

Case No. 2 HELD: Order appealed is Affirmed

Ansay v NDC.
G.R. No. L-13667 April 29, 1960 Article 1423 of the New Civil Code classifies
obligations into civil or natural.
"Civil obligations are a right of action to compel
their performance.


OBLIGATIONS (Cases 1-48)
Natural obligations, not being based on positive DBP v. Confessor
law but on equity and natural law, do not grant a 161 SCRA 307 (1988)
right of action to enforce their performance, but
after voluntary fulfillment by the obligor, they
authorize the retention of what has been
delivered or rendered by reason thereof". FACTS:

It is thus readily seen that an element of natural On February 10, 1940 spouses Patricio
obligation before it can be cognizable by the court Confesor and Jovita Villafuerte obtained an
is voluntary fulfillment by the obligor. Certainly agricultural loan from DBP, in the sum of
retention can be ordered but only after there has P2,000, as evidenced by a promissory note,
been voluntary performance. But here there has whereby they bound themselves jointly and
been no voluntary performance. In fact, the court severally to pay the account in ten (10) equal
cannot order the performance. yearly amortizations.

At this point, we would like to reiterate what we After ten years, the debt remained unpaid.
said in the case of Philippine Education Co. vs. CIR Confessor, now a Congressman, executed a
and the Union of Philippine Education Co., second promissory note acknowledging the
Employees (NUL) (92 Phil., 381; 48 Off. Gaz., loan and promising to pay the same before
5278) — June 15, 1961.

From the legal point of view a bonus is Still not having paid the obligation on the
not a demandable and enforceable specified date, the DBP filed a complaint
obligation. It is so when it is made a part against the spouses for the payment of the
of the wage or salary compensation. loan.

And while it is true that the subsequent case of H. ISSUE:

E. Heacock vs. National Labor Union, et al., 95
Phil., 553; 50 Off. Gaz., 4253, we stated that: Whether or not prescription had barred the
Even if a bonus is not demandable for not
forming part of the wage, salary or HELD:
compensation of an employee, the same
may nevertheless, be granted on equitable No. Prescription was renounced when
consideration as when it was given in the Confessor signed the second promissory note.
past, though withheld in succeeding two
years from low salaried employees due to The right to prescription may be waived or
salary increases. renounced. Prescription is deemed to have
been tacitly renounced when the renunciation
still the facts in said Heacock case are not the results from acts which imply the
same as in the instant one, and hence the ruling abandonment of the right acquired.
applied in said case cannot be considered in the
present action. The Court ruled that when a debt is already
barred by prescription, it cannot be enforced
Case No. 3 by the creditor. But a new contract


OBLIGATIONS (Cases 1-48)
recognizing and assuming the prescribed debt was authorized to repair the warehouse on the
would be valid and enforceable. land, and actually spent thereon the repairs the
sum of P26,898.27. In 1948, defendant leased
The statutory limitation bars the remedy but one-third of the warehouse to one Dioscoro Sarile
does not discharge the debt. A new express at a monthly rental of P500, which was later
promise to pay a debt barred ... will take the raised to P1,000 a month. Sarile did not pay the
case from the operation of the statute of rents, so action was brought against him. It is not
limitations as this proceeds upon the ground shown, however, if the judgment was ever
that as a statutory limitation merely bars the executed.
remedy and does not discharge the debt, there The present action is to recover the reasonable
is something more than a mere moral rentals from August, 1946, the date when the
obligation to support a promise, to wit a – pre- defendant began to occupy the premises, to the
existing debt which is a sufficient date it vacated it. The defendant does not contest
consideration for the new the new promise; its liability for the rentals at the rate of P3,000 per
upon this sufficient consideration constitutes, month from February 28, 1949 (the date specified
in fact, a new cause of action. in the judgment in civil case No. 5007), but resists
the claim therefor prior to this date. It interposes
Case No. 4 the defense that it occupied the property in good
SAGRADA ORDEN vs. NACOCO faith, under no obligation whatsoever to pay
91 Phil 503 rentals for the use and occupation of the
FACTS: ISSUE: Whether or not NACOCO has the
This is an action to recover the possession of a obligation to pay rentals.
piece of real property situated in Pandacan RULING: NO.
Manila, and the rentals for its occupation and use. We can not understand how the trial court, from
The land belongs to the plaintiff, in whose name the mere fact that plaintiff-appellee was the
the title was registered before the war. On owner of the property and the defendant-
January 4, 1943, during the Japanese military appellant the occupant, which used for its own
occupation, the land was acquired by a Japanese benefit but by the express permission of the APC
corporation by the name of Taiwan Tekkosho for of the US, so easily jumped to the conclusion that
the sum of P140,00, and thereupon title thereto the occupant is liable for the value of such use and
issued in its name. After liberation, more occupation. If defendant-appellant is liable at
specifically on April 4, 1946, the Alien Property all, its obligations, must arise from any of the
Custodian (APC) of the United States of America four sources of obligations, namley, law,
took possession, control, and custody thereof contract or quasi-contract, crime, or
under section 12 of the Trading with the Enemy negligence. (Article 1089, Spanish Civil Code.)
Act, 40 Stat., 411, for the reason that it belonged Defendant-appellant is not guilty of any offense at
to an enemy national. During the year 1946 the all, because it entered the premises and occupied
property was occupied by the Copra Export it with the permission of the entity which had the
Management Company under a custodianship legal control and administration thereof, the
agreement with US APC. When it vacated the Allien Property Administration. Neither was
property it was occupied by the defendant herein. there any negligence on its part. There was also
The Philippine Government made no privity (of contract or obligation) between the
representations with the Office Alien Property APC and the Taiwan Tekkosho, which had
Custodian for the use of property by the secured the possession of the property from the
Government. On March 31, 1947, the defendant plaintiff-appellee by the use of duress, such that


OBLIGATIONS (Cases 1-48)
the Alien Property Custodian or its permittee occupation, it is only fair and just that it may not
(defendant-appellant) may be held responsible be held liable therefor. And as to the rents it
for the supposed illegality of the occupation of the collected from its lessee, the same should accrue
property by the said Taiwan Tekkosho. The Allien to it as a possessor in good faith, as this Court has
Property Administration had the control and already expressly held.
administration of the property not as successor to
the interests of the enemy holder of the title, the
Taiwan Tekkosho, but by express provision of law CASE NO. 5
(Trading with the Enemy Act). Neither is it a METROPOLITAN BANK AND TRUST COMPANY
trustee of the former owner, the plaintiff-appellee VS ROSALES
herein, but a trustee of then Government of the G.R. No. 183204
United States, in its own right, to the exclusion of,
and against the claim or title of, the enemy owner. FACTS:
From August, 1946, when defendant-appellant
took possession, to the late of judgment on Petitioner Metrobank is a domestic banking
February 28, 1948, Allien Property corporation duly organized and existing under
Administration had the absolute control of the the laws of the Philippines. Respondent Rosales is
property as trustee of the USA, with power to the owner of a travel agency while Yo Yuk To is
dispose of it by sale or otherwise, as though it her mother.
were the absolute owner. Therefore, even if
defendant-appellant were liable to the Allien In 2000, respondents opened a Joint Peso
Property Administration for rentals, these would Account10 with petitioner s Pritil-Tondo Branch.
not accrue to the benefit of the plaintiffappellee, In May 2002, respondent Rosales accompanied
the owner, but to the US government. her client Liu Chiu Fang, a Taiwanese National
But there is another ground why the claim or applying for a retiree s visa from the Philippine
rentals can not be made against defendant- Leisure and Retirement Authority (PLRA), to
appellant. There was no agreement between the petitioner s branch in Escolta to open a savings
Alien Property Custodian and the defendant- account. Since Liu Chiu Fang could speak only in
appellant for the latter to pay rentals on the Mandarin, respondent Rosales acted as an
property. interpreter for her.
The above considerations show that plaintiff-
appellee's claim for rentals before it obtained the On March 3, 2003, respondents opened with
judgment annulling the sale of the Taiwan petitioner s Pritil-Tondo Branch a Joint Dollar
Tekkosho may not be predicated on any Account with an initial deposit of US$14,000.00.
negligence or offense of the defendant-appellant,
or any contract, express or implied, because the On July 31, 2003, petitioner issued a Hold Out
Allien Property Administration was neither a order against respondents’ accounts.
trustee of plaintiff-appellee, nor a privy to the
obligations of the Taiwan Tekkosho, its title being On September 3, 2003, petitioner, through its
based by legal provision of the seizure of enemy Special Audit Department Head Antonio Ivan
property. We have also tried in vain to find a law Aguirre, filed before the Office of the Prosecutor
or provision thereof, or any principle in quasi of Manila a criminal case for Estafa through False
contracts or equity, upon which the claim can be Pretences, Misrepresentation, Deceit, and Use of
supported. On the contrary, as defendant- Falsified Documents.
appellant entered into possession without any
expectation of liability for such use and


OBLIGATIONS (Cases 1-48)
Respondent Rosales, however, denied taking part Accordingly, we agree with the findings of the
in the fraudulent and unauthorized withdrawal RTC and the CA that the Hold Out clause does not
from the dollar account of Liu Chiu Fang. apply in the instant case.

On December 15, 2003, the Office of the City In view of the foregoing, the Court found that
Prosecutor of Manila issued a Resolution petitioner is guilty of breach of contract when it
dismissing the criminal case for lack of probable unjustifiably refused to release respondents
cause. On September 10, 2004, respondents filed deposit despite demand. Having breached its
before the RTC of Manila a complaint for Breach contract with respondents, petitioner is liable for
of Obligation and Contract with Damages. damages.

ISSUE: Whether Metrobank breached its contract

with respondents. Case No. 6
HELD: YES. The Court held that Metrobank‘s G.R. No. 179337 April 30, 2008
reliance on the Hold Out clause in the Application
and Agreement for Deposit Account is misplaced.
Bank deposits, which are in the nature of a simple Petitioner Joseph Saludaga was a sophomore law
loan or mutuum, must be paid upon demand by student of (FEU) when he was shot by Alejandro
the depositor. Rosete, one of the security guards on duty at the
school premises on August 18, 1996. Petitioner
The Hold Out clause applies only if there is a valid was rushed to FEU Hospital due to the wound he
and existing obligation arising from any of the sustained. Meanwhile, Rosete was brought to the
sources of obligation enumerated in Article 1157 police station where he explained that the
of the Civil Code, to wit: law, contracts, quasi- shooting was accidental. He was eventually
contracts, delict, and quasi-delict. In this case, released considering that no formal complaint
petitioner failed to show that respondents have was filed against him.
an obligation to it under any law, contract, quasi-
contract, delict, or quasi-delict. And although a Saludaga thereafter filed with RTC Manila
criminal case was filed by petitioner against a complaint for damages against respondents on
respondent Rosales, this is not enough reason for the ground that they breached their obligation to
petitioner to issue a Hold Out order as the case is provide students with a safe and secure
still pending and no final judgment of conviction environment and an atmosphere conducive to
has been rendered against respondent Rosales. learning.

In fact, it is significant to note that at the time Respondents, in turn, filed a Third-Party
petitioner issued the Hold Out order, the criminal Complaint against Galaxy Dvpt and Mgt Corp.
complaint had not yet been filed. Thus, (Galaxy), the agency contracted by FEU to provide
considering that respondent Rosales is not liable security services within its premises and Mariano
under any of the five sources of obligation, there D. Imperial (Imperial), Galaxy's President, to
was no legal basis for petitioner to issue the Hold indemnify them for whatever would be adjudged
Out order. in favor of petitioner, if any; and to pay attorney's
fees and cost of the suit. On the other hand, Galaxy
and Imperial filed a Fourth-Party Complaint
against AFP General Insurance.


OBLIGATIONS (Cases 1-48)
1. WON Saludaga may claim damages from
On Nov.10, 2004, the trial court ruled in favor of FEU for breach of student-school contract
Saludaga, the dispositive portion of which reads: for a safe learning environment
WHEREFORE, from the foregoing, judgment is 2. Whether FEU’s liability is based on quasi-
hereby rendered ordering: delict or on contract
1. FEU and Edilberto de Jesus, in his capacity as 3. From what source of obligation did the
president of FEU to pay jointly and severally other claims arose?
Joseph Saludaga the amount of P35,298.25 for
actual damages with 12% interest per annum HELD:
from the filing of the complaint until fully paid; 1) Yes.
moral damages xxx, exemplary damages xx, 2) FEU’s liability is based on contract, not quasi-
attorney's fees xx and cost of the suit; delict.
2. Galaxy Corp. and its president, Col. Mariano 3) Quasi-delict – vicarious liability between
Imperial to indemnify jointly and severally 3rd Galaxy Agency and security guard Rosete
party plaintiffs (FEU and Edilberto de Jesus in his Quasi-delict – but SC held that there is no
capacity as President of FEU) for the above- vicarious liability between FEU and Rosete
mentioned amounts; Quasi-delict – damage to FEU due to the
3. And the 4th party complaint is dismissed for negligence of Galaxy Agency in supplying FEU
lack of cause of action. No pronouncement as to with an unqualified guard (Imperial, the
costs. president of Galaxy is solidarily liable with the
Respondents appealed to the CA which ruled in its agency)
favor, reversing the RTC decision, dismissing the
complaint, and also denying Saludaga’s It is undisputed that Saludaga was enrolled as a
subsequent MR. Hence, the instant petition based sophomore law student in FEU. As such, there was
on the following grounds: created a contractual obligation between the two
parties. On Saludaga's part, he was obliged to
THE CA SERIOUSLY ERRED....IN RULING THAT: comply with the rules and regulations of the
1. THE SHOOTING INCIDENT IS A FORTUITOUS school. On the other hand, FEU, as a learning
EVENT; institution is mandated to impart knowledge and
2. RESPONDENTS ARE NOT LIABLE FOR equip its students with the necessary skills to
DAMAGES FOR THE INJURY RESULTING FROM A pursue higher education or a profession. At the
GUNSHOT WOUND SUFFERED BY THE same time, it is obliged to ensure and take
PETITIONER.....IN VIOLATION OF adequate steps to maintain peace and order
AND SECURE EDUCATIONAL ENVIRONMENT; It is settled that in culpa contractual, the mere
3. ALEJANDRO ROSETE....IS NOT FEU’S proof of the existence of the contract and the
EMPLOYEE.....; and failure of its compliance justify, prima facie, a
4. RESPONDENT EXERCISED DUE DILIGENCE IN corresponding right of relief. In the instant case
SELECTING GALAXY AS THE AGENCY WHICH when Saludaga was shot inside the campus by no
WOULD PROVIDE SECURITY SERVICES WITHIN less the security guard who was hired to maintain
THE PREMISES OF RESPONDENT FEU. peace and secure the premises, there is a prima
facie showing that FEU failed to comply with its
ISSUES: obligation to provide a safe and secure
environment to its students.


OBLIGATIONS (Cases 1-48)
In order to avoid liability, however, FEU alleged respondent FEU is liable to petitioner for
that the shooting incident was a fortuitous event damages.
because they could not have reasonably foreseen
nor avoided the accident caused by Rosete as he We note that the trial court held respondent De
was not their employee; and that they complied Jesus solidarily liable with respondent FEU.
with their obligation to ensure a safe learning In Powton Conglomerate, Inc. v. Agcolicol, we held
environment for their students by having that:
exercised due diligence in selecting the security ... Personal liability of a corporate director,
services of Galaxy. trustee or officer along (although not necessarily)
with the corporation may so validly attach, as a
After a thorough review of the records, the SC rule, only when - (1) he assents to a patently
found that FEU failed to discharge the burden of unlawful act of the corporation, or when he is
proving that they exercised due diligence in guilty of bad faith or gross negligence in directing
providing a safe learning environment for their its affairs, or when there is a conflict of interest
students. They failed to prove that they ensured resulting in damages to the corporation, its
that the guards assigned in the campus met the stockholders or other persons; (2) he consents to
requirements stipulated in the Security Service the issuance of watered down stocks or who,
Agreement. Certain documents about Galaxy having knowledge thereof, does not forthwith file
were presented during trial; however, no with the corporate secretary his written objection
evidence as to the qualifications of Rosete as a thereto; (3) he agrees to hold himself personally
security guard for the university was offered. FEU and solidarily liable with the corporation; or (4)
also failed to show that they undertook steps to he is made by a specific provision of law
ascertain and confirm that the security guards personally answerable for his corporate action.
assigned to them actually possess the None of the foregoing exceptions was established
qualifications required in the Security Service in the instant case; hence, respondent De Jesus
Agreement. should not be held solidarily liable with
respondent FEU.
Consequently, FEU's defense of force
majeure must fail. In order for force majeure to be Incidentally, although the main cause of action in
considered, FEU must show that no negligence or the instant case is the breach of the school-
misconduct was committed that may have student contract, petitioner, in the alternative,
occasioned the loss. An act of God cannot be also holds respondents vicariously liable under
invoked to protect a person who has failed to take Article 2180 of the Civil Code.
steps to forestall the possible adverse However, respondents cannot be held liable
consequences of such a loss. When the effect is for damages under Art. 2180 of the Civil Code
found to be partly the result of a person's because respondents are not the employers of
participation - whether by active intervention, Rosete. The latter was employed by Galaxy. The
neglect or failure to act - the whole occurrence is instructions issued by respondents' Security
humanized and removed from the rules Consultant to Galaxy and its security guards are
applicable to acts of God. ordinarily no more than requests commonly
envisaged in the contract for services entered into
Article 1170 of the Civil Code provides that those by a principal and a security agency.
who are negligent in the performance of their
obligations are liable for damages. Accordingly, As to the Third Party Claim against Galaxy,
for breach of contract due to negligence in evidence duly supports that Galaxy is negligent
providing a safe learning environment, not only in the selection of its employees but also


OBLIGATIONS (Cases 1-48)
in their supervision. Indeed, no administrative of law between the contracting parties and should
sanction was imposed against Rosete despite the be complied with in good faith."
shooting incident; moreover, he was even FACTS
allowed to go on leave of absence which led People’s Car Inc (People’s) contracted
eventually to his disappearance. Galaxy also failed Commonado Security Agency (Commonado)
to monitor petitioner's condition or extend the under a Guard Service Contract. A guard under
necessary assistance. For these acts of contract, while on duty, took out a customer’s car
negligence and for having supplied [Joseph Luy’] for a joyride. While driving along JP
respondent FEU with an unqualified security Laurel St, Davao City, the guard lost control of the
guard, which resulted to the latter's breach of car and the car fell into a ditch. The car guard was
obligation to petitioner, it is proper to charged with qualified theft and the car and
hold Galaxy liable to respondent FEU for such company sustained damages amounting to
damages equivalent to the above-mentioned P8,489.
amounts awarded to petitioner. People’s Car Inc claims that the security agency is
liable under paragraph 5 of their contract 1 as they
Unlike respondent De Jesus, we deem Imperial assumed the “sole responsibility for the acts done
to be solidarily liable with Galaxy for being during their watch hours” by the guards.
grossly negligent in directing the affairs of the Commondao countered that under the contract
security agency. It was Imperial who assured their liability shall not exceed P1,000.00 per
petitioner that his medical expenses will be guard post (par. 4).
shouldered by Galaxy but said representations Davao RTC held for Commonado and limited
were not fulfilled. award of damages to P1,000.00 based on the
contract. RTC also commented that if the situation
was one falling on par. 5, People’s should have
CASE NO. 7 insisted and not paid the damages to Luy, and told
PEOPLE ’S CAR INC. V. COMMANDO SECURITY him instead to bring a case where Commonado
51 SCRA 40 would be become a party through a third-party
DOCTRINE complaint or as a co-defendant.
A party under contract is, in law, liable to its ISSUE /S
customer for the damages caused the customer's Whether the award of P1,000.00 was proper.
car, which had been entrusted into its custody. HELD
The party is therefore justified in law in making NO. Court reversed and awarded the full amount
good such damages and relying in turn on of actual damages.
defendant to honor its contract and indemnify it The limited liability is only applicable is loss or
for such undisputed damages, which had been damage was through the negligence of
caused directly by the unlawful and wrongful acts Commondo’s guards, not when the guards
of defendant's security guard in breach of their deliberately disregarded his duty to safeguard
contract. As ordained in Article 1159, Civil Code, People’s property by taking a customer’s car out
"obligations arising from contracts have the force on a joyride.

'Par. 4. — Party of the Second Part (def endant) through the negligence of its per guard post.'
guards, af ter an inv estigation has been conducted by the Party of the First Part
(plaintif f ) wherein the Party of the Second Part has been duly represented shall
assume f ull responsibilities f or any loss or damages that may occur to any property 'Par. 5 — The party of the Second Part assumes the responsibility f or the proper
of the Party of the First Part f or which it is accountable, during the watch hours of perf ormance by the guards employ ed, of their duties and (shall) be solely
the Party of the Second Part, prov ided the same is reported to the Party of the responsible f or the acts done during their watch hours, the Party of the First Part
Second Part within twenty -f our (24) hours of the occurrence, except where such being specif ically released f rom any and all liabilities to the f ormer's employ ee or
loss or damage is due to force majeure, prov ided howev er that af ter the proper to the third parties arising f rom the acts or omissions done by the guard during
inv estigation to be made thereof that the guard on post is f ound negligent and that their tour of 
 duty .' ...
the amount of the loss shall not exceed ONE THOUSAND (P1,000.00) PESOS


OBLIGATIONS (Cases 1-48)
Plaintiff was in law liable to its customer for the 3. In 1952, Tuason & Co. availed of Cruz’ services
damages caused the customer's car, which had as an intermediary with the Deudors, to work for
been entrusted into its custody. Plaintiff therefore the amicable settlement in a civil case. The said
was in law justified in making good such damages case involved 50 quiones of land, of which the 20
and relying in turn on defendant to honor its quiones of land mentioned formed part;
contract and indemnify it for such undisputed 4. A compromise agreement between the Deudors
damages, which had been caused directly by the and Tuason & Co. was entered into on 1963 which
unlawful and wrongful acts of defendant's was approved by court;
security guard in breach of their contract. As 5. Cruz alleged that Tuason & Co. promised to
ordained in Article 1159, Civil Code, "obligations convey him the 3,000 sq. meters of land occupied
arising from contracts have the force of law by him which was part of the 20 quiones of land
between the contracting parties and should be within 10 years from the date of signing of the
complied with in good faith." compromise agreement between the Deudors
Plaintiff in law could not tell its customer, as per and the latter as consideration of his services. The
the trial court's view, that "under the Guard said land was not conveyed to him by Tuason &
Service Contract it was not liable for the damage Co.
but the defendant" — since the customer could 6. Cruz further alleged that Tuason & Co. was
not hold defendant to account for the damages as unjustly enriched at his expense since they
he had no privity of contract with defendant. Such enjoyed the benefits of the improvements he
an approach of telling the adverse party to go to made on the land acquired by the latter.
court, notwithstanding his plainly valid claim, 7. The trial court dismissed the case on the
aside from its ethical deficiency among others, ground that there was no cause of action. Hence,
could hardly create any goodwill for plaintiff's this appeal
business, in the same way that defendant's ISSUE:
baseless attempt to evade fully discharging its Whether or not a presumed quasi-contract be
contractual liability to plaintiff cannot be emerged as against one part when the subject
expected to have brought it more business. matter thereof is already covered by a contract
Worse, the administration of justice is prejudiced, with another party.
since the court dockets are unduly burdened with HELD:
unnecessary litigation. From the very language of this provision, it is
obvious that a presumed qauasi-contract cannot
CASE No. 8 emerge as against one party when the subject
CRUZ vs TUASON & CO. mater thereof is already covered by an existing
G.R. No. L-23749 April 29, 1977 contract with another party. Predicated on the
principle that no one should be allowed to
FACTS: unjustly enrich himself at the expense of another,
1. As requested by the Deudors, the family of Article 2124 creates the legal fiction of a quasi-
Telesforo Deudor who laid claim on the land in contract precisely because of the absence of any
questionon the strength of an informacion actual agreement between the parties concerned.
posesoria, Cruz made permanent improvements Corollarily, if the one who claims having enriched
on the said land having an area of more or less 20 somebody has done so pursuant to a contract
quinones; with a third party, his cause of action should be
2. The improvements were valued at P30,400 and against the latter, who in turn may, if there is any
for which he incurred expenses amounting to ground therefor, seek relief against the party
P7,781.74; benefited. It is essential that the act by which the
defendant is benefited must have been voluntary


OBLIGATIONS (Cases 1-48)
and unilateral on the part of the plaintiff. As one for the redemption, the defendant refused to
distinguished civilian puts it, "The act is deliver the property to the purchaser. Gutierrez
voluntary. because the actor in quasi-contracts is Hermanos then charged Duran with Estafa, for
not bound by any pre-existing obligation to act. It having represented himself in the said deed of
is unilateral, because it arises from the sole will of sale to be the absolute owner of the land. During
the actor who is not previously bound by any that trial, when Orense was called as a witness, he
reciprocal or bilateral agreement. admitted that he consented to Duran’s selling of
The reason why the law creates a juridical property under right of redemption. Because of
relations and imposes certain obligation is to this, the court acquitted Duran for charge of
prevent a situation where a person is able to Estafa. Mar 5, 1913 Gutierrez Hermanos then filed
benefit or take advantage of such lawful, a complaint in the CFI Albay against Engracio
voluntary and unilateral acts at the expense of Orense.
said actor." In the case at bar, since appellant has
a clearer and more direct recourse against the Petitioner Claims that the instrument of
Deudors with whom he had entered into an sale of the property, executed by Jose Duran, was
agreement regarding the improvements and publicly and freely confirmed and ratified by
expenditures made by him on the land of Orense. In order to perfect the title to the said
appellees. It Cannot be said, in the sense property, all plaintiff had to do was demand of
contemplated in Article 2142, that appellees have Orense to execute in legal form a deed of
been enriched at the expense of appellant. conveyance. But Orense refused to do so, without
any justifiable cause or reason, and so he should
be compelled to execute the said deed by an
Case No. 9 express order of the court. Jose DURAN is
Gutierrez Hermanos vs. Orense notoriously insolvent and cannot reimburse the
Gr. No. L-9188 plaintiff company for the price of the sale which
1914 he received, nor pay any sum for the losses and
damages occasioned by the sale. Also, Duran had
Facts: been occupying the said property since February
Orense is the owner a parcel of land (with 14, 1911, and refused to pay the rental
masonry house, and with the nipa roof erected) notwithstanding the demand made upon him at
situated in the pueblo of Guinobatan, Albay. This the rate of P30 per month. Plaintiff prays that the
property has been recorded in the new property land and improvements be declared as belonging
registry in his name. Feb 14, 1907. Jose Duran, legitimately and exclusively to him, and that
nephew of Orense, executed before a notary defendant be ordered to execute in the plaintiff's
public instrument that he sold and conveyed to behalf the said instrument of transfer and
the plaintiff company the said property for P1,500 conveyance of the property and of all the right,
and that the vendor Duran reserved to himself the interest, title and share which the defendant has.
right to repurchase it for the same price within a Respondent contends that the Facts in the
period of four years. complaint did not constitute a cause of action and
He is the lawful owner of the property claimed in
Gutierrez Hermanos had not entered into the complaint, and since his Ownership was
possession of the purchased property because of recorded in the property registry, this was
its continued occupancy by Orense and Duran by conclusive against the plaintiff, He had not
virtue of a contract of lease executed by the executed any written power of attorney nor given
plaintiff to Duran, effective up to February 14, any verbal authority to Jose DURAN to sell the
1911. After the lapse of the four years stipulated property to Gutierrez Hermanos. His knowledge


OBLIGATIONS (Cases 1-48)
of the sale was acquired long after the execution
of the contract of sale between Duran and TOPIC: Sources of Obligations
Gutierrez Hermanos, and he did not intentionally
and deliberately perform any act such as might
have induced the plaintiff company to believe that FACTS:
Duran was empowered and authorized by the Petitioner herein is the child of one Felisa Alzul by
defendant. her first marriage while respondents are her
children in her second marriage. Felisa Alzul sold
Issue: her property in pacto de retro but died without
having redeemed the property. Petitioner
It is whether Orense is bound by Duran’s repurchased by himself alone the said property
act of selling plaintiff’s property. within the period of redemption and executed a
deed of extra-judicial partition misrepresenting
Decision: himself as the only heir of his mother and
successfully had the certificate of title transferred
Yes. Ratio It having been proven at the trial to petitioner’s name. Respondents who are his
that he gave his consent to the said sale, it follows half siblings filed a case for partition and
that the defendant conferred verbal, or at least accounting claiming that he is only a trustee of an
implied, power of agency upon his nephew Duran, implied trust when he redeemed it. It also
who accepted it in the same way by selling the appears that one of the respondents occupied a
said property. The principal must therefore fulfill portion of the property. Petitioner’s position
all the obligations contracted by the agent, who however is that for failure of his co-heirs
acted within the scope of his authority. (Civil (respondents) to join him in the redemption
Code, arts. 1709, 1710 and 1727)Article 1259 of within the period required by law, title vests in
the Civil Code prescribes: "No one can contract in him relying on Art. 1613 of the New Civil Code
the name of another without being authorized by giving the vendee a retro the right to demand
him or without his legal representation according redemption of the entire property.
to law. A contract executed in the name of another
by one who has neither his authorization nor legal ISSUE/S: Whether or not a co-owner may acquire
representation shall be void, unless it should be excusive ownership over the property held in
ratified by the person in whose name it was common.
executed before being revoked by the other
contracting party.”- The sworn statement made
by the defendant, Orense, while testifying as a RULING: There is no merit in the petition. The
witness at the trial of Duran for Estafa, virtually right of repurchase may be exercised by a co-
confirms and ratifies the sale of his property owner but only with respect to his/her share
affected by his nephew, Duran, and, pursuant to alone. The redemption by the petitioner of the
article 1313 of the Civil Code, remedies all defects entire property did not vest in him ownership of
which the contract may have contained from the the entire property because it does not put an end
moment of its execution. to the existing state of co-ownership between the
siblings. Failure on the part of all the co-owners
to redeem the property entitles the vendee a retro
to retain the property and consolidate title under
Case No. 10 his name. Neither will the successful transfer of
ADILLE vs. CA the title in his name operate to terminate co-
G.R. No. L-44546 January 29, 1988 ownership. Registration of property is not one of


OBLIGATIONS (Cases 1-48)
the means of acquiring ownership. Petitioner is After Mantrust effected the transfer, the payment
thus said to be only a trustee pursuant to Art. was not effected immediately because the payee
1456 of the New Civil Code of the Philippines designated in the telex was only “Wearing
which states that if property is acquired through Apparel.” Private respondent sent PNB another
mistake or fraud, the person obtaining it is, by telex stating that the payment was to be made to
force of law, considered a trustee of an implied “Irene’s Wearing Apparel.”
trust for the benefit of the person from whom the
property comes. Prescription to bar the On August 28, 1980, petitioner received the
respondents to demand the thing owned in remittance of $10,000.
common has likewise not set in as the petitioner
has not repudiated the said co-ownership further After learning about the delay, Facets informed
proven by the fact that one of the respondents has FNSB about the situation. Facts, unaware that
been occupying a portion of the land. He has not petitioner had already received the remittance,
even made known to the said respondent that he informed private respondent and amended its
has already repudiated the co-ownership and that instruction y asking it to effect the payment to
he has to vacate the premises. Similarly, Philippine Commercial and Industrial Bank
prescription on action to enforce constructive (PCIB) instead of PNB.
trust prescribes in ten (10) years reckoned from
registration of property will not in anyway work Private respondent, also unaware that petitioner
to bar any action that may be instituted by the had already received the remittance, instructed
respondents because it should be reckoned from PCIB to pay $10,000 to petitioner. Hence,
the time of discovery of the fraud which in this petitioner received another $10,000 which was
case became apparent only during the progress of charged again to the account of Facets with FNSB.
the litigation.
FNSB discovered that private respondent had
made a duplication of remittance. Private
CASE No. 11
ANDRES VS MANTRUST respondent asked petitioner to return the second
remittance of $10,000 but the latter refused to do
G.R. NO. 82670 SEPTEMBER 15, 1989
so contending that the doctrine of solution
indebiti does not apply because there was
FACTS: negligence on the part of the respondents and
that they were not unjustly enriched since Facets
Andres, using the business name “Irene’s Wearing still has a balance of $49,324.
Apparel” was engaged in the manufacture of ISSUE: Whether or not there is solution indebiti
ladies garments, children’s wear, men’s apparel
and linens for local and foreign buyers. Among its HELD: Yes. Art 2154 of the New Civil Code is
foreign buyers was Facts of the United States.
Art. 2154. If something received when there is no
Sometime in August 1980, Facts instructed the right to demand it, and it was unduly delivered
First National State Bank (FNSB) of New Jersey to through mistake, the obligation to return it arises.
transfer $10,000 to Irene’s Wearing Apparel via …This legal provision, which determines the
Philippine National Bank (PNB) Sta. Cruz, Manila quasi-contract of solution indebiti, is one of the
concrete manifestations of the ancient principle
branch. FNSB instructed Manufacturers Hanover
that no one shall enrich himself unjustly at the
and Trust Corporation (Mantrust) to effect the
expense of another.
transfer by charging the amount to the account of For this article to apply, the following requisites
FNSB with private respondent.
must concur: 1) that he who paid was not under
OBLIGATIONS (Cases 1-48)
obligation to do so; and 2) that payment was Group II or Ordinance No. 3364 as
made by reason of an essential mistake of fact. amended by Sec. 1, Group II of Ordinance
No. 3816 on the sales of imported billiard
There was a mistake, not negligence, in the balls, bowling balls and other accessories
second remittance. It was evident by the fact that at its display room.
both remittances have the same reference invoice
number. 6. The plaintiff filed with defendant City
Treasurer of Manila, a formal request for
refund of the retail dealer's taxes unduly
paid by it.
Case No. 12
PUYAT & SONS vs. MANILA 7. The defendant City Treasurer of Manila
G.R. No. L-17447 April 30, 1963
definitely denied said request for refund.
ISSUE: Whether the City of Manila has the
1. The plaintiff is a corporation duly obligation to return the tax paid by the plaintiff
organized and existing according to the under the principle of solutio indebiti?
laws of the Philippines, with offices at
Manila; while defendant City Manila is a
Municipal Corporation duly organized in HELD: YES.
accordance with the laws of the
Philippines, and defendant Marcelino Under the first issue, defendants-appellants
Sarmiento is the duly qualified incumbent contend that the taxes in question were
City Treasurer of Manila; voluntarily paid by appellee company and since,
in this jurisdiction, in order that a legal basis arise
2. Plaintiff is engaged in the business of for claim of refund of taxes erroneously assessed,
manufacturing and selling all kinds of payment thereof must be made under protest,
furniture. and this being a condition sine qua non, and no
protest having been made, -- verbally or in
3. Acting pursuant to Ordinance No. 3364, writing, there by indicating that the payment was
defendant City Treasurer assessed from voluntary, the action must fail. Cited in support of
plaintiff retail dealer's tax on the sales of the above contention, are the cases of Zaragoza vs.
furniture manufactured and sold by it at its
Alfonso, 46 Phil. 160-161, and Gavino v.
factory site. Municipality of Calapan, 71 Phil. 438..
4. Plaintiff, being a manufacturer of various In refutation of the above stand of appellants,
kinds of furniture, is exempt from the
appellee avers that the payments could not
payment of taxes imposed under the have been voluntary. At most, they were paid
Ordinance No. 3364 on the sale of the "mistakenly and in good faith" and "without
various kinds of furniture manufactured protest in the erroneous belief that it was
by it pursuant to Republic Act No. 409 liable thereof." Voluntariness is incompatible
(Revised Charter of Manila), as restated in with protest and mistake. It submits that this
Ordinance No.3816. is a simple case of "solutio indebiti"..
5. That, however, plaintiff, is liable for the
payment of taxes prescribed in Section 1,
OBLIGATIONS (Cases 1-48)
Appellants do not dispute the fact that appellee- expressed in the case of Newport v. Ringo, 37 Ky.
company is exempted from the payment of the tax 635, 636; 10 S.W. 2, in the following manner:.
in question. This is manifest from the reply of "It is too well settled in this state to need the
appellant City Treasurer stating that sales of citation of authority that if money be paid through
manufactured products at the factory site are not a clear mistake of law or fact, essentially affecting
taxable either under the Wholesalers Ordinance the rights of the parties, and which in law or
or under the Retailers' Ordinance. conscience was not payable, and should not be
retained by the party receiving it, it may be
With this admission, it would seem clear that the recovered. Both law and sound morality so
taxes collected from appellee were paid, thru an dictate. Especially should this be the rule as to
error or mistake, which places said act of payment illegal taxation. The taxpayer has no voice in the
within the pale of the new Civil Code provision on imposition of the burden. He has the right to
solutio indebiti. The appellant City of Manila, at presume that the taxing power has been lawfully
the very start, notwithstanding the Ordinance exercised. He should not be required to know
imposing the Retailer's Tax, had no right to more than those in authority over him, nor should
demand payment thereof.. he suffer loss by complying with what he bona
fide believe to be his duty as a good citizen. Upon
"If something is received when there is no the contrary, he should be promoted to its ready
right to demand it, and it was unduly performance by refunding to him any legal
delivered through mistake, the obligation to exaction paid by him in ignorance of its illegality;
return it arises" (Art. 2154, NCC).. and, certainly, in such a case, if be subject to a
penalty for nonpayment, his compliance under
Appellee categorically stated that the belief of its legality, and without awaiting a resort
payment was not voluntarily made, (a fact to judicial proceedings should not be regarded in
found also by the lower court), but on the law as so far voluntary as to affect his right of
erroneous belief, that they were due. Under recovery.".
this circumstance, the amount paid, even
without protest is recoverable. "If the payer "Every person who through an act or
was in doubt whether the debt was due, he performance by another, or any other means,
may recover if he proves that it was not due" acquires or comes into possession of something at
(Art. 2156, NCC). Appellee had duly proved the expense of the latter without just or legal
that taxes were not lawfully due. There is, grounds, shall return the same to him"(Art. 22,
therefore, no doubt that the provisions of Civil Code). It would seems unedifying for the
solutio indebtiti, the new Civil Code, apply to government, (here the City of Manila), that
the admitted facts of the case.. knowing it has no right at all to collect or to
receive money for alleged taxes paid by mistake,
"Payment by reason of a mistake in the it would be reluctant to return the same. No one
construction or application of a doubtful or should enrich itself unjustly at the expense of
difficult question of law may come within the another (Art. 2125, Civil Code).
scope of the preceding article" (Art. 21555)..
Admittedly, plaintiff-appellee paid the tax
There is no gainsaying the fact that the payments without protest.Equally admitted is the fact that
made by appellee was due to a mistake in the section 76 of the Charter of Manila provides that
construction of a doubtful question of law. The "No court shall entertain any suit assailing the
reason underlying similar provisions, as applied validity of tax assessed under this article until the
to illegal taxation, in the United States, is taxpayer shall have paid, under protest the taxes


OBLIGATIONS (Cases 1-48)
assessed against him, xx". It should be noted, protest is not required as a condition sine qua
however, that the article referred to in said non for its application..
section is Article XXI, entitled Department of
Assessment and the sections thereunder
manifestly show that said article and its sections Case No. 13
relate to assessment, collection and recovery of CBK vs CIR
real estate taxes only. Said section 76, therefor, is Gr. Nos. 198729-30 Jan. 15, 2014
not applicable to the case at bar, which relates to
the recover of retail dealer taxes.. Topic: Quasi-delicts; Solutio Indebiti

In the opinion of the Secretary of Justice (Op. Facts:

90,Series of 1957, in a question similar to the case
at bar, it was held that the requiredment of Petitioner is engaged, among others, in the
protest refers only to the payment of taxes which operation, maintenance, and management of the
are directly imposed by the charter itself, that is, Kalayaan II pumped-storage hydroelectric power
real estate taxes, which view was sustained by plant, the new Caliraya Spillway, Caliraya,
judicial and administrative precedents, one of Botocan; and the Kalayaan I hydroelectric power
which is the case of Medina, et al., v. City of Baguio, plants and their related facilities located in the
G.R. No. L-4269, Aug. 29, 1952. In other words, Province of Laguna.6
protest is not necessary for the recovery of retail
dealer's taxes, like the present, because they are On 29 December 2004, petitioner filed an
not directly imposed by the charter. In the Medina Application for VAT Zero-Rate with the Bureau of
case, the Charter of Baguio (Chap. 61, Revised Internal Revenue (BIR) in accordance with
Adm. Code), provides that "no court shall Section 108(B)(3) of the National Internal
entertain any suit assailing the validity of a tax Revenue Code (NIRC) of 1997, as amended. The
assessed unde this charter until the tax-payer application was duly approved by the BIR. Thus,
shall have paid, under protest, the taxes assessed petitioner ’s sale of electr icity to the NPC from 1
against him (sec.25474[b], Rev. Adm. Code), a January 2005 to 31 October 2005 was declared to
proviso similar to section 76 of the Manila be entitled to the benefit of effectively zero-rated
Charter. The refund of specific taxes paid under a value added tax (VAT).7
void ordinance was ordered, although it did not
appear that payment thereof was made under Petitioner filed its administrative claims for the
protest.. issuance of tax credit certificates for its alleged
unutilized input taxes on its purchase of capital
In a recent case, We said: "The appellants argue goods and alleged unutilized input taxes on its
that the sum the refund of which is sought by the local purchases and/or importation of goods and
appellee, was not paid under protest and hence is services, other than capital goods, pursuant to
not refundable. Again, the trial court correctly Sections 112(A) and (B) of the NIRC of 1997, as
held that being unauthorized, it is not a tax amended,
assessed under the Charter of the Appellant City
of Davao and for that reason, no protest is Alleging inaction of the Commissioner of Internal
necessary for a claim or demand for its refund" Revenue (CIR), petitioner filed a Petition for
(Citing the Medina case, supra; East Asiatic Co., Review with the CTA on 18 April 2007.
Ltd. v. City of Davao, G.R. No. L-16253, Aug. 21,
1962). Lastly, being a case of solutio indebiti, CTA division


OBLIGATIONS (Cases 1-48)
Accordingly, petitioner timely filed its There is solutio indebiti when:
administrative claims for the three quarters of
2005. However, considering that the judicial (1) Payment is made when there exists no
claim was filed on 18 April 2007, the CTA Division binding relation between the payor, who
denied the claim for the first quarter of 2005 for has no duty to pay, and the person who
having been filed out of time. received the payment; and

After an evaluation of petitioner’s claim for the (2) Payment is made through mistake, and
second and third quarters of 2005, the court a quo not through liberality or some other cause.
partly granted the claim and ordered the issuance
of a tax credit certificate in favor of petitioner in Though the principle of solutio indebiti may be
the reduced amount of P27,170,123.36. applicable to some instances of claims for a
refund, the elements thereof are wanting in this
The parties filed their respective Motions for case.
Partial Reconsideration, which were both denied
by the CTA Division. First, there exists a binding relation between
petitioner and the CIR, the former being a
CTA en banc taxpayer obligated to pay VAT.
On appeal, relying on Commissioner of Internal
Revenue v. Aichi Forging Company of Asia, Inc. Second, the payment of input tax was not made
(Aichi), the CTA En Banc ruled that petitioner’s through mistake, since petitioner was legally
judicial claim for the first, second, and third obligated to pay for that liability. The entitlement
quarters of 2005 were belatedly filed. to a refund or credit of excess input tax is solely
based on the distinctive nature of the VAT system.
Issue: At the time of payment of the input VAT, the
amount paid was correct and proper.
Whether or not Solutio Indebiti will apply.
Finally, equity, which has been aptly described as
Ruling: "a justice outside legality," is applied only in the
absence of, and never against, statutory law or
No. Also devoid of merit is the applicability of the judicial rules of procedure. Section 112 is a
principle of solutio indebiti to the present case. positive rule that should preempt and prevail
According to this principle, if something is over all abstract arguments based only on equity.
received when there is no right to demand it, and Well-settled is the rule that tax refunds or credits,
it was unduly delivered through mistake, the just like tax exemptions, are strictly construed
obligation to return it arises. In that situation, a against the taxpayer. The burden is on the
creditor-debtor relationship is created under a taxpayer to show strict compliance with the
quasi-contract, whereby the payor becomes the conditions for the grant of the tax refund or credit.
creditor who then has the right to demand the
return of payment made by mistake, and the
person who has no right to receive the payment
becomes obligated to return it. The quasi- Case No. 14
contract of solutio indebiti is based on the ancient CANGCO vs. MRR
principle that no one shall enrich oneself unjustly 38 Phil 768
at the expense of another.


OBLIGATIONS (Cases 1-48)
1. January 20, 1915 around 7 to 8 p.m.: Jose HELD: YES. lower court is reversed, and judgment
Cangco arose from his seat in the 2nd is hereby rendered plaintiff for the sum of
class-car where he was riding and, making, P3,290.25
his exit through the door, took his position  It can not be doubted that the employees
upon the steps of the coach, seizing the of the railroad company were guilty of
upright guardrail with his right hand for negligence. It necessarily follows that the
support defendant company is liable for the
2. As the train slowed down another damage thereby occasioned unless
passenger and also an employee of the recovery is barred by the plaintiff's own
railroad company Emilio Zuñiga got off the contributory negligence.
same car alighting safely at the point
where the platform begins to rise from the  In resolving this problem it is necessary
level of the ground. that each of these conceptions of liability,
3. When the train had proceeded a little to-wit, the primary responsibility of the
farther Cangco stepped off but 1 or both of defendant company and the contributory
his feet came in contact with a sack of negligence of the plaintiff should be
watermelons so his feet slipped from separately examined
under him and he fell violently on the  Article 1903 of the Civil Code is not
platform. applicable to obligations arising ex
a. His body rolled from the platform
contractu, but only to extra-contractual
and was drawn under the moving obligations — or to use the technical form
car, where his right arm was badly of expression, that article relates only
crushed and lacerated. to culpa aquiliana and not to culpa
i. the car moved forward
possibly 6 meters before it
came to a full stop  article 1903 of the Civil Code is not
4. He was bought to the hospital in the city of applicable to acts of negligence
Manila where an examination was made which constitute the breach of a
and his arm was amputated contract
a. operation was unsatisfactory so he
had second operation at another  two things are apparent: (1) That when an
hospital was performed and the injury is caused by the negligence of a
member was again amputated servant or employee there instantly arises
higher up near the a presumption of law that there was
shoulder expending a total of negligence on the part of the master or
P790.25 employer either in selection of the servant
5. It is customary season for harvesting these or employee, or in supervision over him
melons and a large lot had been brought to after the selection, or both; and (2) that
the station for the shipment to the market that presumption is juris tantum and
6. CFI: favored Manila Railroad Co. (MRR)- not juris et de jure, and consequently, may
Cangco had failed to use due caution in be rebutted. It follows necessarily that if
alighting from the coach and was therefore the employer shows to the satisfaction of
precluded form recovering the court that in selection and supervision
he has exercised the care and diligence of
a good father of a family, the presumption
ISSUE: W/N MRR should be held liable.


OBLIGATIONS (Cases 1-48)
is overcome and he is relieved from undertaking to alight while the
liability. train was yet slightly under way
was not characterized by
 As a general rule . . . it is logical that in case imprudence and that therefore he
of extra-contractual culpa, a suing creditor was not guilty of contributory
should assume the burden of proof of its negligence.
existence, as the only fact upon which his
action is based; while on the contrary, in a  at the time of the accident, was earning
case of negligence which presupposes the P25 a month as a copyist clerk, and that the
existence of a contractual obligation, if the injuries he has suffered have permanently
creditor shows that it exists and that it has disabled him from continuing that
been broken, it is not necessary for him to employment. Defendant has not shown
prove negligence. that any other gainful occupation is open
to plaintiff. His expectancy of life,
 The test by which to determine whether according to the standard mortality tables,
the passenger has been guilty of is approximately thirty-three years. We
negligence in attempting to alight from a are of the opinion that a fair compensation
moving railway train, is that of ordinary or for the damage suffered by him for his
reasonable care. It is to be considered permanent disability is the sum of P2,500,
whether an ordinarily prudent person, of and that he is also entitled to recover of
the age, sex and condition of the defendant the additional sum of P790.25
passenger, would have acted as the for medical attention, hospital services,
passenger acted under the circumstances and other incidental expenditures
disclosed by the evidence. This care has connected with the treatment of his
been defined to be, not the care which may injuries.
or should be used by the prudent man
generally, but the care which a man of Case No. 15
ordinary prudence would use under NARCISO GUTIERREZ vs BONIFACIO
similar circumstances, to avoid injury. GUTIERREZ, et al.
GR. No 34840 September 23, 1931
 Women, it has been observed, as a
general rule are less capable than TOPIC: Quasi-delict (Art 1162, 2176)
men of alighting with safety under
such conditions, as the nature of FACTS:
their wearing apparel obstructs the A passenger truck and an automobile of
free movement of the limbs. Again, private ownership collided while attempting to
it may be noted that the place was pass each other on the Talon bridge on the Manila
perfectly familiar to the plaintiff as South Road in the municipality of Las Piñas. The
it was his daily custom to get on and truck was driven by the chauffeur Abelardo
of the train at this station. There Velasco, and was owned by Saturnino Cortez. The
could, therefore, be no uncertainty automobile was being operated by Bonifacio
in his mind with regard either to Gutierrez, a lad 18 years of age, and was owned by
the length of the step which he was Bonifacio's father and mother, Mr. and Mrs.
required to take or the character of Manuel Gutierrez. At the time of the collision, the
the platform where he was father was not in the car, but the mother, together
alighting. Our conclusion is that the will several other members of the Gutierrez
conduct of the plaintiff in family, seven in all, were accommodated therein.
OBLIGATIONS (Cases 1-48)
A passenger in the autobus, by the name of the owner's business, so that he is liable for the
Narciso Gutierrez, was en route from San Pablo, negligence of the child because of the relationship
Laguna, to Manila. The collision between the bus of master and servant. (Huddy On Automobiles,
and the automobile resulted in Narciso Gutierrez 6th ed., sec. 660; Missell vs. Hayes [1914], 91 Atl.,
suffering a fracture right leg which required 322.) The liability of Saturnino Cortez, the owner
medical attendance for a considerable period of of the truck, and of his chauffeur Abelardo Velasco
time, and which even at the date of the trial rests on a different basis, namely, that of contract
appears not to have healed properly. which, we think, has been sufficiently
demonstrated by the allegations of the complaint,
ISSUE: WHETHER OR NOT MANUEL GUTIERREZ, not controverted, and the evidence. The reason
THE FATHER OF BONIFACIO, SHOULD BE HELD for this conclusion reaches to the findings of the
LIABLE FOR THE DAMAGES CAUSE BY THE trial court concerning the position of the truck on
MINOR? the bridge, the speed in operating the machine,
and the lack of care employed by the chauffeur.
COURT’S RULING: While these facts are not as clearly evidenced as
Yes. In amplification of so much of the are those which convict the other defendant, we
pronouncement as concerns the Gutierrez family, nevertheless hesitate to disregard the points
it may be explained that the youth Bonifacio was emphasized by the trial judge. In its broader
in incompetent chauffeur, that he was driving at aspects, the case is one of two drivers
an excessive rate of speed, and that, on approaching a narrow bridge from opposite
approaching the bridge and the truck, he lost his directions, with neither being willing to slow up
head and so contributed by his negligence to the and give the right of way to the other, with the
accident. The guaranty given by the father at the inevitable result of a collision and an accident.
time the son was granted a license to operate The defendants Velasco and Cortez further
motor vehicles made the father responsible for contend that there existed contributory
the acts of his son. Based on these facts, pursuant negligence on the part of the plaintiff, consisting
to the provisions of article 1903 of the Civil Code, principally of his keeping his foot outside the
the father alone and not the minor or the mother, truck, which occasioned his injury. In this
would be liable for the damages caused by the connection, it is sufficient to state that, aside from
minor. the fact that the defense of contributory
We are dealing with the civil law liability negligence was not pleaded, the evidence bearing
of parties for obligations which arise from fault or out this theory of the case is contradictory in the
negligence. At the same time, we believe that, as extreme and leads us far afield into speculative
has been done in other cases, we can take matters.
cognizance of the common law rule on the same
subject. In the United States, it is uniformly held Case No. 16
that the head of a house, the owner of an HSBC vs. Spouses Broqueza
automobile, who maintains it for the general use G.R. No. 178610 November 17, 2010
of his family is liable for its negligent operation by
one of his children, whom he designates or Facts:
permits to run it, where the car is occupied and
being used at the time of the injury for the Petitioners Gerong and [Editha] Broqueza are
pleasure of other members of the owner's family employees of Hongkong and Shanghai Banking
than the child driving it. The theory of the law is Corporation (HSBC). They are also members of
that the running of the machine by a child to carry respondent Hongkong Shanghai Banking
other members of the family is within the scope of Corporation, Ltd. Staff Retirement Plan (HSBCL-


OBLIGATIONS (Cases 1-48)
SRP, plaintiff below). The HSBCL-SRP is a or upon a past event unknown to the parties,
retirement plan established by HSBC through its is demandable at once.
Board of Trustees for the benefit of the
employees. The court affirmed the findings of the MeTC and
the RTC that there is no date of payment indicated
On October 1, 1990, petitioner [Editha] Broqueza in the Promissory Notes. The RTC is correct in
obtained a car loan in the amount of ruling that since the Promissory Notes do not
Php175,000.00. On December 12, 1991, she again contain a period, HSBCL-SRP has the right to
applied and was granted an appliance loan in the demand immediate payment. Article 1179 of the
amount of Php24,000.00. On the other hand, Civil Code applies. The spouses Broqueza’s
petitioner Gerong applied and was granted an obligation to pay HSBCL-SRP is a pure obligation.
emergency loan in the amount of Php35,780.00 The fact that HSBCL-SRP was content with the
on June 2, 1993. These loans are paid through prior monthly check-off from Editha Broqueza’s
automatic salary deduction. salary is of no moment. Once Editha Broqueza
defaulted in her monthly payment, HSBCL-SRP
Meanwhile [in 1993], a labor dispute arose made a demand to enforce a pure obligation.
between HSBC and its employees. Majority of
HSBC’s employees were terminated, among In their Answer, the spouses Broqueza admitted
whom are petitioners Editha Broqueza and Fe that prior to Editha Broqueza’s dismissal from
Gerong. The employees then filed an illegal HSBC in December 1993, she "religiously paid the
dismissal case before the National Labor loan amortizations, which HSBC collected
Relations Commission (NLRC) against HSBC. through payroll check-off."16 A definite amount is
Because of their dismissal, petitioners were not paid to HSBCL-SRP on a specific date. Editha
able to pay the monthly amortizations of their Broqueza authorized HSBCL-SRP to make
respective loans. Thus, respondent HSBCL-SRP deductions from her payroll until her loans are
considered the accounts of petitioners fully paid. Editha Broqueza, however, defaulted in
delinquent. Demands to pay the respective her monthly loan payment due to her dismissal.
obligations were made upon petitioners, but they Despite the spouses Broqueza’s protestations, the
failed to pay.6 payroll deduction is merely a convenient mode of
payment and not the sole source of payment for
HSBCL-SRP, acting through its Board of Trustees the loans. HSBCL-SRP never agreed that the loans
and represented by Alejandro L. Custodio, filed will be paid only through salary deductions.
Civil Case No. 52400 against the spouses Neither did HSBCL-SRP agree that if Editha
Broqueza on 31 July 1996. On 19 September Broqueza ceases to be an employee of HSBC, her
1996, HSBCL-SRP filed Civil Case No. 52911 obligation to pay the loans will be suspended.
against Gerong. Both suits were civil actions for HSBCL-SRP can immediately demand payment of
recovery and collection of sums of money. the loans at anytime because the obligation to pay
has no period. Moreover, the spouses Broqueza
Issues: Whether or not the Promisorry Note in have already incurred in default in paying the
question is immediately demandable monthly installments.

Held: Finally, the enforcement of a loan agreement

involves "debtor-creditor relations founded on
Art. 1179. Every obligation whose performance contract and does not in any way concern
does not depend upon a future or uncertain event, employee relations. As such it should be enforced


OBLIGATIONS (Cases 1-48)
through a separate civil action in the regular TC ruled in favor of Palanca and dismissed the
courts and not before the Labor Arbiter. case

The petition is granted. The Decision of the Court ISSUE: Whether a creditor is barred by
of Appeals was reversed and set aside. The prescription in his attempted to collect on a
decisions of the Regional Trial Court of Makati, as promissory note executed more than 15 years
well as the decision of the Metropolitan Trial earlier.
Court of Makati City against the spouses
Bienvenido and Editha Broqueza, were affirmed. RULING: Yes.
Based on the evidence presented, the only
CASE No. 17 argument that merits the attention of the Court is
PAY VS PALANCA that of prescription. As noted by NCC 1179, any
Nature: Action for a sum of money based on a obligation that does not depend on a future or
promissory note uncertain event, or upon a past event unknown to
Ponente: Fernando the parties is demandable at once.
Date: June 28, 1974 As the obligation was due and demandable, the
filing of the suit after 15 years was much too late.
DOCTRINE: An obligation that does not depend The Civil Code additionally states that the
on a future or uncertain event, or upon a past prescriptive period of a written contract is 10
event unknown to the parties, is demandable at years.
once. The filing of an action only 15 years after is
too late to enforce.
Case No. 18
Relevant Provision of Law: SMITH BELL & CO., LTD. VS. VICENTE SOTELO
NCC 1179. Every obligation whose performance MATTI
does not depend upon a future or uncertain event, G.R. NO. L-16570, MARCH 9, 1922
or upon a past event unknown to the parties, is FACTS:
demandable at once Smith Bell & Co., Ltd., (Smith Bell) and Mr. Vicente
George Pay is a creditor of the late Justo Palanca. Sotelo (Sotelo) entered into contracts whereby
Pay‘s claim is based on a promissory noted dated Smith Bell obligated itself to sell and Sotelo to
January 30, 1952, wherein Justo Palanca and Rosa purchase from it the following: a.) 2 steel tanks for
Palanca promised to pay the amount of total price of P21, 000.00 to be shipped from New
Php26,900.00. Pay comes to the court seeking York and delivered at Manila within 3 or 4
that Segunda, the widow, be appointed as the months; b.) 2 expellers for P25, 000.00 per piece
administratrix under the belief that once a certain to be shipped from San Francisco in the month of
parcel of land is under her administration, Pay, as September 1918 or as soon as possible; and c.) 2
the creditor, could seek his claim against the Electric motors for P2, 000.00 per piece
administratrix. approximate delivery within 90days - this is not
Palanca denies stating that she had refused to be guaranteed. The tanks arrived in Manila on April
appointed as the administratrix, that the property 27, 1919, expellers on October 26, 1918 and the
no longer belonged to the deceased, and that the motors on February 27, 1919. Smith Bell brought
rights of Pay on the instrument had already a suit against Sotelo based on 4 separate causes of
prescribe; the note had been executed 15 years action alleging among other facts, that
prior. immediately notified Sotelo of the arrival of the
goods and asked instructions from him as to the


OBLIGATIONS (Cases 1-48)
delivery thereof, and that Mr. Sotelo refused to requirements of the United States Government, in
receive any of them and to pay their price. Mr. connection with the tanks and Priority Certificate,
Sotelo denied the allegations and posits that it subject to the US Gov't., with respect to the
was only on May 1919 that he was notified of the motors. At the time of the execution of the
arrival of the steel tanks, the motors and the contracts, the parties were not unmindful of the
expellers having arrived incomplete and long contingency of the US Gov't., not allowing the
after the date stipulated. As a consequence of export of the goods, nor of the fact that the other
delay in making the delivery of goods which the foreseen circumstances therein stated might
intervenor Manila Oil Refining Co., Ltd., intended prevent it. The Court conclude that the term
to use it in the manufacture of coconut oil it which the parties attempted to fix is so uncertain
suffered damages in the amount of P116, 783.91 that one cannot tell just whether, as a matter of
for non-delivery of tanks an P21, 250.00 on fact, those articles could be brought to Manila or
account of expellers and the motors not having not. If that is the case, the obligations must be
arrived in due time. Trial ensued and the Regional regarded as conditional. obligations for the
Trial Court absolved Mr. Sotelo from the performance of which a day certain has been fixed
complaint in so far as the tanks and the electric shall be demandable only when the day arrives. a
motors but rendered judgment against them to day certain is understood to be one which must
receive the expellers and pay P50, 000.00, the necessarily arrive, even though its date be
price of goods and interests thereon. unknown. if the uncertainty should consist in the
ISSUE: Whether Smith Bell fulfilled in due time its arrival on non-arrival of the day, the obligation is
obligation to bring the goods to Manila, otherwise conditional and shall be governed by the rules of
held guilty of delay and liable for the the next preceding section. ( referring to pure and
consequences thereof. conditional obligations). (art. 1125, Civ. Code).
RULING: The Court determined what period was and as the export of the machineries question
fixed for the delivery of the goods. As regard the was, as stated in the contract, contingent upon the
tanks within 3 or 4 months. With reference to sellers obtaining certificate of priority and
expellers, to be shipped at San Francisco within permissions of the US Government, subject to the
the month of September 1918 or as soon as rules and regulations, as well as to railroad
possible and the motors approximate delivery embargoes, then the delivery was subject to a
within 90 days- this is not guaranteed. In all these condition the fulfillment of which depended not
contracts, there is a final clause that " sellers are only upon the effort of the herein plaintiff, but
not responsible for delays caused by fire, riots on upon the will of third person s who could in no
lands or on the sea, strikes or other causes known way be compelled to fulfill the condition. In cases
as Force Majeure entirely beyond the control of like this, which are not expressly provided for, but
the sellers or their representatives". The impliedly covered by the Civil Code, the obligor
stipulation fall short of fixing a period. From the will be deemed to have sufficiently performed his
records it appears that the contracts were part of the obligation, if he has done all that was
executed at the time of world war when there in his power, even the condition has not been
existed rigid restrictions on the export from the fulfilled in reality. In such cases, the decision prior
United States of articles like the machinery in to the Civil Code have held that the obligee having
question, maritime as well as railroad, done all that was in his power, was entitled to
transportation was difficult, which fact was enforce performance of the obligation. This
known to the parties. Hence, clauses were performance, which is fictitious - not real - is not
inserted in the contracts regarding the expressly authorized by the Code, which limit
Government regulations, railroad embargoes, itself only to declare valid those conditions and
lack of vessel space, the exigencies of the the obligation thereby affected ; but it is neither


OBLIGATIONS (Cases 1-48)
disallowed, and the Code being thus silent, the old the missing parts, the interior cover and the sum of
view can be maintained as doctrine. Mr. Sotelo is P6.00. The following day, Gonzales returned some
sentenced to accept and receive from Smith Bell of the missing parts, the interior cover and the
the tanks, the expellers and the motors in P6.00.
question, and to pay Smith Bell the sum of P96,
000.00 with legal interest thereon from July 17, The plaintiff had his typewriter repaired by Freixas
1919, the date of filing the complaint, until fully Business Machines, and the repair job cost him a
paid, and the costs of both instances. total of P89.85, including labor and materials. On
August 23, 1965, the plaintiff commenced this
action before the City Court of Manila, demanding
CASE No. 19 from the defendant the payment of P90.00 as actual
CHAVES v.s. GONZALES and compensatory damages, P100.00 for temperate
32 SCRA 547 damages, P500.00 for moral damages, and P500.00
Article 1191 as attorney’s fees but the court a quo awarded only
the value of the missing parts of the typewriter
TOPIC: KINDS OF OBLIGATION (WITH A PERIOD) – (P31.10), instead of the whole cost of labor and
ANY OTHER MANNER OF CONTRAVENTION materials that went into the repair of the machine.
Article 1167 - If a person obliged to do something Chaves appealed. Gonzales argued that he is not
fails to do it, the same shall be executed at his cost. liable at all because his contract with Chaves did not
Article 1170 – Those who in the performance of contain a period, so that Chaves should have first
their obligations are guilty of fraud, negligence, or filed a petition for the court to fix the period, under
delay, and those who in any manner contravene the Article 1197 of the Civil Code, within which the
tenor thereof, are liable for damages. Gonzales was to comply with the contract before
Article 1197 - If the obligation does not fix a period, said defendant-appellee could be held liable for
but from its nature and the circumstances it can be breach of contract.
inferred that a period was intended, the courts may
fix the duration thereof.

FACTS: 1. WON Chaves should have gone to Court to

In the early part of July, 1963, Chaves delivered to fix the period of their contract before
the Gonzales a portable typewriter for routine commencing present action
cleaning and servicing. Gonzales was not able to 2. WON Chaves can recover the cost of
finish the job after some time despite repeated executing the obligation from Gonzales
reminders. In October, 1963, Gonzales asked the
sum of P6.00 from Chaves for the purchase of spare RULING:
parts. On October 26, 1963, after getting 1. NO. Defendant cannot invoke Article 1197 of
exasperated with the delay of the repair of the the Civil Code for he virtually admitted non-
typewriter, Chaves went to the house of Gonzales performance by returning the typewriter
and asked for the return of the typewriter. Gonzales that he was obliged to repair in a non-
delivered the typewriter in a wrapped package and working condition, with essential parts
upon reaching home, the Chaves examined the missing. The fixing of a period would thus be
typewriter and found out that the same was in a mere formality and would serve no
shambles, with the interior cover and some parts purpose than to delay
and screws missing. On October 29, 1963. He sent a
letter to Gonzales formally demanding the return of


OBLIGATIONS (Cases 1-48)
2. YES. It is clear that the defendant-appellee When the original action was lodged with the
contravened the tenor of his obligation Municipal Court of Manila on April 20, 1945,
because he not only did not repair the defendants were in arrears in the payment of the
typewriter but returned it "in shambles", rental corresponding to said month, the agrees
according to the appealed decision. For such rental being payable within the first five days of
contravention, as appellant contends, he is each month. That rental was paid prior to the
liable under Article 1167 of the Civil Code hearing of the case in the municipal court, as a
for the cost of executing the obligation in a consequence of which said court entered
proper manner. The cost of the execution of judgment for restitution and payment of rentals
the obligation in this case should be the cost at the rate of P35 a month from May 1, 1945, until
of the labor or service expended in the defendants completely vacate the premises.
repair of the typewriter, which is in the Although plaintiff included in said original
amount of P58.75. because the obligation or complaint a claim for P500 damages per month,
contract was to repair it. that claim was waived by him before the hearing
in the municipal court, on account of which
In addition, the defendant-appellee is nothing was said regarding said damages in the
likewise liable, under Article 1170 of the municipal court's decision.
Code, for the cost of the missing parts, in the
amount of P31.10, for in his obligation to When the case reached the Court of First Instance
repair the typewriter he was bound, but of Manila upon appeal, defendants filed therein a
failed or neglected, to return it in the same motion to dismiss (which was similar to a motion
condition it was when he received it. to dismiss filed by them in the municipal court)
based upon the ground that the municipal court
had no jurisdiction over the subject matter due to
Case No. 20 the aforesaid claim for damages and that,
Encarnacion vs Baldomar therefore, the Court of First Instance had no
77 Phil. 470 appellate jurisdiction over the subject matter of
D. Kinds of Civil Obligations 1. As to Perfection & the action. That motion to dismiss was denied by
Extinguishment His Honor, Judge Mamerto Roxas, by order dated
July 21, 1945, on the ground that in the municipal
Facts: Vicente Singson Encarnacion, owner of the court plaintiff had waived said claim for damages
house numbered 589 Legarda Street, Manila, and that, therefore, the same waiver was
some six years ago leased said house to Jacinto understood also to have been made in the Court
Baldomar and her son, Lefrado Fernando, upon a of First
month-to-month basis for the monthly rental of
P35. After Manila was liberated in the last war, In the Court of First Instance the graveman of the
specifically on March 16, 1945, and on April 7, of defense interposed by defendants, as it was
the same year, plaintiff Singson Encarnacion expressed defendant Lefrado Fernando during
notified defendants, the said mother and son, to the trial, was that the contract which they had
vacate the house above-mentioned on or before celebrated with plaintiff since the beginning
April 15, 1945, because plaintiff needed it for his authorized them to continue occupying the house
offices as a result of the destruction of the indefinitely and while they should faithfully fulfill
building where said plaintiff had said offices their obligations as respects the payment of the
before. Despite this demand, defendants insisted rentals, and that this agreement had been ratified
on continuing their occupancy. when another ejectment case between the parties
filed during the Japanese regime concerning the


OBLIGATIONS (Cases 1-48)
same house was allegedly compounded in the judgment at the rate of P35 a month. During the
municipal court. The Court of First Instance gave pendency of the appeal in that court, certain
more credit to plaintiff's witness, Vicente Singson deposits were made by defendants on account of
Encarnacion, jr., who testified that the lease had rentals with the clerk of said court, and in said
always and since the beginning been upon a judgment it is disposed that the amounts thus
month-to-month basis. The court added in its deposited should be delivered to plaintiff.
decision that this defense which was put up by
defendant's answer, for which reason the Court Upon the whole, we are clearly of opinion that the
considered it as indicative of an eleventh-hour judgment appealed from should be, as it is hereby,
theory. affirmed, with the costs of the three instances to
appellants. So ordered.
Issue: Whether the condition is void for being
dependent upon the will of the obligor

Held: We think that the Court of First Instance

was right in so declaring. Furthermore, carried to
its logical conclusion, the defense thus set up by Case No, 21
defendant Lefrado Fernando would leave to the DARIO AND GAUDENCIO ELEIZEGUI, plaintiffs-
sole and exclusive will of one of the contracting appellees,
parties (defendants in this case) the validity and vs.
fulfillment of the contract of lease, within the THE MANILA LAWN TENNIS CLUB, defendant-
meaning of article 1256 of the Civil Code, since the appellant.
continuance and fulfillment of the contract would May 19, 1903
then depend solely and exclusively upon their Topic: Obligations with a term or period
free and uncontrolled choice between continuing Facts:
paying the rentals or not, completely depriving Parties entered into a Contract of Lease, the
the owner of all say in the matter. lessee, Mr. Williamson shall pay the sum of 25
pesos and the period of the lease shall be left to
If this defense were to be allowed, so long as the will of the lessee, the termination of which
defendants elected to continue the lease by shall be communicated to the lessor with one
continuing the payment of the rentals, the owner month’s notice. The Lessor, defendant herein,
would never be able to discontinue it; conversely, decided to end the lease, affording one month’s
although the owner should desire the lease to notice to the lessee, and brought suit for unlawful
continue, the lessees could effectively thwart his detainer to recover possession of the property.
purpose if they should prefer to terminate the (Court did not elaborate on the facts or the
contract by the simple expedient of stopping procedural background of the case, above
payment of the rentals. This, of course, is description is complete and short as can be)
prohibited by the aforesaid article of the Civil Other concepts mentioned in the case:
Code. (8 Manresa, 3d ed., pp. 626, 627; Conventional Term – period of lease as per
Cuyugan vs. Santos, 34 Phil., 100.) agreement of the parties
Legal Term – period of lease provided by law in
During the pendency of the appeal in the Court of absence of conventional term set by the parties
First Instance and before the judgment appealed Emphyteusis - is a real right (right in rem),
from was rendered on October 31, 1945, the susceptible of assignment and of descent, charged
rentals in areas were those pertaining to the on productive real estate, the right being coupled
month of August, 1945, to the date of said with the enjoyment of the property on condition


OBLIGATIONS (Cases 1-48)
of taking care of the estate and paying taxes, and P120,000, payable within ten years at a monthly
sometimes the payment of a small rent. installment of P1,000. The option, written in
Issue: Tagalog, imposed on him the obligation to pay for
Whether or not the duration of the lease the food of the dogs and the salaries of the maids
may be completely left to the will of the lessee. in her household, the charge not to exceed P1,800
Ruling: a month. The option was conditioned on his
No. It cannot be concluded that the termination of obtaining Philippine citizenship, a petition for
the contract is to be left completely at the will of which was then pending in the Court of First
the lessee, because it has been stipulated that its Instance of Rizal.
duration is to be left to his will. It appears, however, that this application
The Civil Code has made provision for such a case for naturalization was withdrawn when it was
in all kinds of obligations. In speaking in general discovered that he was not a resident of Rizal.
of obligations with a term it has supplied the Justina filed a petition to adopt him and his
deficiency of the former law with respect to the children on the erroneous belief that adoption
"duration of the term when it has been left to the would confer on them Philippine citizenship. The
will of the debtor," and provides that in this case error was discovered and the proceedings were
the term shall be fixed by the courts. (Art. 1128, abandoned.
sec. 2.) In every contract, as laid down by the In two wills executed by Justina, she bade
authorities, there is always a creditor who is her legatees to respect the contracts she had
entitled to demand the performance, and a debtor entered into with Wong, but in a codicil of a later
upon whom rests the obligation to perform the date she appears to have a change of heart.
undertaking. In bilateral contracts the contracting Claiming that the various contracts were made by
parties are mutually creditors and debtors. Thus, her because of machinations and inducements
in this contract of lease, the lessee is the creditor practiced by him, she now directed her executor
with respect to the rights enumerated in article to secure the annulment of the contracts.
1554, and is the debtor with respect to the ISSUE:
obligations imposed by articles 1555 and 1561. Whether the lease contract involving Wong
The term within which performance of the latter were valid
obligation is due is what has been left to the will HELD:
of the debtor. This term it is which must be fixed No, the contracts show nothing that is
by the courts. necessarily illegal, but considered collectively,
Case No. 22 they reveal an insidious pattern to subvert by
PHILIPPINE BANKING CORPORATION v. LUI indirection what the Constitution directly
SHE prohibits. To be sure, a lease to an alien for a
G.R. No. L-17587. September 12, 1967 reasonable period is valid. So is an option giving
an alien the right to buy real property on
FACTS: condition that he is granted Philippine
Justina Santos executed on a contract of citizenship.
lease in favor of Wong Heng, covering the portion But if an alien is given not only a lease of,
then already leased to him and another portion but also an option to buy, a piece of land, by virtue
fronting Florentino Torres street. The lease was of which the Filipino owner cannot sell or
for 50 years, although the lessee was given the otherwise dispose of his property, this to last for
right to withdraw at any time from the 50 years, then it becomes clear that the
agreement. arrangement is a virtual transfer of ownership
Justina executed another contract giving whereby the owner divests himself in stages not
Wong the option to buy the leased premises for only of the right to enjoy the land but also of the


OBLIGATIONS (Cases 1-48)
right to dispose of it— rights the sum total of
which make up ownership. If this can be done, RULING:
then the Constitutional ban against alien No. It is clear in the agreement, Exhibit "A", that
landholding in the Philippines, is indeed in grave the proceeds of the sale of the tobacco should be
peril. turned over to the complainant as soon as the
same was sold, or, that the obligation was
immediately demandable as soon as the tobacco
was disposed of. Hence, Article 1197 of the New
Case No. 23 Civil Code, which provides that the courts may fix
the duration of the obligation if it does not fix a
LIM VS PEOPLE, 133 SCRA 333 period, does not apply. The fact that appellant
received the tobacco to be sold at P1.30 per kilo
TOPIC: Kinds of Obligation - As to Perfection and and the proceeds to be given to complainant as
Extinguishment soon as it was sold, strongly negates transfer of
ownership of the goods to the petitioner. The
FACTS: agreement (Exhibit "A') constituted her as an
agent with the obligation to return the tobacco if
the same was not sold.
Lourdes Valerio Lim was a businesswoman, who,
on January 10, 1966, went to the house of Maria Case No. 24
Ayroso and proposed to sell the latter’s tobacco.
Ayroso agreed to the proposition of the appellant GREGORIO ARANETA, INC., petitioner,
to sell her tobacco consisting of 615 kilos at P1.30 vs. THE PHILIPPINE SUGAR ESTATES
per kilo. The appellant was to receive the DEVELOPMENT CO., LTD., respondent.
overprice for which she could sell the tobacco. G.R. No. L-22558 May 31, 1967 REYES, J.B.L., J.:
This agreement was made in the presence of
plaintiff's sister, Salud G. Bantug. Salvador Bantug FACTS:
drew a document which certifies of the J. M. Tuason & Co., Inc. is the owner of a big tract
agreement made between Lim and Ayroso. It also land situated in Quezon City, otherwise known as
states that the proceeds of P799.50 will be given the Sta. Mesa Heights Subdivision, and covered by
to Ayroso as soon as it was sold. The agreement a Torrens title in its name. On July 28, 1950,
was signed by the appellant and witnessed by through Gregorio Araneta, Inc., it (Tuason & Co.)
Bantug and Ruiz. However, out of the total value sold a portion thereof to Philippine Sugar Estates
of P799.50, only P240.00 was paid to Ayroso on Development Co., Ltd. The parties stipulated,
three different times. Because Ayroso claimed among in the contract of purchase and sale with
that Lim often eluded her even when the former mortgage, that the buyer will — “Build on the
visits the later’s house, Ayroso filed a complaint said parcel land the Sto. Domingo Church and
for estafa against Lim. Judgment was rendered, Convent” while the seller for its part will —
however, on appeal, Lim questions whether CA “Construct streets on the NE and NW and SW
was correct that the agreement fixed the period, sides of the land herein sold so that the latter
making the obligation immediately demandable will be a block surrounded by streets on all four
as soon as the tobacco was sold. sides; and the street on the NE side shall be
named "Sto. Domingo Avenue;"
ISSUE: The buyer, Philippine Sugar Estates Development
Whether or not Lim’s contention was correct in Co., Ltd., finished the construction of Sto.
applying Article 1197 of the Civil Code? Domingo Church and Convent, but the seller,


OBLIGATIONS (Cases 1-48)
Gregorio Araneta, Inc., which began constructing NO. Article 1197 expressly prescribes that — “the
the streets, is unable to finish the construction of Court shall determine such period as may under
the street in the Northeast side named (Sto. the circumstances been probably contemplated
Domingo Avenue) because a certain third-party, by the parties.”
by the name of Manuel Abundo, who has been The fixing of a period by the courts under Article
physically occupying a middle part thereof, 1197 of the Civil Code of the Philippines is sought
refused to vacate the same; hence, on May 7, to be justified on the basis that petitioner
1958, Philippine Sugar Estates Development Co., (defendant below) placed the absence of a period
Lt. filed its complaint against J. M. Tuason & Co., in issue by pleading in its answer that the contract
Inc., and instance, seeking to compel the latter to with respondent Philippine Sugar Estates
comply with their obligation, as stipulated in the Development Co., Ltd. gave petitioner Gregorio
above-mentioned deed of sale, and/or to pay Araneta, Inc. "reasonable time within which to
damages in the event they failed or refused to comply with its obligation to construct and
perform said obligation. complete the streets." Neither of the courts below
Both defendants J. M. Tuason and Co. and seems to have noticed that, on the hypothesis
Gregorio Araneta, Inc. answered the complaint, stated, what the answer put in issue was not
the latter particularly setting up the principal whether the court should fix the time of
defense that the action was premature since its performance, but whether or not the parties
obligation to construct the streets in question was agreed that the petitioner should have reasonable
without a definite period which needs to be fixed time to perform its part of the bargain. If the
first by the court in a proper suit for that purpose contract so provided, then there was a period
before a complaint for specific performance will fixed, a "reasonable time;" and all that the court
prosper. should have done was to determine if that
The trial court dismissed plaintiff's complaint. reasonable time had already elapsed when suit
Plaintiff moved to reconsider and modify the was filed if it had passed, then the court should
above decision, praying that the court fix a period declare that petitioner had breached the contract,
within which defendants will comply with their as averred in the complaint, and fix the resulting
obligation to construct the streets in question. damages. On the other hand, if the reasonable
The lower court ordered defendant Gregorio time had not yet elapsed, the court perforce was
Araneta, Inc., a period of two (2) years from bound to dismiss the action for being premature.
notice, within which to comply with its obligation But in no case can it be logically held that under
under the contract. On appeal, the appellate court the plea above quoted, the intervention of the
pointed out that under the Deed of Sale between court to fix the period for performance was
the parties, herein defendant has a reasonable warranted, for Article 1197 is precisely
time within which to comply with its obligations predicated on the absence of any period fixed by
to construct and complete the streets on the NE, the parties.
NW and SW sides of the lot in question; that under It must be recalled that Article 1197 of the Civil
the circumstances, said reasonable time has not Code involves a two-step process. The Court must
elapsed; thus fixing the period is proper. first determine that "the obligation does not fix a
period" (or that the period is made to depend upon
ISSUE: the will of the debtor)," but from the nature and the
Whether or not the clause in the parties contract circumstances it can be inferred that a period was
“reasonable time” needs to be fixed a period for intended" (Art. 1197, pars. 1 and 2). This
the defendant to comply with its obligation preliminary point settled, the Court must then
proceed to the second step, and decide what
HELD: period was "probably contemplated by the parties"


OBLIGATIONS (Cases 1-48)
. So that, ultimately, the Court cannot fix a period agreement, which was scheduled to expire on
merely because in its opinion it is or should be May 31, 1980, the lessor-petitioner agreed to rent
reasonable, but must set the time that the parties out to the lessee at a monthly rate of
are shown to have intended. As the record stands, P350.00 the “People’s Restaurant”, a commercial
the trial Court appears to have pulled the two- establishment located at the corner of McKinley
year period set in its decision out of thin air, since and Pratt Streets in Bangued, Abra.
no circumstances are mentioned to support it.
Plainly, this is not warranted by the Civil Code. In May 1980, Millare informed the Cos that they
The conclusion is thus forced that the parties could continue leasing so long as they were
must have intended to defer the performance of amenable to paying creased rentals of P1,200.00
the obligations under the contract until the a month. In response, a counteroffer of P700.00 a
squatters were duly evicted, as contended by the month was made and to this, Millare allegedly
petitioner Gregorio Araneta, Inc. stated that the amount of monthly rentals could
be resolved at a later time since "the matter is
Case No. 25 simple among us." This led the spouses Co to think
MILLARE vs. HERNANDO that the lease had been renewed, but Millare
G.R. No. L-55480; 151 scra 484 thought otherwise and demanded that they
vacate the property.
TOPIC: Kinds of Civil Obligations - As to Perfection
& Extinguishment Paragraph 13 of the lease contract states the
following: This contract of lease is subject to the
Relevant Provision of Law: Art. 1197. laws and regulations of the government; and that
If the obligation does not fix a period, but from its this contract of lease may be renewed after a
nature and the circumstances it can be inferred period of five (5) years under the terms and
that a period was intended, the courts may fix the conditions as will be mutually agreed upon by the
duration thereof. parties at the time of renewal.

The courts shall also fix the duration of the period The Co spouses went to court to ask for the
when it depends upon the will of the debtor. renewal of the lease contract at P700 for 10 years.
The CFI ruled on their behalf. The lower court
In every case, the courts shall determine such judge interpreted paragraph 13 to mean that
period as may under the circumstances have been since the original lease was fixed for five years, it
probably contemplated by the parties. Once fixed follows, therefore, that the lease contract is
by the courts, the period cannot be changed by renewable for another five.

FACTS: WON the lease was renewed.
This is a petition for certiorari, prohibition and RULING: No.
mandamus to review the order of the Court of The lease contract (paragraph 13) can only mean
First Instance of Abra. that the lessor and lessee may agree to renew the
contract upon their reaching agreement on the
On June 17, 1975, a five year contract was terms and conditions. Failure to reach agreement
executed between petitioner Pacifica Millare as will of course prevent the contract from being
lessor and private respondent Elsa Co, married to renewed at all. In the instant case, the lessor and
Antonio Co, as lessee. Under the written the lessee conspicuously failed to reach


OBLIGATIONS (Cases 1-48)
agreement both on the amount of the rental to be him their finished products of
payable during the renewal term, therefore there equivalent value.
was no renewal. 4. Lim alleged that when he delivered the
raw materials, Arco issued a PDC dated
The first paragraph of Article 1197 is clearly April 18, 2007, amounting to P1.48 Million
inapplicable, since the Contract of Lease did in as partial payment, which was dishonored
fact fix an original period of five years, which had when Lim deposited for being drawn
expired. The second paragraph of Article 1197 is against a closed account;
equally clearly inapplicable since the duration of
the renewal period was not left to the will of the 5. On April 18, 2007, Arco entered into a
lessee alone, but rather to the will of both the MOA with one Eric Sy where Arco bound
lessor and the lessee. Most importantly, Article itself to deliver their finished product to
1197 applies only where a contract of lease Sy’s Megapack Container Corporation. The
clearly exists. Here, the contract was not renewed MOA contained a provision that Quality
at all, there was in fact no contract at all the period Paper would supply the raw materials;
of which could have been fixed. 6. Lim demanded payment amounting to
P7.2 M but no payment was made. Lim
It follows that the respondent judge’s decision filed a collection case with the RTC of
requiring renewal of the lease has no basis in law Valenzuela but the RTC ruled for Arco
or in fact. Save in the limited and exceptional ruling that there was novation through the
situations envisaged in Articles 1197 and 1670 of MOA which thereby extinguished Arco’s
the Civil Code, which do not obtain here, courts obligation with Lim;
have no authority to prescribe the terms and 7. On Appeal, the CA reversed the RTC stating
conditions of a contract for the parties. among others that there was no novation
but a case of alternative obligation;

Case No. 26-A

Arco Pulp and Paper Co., Inc. vs. Dan Lim
June 25 2014
TOPIC: Alternative Obligations (As to Plurality of
Prestation) Whether the alleged agreement as to the
payment between the parties constitute
alternative obligation.
1. Dan Lim (doing business under the name RULING:
Quality Paper and Plastic Products
Enterprises) is a supplier of scrap papers,
cartons and other raw materials; The appellate court correctly identified
the obligation between the parties as an
2. From February to March 2007, Lim
delivered P7.2 Million worth of scrap alternative obligation, whereby Arco Pulp and
papers tp Arco Pulp through its CEO, Paper, after receiving the raw materials from
respondent Lim would either pay him the price of
Candida Santos;
the raw materials or in the alternative, deliver to
3. The parties allegedly agreed that Arco him finished products of equivalent value.
would either (1) pay Dan Lim the value
of the raw materials or (2) deliver to In an alternative obligation, there is more
than one object, and the fulfillment of one is
OBLIGATIONS (Cases 1-48)
sufficient, determined by the choice of the debtor Petitioner tendered the amount of
who generally has the right of election. The right P13,750.00, as his prorata share in the
of election is extinguished when the party who P55,000.00 initial payment. Another defendant,
may exercise that option categorically and Pilar P. Tan, offered to pay the same amount.
unequivocally makes his or her choice known. Because private respondent refused to accept
The choice of the debtor must also be their payments, demanding from them the full
communicated to the creditor who must receive initial installment of P 55,000.00, petitioner and
notice of it since: The object of this notice is to Pilar Tan instead deposited the said amount with
give the creditor opportunity to express his the Clerk of Court.
consent, or impugn the election made by the So moved for the reconsideration and/or
debtor, and only after said notice shall the modification of the aforesaid Order of execution
election take legal effect when consented by the and prayed instead for the "execution of the
creditor, or impugned by the latter, when decision in its entirety against all defendants,
declared proper by a competent court. jointly and severally."
When Arco tendered a check to Lim in
partial payment for the scrap papers, they
exercised their option to pay the price. Lim’s ISSUE/S:
receipt of the check and his subsequent act of WON the nature of the liability of the defendants
depositing it constituted his notice of
(including petitioner), was joint, or several or
Petitioner Arco’s option to pay. solidary?
This choice was also shown in the terms of
the MOA. The MOA declared in clear terms that
RULING: solidary
the delivery of Arco’s finished products would be
to a third person (Sy), thereby extinguishing the
The decision of the lower court based on
option to deliver the finished products of
the parties' compromise agreement, provides:
equivalent value to Lim.
1. Plaintiff agrees to reduce its total
Case No. 26 claim of P117,498.95 to only
Ronquillo vs CA, So P110,000.00 and defendants agree
132 SCRA 274 to acknowledge the validity of such
claim and further bind themselves
to initially pay out of the total
TOPIC: Kinds of Civil Obligations - As to rights and indebtedness of P110,000.00, the
obligations of multiple parties amount of P5,000.00 on or before
December 24, 1979, the balance of
FACTS: P55,000.00,
defendants individually and
Petitioner Ernesto V. Ronquillo was one of jointly agree to pay within a period
(4) defendants in a Civil Case filed by So for the of six months from January 1980 or
collection of the sum of money. The amount of before June 30, 1980. (Emphasis
P117,498.98 sought to be collected represents supply)
the value of the checks issued by said defendants
in payment for foodstuffs delivered to and Clearly then, by the express term of the
received by them. The said checks were compromise agreement and the decision based
dishonored by the drawee bank.


OBLIGATIONS (Cases 1-48)
upon it, the defendants obligated themselves to ordered to pay on its policy, since the San Leon
pay their obligation "individually and jointly". Rice Mill, Inc. is not a privy to the contract of
insurance between Sio Choy and the insurance
The term "individually" has the same meaning as company.
"collectively", "separately", "distinctively",
respectively or "severally". An agreement to be ISSUE:
"individually liable" undoubtedly creates a several Whether or not Malayan Insurance is solidarily
obligation, and a "several obligation is one by liable with Sio Choy and San Leon Rice Mill to
which one individual binds himself to perform the Vallejos.
whole obligation.
Case No. 27 NO. It is only respondents Sio Choy and San Leon
MALAYAN INSURANCE vs. COURT OF APPEALS, Rice Mill, Inc, that are solidarily liable to
165 SCRA 536, GR L-36413, September 26, respondent Vallejos for the damages awarded to
1988 Vallejos. It must be observed that respondent Sio
Choy is made liable to said plaintiff as owner of
Syllabi Class : Insurance|Civil Law|Third-Party the ill-fated Willys jeep, pursuant to Article 2184
Liability|Solidary Obligation|Subrogation of the Civil Code.

FACTS: It thus appears that respondents Sio Choy and San

Malayan Insurance issued in favor of Sio Choy, a Leon Rice Mill, Inc. are the principal tortfeasors
Private Car Comprehensive Policy effective from who are primarily liable to respondent Vallejos.
April 18, 1967 to April 18, 1968 covering a Willys The law states that the responsibility of two or
jeep. The insurance coverage for third-party more persons who are liable for a quasi-delict is
liability was amounting to P20,000. During the solidarily.
effectivity of the said policy, the insured jeep
while being driven by one Juan Campollo, an On the other hand, the basis of petitioner's
employee of San Leon Rice Mill, collided with a liability is its insurance contract with respondent
passenger bus owned by Pangasinan Sio Choy. If petitioner is adjudged to pay
Transportation Co. (Pantranco) causing damage respondent Vallejos in the amount of not more
to the insured vehicle and injuries to the driver than P20,000.00, this is on account of its being the
and Martin Vallejos who was riding in an ill-fated insurer of respondent Sio Choy under the third
jeep. Vallejos sued for damages against Sio Choy, party liability clause included in the private car
Malayan Insurance and Pantranco. However the comprehensive policy existing between
trial court only ordered Sio Choy, Malayan and petitioner and respondent Sio Choy at the time of
San Leon to pay Vallejos a total of P29,103 (jointly the complained vehicular accident.
and severally liable) but Malayan will be liable
only up to P20,000, the consideration in the In solidary obligation, the creditor may enforce
policy. CA affirmed the judgment of the trial court the entire obligation against one of the solidary
that Sio Choy, the San Leon Rice Mill, Inc. and the debtors. On the other hand, insurance is defined
Malayan Insurance Co., Inc. are jointly and as "a contract whereby one undertakes for a
severally liable for the damages awarded to the consideration to indemnify another against loss,
plaintiff Martin C. Vallejos. It ruled, however, that damage, or liability arising from an unknown or
the San Leon Rice Mill, Inc. has no obligation to contingent event."
indemnify or reimburse the petitioner insurance
company for whatever amount it has been


OBLIGATIONS (Cases 1-48)
Case No. 28 enforcing collection in case a creditor chooses to
PNB vs. Independent Planters Association, Inc. pursue his claim against the estate of the deceased
G.R. No. L-28046 May 16, 1983 solidary, debtor.
Facts: It is crystal clear that Article 1216 of the New Civil
Philippine National Bank (PNB) appealed to the S. Code is the applicable provision in this matter.
C. the Order of the defunct Court of First Instance Said provision gives the creditor the right to
of Manila in its Civil Case which dismisses PNB's 'proceed against anyone of the solidary debtors or
complaint against several solidary debtors for the some or all of them simultaneously.' The choice is
collection of a sum of money on the ground that undoubtedly left to the solidary, creditor to
one of the defendants (Ceferino Valencia) died determine against whom he will enforce collection.
during the pendency of the case, PNB claimed that In case of the death of one of the solidary debtors,
the complaint is a money claim based on contract he (the creditor) may, if he so chooses, proceed
which therefore should be prosecuted in the against the surviving solidary debtors without
testate or intestate proceeding for the settlement necessity of filing a claim in the estate of the
of the estate of the deceased defendant pursuant deceased debtors. It is not mandatory for him to
to Section 6 of Rule 86 of the Rules of Court. have the case dismissed against the surviving
PNB assails the order of dismissal, invoking its debtors and file its claim in the estate of the
right of recourse against one, some or all of its deceased solidary debtor . . .
solidary debtors under Article 1216 of the Civil Section 6, Rule 86 of the Revised Rules of Court
Code — ART. 1216. The creditor may proceed cannot be made to prevail over Article 1216 of the
against any one of the solidary debtors or some or New Civil Code, the former being merely
all of them simultaneously. The demand made procedural, while the latter, substantive.
against one of them shall not be an obstacle to
those which may subsequently be directed Case No. 29
against the others, so long as the debt has not ROLITO CALANG and PHILTRANCO SERVICE
been fully collected. ENTERPRISES, INC vs. PEOPLE OF THE
Issue: Whether or not in an action for collection PHILIPPINES,
of a sum of money based on contract against all G.R. No. 190696, August 3, 2010
the solidary debtors, the death of one defendant
deprives the court of jurisdiction to proceed with TOPIC: Sources of Obligation; the employer
the case against the surviving defendants. cannot be held solidarily liable with his employee
Ruling: Article 1216 grants the creditor the on an action based on delict;
substantive right to seek satisfaction of his credit FACTS:
from one, some or all of his solidary debtors, as he At around 2:00 p.m. of April 22, 1989, Rolito
deems fit or convenient for the protection of his Calang was driving Philtranco Bus No. 7001,
interests; and if, after instituting a collection suit owned by Philtranco along Daang Maharlika
based on contract against some or all of them and, Highway in Barangay Lambao, Sta. Margarita,
during its pendency, one of the defendants dies, Samar when its rear left side hit the front left
the court retains jurisdiction to continue the portion of a Sarao jeep coming from the opposite
proceedings and decide the case in respect of the direction. As a result of the collision, Cresencio
surviving defendants. Pinohermoso, the jeep’s driver, lost control of the
A cursory perusal of Section 6, Rule 86 of the vehicle, and bumped and killed Jose Mabansag, a
Revised Rules of Court reveals that nothing bystander who was standing along the highway’s
therein prevents a creditor from proceeding shoulder. The jeep turned turtle three (3) times
against the surviving solidary debtors. Said before finally stopping at about 25 meters from
provision merely sets up the procedure in the point of impact. Two of the jeep’s passengers,


OBLIGATIONS (Cases 1-48)
Armando Nablo and an unidentified woman, were collision. The Supreme Court partly granted the
instantly killed, while the other passengers motion.
sustained serious physical injuries. ISSUE: Is Philtranco’s liability Solidary or
The prosecution charged Calang with multiple Subsidiary?
homicide, multiple serious physical injuries and HELD:
damage to property thru reckless imprudence Liability of Calang
before the Regional Trial Court (RTC) which We see no reason to overturn the lower courts’
found Calang guilty beyond reasonable doubt. finding on Calang’s culpability. The finding of
The RTC sentenced him to suffer an negligence on his part by the trial court, affirmed
indeterminate penalty of thirty days of arresto by the CA, is a question of fact that we cannot pass
menor, as minimum, to four years and two upon without going into factual matters touching
months of prision correccional, as maximum. The on the finding of negligence. In petitions for
RTC ordered Calang and Philtranco, jointly and review on certiorari under Rule 45 of the Revised
severally, to pay P50,000 as death indemnity to Rules of Court, this Court is limited to reviewing
the heirs of Armando; P50,000 as death only errors of law, not of fact, unless the factual
indemnity to the heirs of Mabansag; and findings complained of are devoid of support by
P90,083.93 as actual damages to the private the evidence on record, or the assailed judgment
complainants. The CA added that the RTC is based on a misapprehension of facts.
correctly held Philtranco jointly and severally Liability of Philtranco
liable with petitioner Calang, for failing to prove We, however, hold that the RTC and the CA both
that it had exercised the diligence of a good father erred in holding Philtranco jointly and severally
of the family to prevent the accident. liable with Calang. We emphasize that Calang was
The petitioners filed with the Supreme Court a charged criminally before the RTC. Undisputedly,
petition for review on certiorari. The same was Philtranco was not a direct party in this case.
denied for failure to sufficiently show any Since the cause of action against Calang was based
reversible error in the assailed decision to on delict, both the RTC and the CA erred in
warrant the exercise of this Court’s discretionary holding Philtranco jointly and severally liable
appellate jurisdiction. with Calang, based on quasi-delict under Articles
In the present motion for reconsideration, the 21761 and 21802 of the Civil Code. Articles 2176
petitioners claim that there was no basis to hold and 2180 of the Civil Code pertain to the vicarious
Philtranco jointly and severally liable with Calang liability of an employer for quasi-delicts that an
because the former was not a party in the criminal employee has committed. Such provision of law
case (for multiple homicide with multiple serious does not apply to civil liability arising from delict.
physical injuries and damage to property thru If at all, Philtranco’s liability may only be
reckless imprudence) before the RTC. subsidiary under Article 102 of the Revised Penal
The petitioners likewise maintain that the courts
below overlooked several relevant facts, Case No. 30
supported by documentary exhibits, which, if RUKS KONSULT AND CONSTRUCTION,
considered, would have shown that Calang was Petitioner, v. ADWORLD SIGN AND
not negligent, such as the affidavit and testimony ADVERTISING CORPORATION* AND
of witness Celestina Cabriga; the testimony of TRANSWORLD MEDIA ADS, INC.,
witness Rodrigo Bocaycay; the traffic accident G.R. No. 204866, January 21, 2015
sketch and report; and the jeepney’s registration The Facts
receipt. The petitioners also insist that the jeep’s Adworld is the owner of a billboard structure
driver had the last clear chance to avoid the located at EDSA Tulay, Guadalupe, Barangka


OBLIGATIONS (Cases 1-48)
Mandaluyong, which was misaligned and its and Ruks appealed to the CA. The CA denied
foundation impaired when the adjacent billboard Ruks’s appeal and affirmed the ruling of the RTC.
structure owned by Transworld and used by It adhered to the RTC’s finding of negligence on
Comark collapsed and crashed against it. the part of Transworld and Ruks which brought
Transworld averred that the collapse of its about the damage to Adworld’s billboard.
billboard structure was due to extraordinarily
strong winds that occurred instantly and Issue: Whether or not the CA correctly affirmed
unexpectedly, and maintained that the damage the ruling of the RTC declaring Ruks jointly and
caused to Adworld’s billboard structure was severally liable with Transworld for damages
hardly noticeable. Transworld filed a Third-Party sustained by Adworld.
Complaint against Ruks, the company which built
the collapsed billboard structure in the former’s Held: The petition is without merit. In this case,
favor. It was alleged therein that the structure the CA correctly affirmed the RTC’s finding that
constructed by Ruks had a weak and poor Transworld’s initial construction of its billboard’s
foundation not suited for billboards, thus, prone lower structure without the proper foundation,
to collapse, and as such, Ruks should ultimately be and that of Ruks’s finishing its upper structure
held liable for the damages caused to Adworld’s and just merely assuming that Transworld would
billboard structure. For its part, Comark denied reinforce the weak foundation are the two (2)
liability for the damages caused to Adworld’s successive acts which were the direct and
billboard structure, maintaining that it does not proximate cause of the damages sustained by
have any interest on Transworld’s collapsed Adworld. Worse, both Transworld and Ruks were
billboard structure as it only contracted the use of fully aware that the foundation for the former’s
the same. Lastly, Ruks admitted that it entered billboard was weak; yet, neither of them took any
into a contract with Transworld for the positive step to reinforce the same. They merely
construction of the latter’s billboard structure, relied on each other’s word that repairs would be
but denied liability for the damages caused by its done to such foundation, but none was done at all.
collapse. It contended that when Transworld Clearly, the foregoing circumstances show that
hired its services, there was already an existing both Transworld and Ruks are guilty of
foundation for the billboard and that it merely negligence in the construction of the former’s
finished the structure according to the terms and billboard, and perforce, should be held liable for
conditions of its contract with the latter. RTC its collapse and the resulting damage to
ruled in Adworld’s favor and declared Adworld’s billboard structure. As joint
Transworld and Ruks jointly and severally liable tortfeasors, therefore, they are solidarily liable to
to Adworld. In particular, the RTC explained that Adworld.
Transworld was made aware by Ruks that the Verily, “[j]oint tortfeasors are those who
initial construction of the lower structure of its command, instigate, promote, encourage, advise,
billboard did not have the proper foundation and countenance, cooperate in, aid or abet the
would require additional columns and pedestals commission of a tort, or approve of it after it is
to support the structure. Notwithstanding, done, if done for their benefit. They are also
however, Ruks proceeded with the construction referred to as those who act together in
of the billboard’s upper structure and merely committing wrong or whose acts, if independent
assumed that Transworld would reinforce its of each other, unite in causing a single injury.
lower structure. The RTC then concluded that Under Article 219429 of the Civil Code, joint
these negligent acts were the direct and tortfeasors are solidarily liable for the resulting
proximate cause of the damages suffered by damage. In other words, joint tortfeasors are each
Adworld’s billboard. Aggrieved, both Transworld liable as principals, to the same extent and in the


OBLIGATIONS (Cases 1-48)
same manner as if they had performed the defendant failed to pay the balance. In July 1925,
wrongful act themselves.” defendant again purchased another truck from
The Court’s pronouncement in People v. Bachrach. The said truck, together with the 3
Velasco31 is instructive on this matter, to wit: other vehicles were mortgaged to the plaintiff to
Where several causes producing an injury are secure the remaining balance. The defendant
concurrent and each is an efficient cause without failed to pay the balance for the latest truck
which the injury would not have happened, the obtained.
injury may be attributed to all or any of the causes
and recovery may be had against any or all of the It was agreed in both sales that 12% interest will
responsible persons although under the be paid on the unpaid price, and in case of the
circumstances of the case, it may appear that one non-payment of the total debt at maturity, 25%
of them was more culpable, and that the duty shall be the penalty. The defendant also signed a
owed by them to the injured person was not same. promissory note solidarily with his brother
No actor’s negligence ceases to be a proximate Rosario (acting as intervenor), the sums secured
cause merely because it does not exceed the by the mortgages. Rosario is alleged to be the
negligence of other actors. Each wrongdoer is owner of the two white trucks no. 77197 & 92744
responsible for the entire result and is liable as mortgaged. In both sales it was agreed that 12 per
though his acts were the sole cause of the injury. cent interest would be paid upon the unpaid
There is no contribution between joint portion of the price at the executon of the
[tortfeasors] whose liability is solidary since both contracts, and in case of non-payment of the total
of them are liable for the total damage. Where the debt upon its maturity, 25 per cent thereon, as
concurrent or successive negligent acts or penalty.
omissions of two or more persons, although
acting independently, are in combination the While these two cases were pending in the lower
direct and proximate cause of a single injury to a court the mortgaged trucks were sold by virtue of
third person, it is impossible to determine in what the mortgage, all of them together bringing in,
proportion each contributed to the injury and after deducting the sheriff's fees and
either of them is responsible for the whole injury. transportation charges to Manila, the net sum of

Case No. 31 The lower court ordered the defendants and the
Bachrach Motor Co. v. Espiritu intervenor to pay plaintiff in case 28497 the sum
52 PHIL 346 of P7,732.09 with interest at the rate of 12 per
Kinds of Obligations – As to presence of an cent per annum from May 1, 1926 until fully paid,
accessory undertaking in case of breach and 25 per cent thereof in addition as penalty. In
case 28498, the trial court ordered the defendant
FACTS: This is a consolidated case (Cases no. and the intervenor to pay plaintiff the sum of
28497 and 28948) involving two separate sale P4,208.28 with interest at 12 per cent per annum
transactions. One made in Feb. 18, 1925 (case from December 1, 1925 until fully paid, and 25
28498), when the defendant earlier bought a per cent thereon as penalty.
truck on installment from the petitioner and said
truck was mortgaged together with the two The appellants contend that trucks 77197 and
others (no. 77197 & 92744 in the the subsequent 92744 were not mortgaged, because, when the
sale transaction dated July 28, 1925. The said two defendant signed the mortgage deeds these
of the other trucks were also purchased (but trucks were not included in those documents, and
already paid previously) from the plaintiff. The were only put in later, without defendant's


OBLIGATIONS (Cases 1-48)
knowledge. Appellants also alleged that on
February 4, 1925, the defendant sold his rights in FACTS:
said trucks Nos. 77197 and 92744 to the
intervenor, and that as the latter did not sign the This is an appeal from the decision of the
mortgage deeds, such trucks cannot be CFI of Rizal rendering judgment against Robes-
considered as mortgaged. Francisco Corporation to register the deed of
absolute sale in favor of Millan with the Register
But there is positive proof that they were of Deeds of Caloocan City and secure the
included at the time the defendant signed these corresponding title within ten days and if not
documents. Besides, there were presented two of possible said Corporation shall pay Millan the
defendant's letters to Hidalgo, an employee of the total amount she paid P5,193.63 with interest at
plaintiff's written a few days before the 4% per annum from June 22, 1972 until fully
transaction, acquiescing in the inclusion of all his paid. In either case Robes Corporation is
White trucks already paid for, in the mortgage. sentenced to pay Millan nominal damages of
P20,000.00 plus P5,000.00 attorney’s fees.
It is finally contended that the 25 per cent penalty
upon the debt, in addition to the interest of 12 per Petitioner Corporation questions the award
cent per annum, makes the contract usurious. of P20,000.00 nominal damages and P5,000.00
attorney’s fees alleging such to be excessive and
ISSUE: Whether the 25% penalty upon the debt in
addition to the 12% interest per annum makes In May 1962, Robes Corporation entered
the contract usurious? into a contract of sale with Millan for a parcel of
land in the amount of 3,864.00 payable in
RULING: No. Article 1152 of the Civil Code installments. Millan complied with her obligation
permits the agreement upon a penalty apart from and made her final payment on December 22,
the interest. Should there be such an agreement, 1971 for a total payment of P5,193.63 including
the penalty, as was held in the case of Lopez vs. interests and expenses for registration of title. On
Hernaez (32 Phil., 631), does not include the March 2, 1973 the deed of absolute sale was
interest, and which may be demanded separately. executed but the transfer certificate of title could
According to this, the penalty is not to be added to not be executed because the parcel of land
the interest for the determination of whether the conveyed to Millan was included among other
interest exceeds the rate fixed by the law, since properties of the corporation mortgaged to GSIS
said rate was fixed only for the interest. But to secure an obligation of P10 million, hence, the
considering that the obligation was partly owner’s duplicate certificate of title of the
performed, and making use of the power given to subdivision was in the possession of the GSIS.
the court by article 1154 of the Civil Code, this
penalty is reduced to 10 per cent of the unpaid ISSUE:
Is the 4% interest provision of the contract
a penal clause?
No. Said clause does not convey any penalty,
86 SCRA 59 for even without it, pursuant to Article 2209 of the


OBLIGATIONS (Cases 1-48)
Civil Code, the vendee would be entitled to Consequently, the two parties fixed a price to the
recover the amount paid by her with legal rate of plastic sheetings regardless of the kind, quality or
interest which is even more than the 4% provided actual invoice value thereof and based it on
for in the clause. dividing the total price of the shipment with its
aggregate quantity. After the shipments arrived in
A penal clause is an accessory undertaking Manila (4 shipments in total), Pamintuan only
to assume greater liability in case of breach. From delivered a portion or 224, 150 yards of the
this alone, the 4% provision does not come to be expected 339, 440 yards of plastic sheetings he
penal in character, hence, Robes Corporation’s received to Yu Ping Kun's warehouse.
contention that the penalty shall substitute the Furthermore, he delivered plastic sheetings of
indemnity for damages and the payment of inferior quality that were valued at a lesser price
interest in case of non-compliance does not hold than what Yu Ping Kun had paid. Subsequently, Yu
water. Ping Kun filed an action to enforce a provision in
their contract of sale which states that any
Unfortunately, Millan failed to show the violation of the stipulations of that contract would
actual damages she suffered as a result of the entitle the aggrieved party to liquidated damages
nonperformance. Nonetheless, the facts show in the amount of 10, 000 Php from the offending
that the right of the vendee was violated and this party.
entitles her at the very least to nominal damages. ISSUE:
Whether or not compensatory damages may be
“In the situation before Us, We are of the awarded for breach of a contract of sale in
view that the amount of P20,000.00 is addition to liquidated damages/stipulated
excessive.” Bad faith can not be penalty in the said contract.
presumed. Petitioner Corporation expected that HELD:
arrangements were possible for the GSIS to make Yes, compensatory damages may be awarded for
partial releases of the subdivision lots from the breach of a contract of sale in addition to
overall real estate mortgage. It was only liquidated damages/stipulated penalty in the said
unfortunate for it not to succeed in that contract. Paragraph 1 of Article 1226 of the New
regard. Hence, the sum of ten thousand pesos by Civil Code states that:
way of nominal damages is fair and just. “In obligations with a penal clause,
the penalty shall substitute the indemnity
Case No. 33 for damages and the payment of interests
PAMINTUAN v. COURT OF APPEALS in case of noncompliance, if there is no
G.R. No. L-26339, 94 Phil. 556 | December 14, stipulation to the contrary. Nevertheless,
1979. damages shall be paid if the obligor refuses
TOPIC: Article 1226 to pay the penalty or is guilty of fraud in the
FACTS: fulfillment of the obligation.”
Mariano Pamintuan was in an agreement with Yu
Ping Kun Co., Inc. to sell plastic sheetings Thus, as a general rule, the penalty takes the
imported by the former from Japan through a place of the indemnity for damages and the
barter license he had for the export of white flint payment of interest. However there are
corn to Toyo Menka Kaisha, Ltd. While the plastic exceptions to this rule under the Civil Code,
sheetings were arriving in Manila, Pamintuan and one of them is; when the obligor is guilty
informed the President of Yu Ping Kun that he was of fraud in the fulfillment of the obligation,
in dire need of cash and requested that he be paid indemnity for damages may be awarded in
immediately for the plastic sheetings.


OBLIGATIONS (Cases 1-48)
addition to and apart from the penalty deducted or refunded whichever is the
stipulated. case by the LICENSOR or LICENSEE;
5. Two films covered by the agreement were
The factual findings of the lower courts that Evangeline Katorse and Bubot which GMA
Pamintuan was guilty of fraud because he did paid at P1.5 Million each;
not make a complete delivery of the plastic
sheetings and he overpriced the same is 6. In 2003, GMA sued Hornado to collect P1.6
conclusive upon the Supreme Court. Hence, Million for fees paid for Evangeline Katorse
based on this fact, Pamintuan should pay and P350,000 as portion of the fees GMA
damages. However, in case of fraud the paid for Bubot telecast, which Hornado
creditor (in this case Yu Ping Kun), in addition failed to remit to Bubot’s owner, Alano
to and apart from the stipulated penalty, may thereby constituting an implied trust;
only recover the difference between the actual 7. GMA allegedly rejected Evangeline Katorse
proven damages and the stipulated penalty. because “its running time was too short
for telecast”;
8. Hornado denied liability and alleged that
Case No. 34 he even replaced Evangeline Katorse with
Hornado vs. GMA Network Films, Inc. Winasak na Pangarap, which GMA
January 14, 2015 accepted as evidenced by a certification
TOPIC: Breach of Obligations that Winasak is of good broadcast quality.
With respect to his non-remittance of fees
to Alano, he invoked non-privity of GMA as
FACTS: to his obligations to Alano;
1. In 1998, GMA Films entered into a TV 9. The RTC of QC ruled in favor of Hornado,
Rights Agreement with Petitioner giving credence to his defense on
Hornado, as licensor of 36 films, which replacement of the rejected film with a
granted GMA with exclusive right to new one and that GMA failed to prove that
telecast the 36 films for a period of three Hornado pocketed any portion of the fees
years; for Bubot.
2. Under paragraph 3,the parties agreed that 10. On Appeal, the CA set aside the RTC’s
all betacam copies of the film should pass decision. The CA found that GMA is
through broadcast quality test conducted authorized to reject Evangeline Katorse
by GMA-7; under Paragraph 4 of the Agreement and
3. The parties also agreed to submit the films that GMA never accepted the replacement
for review by the MTRCB and stipulated on Winasak na Pangarap because it is a bold
the remedies in the event that MTRCB film. Additionally, there was implied trust
bans the telecasting of any of the films; between Hornado and GMA films which
obligates Hornado, as trustee to return to
4. Paragraph 4 states that xxx “in the event GMA, as beneficiary the P350,000.
of disapproval, LICENSOR will either (1)
replace the censor Programme Titles
with another title which is mutually ISSUE:
acceptable to both parties, or (2) failure Whether or not Hornado was liable for
to do such, a proportionate reduction breach of agreement or trust?
from the total price shall either be


OBLIGATIONS (Cases 1-48)
RULING: Case No. 35
JOSE CANGCO, plaintiff-appellant, vs. MANILA
RAILROAD CO., defendant-appellee. G.R. No. L-
Hornado committed no breach of contract
12191 October 14, 1918
or trust.
Under the stipulation in paragraph 4, what
triggers the rejection and replacement of any film
listed in the Agreement is the “disapproval” of Plaintiff was riding the train of the MRC
its telecasting by the MTRCB. where he was an employee. As the train drew
It was not disputed that GMA Films near to his destination, he arose from his seat.
rejected Evangeline Katorse not because it was When he was about to alight from the train, he
disapproved by the MTRCB but because the accidentally stepped on a sack of watermelons
film’s total running time was too short for which he failed to notice because it was already
telecast. Instead of rejecting GMA’s demand for 7:00 in the evening and the place is dark.
falling outside the terms of Paragraph 4, Consequently, he slipped and fell violently on the
petitioner voluntarily acceded to it and replaced platform, badly crushing his arm. He then sued
such film with Winasak na Pangarap. MRC on the ground of negligence of its employees
In terms devoid of any ambiguity, placing the sacks of melons upon the platform and
Paragraph 4 requires the intervention of MTRCB, in leaving them so placed as to be a menace to the
the state censor, before GMA Films can reject a security of passenger alighting from the
film and require its replacement. Paragraph 4 company’s trains.
requires that MTRCB disapprove or X-rate the
film for telecasting. GMA Films does not allege and The company’s defense was that granting
did not prove that MTRCB reviewed Winasak na that its employees were negligent in placing an
obstruction upon the platform, the direct and
Pangarap and x-rated it. Rather, GMA’s witness
proximate cause of the injury suffered by plaintiff
testified that it was rejected because it was
considered as “bomba”. This runs counter to was his own contributing negligence.
paragraphs 3 and 4 of the agreement when GMA
arrogated unto itself the function of the MTRCB
under the agreement to evaluate the films for the Whether defendant can be held liable for
propriety of their content. damages incurred by the plaintiff despite the
latter’s contributory negligence.
As to the issue Trust, nowhere in the agreement
did the parties stipulate that Hornado would
merely act as agent of the film owners. We YES. While the plaintiff may have been
entertain no doubt that Hornado forged separate negligent, the defendant is also negligent. The
contractual arrangements with the owners of the case falls under the category that of culpa
films listed in the Agreements, spelling out the contractual. It is important to note that the
terms of payment to the latter. Whether or not foundation of the legal liability of the defendant is
Hornado complied with these terms is a matter to the contract of carriage, and that the obligation to
which GMA Films holds absolutely no interest. respond for the damage which plaintiff has
suffered arises, if at all, from the breach of that
contract by reason of the failure of defendant to


OBLIGATIONS (Cases 1-48)
exercise due care in its performance. That is to in his mind with regard either to the length of the
say, its liability is direct and immediate, differing step which he was required to take or the
essentially, in legal viewpoint from that character of the platform where he was alighting.
presumptive responsibility for the negligence of Our conclusion is that the conduct of the plaintiff
its servants, imposed by article 1903 of the Civil in undertaking to alight while the train was yet
Code, which can be rebutted by proof of the slightly under way was not characterized by
exercise of due care in their selection and imprudence and that therefore he was not guilty
supervision. Article 1903 of the Civil Code is not of contributory negligence.
applicable to obligations arising ex contractu, but
only to extra-contractual obligations — or to use Case No. 36
the technical form of expression, that article Telefast v. Castro
relates only to culpa aquiliana and not to culpa G.R. No. 73867 February 29, 1988
contractual. Facts:

As pertinent to the question of 1. The petitioner is a company engaged in

contributory negligence on the part of the transmitting telegrams. The plaintiffs are
plaintiff in this case the following circumstances the children and spouse of Consolacion
are to be noted: The company's platform was Castro who died in the Philippines. One of
constructed upon a level higher than that of the the plaintiffs, Sofia sent a telegram thru
roadbed and the surrounding ground. The Telefast to her father and other siblings in
distance from the steps of the car to the spot the USA to inform about the death of their
where the alighting passenger would place his mother. Unfortunately, the deceased had
feet on the platform was thus reduced, thereby already been interred but not one from the
decreasing the risk incident to stepping off. The relatives abroad was able to pay their last
nature of the platform, constructed as it was of respects. Sofia found out upon her return
cement material, also assured to the passenger a in the US that the telegram was never
stable and even surface on which to alight. received. Hence the suit for damages on
Furthermore, the plaintiff was possessed of the the ground of breach of contract. The
vigor and agility of young manhood, and it was by defendant-petitioner argues that it should
no means so risky for him to get off while the train only pay the actual amount paid to it.
was yet moving as the same act would have been 2. The lower court ruled in favor of the
in an aged or feeble person. In determining the plaintiffs and awarded compensatory,
question of contributory negligence in moral, exemplary, damages to each of the
performing such act — that is to say, whether the plaintiffs with 6% interest p.a. plus
passenger acted prudently or recklessly — the attorney’s fees. The Court of Appeals
age, sex, and physical condition of the passenger affirmed this ruling but modified and
are circumstances necessarily affecting the safety eliminated the compensatory damages to
of the passenger, and should be considered. Sofia and exemplary damages to each
Women, it has been observed, as a general rule plaintiff, it also reduced the moral
are less capable than men of alighting with safety damages for each. The petitioner appealed
under such conditions, as the nature of their contending that, it can only be held liable
wearing apparel obstructs the free movement of for P 31.92, the fee or charges paid by Sofia
the limbs. Again, it may be noted that the place C. Crouch for the telegram that was never
was perfectly familiar to the plaintiff as it was his sent to the addressee, and that the moral
daily custom to get on and of the train at this damages should be removed since
station. There could, therefore, be no uncertainty defendant's negligent act was not


OBLIGATIONS (Cases 1-48)
motivated by "fraud, malice or Philippines from the United States to testify
recklessness. before the trial court. Had petitioner not been
remiss in performing its obligation, there would
Issue: Whether or not the award of the moral, have been no need for this suit or for Mrs.
compensatory and exemplary damages is Crouch's testimony.
proper. The award of exemplary damages by the trial
RULING: Yes, there was a contract between court is likewise justified for each of the private
the petitioner and private respondent Sofia C. respondents, as a warning to all telegram
Crouch whereby, for a fee, petitioner undertook companies to observe due diligence in
to send said private respondent's message transmitting the messages of their customers.
overseas by telegram. Petitioner failed to do this
despite performance by said private respondent Case No. 37
of her obligation by paying the required charges. Meralco vs. Ramoy
Petitioner was therefore guilty of contravening its GR. No. 158911; March 4, 2008
and is thus liable for damages. This liability is not TOPIC: Manner of breach as to negligence
limited to actual or quantified damages. To Article 1170. Those who in the performance of
sustain petitioner's contrary position in this their obligations are guilty of fraud, negligence,
regard would result in an inequitous situation or delay, and those who in any manner
where petitioner will only be held liable for the contravene the tenor thereof, are liable for
actual cost of a telegram fixed thirty (30) years damages.
ago. Facts
Art. 1170 of the Civil Code provides that "those On 1987, the National Power Corporation (NPC) filed
who in the performance of their obligations are with the MTC Quezon City a case for ejectment against
guilty of fraud, negligence or delay, and those who several persons allegedly illegally occupying its
in any manner contravene the tenor thereof, are properties in Baesa, Quezon City and among the
liable for damages." Art. 2176 also provides that defendants was Leoncio Ramoy, one of the plaintiffs in
"whoever by act or omission causes damage to the case at bar. After the defendants failed to file an
another, there being fault or negligence, is obliged answer in spite of summons duly served, the
to pay for the damage done." MTC rendered judgment for the plaintiff MERALCO
Award of Moral, compensatory and exemplary and ordering the defendants to demolish or remove
damages is proper. the building and structures they built on the land of the
The petitioner's act or omission, which amounted plaintiff and to vacate the premises. In the case
to gross negligence, was precisely the cause of the of Leoncio Ramoy, the Court found that he was
suffering private respondents had to occupying a portion of Lot No. 72-B-2-B with the exact
undergo. Art. 2217 of the Civil Code states: location of his apartments indicated and encircled in
"Moral damages include physical suffering, the location map as No. 7.
mental anguish, fright, serious anxiety, Sometime in 1990, NPC wrote Meralco requesting for
besmirched reputation, wounded feelings, moral the immediate disconnection of electric power supply
shock, social humiliation, and similar to all residential and commercial establishments
injury. Though incapable of pecuniary beneath the NPC transmission lines
computation, moral damages may be recovered if along Baesa, Quezon. Attached to the letter was a list of
they are the proximate results of the defendant's establishments affected which included
wrongful act or omission." plaintiffs Leoncio and Matilde Ramoy as well as a copy
Then, the award of P16,000.00 as compensatory of the court decision. After deliberating
damages to Sofia C. Crouch representing the on NPC's letter, Meralco decided to comply
expenses she incurred when she came to the with NPC's request and thereupon issued notices of


OBLIGATIONS (Cases 1-48)
disconnection to all establishments affected including and attorney's fees. MERALCO's motion for
plaintiffs Leoncio Ramoy. In a letter, Meralco requested reconsideration of the Decision was denied; hence, this
NPC for a joint survey to determine all the petition.
establishments which are considered under NPC ISSUES
property in view of the fact that the houses in the area 1. Won MERALCO is negligent when it
are very close to each other. Shortly thereafter, a joint disconnected the electric service of respondent;
survey was conducted and the NPC personnel pointed 2. Won MERALCO is liable for moral, exemplary
out the electric meters to be disconnected. In due time, damages and attorney’s fees under the
the electric service connection of the plaintiffs [herein circumstance that it acted in good faith in the
respondents] was disconnected. disconnection of the electrical services of the
On one hand, Plaintiff Leoncio Ramoy testified that he respondents.
and his wife are the registered owners of a parcel of RULING
land covered by TCT No. 326346, a portion of which 1. MERALCO failed to exercise the utmost degree of
was occupied by other plaintiffs as lessees. When care and diligence required of it. It was not enough for
the Meralco employees were disconnecting plaintiffs' MERALCO to merely rely on the Decision of the MTC
power connection, plaintiff Ramoy objected by without ascertaining whether it had become final
informing the Meralco foreman that his property was and executory. Verily, only upon finality of said
outside the NPC property and pointing out the Decision can it be said with conclusiveness that
monuments showing the boundaries of his respondents have no right or proper interest over the
property. However, he was threatened and told not to subject property, thus, are not entitled to the services
interfere by the armed men who accompanied of MERALCO. Moreover, if it were true that the decision
the Meralco employees. After the electric power was final and executory, the most prudent thing for
in Ramoy's apartment was cut off, the plaintiffs-lessees MERALCO to have done was to coordinate with the
left the premises. proper court officials in determining which structures
During the ocular inspection ordered by the Court and are covered by said court order. Likewise, there is no
attended by the parties, it was found out that the evidence on record to show that this was done by
residence of plaintiffs-spouses Leoncio and Matilde MERALCO.
Ramoy was indeed outside the NPC property. This was In Ridjo Tape, the Court explained that being a public
confirmed by defendant's witness R.P. Monsale III on utility vested with vital public interest, MERALCO is
cross-examination. Monsale also admitted that he did impressed with certain obligations towards its
not inform his supervisor about this fact nor did he customers and any omission on its part to perform
recommend re-connection of plaintiffs' power supply. such duties would be prejudicial to its interest. For in
It also shows that at the request of NPC, the final analysis, the bottom line is that those who do
defendant Meralco re-connected the electric service of not exercise such prudence in the discharge of their
four customers previously disconnected none of duties shall be made to bear the consequences of such
whom was any of the plaintiffs. oversight.
Under the Service Contract, [a] customer of electric
RTC ordered MERALCO to restore the electric power service must show his right or proper interest over the
supply of respondents and dismissed respondents' property in order that he will be provided with and
claim for moral damages, exemplary damages and assured a continuous electric service. Clearly,
attorney's fees. Upon respondents’ appeal, CA faulted respondents' cause of action against MERALCO is
MERALCO for not requiring from NPC a writ of anchored on culpa contractual or breach of contract for
execution or demolition and in not coordinating with the latter's discontinuance of its service to respondents
the court sheriff or other proper officer before under Article 1170 of the Civil Code.
complying with the NPC's request. Thus, the CA held In Radio Communications of the Philippines, Inc.
MERALCO liable for moral and exemplary damages v. Verchez, Court expounded on the nature of culpa


OBLIGATIONS (Cases 1-48)
contractual that the mere proof of the existence of the Case No. 38
contract and the failure of its compliance justify, MINDANAO TERMINAL AND
prima facie, a corresponding right of relief. The BROKERAGESERVICE, INC.- versus -PHOENIX
remedy serves to preserve the interests of ASSURANCE COMPANY OF NEW YORK/MCGEE &
the promissee that may include his expectation CO., INC
interest, or his reliance interest, or his restitution G.R. No. L- G.R. No. 162467
interest. The effect of every infraction is to create a new May 8, 2009
duty, that is, to make recompense to the one who has FACTS:
been injured by the failure of another to observe his Del Monte Philippines, Inc. contracted petitioner
contractual obligation unless he can show extenuating Mindanao Terminal and Brokerage Service, Inc., a
circumstances, like proof of his exercise of due stevedoring company, to load and stow a
diligence x x x or of the attendance of fortuitous shipment of 146,288 cartons of fresh green
event, to excuse him from his ensuing liability. Article Philippine bananas and 15,202cartons of fresh
1173 also provides that the fault or negligence of the pineapples belonging to Del Monte Fresh Produce
obligor consists in the omission of that diligence which International, Inc. into the cargo hold of the vessel
is required by the nature of the obligation and M/V Mistrau. The vessel was docked at the port of
corresponds with the circumstances of the persons, of Davao City and the goods were to be transported
the time and of the place. by it to the port of Inchon, Korea in favor of
2. consignee Taegu Industries, Inc. Del Monte
Respondent Leoncio Ramoy may be awarded moral Produce insured the shipment under an "open
damages because he testified as to his wounded cargo policy" with private respondent Phoenix
feelings In Mahinay v. Velasquez, Jr., the Court held that Assurance Company of New York , a non-life
in order that moral damages may be awarded, there insurance company, and private respondent
must be pleading and proof of moral suffering, McGee & Co. Inc. (McGee), the underwriting
mental anguish, fright and the like. Indeed, manager/agent of Phoenix.
respondent should have taken the witness stand The vessel set sail from the port of Davao City and
and should have testified. arrived at the port of Inchon, Korea. It was then
With regard to exemplary damages, it was not discovered upon discharge that some of the cargo
awarded. Article 2232 of the Civil Code provides that in was in bad condition. The Marine Cargo Damage
contracts and quasi-contracts, the court may award Surveyor of Incok Loss and Average Adjuster of
exemplary damages had defendant MERALCO acted in Korea, through its representative Byeong Yong
a wanton, fraudulent, reckless, oppressive, or Ahn (Byeong),surveyed the extent of the damage
malevolent manner but records show that MERALCO of the shipment. In a survey report, it was stated
did take some measures, i.e., coordinating with NPC that16,069 cartons of the banana shipment
officials and conducting a joint survey of the subject and2,185 cartons of the pineapple shipment were
area, to verify which electric meters should be so damaged that they no longer had commercial
disconnected although these measures are not value.
sufficient, considering the degree of diligence required Mindanao Terminal loaded and stowed the
of it. cargoes aboard the M/V Mistrau. The vessel set
Since the Court does not deem it proper to award sail from the port of Davao City and arrived at the
exemplary damages in this case, then the CA's award port of Inchon, Korea. It was then discovered
for attorney's fees should likewise be deleted, as Article upon discharge that some of the cargo was in bad
2208 of the Civil Code states that in the absence of condition.
stipulation, attorney's fees cannot be recovered Del Monte Produce filed a claim under the open
except in cases provided for in said Article. cargo policy for the damages to its shipment.
McGee’s Marine Claims Insurance Adjuster


OBLIGATIONS (Cases 1-48)
evaluated the claim and recommended that stowing the cargoes of Del Monte Produce aboard
payment in the amount of $210,266.43 be made. M/V Mistrau, had acted merely as a labor
Phoenix and McGee instituted an action for provider in the case at bar. There is no specific
damages against Mindanao Terminal. provision of law that imposes a higher degree of
After trial, the RTC held that the only diligence than ordinary diligence for a
participation of Mindanao Terminal was to load stevedoring company or one who is charged only
the cargoes on board the M/V Mistrau under the with the loading and stowing of cargoes. It was
direction and supervision of the ship’s officers, neither alleged nor proven by Phoenix and McGee
who would not have accepted the cargoes on that Mindanao Terminal was bound by
board the vessel and signed the foreman’s report contractual stipulation to observe a higher degree
unless they were properly arranged and tightly of diligence than that required of a good father of
secured to with stand voyage across the open a family. We therefore conclude that following
seas. Accordingly, Mindanao Terminal cannot be Article 1173, Mindanao Terminal was required to
held liable for whatever happened to the cargoes observe ordinary diligence only in loading and
after it had loaded and stowed them. Moreover, stowing the cargoes of Del Monte Produce aboard
citing the survey report, it was found by the RTC M/V Mistrau.
that the cargoes were damaged on account of a
typhoon which M/V Mistrau had encountered Case No. 39
during the voyage. It was further held that JIMENEZ vs. MANILA
Phoenix and McGee had no cause of action against 150 SCRA 510
Mindanao Terminal because the latter, whose
services were contracted by Del Monte, a distinct FACTS:
corporation from Del Monte Produce, had no
contract with the assured Del Monte Produce. The Petitioner together with his neighbors, went to
RTC dismissed the complaint and awarded the Sta. Ana public market to buy "bagoong" at the
counterclaim of Mindanao Terminal in the time when the public market was flooded with
amount of P83,945.80 as actual damages and ankle deep rainwater. After purchasing the
P100,000.00 as attorney’s fees. "bagoong" he turned around to return home but
he stepped on an uncovered opening which could
ISSUE: Whether or not Phoenix have a cause of not be seen because of the dirty rainwater,
action and whether Mindanao Terminal is liable causing a dirty and rusty four- inch nail, stuck
for not having exercised extra ordinary diligence inside the uncovered opening, to pierce the left
in the transport and storage of the cargo. leg of plaintiff-petitioner penetrating to a depth of
RULING: about one and a half inches. After administering
No, in the present case, Mindanao Terminal, as a first aid treatment at a nearby drugstore, his
stevedore, was only charged with the loading and companions helped him hobble home. He felt ill
stowing of the cargoes from the pier to the ship’s and developed fever and he had to be carried to
cargo hold; it was never the custodian of the Dr. Juanita Mascardo. Despite the medicine
shipment of Del Monte Produce. A stevedore is administered to him by the latter, his left leg
not a common carrier for it does not transport swelled with great pain. He was then rushed to
goods or passengers; it is not akin to a the Veterans Memorial Hospital where he had to
warehouseman for it does not store goods for be confined for twenty (20) days due to high fever
profit. and severe pain.
Stevedoring companies are required only to
exercise ordinary diligence: a stevedoring Upon his discharge from the hospital, he had to
company which was charged with the loading and walk around with crutches for fifteen (15) days.


OBLIGATIONS (Cases 1-48)
His injury prevented him from attending to the defective condition of roads, streets, bridges,
school buses he is operating. As a result, he had to public buildings, and other public works under
engage the services of one Bienvenido Valdez to their control or supervision." In other words, Art.
supervise his business for an aggregate 1, sec. 4, R.A. No. 409 refers to liability arising
compensation of nine hundred pesos (P900.00). from negligence, in general, regardless of the
object, thereof, while Article 2189 of the Civil
Petitioner sued for damages the City of Manila Code governs liability due to "defective streets,
and the Asiatic Integrated Corporation under public buildings and other public works" in
whose administration the Sta. Ana Public Market particular and is therefore decisive on this
had been placed by virtue of a Management and specific case.
Operating Contract.
In the same suit, the Supreme Court clarified
ISSUE: Whether or not the City of Manila is further that under Article 2189 of the Civil Code,
solidarily liable with Asiatic Integrated it is not necessary for the liability therein
Corporation for the injuries sustained by the established to attach, that the defective public
Petitioner works belong to the province, city or municipality
HELD: YES from which responsibility is exacted. What said
article requires is that the province, city or
This issue has been laid to rest in the case of City municipality has either "control or supervision"
of Manila v. Teotico (22 SCRA 269-272 [1968]) over the public building in question.
where the Supreme Court squarely ruled that
Republic Act No. 409 establishes a general rule In the case at bar, there is no question that the Sta.
regulating the liability of the City of Manila for Ana Public Market, despite the Management and
"damages or injury to persons or property arising Operating Contract between respondent City and
from the failure of city officers" to enforce the Asiatic Integrated Corporation remained under
provisions of said Act, "or any other law or the control of the former.
ordinance or from negligence" of the City "Mayor,
Municipal Board, or other officers while enforcing As a defense against liability on the basis of a
or attempting to enforce said provisions." quasi-delict, one must have exercised the
diligence of a good father of a family. (Art. 1173 of
Upon the other hand, Article 2189 of the Civil the Civil Code).
Code of the Philippines which provides that:
There is no argument that it is the duty of the City
Provinces, cities and municipalities of Manila to exercise reasonable care to keep the
shall be liable for damages for the public market reasonably safe for people
death of, or injuries suffered by any frequenting the place for their marketing needs.
person by reason of defective
conditions of roads, streets, While it may be conceded that the fulfillment of
bridges, public buildings and other such duties is extremely difficult during storms
public works under their control or and floods, it must however, be admitted that
supervision. ordinary precautions could have been taken
during good weather to minimize the dangers to
constitutes a particular prescription making life and limb under those difficult circumstances.
"provinces, cities and municipalities ... liable for
damages for the death of, or injury suffered by any For instance, the drainage hole could have been
person by reason" — specifically — "of the placed under the stalls instead of on the passage


OBLIGATIONS (Cases 1-48)
ways. Even more important is the fact, that the caused it to lean forward dangerously which led
City should have seen to it that the openings were to the vacation of the building.
covered. Sadly, the evidence indicates that long United Construction Company in turn shored up
before petitioner fell into the opening, it was the building and incurred 13,661.28 php as costs.
already uncovered, and five (5) months after the The PBA then instituted a case against UCC for
incident happened, the opening was still damages due to its negligence regarding the
uncovered. (Rollo, pp. 57; 59). Moreover, while construction of the said building thru its failure to
there are findings that during floods the vendors follow the designs coming from the architects.
remove the iron grills to hasten the flow of water UCC then filed a complaint against the architects
(Decision, AC-G.R. CV No. 0 1387; Rollo, p. 17), (Nakpil & Sons) alleging that it was the designs
there is no showing that such practice has ever that are flawed and that caused the building’s
been prohibited, much less penalized by the City inability to withstand an earthquake. UCC also
of Manila. Neither was it shown that any sign had included the president of PBA for including them
been placed thereabouts to warn passersby of the in their petition.
impending danger. Nakpil & Sons answer that the petitioners need
not to change the defendants in their petition as
To recapitulate, it appears evident that the City of United Construction Company deviated from the
Manila is likewise liable for damages under plans which caused the damages to the building.
Article 2189 of the Civil Code, respondent City In the course of the trial a commissioner was
having retained control and supervision over the appointed by both parties to give a report
Sta. Ana Public Market and as tort-feasor under regarding the technical aspects of the case. His
Article 2176 of the Civil Code on quasi-delicts report concluded that indeed there were faults
arising from the negligence of both defendants.
Petitioner had the right to assume that there were The report stated that the design was flawed and
no openings in the middle of the passageways and that UCC deviated from the designs which
if any, that they were adequately covered. Had the aggravated the problem. The defendants then put
opening been covered, petitioner could not have up the Act of God defense.
fallen into it. Thus the negligence of the City of Issue: Whether or not the defendants could
Manila is the proximate cause of the injury escape liability from the building due to a
suffered, the City is therefore liable for the injury fortuitous event which is unforeseeable and
suffered by the petitioner. inevitable even if their negligence is established?
Held: The defendants cannot validly invoke
Case No. 40 the Act of God defense. This is because of the
Nakpil and Sons v. CA, report submitted by the appointed
144 SCRA 596 Commissioner which established their
negligence. Acceptance of the building, after
Facts: The Philippine Bar Association wanted to completion, does not imply waiver of any of the
erect a building in its lot in Intramuros. They were causes of action by reason of any defect. To
able to obtain a contract with the exempt the obligor from its liability these
United Construction Company Inc for the requisites should first concur:
construction of the building and the design was (a) the cause of the breach of the obligation must
obtained from Juan M. Nakpil & Sons and Juan F. be independent of the will of the debtor;
Nakpil. The Building was completed in June 1966. (b) the event must be either unforeseeable or
On August 2, 1968 a massive earthquake hit unavoidable;
Manila with an intensity of about 7.3. This
earthquake caused damage to the building and


OBLIGATIONS (Cases 1-48)
(c) the event must be such as to render it (Gilat) a purchase order for various
impossible for the debtor to fulfill his obligation telecommunications equipment, promising to pay
in a normal manner; and portions of the price according to a payment
(d) the debtor must be free from any schedule. To ensure the prompt payment, it
participation in, or aggravation of the injury to the obtained a surety bond from defendant UCPB
creditor. The report of General Insurance Co., Inc. (UCPB) in favor of Gilat
the Commissioner established that the defects One Virtual failed to pay Gilat twice, prompting
that occurred to the building could be attributed Gilat to write the surety UCPB two demand letters
to the act of man specifically that of the architects for payment. However, UCPB failed to settle the
and the engineers as well as the builders. This was amount.
because of the fact that UCC deviated from the Gilat filed a complaint against UCPB. The RTC,
plans submitted by the architects and their failure ruling in favor of Gilat, found that Gilat has
to observe the required marksmanship in already complied with it’s end of the obligation,
constructing the building as well as the required i.e. delivery and installation of the purchased
degree of supervision. Nakpil & Sons are also equipments.
liable for the inadequacies and defect in their Demand notwithstanding, One Virtual and UCPB,
submitted plan and specifications. as surety, failed to settle the obligation. The lower
These circumstances are the proximate causes of court reasoned that UCPB, as surety, bound itself
the damages that the PBA building incurred. to pay in accordance with the Payment
The costs are to be paid by the defendants Milestones.
amounting to 5M which includes all appreciable This obligation was not made dependent on any
damages as well as indemnity plus 100,000php condition outside the terms and conditions of the
for the attorney’s fee. Surety Bond and Payment Milestones.
One who negligently creates a dangerous However, the RTC denied Gilat’s claim for interest
condition cannot escape liability for the natural on the premise that the interest shall only accrue
and probable consequences thereof, although the when the delay or refusal to pay the principal
act of a third person, or an act of God for which he obligation is without any justifiable cause. Here,
is not responsible, intervenes to precipitate the UCPB failed to pay its surety obligation because of
loss. the advice of its principal (One Virtual) not to pay.
The RTC then obligated UCPB to pay Gilat the
principal debt (US $1.2 Million) under the Surety
Case No. 41 Bond, with legal interest at the rate of 12% per
Gilat Satellite vs. UCPB (2014) annum computed from the time the judgment
Breach of Obligations becomes final and executory, plus attorney’s fees
Topic: and litigation expenses.
Liability of a surety on the principal contract is The Court of Appeals (CA) dismissed the appeal of
direct, primary and absolute; The existence of a UCPB based on lack of jurisdiction. It ruled that in
suretyship agreement does not give the surety the "enforcing a surety contract, the ‘complementary-
right to intervene in the principal contract, hence, contracts-construed-together’ doctrine finds
surety cannot invoke the arbitration clause application." In this case, the CA considered the
between the parties in the principal contract; arbitration clause contained in the Purchase
Interest, as a form of indemnity, may be awarded Agreement (principal contract) between Gilat and
to a creditor in case of inexcusable delay incurred One Virtual as applicable and binding on the
by a debtor in the payment of his obligation parties to the suretyship agreement (accessory
Facts: contract). Hence, the trial court’s Decision was
One Virtual placed with Gilat Satellite Network vacated. Gilat and One


OBLIGATIONS (Cases 1-48)
Virtual were ordered to proceed to arbitration. arbitration would render the very essence of
suretyship nugatory and diminish its value in
Issues: commerce. (See Palmares v. Court of Appeals)
1. Whether or not the CA erred in dismissing the The existence of a suretyship agreement does not
case and ordering petitioner and One Virtual to give the surety the right to intervene in the
arbitrate; and principal ontract, hence, surety cannot invoke the
2. Whether or not petitioner is entitled to legal arbitration clause between the parties in the
interest due to the delay in the fulfilment by principal contract
respondent of its obligation under the Suretyship 5. UCPB’s claim that the Purchase Agreement,
Agreement. being the principal contract to which the
Ruling: Suretyship Agreement is accessory, must take
Liability of a surety on the principal contract is precedence over arbitration as the preferred
direct, primary and absolute mode of settling disputes, cannot be sustained.
1. The failure of One Virtual, as the principal 6. The acceptance of a surety agreement does not
debtor, to fulfill its monetary obligation to change in any material way the creditor’s
petitioner Gilat gave the latter an immediate right relationship with the principal debtor nor does it
to pursue UCPB as the surety. make the surety an active party to the principal
2. In suretyship, the oft-repeated rule is that a creditor-debtor relationship. In other words, the
surety’s liability is joint and solidary with that of acceptance [of the surety agreement] does not
the principal debtor. This undertaking makes a give the surety the right to intervene in the
surety agreement an ancillary contract, as it principal contract. The surety’s role arises only
presupposes the existence of a principal contract. upon the debtor’s default, at which time, it can be
Nevertheless, although the contract of a surety is directly held liable by the creditor for payment as
in essence secondary only to a valid principal a solidary obligor. Hence, the surety remains a
obligation, its liability to the creditor or "promise" stranger to the Purchase Agreement.
of the principal is said to be direct, primary and (SeeStronghold Insurance Co. Inc. v. Tokyu
absolute; in other words, a surety is directly and Construction Co. Ltd.)
equally bound with the principal. He becomes
liable for the debt and duty of the principal 7. UCPB cannot invoke in its favor the arbitration
obligor, even without possessing a direct or clause in the Purchase Agreement, because it is
personal interest in the obligations constituted by not a party to that contract. An arbitration
the latter. agreement being contractual in nature, it is
3. Thus, a surety is not entitled to a separate binding only on the parties thereto, as well as
notice of default or to the benefit of excussion. It their assigns and heirs.
may in fact be sued separately or together with 8. Section 24 of Republic Act No. 9285 is clear in
the principal debtor. stating that a referral to arbitration may only take
4. Sureties do not insure the solvency of the place "if at least one party so requests not later
debtor, but rather the debt itself. They are than the pre-trial conference, or upon the request
contracted precisely to mitigate risks of non- of both parties thereafter." UCPB has not
performance on the part of the obligor. This presented evidence to show that either Gilat
responsibility necessarily places a surety on the orOne Virtual submitted its contesting claim for
same level as that of the principal debtor. The arbitration. Interest, by way of damages or
effect is that the creditor is given the right to indemnity, may be awarded to a creditor in case
directly proceed against either principal debtor of inexcusable delay incurred by a debtor in the
or surety. This is the reason why excussion cannot payment of his obligation
be invoked. To require the creditor to proceed to 9. Article 2209 of the Civil Code is clear: "[i]f an


OBLIGATIONS (Cases 1-48)
obligation consists in the payment of a sum of upon. It was also mentioned that Solar placed an
money, and the debtor incurs a delay, the additional order, out of which, half had been
indemnity for damages, there being no stipulation manufactured without any advanced payment
to the contrary, shall be the payment of the from Solar. (Solar alleges that the agreement was
interest agreed upon, and in the absence of for DCCC to deliver within 30 days from payment
stipulation, the legal interest." demanded. In the the said cartons to Tagum Agricultural
absence of stipulation, the rate of interest shall be Development Corporation (TADECO) which the
6% per annum to be computed from default, i.e., latter failed to manufacture and deliver within
from judicial or extrajudicial demand under and such time.)
subject to the provisions of Article 1169 of the 7. DCCC then demanded Solar to remove the
Civil Code. x x x When the judgment of the court boxes from the factory and to pay the balance for
awarding a sum of money becomes final and the additional boxes.
executory, the rate of legal interes...shall be 6% ISSUES:(1) WON there was default on the part of
per annum from such finality until its satisfaction, Davao Corrugated Carton to deliver the boxes and
this interim period being deemed to be by then an thus make it liable for breach of contract to Solar
equivalent to a forbearance of credit." (See Nacar Harvest
v. Gallery Frames, modifying Eastern Shipping (2) May Solar Harvest be allowed to rescind the
Lines v. CA). contract?
Case No. 43 (1) No. It was unthinkable that, over a period of
Solar Harvest vs Davao Corrugated Carton more than two years, Solar did not even demand
G.R. No. L- 176868 for the delivery of the boxes. Even assuming that
July 26, 2010 the agreement was for DCCC to deliver the boxes,
the latter would not be liable for breach of
Facts: contract as Solar had not yet demanded from it
the delivery of the boxes.
1. The petitioner (Solar Harvest, Inc., Solar (2) Based on Art. 1191, in reciprocal obligations,
for brevity) entered into an agreement with the right to rescind a contract arises once the
respondent, Davao Corrugated Carton other party defaults in the performance of his
Corporation (DCCC for brevity), for the purchase obligation. In determining when default occurs,
of corrugated carton boxes, specifically designed Art. 1191 should be taken in conjunction with Art.
for petitioners business of exporting fresh 1169 which provides as to when delay is
bananas. incurred.
2. The agreement was not reduced into
writing. In reciprocal obligations, as in a contract of sale,
3. To start the production, Solar deposited in the general rule is that the fulfillment of the
DCCC’s US Dollar Savings Account with Westmont parties' respective obligations should be
bank, as full payment for the ordered boxes. simultaneous. Hence, no demand is generally
4. Despite such payment, Solar did not necessary because, once a party fulfills his
receive any boxes from DCCC. obligation and the other party does not fulfill his,
5. Solar wrote a demand letter for the latter automatically incurs in delay. But when
reimbursement of the amount paid. different dates for performance of the obligations
6. DCCC replied that the boxes had been are fixed, the default for each obligation must be
completed as early as April 3, 1998 and that Solar determined by the rules given in the first
failed to pick them up from the formers paragraph of Art. 1169, that is, the other party
warehouse 30 days from completion, as agreed would incur in delay only from the moment the


OBLIGATIONS (Cases 1-48)
other party demands fulfillment of the former's petitioner's fault that the boxes were not
obligation. Thus, even in reciprocal obligations, if delivered to TADECO. Petitioner had the burden
the period for the fulfillment of the obligation is to prove that the agreement was, in fact, for
fixed, demand upon the obligee is still necessary respondent to deliver the boxes within 30 days
before the obligor can be considered in default from payment, as alleged in the Complaint. It
and before a cause of action for rescission will failed to do so. Its sole witness, Que, was not even
accrue. competent to testify on the terms of the
Evident from the records and even from the agreement because he did not personally place
allegations in the complaint was the lack of the order with Tan. Moreover, assuming that
demand by petitioner upon respondent to fulfill respondent was obliged to deliver the boxes, it
its obligation to manufacture and deliver the could not have complied with such obligation
boxes. The Complaint only alleged that petitioner because as admitted by Que, he did not give
made a "follow-up" upon respondent, which, respondent the authority to deliver the boxes to
however, would not qualify as a demand for the TADECO
fulfillment of the obligation. Note is taken of the Surely, without such authority, TADECO would
fact that, with respect to their claim for not have allowed respondent to deposit the boxes
reimbursement, the Complaint alleged and the within its premises.
witness testified that a demand letter was sent to In sum, the Court finds that petitioner failed to
respondent. Without a previous demand for the establish a cause of action for rescission, the
fulfillment of the obligation, petitioner would not evidence having shown that respondent did not
have a cause of action for rescission against commit any breach of its contractual obligation.
respondent as the latter would not yet be As previously stated, the subject boxes are still
considered in breach of its contractual obligation. within respondent's premises. To put a rest to
Even assuming that a demand had been this dispute, we therefore relieve respondent
previously made before filing the present case, from the burden of having to keep the boxes
petitioner's claim for reimbursement would still within its premises and, consequently, give it the
fail, as the circumstances would show that right to dispose of them, after petitioner is given
respondent was not guilty of breach of contract. 30 days within which to remove them from the
The existence of a breach of contract is a factual premises.
matter. As correctly observed by the CA, there is
ample showing that the boxes had already been
manufactured by respondent. Que's absolute Case No. 44
assertion that the boxes were not manufactured Agcaoli vs.GSIS
is implausible and suspicious. We note that 165 SCRA 1
respondent's counsel manifested during trial, that TOPIC: Excuses for non-performance--act of
his client was willing to shoulder expenses for a creditor
representative of the court to visit the plant and FACTS:
see the boxes. Even in its Comment to this The appellant, GSIS,having approved the
petition, respondent prays that petitioner be application of the appellee Agcaoili for the
ordered to remove the boxes from its factory site, purchase of a house and lot in the GSIS Housing
which could only mean that the boxes are, up to Project at Nangka Marikina, Rizal, subject to the
the present, still in respondent's premises. condition that the latter should forthwith occupy
We also believe that the agreement between the the house, a condition that Agacoili tried to fulfill
parties was for petitioner to pick up the boxes but could not for the reason that the house was
from respondent's warehouse, contrary to absolutely uninhabitable; Agcaoili, after paying
petitioner's allegation. Thus, it was due to the first installment and other fees, having


OBLIGATIONS (Cases 1-48)
thereafter refused to make further payment of making do with whatever he found available in
other stipulated installments until GSIS had made the envirornment.
the house habitable; and appellant having refused There was then a perfected contract of sale
to do so, opting instead to cancel the award and between the parties; there had been a meeting of
demand the vacation by Agcaoili of the premises; the minds upon the purchase by Agcaoili of a
and Agcaoili having sued the GSIS in the Court of determinate house and lot in the GSIS Housing
First Instance of Manila for specific performance Project at Nangka Marikina, Rizal at a definite
with damages and having obtained a favorable price payable in amortizations at P31.56 per
judgment, the case was appealled to this Court by month, and from that moment the parties
the GSIS. acquired the right to reciprocally demand
ISSUE: Whether or not GSIS should be held liable performance. It was, to be sure, the duty of the
for its failure to perform its obligation to deliver a GSIS, as seller, to deliver the thing sold in a
habitable house. condition suitable for its enjoyment by the buyer
RULING: YES Agcaoili's offer to buy from GSIS for the purpose contemplated ,in other words, to
was contained in a printed form drawn up by the deliver the house subject of the contract in a
latter, entitled "Application to Purchase a House reasonably livable state. This it failed to do.
and/or Lot." Agcaoili filled up the form, signed it, It sold a house to Agcaoili, and required him
and submitted it. The acceptance of the to immediately occupy it under pain of
application was also set out in a form cancellation of the sale. Under the circumstances
(mimeographed) also prepared by the GSIS; This there can hardly be any doubt that the house
form was sent to Agcaoili, duly filled up, advising contemplated was one that could be occupied for
him of the approval of his "application to purposes of residence in reasonable comfort and
purchase a house and lot in our GSIS Housing convenience. There would be no sense to require
Project at NANGKA, MARIKINA, RIZAL," and that the awardee to immediately occupy and live in a
"Lot No. 26, Block No. (48) 2, together with the shell of a house, a structure consisting only of four
housing unit constructed thereon, has been walls with openings, and a roof, and to theorize,
allocated to you." Neither the application form as the GSIS does, that this was what was intended
nor the acceptance or approval form of the GSIS by the parties, since the contract did not clearly
— nor the notice to commence payment of a impose upon it the obligation to deliver a
monthly amortizations, which again refers to "the habitable house, is to advocate an absurdity, the
house and lot awarded" — contained any hint that creation of an unfair situation. By any objective
the house was incomplete, and was being sold "as interpretation of its terms, the contract can only
is," i.e., in whatever state of completion it might be be understood as imposing on the GSIS an
at the time. On the other hand, the condition obligation to deliver to Agcaoili a reasonably
explicitly imposed on Agcaoili — "to occupy the habitable dwelling in return for his undertaking
said house immediately," or in any case within to pay the stipulated price. Since GSIS did not
three (3) days from notice, otherwise his fulfill that obligation, and was not willing to put
"application shall be considered automatically the house in habitable state, it cannot invoke
disapproved and the said house and lot will be Agcaoili's suspension of payment of
awarded to another applicant" — would imply amortizations as cause to cancel the contract
that construction of the house was more orless between them. It is axiomatic that "(i)n reciprocal
complete,and it was by reasonable standards, obligations, neither party incurs in delay if the
habitable, and that indeed, the awardee should other does not comply or is not ready to comply
stay and live in it; it could not be interpreted as in a proper manner with what is incumbent upon
meaning that the awardee would occupy it in the him."
sense of a pioneer or settler in a rude wilderness,


OBLIGATIONS (Cases 1-48)
Nor may the GSIS succeed in justifying its and with equitable norms, to simply require
cancellation of the award to Agcaoili by the claim payment for the land on which the house stands,
that the latter had not complied with the and for the house itself, in its unfinished state, as
condition of occupying the house within three (3) of the time of the contract. In fact, this is an
days. The record shows that Agcaoili did try to alternative relief proposed by Agcaoili himself,
fulfill the condition; he did try to occupy the house i.e., "that judgment issue . . (o)rdering the
but found it to be so uninhabitable that he had to defendant (GSIS) to execute a deed of sale that
leave it the following day. He did however leave a would embody and provide for a reasonable
friend in the structure, who being homeless and amortization of payment on the basis of the
hence willing to accept shelter even of the most present actual unfinished and uncompleted
rudimentary sort, agreed to stay therein and look condition, worth and value of the said house."
after it. Thus the argument that Agcaoili breached Case No. 45
the agreement by failing to occupy the house, and Arrieta v. NARIC
by allowing another person to stay in it without 10 SCRA 79/ GR L-15645 January 31, 1964
the consent of the GSIS, must be rejected as TOPIC: E. Breach of Obligations
devoid of merit. FACTS:
Finally, the GSIS should not be heard to say On May 19, 1952, plaintiff-appellee Mrs. Paz
that the agreement between it and Agcaoili is Arrieta participated in a public bidding called by
silent, or imprecise as to its exact prestation. NARIC for the supply of 20,000 metric tons of
Blame for the imprecision cannot be imputed to Burmese rice. As her bid of $203, 000 per metric
Agcaoili; it was after all the GSIS which caused the ton was the lowest, she was awarded the contract
contract to come into being by its written for the same. On July 1, 1952, Arrieta and NARIC
acceptance of Agcaoili's offer to purchase, that entered into Contract of Sale of Rice under the
offer being contained in a printed form supplied term of which the former obligated herself to
by the GSIS. Said appellant having caused the deliver to the latter 20, 000 metric tons of
ambiguity of which it would now make capital, Burmese rice at $203, 000 per metric ton. In turn,
the question of interpretation arising therefrom, NARIC committed itself to pay for the imported
should be resolved against it. rice “by means of an irrevocable, confirmed and
Note* assignable letter of credit in US currency in favor
The SC exercised equity jurisdiction in this case of Arrieta and/or supplier in Burma,
inasmuch as 20 years had already elapsed since immediately.” However, it was only on July 30,
the filing of the same. Hence, the SC held that "In 1952 that NARIC took the first step to open a
determining the precise relief to give, the Court letter of credit by forwarding to the PNB its
will "balance the equities" or the respective application for Commercial Letter of Credit.
interests of the parties, and take account of the
relative hardship that one relief or another may On the same day, Arrieta, thru counsel, advised
occasion to them . NARIC of the extreme necessity for the opening of
The completion of the unfinished house so that it the letter of credit since she had by then made a
may be put into habitable condition, as one form tender to her supplier in
of relief to the plaintiff Agcaoili, no longer appears Rangoon, Burma equivalent to 5% of the F.O.B.
to be a feasible option in view of the not price of20, 000 tons at $180.70 and in compliance
inconsiderable time that has already elapsed. with the regulations in Rangoon, this 5% will be
That would require an adjustment of the price of confiscated if the required letter of credit is not
the subject of the sale to conform to present received by them before August 4, 1952.
prices of construction materials and labor. It is
more in keeping with the realities of the situation,


OBLIGATIONS (Cases 1-48)
On August 4, PNB informed NARIC that its for withdrawal on November 6, but Sicam failed
application for a letter of credit has been to return the jewelry.
approved by the Board of Directors with the
condition that 50% marginal cash deposit be paid Lulu, joined by her husband Cesar, filed a
and that drafts a5e to be paid upon presentment. complaint against Sicam with the RTC of Makati
It turned out that NARIC was not in financial seeking indemnification for the loss of pawned
position to meet the condition. As a result of the jewelry and payment of AD, MD and ED as well as
delay, the allocation of Arrieta’s supplier in AF.
Rangoon was cancelled and the 5% deposit
amounting to 524 kyats or approximately P200, The RTC rendered its Decision dismissing
000 was forfeited. respondents’ complaint as well as petitioners’
ISSUE: counterclaim. Respondents appealed the RTC
Was NARIC liable for damages? Decision to the CA which reversed the RTC,
HELD: ordering the appellees to pay appellants the
Yes, because the reason of the cancellation of the actual value of the lost jewelry and AF. Petitioners
contract by Arrieta in Ragoon, Burma was the MR denied, hence the instant petition for review
failure of NARIC to open the letter of credit within on Certiorari.
a specific period of time. One who assumes
contractual obligation and fails to perform in ISSUE: are the petitioners liable for the loss of the
which he knew and was aware when he entered pawned articles in their possession? (Petitioners
in the contract, should be liable for his failure to insist that they are not liable since robbery is a
do what is required by a law. Under the Art. 1170 fortuitous event and they are not negligent at all.)
of the Civil Code, not only the debtors guilty of
fraud, negligence or default but also a debtor of HELD: The Decision of the CA is AFFIRMED.
every, in general, who fails in the performance of
his obligation is bound to indemnify for the losses YES
and damages caused thereby.
Article 1174 of the Civil Code provides:
Case No. 46 Art. 1174. Except in cases expressly specified by
the law, or when it is otherwise declared by
ROBERTO C. SICAM and AGENCIA de R.C. stipulation, or when the nature of the obligation
SICAM, INC. vs. SPOUSES JORGE requires the assumption of risk, no person shall
G.R. No. 159617, August 8, 2007 be responsible for those events which could not
be foreseen or which, though foreseen, were
FACTS: On different dates, Lulu Jorge pawned inevitable.
several pieces of jewelry with Agencia de R. C.
Sicam located in Parañaque to secure a loan. Fortuitous events by definition are extraordinary
events not foreseeable or avoidable. It is
On October 19, 1987, two armed men entered the therefore, not enough that the event should not
pawnshop and took away whatever cash and have been foreseen or anticipated, as is
jewelry were found inside the pawnshop vault. commonly believed but it must be one impossible
On the same date, Sicam sent Lulu a letter to foresee or to avoid. The mere difficulty to
informing her of the loss of her jewelry due to the foresee the happening is not impossibility to
robbery incident in the pawnshop. Respondent foresee the same.
Lulu then wroteback expressing disbelief, then To constitute a fortuitous event, the following
requested Sicam to prepare the pawned jewelry elements must concur:


OBLIGATIONS (Cases 1-48)
(a) the cause of the unforeseen and unexpected Petitioners merely presented the police report of
occurrence or of the failure of the debtor to the Parañaque Police Station on the robbery
comply with obligations must be independent of committed based on the report of petitioners’
human will; employees which is not sufficient to establish
(b) it must be impossible to foresee the event that robbery. Such report also does not prove that
constitutes the caso fortuito or, if it can be petitioners were not at fault. On the contrary, by
foreseen, it must be impossible to avoid; the very evidence of petitioners, the CA did not
(c) the occurrence must be such as to render it err in finding that petitioners are guilty of
impossible for the debtor to fulfill obligations in a concurrent or contributory negligence as
normal manner; and, provided in Article 1170 of the Civil Code, to wit:
(d) the obligor must be free from any
participation in the aggravation of the injury or Art. 1170. Those who in the performance of their
loss. obligations are guilty of fraud, negligence, or
delay, and those who in any manner contravene
The burden of proving that the loss was due to a the tenor thereof, are liable for damages.
fortuitous event rests on him who invokes it. And,
in order for a fortuitous event to exempt one from **
liability, it is necessary that one has committed no Article 2123 of the Civil Code provides that with
negligence or misconduct that may have regard to pawnshops and other establishments
occasioned the loss. which are engaged in making loans secured by
Sicam had testified that there was a security pledges, the special laws and regulations
guard in their pawnshop at the time of the concerning them shall be observed, and
robbery. He likewise testified that when he subsidiarily, the provisions on pledge, mortgage
started the pawnshop business in 1983, he and antichresis.
thought of opening a vault with the nearby bank
for the purpose of safekeeping the valuables but The provision on pledge, particularly Article 2099
was discouraged by the Central Bank since of the Civil Code, provides that the creditor shall
pawned articles should only be stored in a vault take care of the thing pledged with the diligence
inside the pawnshop. The very measures which of a good father of a family. This means that
petitioners had allegedly adopted show that to petitioners must take care of the pawns the way a
them the possibility of robbery was not only prudent person would as to his own property.
foreseeable, but actually foreseen and
anticipated. Sicam’s testimony, in effect, In this connection, Article 1173 of the Civil Code
contradicts petitioners’ defense of fortuitous further provides:
event. Art. 1173. The fault or negligence of the obligor
consists in the omission of that diligence which is
Moreover, petitioners failed to show that they required by the nature of the obligation and
were free from any negligence by which the loss corresponds with the circumstances of the
of the pawned jewelry may have been occasioned. persons, of time and of the place. When
negligence shows bad faith, the provisions of
Robbery per se, just like carnapping, is not a Articles 1171 and 2201, paragraph 2 shall apply.
fortuitous event. It does not foreclose the
possibility of negligence on the part of herein If the law or contract does not state the diligence
petitioners. which is to be observed in the performance, that
which is expected of a good father of a family shall
be required.


OBLIGATIONS (Cases 1-48)
exercising the precautions justly demanded of a
We expounded in Cruz v. Gangan that negligence pawnshop.
is the omission to do something which a
reasonable man, guided by those considerations
which ordinarily regulate the conduct of human Case No. 46
affairs, would do; or the doing of something which SICAM vs. JORGE, 529 SCRA 443, GR No.
a prudent and reasonable man would not do. It is 159617, August 8, 2007
want of care required by the circumstances. Syllabi Class : Courts|Corporation
Law|Actions|Obligations and
A review of the records clearly shows that Contracts|Judgments|Piercing the Veil of
petitioners failed to exercise reasonable care and Corporate Fiction|Judicial Admissions|Fortuitous
caution that an ordinarily prudent person would Events|Elements|Words and
have used in the same situation. Petitioners were Phrases|Pawnshops|Robbery|Negligence
guilty of negligence in the operation of their
pawnshop business. Sicam’s testimony revealed FACTS:
that there were no security measures adopted by On October 19, 1987, two armed men entered the
petitioners in the operation of the pawnshop. pawnshop and took away whatever cash and
Evidently, no sufficient precaution and vigilance jewelry were found inside. The incident was
were adopted by petitioners to protect the entered in police blotter in Paranaque. Sicam then
pawnshop from unlawful intrusion. There was no sent letter to Lulu informing the latter of the loss
clear showing that there was any security guard of her jewelry due to the robbery. However, Lulu
at all. Or if there was one, that he had sufficient wrote a letter expressing her disbelief and asking
training in securing a pawnshop. Further, there is the return of her jewelry instead. But Sicam failed
no showing that the alleged security guard to return the same. Hence, Lulu and husband filed
exercised all that was necessary to prevent any a complaint seeking indemnification for the loss
untoward incident or to ensure that no suspicious of pawned jewelry. RTC dismissed the complaint
individuals were allowed to enter the premises. In since Sicam cannot be made personally liable for
fact, it is even doubtful that there was a security an incident which is in relation to corporate
guard, since it is quite impossible that he would transaction and so as the corporation because the
not have noticed that the robbers were armed loss was occasioned by a fortuitous event. CA
with caliber .45 pistols each, which were allegedly reversed the RTC and held Sicam liable together
poked at the employees. Significantly, the alleged with the corporation.
security guard was not presented at all to ISSUE:
corroborate petitioner Sicam’s claim; not one of Whether or not the robbery in pawnshop
petitioners’ employees who were present during resulting to the loss of pawned jewelry can be
the robbery incident testified in court. considered as fortuitous event thereby excusing
liability of Sicam and Corporation.
Furthermore, petitioner Sicam’s admission that HELD:
the vault was open at the time of robbery is NO. Article 1174 of the Civil Code provides:
clearly a proof of petitioners’ failure to observe Art. 1174. Except in cases expressly specified by
the care, precaution and vigilance that the the law, or when it is otherwise declared by
circumstances justly demanded. stipulation, or when the nature of the obligation
requires the assumption of risk, no person shall
The robbery in this case happened in petitioners’ be responsible for those events which could not
pawnshop and they were negligent in not be foreseen or which, though foreseen, were


OBLIGATIONS (Cases 1-48)
Fortuitous events by definition are extraordinary gradually. They knew the typhoon was coming 4
events not foreseeable or avoidable. It is days before it actually hit the project area.
therefore, not enough that the event should not
have been foreseen or anticipated, as is Defendant NPC argues that the destruction of the
commonly believed but it must be one impossible equipment and materials of plaintiff ECI was due
to foresee or to avoid. The mere difficulty to to force majeure. The rapid rise of the water level
foresee the happening is not impossibility to was an extraordinary occurrence that could not
foresee the same. have been foreseen.
A review of the records clearly shows that
petitioners failed to exercise reasonable care and ISSUE:
caution that an ordinarily prudent person would
have used in the same situation. Whether or not the typhoon is a fortuitous event
which releases NPC from liability?
G.R. L-47379, May 16, 1988 NO. Supreme Court held that even though the
161 SCRA 334 typhoon is an act of God, NPC cannot escape
liability because its negligence is the proximate
FACTS: cause of the loss and damage.

Plaintiff Engineering Construction, Inc. (ECI) was As we have ruled in Juan F. Nakpil & Sons v. Court
to construct a Tunnel and several structures in of Appeals:
Norzagaray, Bulacan. The project was to be
accomplished in 2 major phases. The first phase Thus, if upon the happening of a fortuitous event
being completed, namely, the tunnel excavation or an act of God, there concurs a corresponding
work. All the equipment no longer needed were fraud, negligence, delay or violation or
transferred to the Ipo Site where the Dam of the contravention in any manner of the tenor of the
defendant is located. On November 1967, obligation as provided for in Article 1170 of the
typhoon “Welming” hit Central Luzon. Due to the Civil Code, which results in loss or damage, the
heavy downpour, the water in the reservoir of the obligor cannot escape liability.
Angat Hydro-Electric Project and Dam was rising The principle embodied in the act of God doctrine
perilously at the rate of 60 centimeters per hour. strictly requires that the act must be one
To prevent an overflow of water, since the water occasioned exclusively by the violence of nature
reached a danger height of 212 meters above sea and human agencies are to be excluded from
level, the defendant caused the opening of the creating or entering into the cause of the mischief.
spillway gates. As a result of which, the plaintiffs When the effect, the cause of which is to be
stockpile of materials and supplies were washed considered, is found to be in part the result of the
away, lost or destroyed. participation of man, whether it be from active
intervention or neglect, or failure to act, the whole
The appelate court held the defendant NPC liable occurrence is thereby humanized, as it was, and
for damages because of negligence. It failed to removed from the rules applicable to the acts of
exercise extraordinary care in the opening of the God.
spillway gates. The maintainers of the dam knew Thus, it has been held that when the negligence of
very well that it was safer to open the gates a person concurs with an act of God in producing
a loss, such person is not exempt from liability by


OBLIGATIONS (Cases 1-48)
showing that the immediate cause of the damage project as a substantial breach of their obligation
was the act of God. To be exempt from liability for which entitles respondents to seek for rescission
loss because of an act of God, he must be free from with payment of damages. The Arbiter also stated
any previous negligence or misconduct by which that mere economic hardship is not an excuse for
the loss or damage may have been occasioned. contractual and legal delay.

Case No. 48 Issue:

Fil-Estate Inc. and Fil-Estate Network Inc. vs Whether or not the Asian financial crisis
Spouse Ronquillo constitute a fortuitous event which would justify
G.R. No. 185798, January 13, 2014 delay by petitioners in the performance of their
Topic: Excuses for Non-Performance (1) contractual obligation.
Fortuitous Event
Facts: Held:
Petitioner Fil-Estate Properties, Inc. is the No. The Supreme Court held that the Asian
owner and developer of the Central Park Place financial crisis is not a fortuitous event that would
Tower while co-petitioner Fil-Estate Network, excuse petitioners from performing their
Inc. is its authorized marketing agent. contractual obligation. The Court ruled that “we
Respondent Spouses Conrado and Maria Victoria cannot generalize that the Asian financial crisis in
Ronquillo purchased from petitioners an 82- 1997 was unforeseeable and beyond the control
square meter condominium unit for a pre-selling of a business corporation. It is unfortunate that
contract price of P5,174,000.00. On 29 August petitioner apparently met with considerable
1997, respondents executed and signed a difficulty e.g. increase cost of materials and labor,
Reservation Application Agreement wherein they even before the scheduled commencement of its
deposited P200,000.00 as reservation fee. As real estate project as early as 1995. However, a
agreed upon, respondents paid the full real estate enterprise engaged in the pre-selling
downpayment of P1,552,200.00 and had been of condominium units is concededly a master in
paying the P63,363.33 projections on commodities and currency
monthly amortizations until September 1998. movements and business risks. The fluctuating
Upon learning that construction works movement of the Philippine peso in the foreign
had stopped, respondents likewise stopped exchange market is an everyday occurrence, and
paying their monthly amortization. Claiming to fluctuations in currency exchange rates happen
have paid a total of P2,198,949.96 to petitioners, every day, thus, not an instance of caso fortuito.”
respondents through two (2) successive letters,
demanded a full refund of their payment with
interest. When their demands went unheeded,
respondents were constrained to file a Complaint
for Refund and Damages before the Housing and
Land Use Regulatory Board (HLURB).
Respondents prayed for reimbursement/refund
of P2,198,949.96 representing the
total amortization payments, P200,000.00 as and
by way of moral damages, attorney’s fees and
other litigation expenses.
On 13 June 2002, the HLURB in favor of
herein respondents. The Arbiter considered
petitioners’ failure to develop the condominium